The head fake

Recall that advice to lock in your ultra-cheapo mortgage? And to use the bank’s dough instead  of your own when buying real estate?

Well, more evidence this makes sense. If you’ve been waiting for the central bank to punt the cost of money, it could be a long stretch. It won’t be happening in July. Or perhaps the rest of the year. Just in time for the October federal election, guess what? The economy’s revived. What a coincidence.

First came the inflation news. Wow. It’s 2.4%. So if your HISA or GIC isn’t pumping out a lot more than that (to compensate for the stiff tax on interest), you’re losing. Fortunately balanced portfolios have been steamy lately – up about 9% so far in 2019. This also means locking into a five-year mortgage at 2.5% or close to it is a brilliant move. Free cash, baby. What are those lenders thinking?

It’s a war. Mortgage originations are w-a-y down thanks to a plop in sales, the moister stress test, turgid incomes and prices which stuck in the red zone. Banks and brokers need to move money. Home loans at insane levels are the response. If you need money, well, come and get it.

Sadly many people have bought into the meme that rates will continue to push lower. New data shows this is unlikely. In fact, the next Bank of Canada move could actually be higher.

Core inflation is surging and central bankers know if they heap more stimulus on the economy (via cheaper rates) the cost of living will continue to rise. That’s a negative, since a key mandate of the bank is to maintain price (and currency) stability.

Second, the economy is rebounding. Just the way BoC boss Poloz told us it would. Despite the Chinese, Trump’s trade wars, Comrade Horgan, hapless Ontariowe and all the pissy peoplekind in Alberta. The April numbers came out Friday. Yuge. Annualized growth north of 3%, and that comes on the heels of a strong March – in fact the two-month swell is the greatest since the end of 2017 (before real estate laid an egg). The oilsands are humming again, thanks to the NDP’s production cuts (sorry, Jason), however car sales have slumped. Overall, a bright picture.

Inflation, jobs, growth all up. Why should rates fall?

So is the Ploz right? The unemployment rate has dropped to 5.4%, which is the lowest since 1976 when people had big hair and sequined bellbottoms (still have mine). The new NAFTA is sealed. Commodity prices have surged. The dollar, too. So with rising employment, higher inflation, a strong currency and robust GDP, why would rates drop?

Truth be told, the central bank doesn’t want to lower the cost of money. If the latest economic numbers are correct (there’s already some dispute over that), it now has justification to sit on its hands for months on end, then surprise us with a bump.

As for the States, Mr. Market has priced in three Fed chops in 2019, but there all that could change on a dime if Trump (a) woos Xi or (b) nukes Iran. Place your bets on either.

The only clear messages are this: (1) when you can borrow money at the inflation rate why use your own? (2) Don’t dawdle.

$     $     $

Hmmmm. What if investors have played this all wrong, and rates do rise in the next few months? What if Trump pulls it off, oil pops on renewed global growth prospects, trade tensions ease and markets melt up?

Then you’ll sure be happy if you ignored the wailing and moaning in this blog’s steerage section and loaded up on unloved, abandoned, besmirched and cheap assets like preferred shares. Prefs are hybrids of stocks and bonds, have less volatility than common stocks with fixed dividends generally higher than equities (ETFs currently pay 4.75%) and deliver the dividend tax credit. The market’s dominated by rate reset prefs, which gain in value as interest rates rise, and lose capital value (but pay a higher yield) when they fall. Lately preferreds have been on the outs as prices slumped. But this is why they now look so tasty.

Investors, coaxed into believing rates will fall further and a recession occur, have priced prefs to reflect this. But increasingly that looks like an extreme view. Growth, inflation, employment and commodities are all up. Trade tensions can vanish in a single political embrace. Central bankers have a great reluctance to cut, knowing the distortion that brings. Besides, stocks are expensive and bonds have recently jumped. In contrast, high-yielding, blue chip-quality preferreds are (like me) cheap and attractive.

Or, you can buy something that’s already gone up. Everybody else is.

93 comments ↓

#1 Jeff on 06.28.19 at 2:56 pm

If interrest rates has to stay that low for a long time, place to be is on stock market.

#2 Max the Tax on 06.28.19 at 2:59 pm

early post today Garth. I guess you’re heading out for the long weekend. Enjoy!

#3 Flop... on 06.28.19 at 3:05 pm

…and all the pissy peoplekind in Alberta.- Garth.

Nothing wrong with a bunch of Cowboys trying to get a fair crack of the whip…

M45BC

#4 JB on 06.28.19 at 3:06 pm

Let the orange man go to war, Canada believe it or not is a large arms supplier. According to Janes we currently sit around #5 or #6 in the world with the good old USA at #1.
We do sell shit that kills other people! So war is good in a weird and twisted manner. I have some investments in the war machine and I can tell you they pay well. So stock up on some ammo while your at it.

#5 Dave on 06.28.19 at 3:13 pm

first!

#6 crowdedelevatorfartz on 06.28.19 at 3:19 pm

Pizza’s here!
You guys will have to wait.

#7 Dave on 06.28.19 at 3:22 pm

Question?
I plan on taking $5000. out of my RRSP to pay off credit card dept. It will increase my tax payable in April by about 900 bucks.
If I make contributions back, will the tax payable be reduced?
Is this ever a good idea? My other option is paying off the cc with my personal line of credit, and trying not to use the cc.
Any advice would be helpful.

#8 Flop... on 06.28.19 at 3:45 pm

#4 JB on 06.28.19 at 3:06 pm
Let the orange man go to war, Canada believe it or not is a large arms supplier. According to Janes we currently sit around #5 or #6 in the world with the good old USA at #1.
We do sell shit that kills other people! So war is good in a weird and twisted manner. I have some investments in the war machine and I can tell you they pay well. So stock up on some ammo while your at it.

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

Dunno, might wanna look at this chart, according to these guys Canada exports 87 million worth of boom-boom.

Then states Canada imports 295 million worth of boom-boom.

Antarctica is a sleeping giant in this department.

Think of all the Penguin Poop Pellets they could export…

M45BC

Lords of War: Visualizing the Global Arms Trade Network.

https://howmuch.net/articles/worlds-biggest-military-weapons-exporters-and-importers

#9 Ron on 06.28.19 at 3:47 pm

Locked in a fat mortgage this week with one of the Big 5 at 2.59% for a 5 year (+$2k cash to cover closing costs to boot). Just tell them HSBC is offering it and they will match.

As nice as it is, as a shareholder in the same bank, I can’t help but think I’ve robbed Peter to pay Paul.

#10 Vancouverite on 06.28.19 at 3:57 pm

Garth and the central banks have been telling us that rates will be going up for a decade.

The Fed raised nine times. Maybe you were in the bathroom. – Garth

#11 Brian Ripley on 06.28.19 at 3:59 pm

My other option is paying off the cc with my personal line of credit, and trying not to use the cc. Any advice would be helpful. #7 Dave

Dave, a line of credit interest rate is less than a credit card interest rate.

Many years ago I was on the cusp of insolvency during the early 80’s when mortgage rates hit 18+ percent during the early stages of divorce and housing uncertainty with my mortgage debt up for renewal.

In this position the clearest path is to repair one’s balance sheet by exchanging debt for equity. This becomes very difficult if asset values are falling, including the value of your labour, because one’s debt to asset ratio increases and that is a big marker of pending bankruptcy.

I just wrote about this today, with charts, on my blog:
http://www.chpc.biz/history-readings/homeless

Many Canadian citizens have this very problem.

#12 not 1st on 06.28.19 at 4:01 pm

Notleys got nothing to do with it. It was the ingenuity and cost efficiency of our fabulous oil patch. They could teach a lot of slacker provinces a real lesson. I am looking at you Quebec.

#13 Graham Kerfoot on 06.28.19 at 4:32 pm

Interest rates going to be negative.
QE to infinity.
No way out for the Fed, and central banks.

#14 IHCTD9 on 06.28.19 at 5:07 pm

#9 Ron on 06.28.19 at 3:47 pm
Locked in a fat mortgage this week with one of the Big 5 at 2.59% for a 5 year (+$2k cash to cover closing costs to boot). Just tell them HSBC is offering it and they will match
——-

Sweet, good move. I had a sub-prime variable for my second term, and for a while, my mortgage rate was 1.5%, I kept the notice from the bank and stashed it for future giggles!

I thought the economy was finally going to recover going into term 3 (2011) so locked in at 4% (doh!).

#15 Vancouverite on 06.28.19 at 5:21 pm

Garth and the central banks have been telling us that rates will be going up for a decade.

The Fed raised nine times. Maybe you were in the bathroom. – Garth

Garth you’ve made numerous predictions that five year mortgages would be close to 5 percent by now, but they are no where near that. Now the fed is more likely to cut than raise.

#16 Alessio on 06.28.19 at 5:25 pm

If the economy is booming why are majority of Canadian 1 paycheque away from bankruptcy? #confused

#17 crowdedelevatorfartz on 06.28.19 at 5:47 pm

@#16 A leased 0
“If the economy is booming why are majority of Canadian 1 paycheque away from bankruptcy? ”

++++++

Stupidity?

#18 Graeme on 06.28.19 at 5:56 pm

Central banks will be lowering rates. Canada will be no exception. Garth is the perfect contrary indicator when it comes to interest rate predictions.

#19 Dolce Vita on 06.28.19 at 6:05 pm

StatCan in today’s April 2019 GDP report LOWERED last months March numbers to show a MoM April 2019 GDP increase of 0.3%. If you use their “original” March numbers from last month you get a MoM April 2019 GDP increase of:

0.2%.

StatCan did not bother to mention the change in March numbers in their April report. Here are the differences in the April revised and original March numbers:

https://i.imgur.com/Hns2CoS.jpg

So, it’s:

March 0.5%
April 0.2%

OR

March 0.4%
April 0.3%

Either way NO SLOW DOWN here including for naysayers like me. Those are booming economy numbers.

Hope StatCan fess up and admit to the change. You expect forthrightness from StatCan especially on something as important as GDP. I emailed StatCan asking for an explanation.

Still the naysayer though, you cannot have a near majority of Canadians a few $100’s away from not making ends meet or bankruptcy, up to their gills in debt and at the same time have a booming economy.

A non sequitur. You cannot have it both ways, it is one or the other.

AND by the way, Energy and Licensed Cannabis had a superb month, now matter how you cook the numbers:

https://i.imgur.com/A2p0i9J.jpg

—————————————

Ciao d'[*]Italia.

*Still wicked hot, loving every second of it. Il Bel Paese delivers when it comes to “Sunny Italy”.

#20 Linda on 06.28.19 at 6:06 pm

Sure hope the pup in today’s pic doesn’t get stuck:) Also, can we clarify: big hair OR sequined bell bottoms or both? Plus do the pants still fit?

#16 ‘Alessio’ – consumer debt can sadly still exist despite (or maybe because of) a booming economy. Back in the early 1980’s when interest rates were insane – mortgages were north of 20% – my husband & I were looking around & wondering how it was that we could not afford to buy. Everyone else seemed to have the new house, the new car, new furnishings, assorted toys plus kids & took at least one sunbelt vacation annually to boot. We on the other hand, with no debt & both working full time couldn’t see how we could afford to even come up with a downpayment on a house, let alone afford a mortgage at such high interest rates. We were in Alberta, Calgary & then – the boom busted. I think NEP (national energy program) had something to do with it. Bottom line was, for the next two years all those folks who on the outside looked so well off – house, car, kids, etc. – went bankrupt. Repossession city. For two solid years there were 4 double sided full sized pages of repossessed houses for sale listed in the local newspapers. A trailer was set up at a major city intersection whose sole purpose was to process offers – any offers – that might be made for said repossessed properties. Of course Calgary wasn’t the only place suffering the fallout from the recession, but it sure was one big eye opener as to the difference between the appearance of financial success & actual financial success. All those folks looked rich, but were literally one pay cheque away from losing it all & they did.

#21 Shawn Allen on 06.28.19 at 6:18 pm

Cause and Effect

#16 Alessio on 06.28.19 at 5:25 pm asked:

If the economy is booming why are majority of Canadian 1 paycheque away from bankruptcy? #confused

****************************
Maybe the economy is booming BECAUSE so many Canadians spend all they make plus some more. Also that stuff about one pay cheque away from bankruptcy is bogus as long as easy credit exists to bridge any gaps in spending versus income.

No one has to declare bankruptcy when they are making all their payments.

And they can make all their payments as long as new debt is available as needed.

Will this end badly? Will it in fact end at all?

#22 Shawn Allen on 06.28.19 at 6:18 pm

Cause and Effect

#16 Alessio on 06.28.19 at 5:25 pm asked:

If the economy is booming why are majority of Canadian 1 paycheque away from bankruptcy? #confused

****************************
Maybe the economy is booming BECAUSE so many Canadians spend all they make plus some more. Also that stuff about one pay cheque away from bankruptcy is bogus as long as easy credit exists to bridge any gaps in spending versus income.

No one has to declare bankruptcy when they are making all their payments.

And they can make all their payments as long as new debt is available as needed.

Will this end badly? Will it in fact end at all?

#23 Ronaldo on 06.28.19 at 6:19 pm

Or, you can buy something that’s already gone up. Everybody else is.
—————————————————————
Like Gold and Bitcoin?

#24 Dolce Vita on 06.28.19 at 6:22 pm

#78 crowdedelevatorfartz on 06.28.19 at 8:53 am

Inform yourself better than the N. American Lefty dominated MSM whose BS you swallowed hook, line and sinker.

FYI, the average Canadian owes $1.70 for every $1 of income as of May 2019. The average Italian, 61%.

As far as external debt, Italy is about the same as Canada (you know, debt you actually have to pay back to foreigners and not yourself).

As for the squabbling, again Progressive N. American Left dominated MSM bull tweed. Anybody right of Stalin or Lenin they hate.

They are worse than Italia’s “Il Manifesto” Communist daily which I peruse every day. Il Manifesto has more common sense than MSNBC, CNN, NBC, CBC, CTV, Global, et. al. put together (including IQ).

There is ONLY ONE G7 country happy with its Gov, like 70% happy (hint: it’s not):

Dilettante Justin or
Orange Man or
German Hillary or
Abe or
Monsieur Gilet Jaune or
Whomever is running the UK nowadays.

You’re being lied to. Search the truth it’s liberating.

#25 Yukon Elvis on 06.28.19 at 6:30 pm

The Fed raised nine times. Maybe you were in the bathroom. – Garth
…………………….
You keep saying that. Bank of Canada raised 5 times for a total of a measly 1.25%. Big. Hairy. Deal. 1.25 % was nothing and caused cracks in the economy so The Ploz has to back pedal now and probably lower rates. Maybe you were in the bathroom too.

The statement was: “Garth and the central banks have been telling us that rates will be going up for a decade.” My response was: “The Fed raised nine times. Maybe you were in the bathroom.” All true. – Garth

#26 Reality is stark on 06.28.19 at 7:02 pm

Let me get this straight.
Inflation is up 2.4% and my property tax bill went up 8.5%.
Is it possible that inflation is up because taxes overall are up? Is that supposed to be a good thing?
I need to revisit my economic textbooks because something tells me we are being scammed.
Things aren’t better just because we are paying higher levels of tax. Something is very wrong in Denmark.
Actually when polled young Danes want to go to Sweden for opportunity. Funny thing is young Swedes when polled want to go to the United States for opportunity.
Pay attention to the people you know extolling the virtues of socialist societies.
One thing you can guarantee, they usually lack ambition and are highly risk averse. This is one of the reasons Garth marvels at the number of Canadians who are in love with their GIC’s.
Don’t go around patting yourself on the back for being mediocre.

#27 Smoking Man on 06.28.19 at 7:04 pm

3% GDP ?

Bahahaha. it’s an election year..

#28 Long-Time Lurker on 06.28.19 at 7:05 pm

Well, June has passed and there were no big stock market shocks like I predicted. Oil tankers were attacked off the coast of Iran, Iran shot down a US drone, and Trump almost bombed Iran but the stock markets went unfazed. Along with this were 1 and 2 million person protest marches in Hong Kong.

The disco’s on fire while the disco bulls dance the night away.

Put on your bell bottoms, Garth.

https://www.youtube.com/watch?v=aXgSHL7efKg

#29 Deplorable Dude on 06.28.19 at 7:12 pm

So what a total clown show the Dem debates were. Trump in a landslide 2020.

The Dems pretty much explicitly said they are open borders…don’t arrest illegal aliens hopping the border, and don’t deport those already in the US…..

….That’s flat out means an open border…

Ohh and just to add the icing on the cake they ALL voted to give illegal aliens free health care….paid for by American taxpayers.

In a nutshell…Orange man bad….here have some more free stuff…

They are insane….

#30 Frank Dimango on 06.28.19 at 7:13 pm

3% GIC for 53 months, 3.78% a 5 year rate escalating GIC. Look it up on Google.

#31 TurnerNation on 06.28.19 at 7:34 pm

You’ll never ever see anybody wearing a button stating
“Respect is earned” or
“Hard work pays off”
or “Family first”.

Why because those people are Conservatives. No need when they are living these values as part of of their every-day (moral) fiber.

But those people wearing buttons with totally unattainable but virtuous-sounding goals – which require me to give up my personal freedom and money?
These people are Liberals.
You know the ones:

“Income equality” or
“World peace” or
“All lives matter”.

Print out this post and stick it to your fridge. Life lessons. Totally sobar.

#32 Andrew MacNeil on 06.28.19 at 7:57 pm

#7

No. You will be hit with 20-30% tax initially,and you never get that contribution room back.

Sell something you dont need to pay off the CC.

#33 El Presidente on 06.28.19 at 7:58 pm

Hello Rocket Man . you home?

Donald J. Trump
‏Verified account @realDonaldTrump

After some very important meetings, including my meeting with President Xi of China, I will be leaving Japan for South Korea (with President Moon). While there, if Chairman Kim of North Korea sees this, I would meet him at the Border/DMZ just to shake his hand and say Hello(?)!

#34 Yukon Elvis on 06.28.19 at 7:59 pm

#25 Yukon Elvis on 06.28.19 at 6:30 pm
The Fed raised nine times. Maybe you were in the bathroom. – Garth
…………………….
You keep saying that. Bank of Canada raised 5 times for a total of a measly 1.25%. Big. Hairy. Deal. 1.25 % was nothing and caused cracks in the economy so The Ploz has to back pedal now and probably lower rates. Maybe you were in the bathroom too.

The statement was: “Garth and the central banks have been telling us that rates will be going up for a decade.” My response was: “The Fed raised nine times. Maybe you were in the bathroom.” All true. – Garth.
………………………
You make is sound like such a big prescient hairy deal. It was not. It was like a fart in a hurricane and it was said that higher rates would hurt us. And now rates are coming down again like many here have suggested, such as Rowat, Llewenza, and Four Fingers Watson.

#35 Bdog on 06.28.19 at 8:10 pm

The Fed raised nine times. Maybe you were in the bathroom. – Garth

____________

And yet we can still get a fiver for 2.7%
It’s like nothing changed

#36 Dolce Vita on 06.28.19 at 8:13 pm

#27 Smoking Man

I don’t buy it either but those are the numbers, so StatCan says.

Yup, election year.

Speaking of election years, I watched the Dem debates. As a Liberal I hate to say this but Ted Cruz was correct in saying:

‘The clown car is broken’.

Meanwhile Trump today Tweets that he is happy with his 57% favorable rating. Says it should be 75% if it were not for the Witch Hunts. Oh Donald, lay off the Diet Coke.

And how is it going for Justin in Japan with China? Well, judge for yourselves with this single image at the delegate table:

https://i.imgur.com/gpLXy1y.jpg

Hope it’s going better behind the scenes than the political theater the image portrays.

Well at least Justin didn’t plank in front of Chairman Xi Jinping or come dressed as a Samurai, Geisha Girl, Ninja or Kabuki. There’s always that to be grateful for.

#37 Lost...but not leased on 06.28.19 at 8:16 pm

Forty-one per cent of homeowners between the ages of 25 and 34 are making interest-only payments, according to the FCAC.

https://globalnews.ca/news/5439688/home-equity-loans-vancouver-real-estate-check/

#38 MF on 06.28.19 at 8:24 pm

#26 Reality is stark on 06.28.19 at 7:02 pm

“This is one of the reasons Garth marvels at the number of Canadians who are in love with their GIC’s.
Don’t go around patting yourself on the back for being mediocre”

-No. It’s more like they are out there improving themselves while you on here complaining.

MF

#39 MF on 06.28.19 at 8:27 pm

#12 not 1st on 06.28.19 at 4:01 pm

No Ontario there?? Maybe we are slowly getting through to this guy/girl/it that we are all in this together as Canadians?

The oil sand revival is 100% due to Albertan tenacity. Agreed and it’s awesome.

MF

#40 Gregor Samsa on 06.28.19 at 8:47 pm

Head fake indeed. With these low borrowing rates, the banks (including the central bank with Poodle Poloz at the helm) are trying to manufacture a “sucker’s rally” in the sagging Canadian housing market. Get those last few fools signed up into debt slavery at house prices 5x their actual value. Lurch the economy along for a few more quarters off it.

#41 Why would rates drop? on 06.28.19 at 8:53 pm

…because the Global recession is upon us.

The US Fed cuts in July.

Congrats on the 9%. I will be up 900% on Eurodollars when the US Fed shocks the world with rate cuts.

#42 Trojan House on 06.28.19 at 8:57 pm

My property tax went up 3%. The water and sewer bill went up 5%. The storm water portion went up a whopping 11%! My transit pass went up 3%. Education portion, up 7%. If you do the math, that’s a 29% total tax increase on my overall municipal tax bill.

Oh yeah, the cost of gas also went up with Justin’s new carbon tax.

2.4% inflation? The statisticians at Statscan must be smoking the overpriced government weed!

#43 ThirdWorldProblems! on 06.28.19 at 9:05 pm

Garth, please tell your steerage section that if they own a 2nd property in Kelowna, I’d really like for them to occasionally do some landscaping maintenance. It’s bad enough I have to pull their weeds, but the fact that they will get a better resale value because we maintain our property kinda rubs me the wrong way. The neighborhood is really going to pot.. No, not that pot.

There should be a tax called the speculation or vacancy tax..but it should go to the neighbors, not the government!

#44 My Dentist on 06.28.19 at 9:08 pm

One day I told him a tale that was hard to believe, and later sent him the evidence. I saw him a few days later, and he said. “Some things in life are not always like they seem to be”.

#45 7-figure Baller on 06.28.19 at 9:13 pm

So, the big scary rate hikes that took several years to materialize have disappeared within months and we are back to 2016 low rates, except house prices basically corrected a small bit but remain elevated 3 fold on the never ending bull run that started in the early 2000.

Take away the stress test like Andrew Scheer wants to do and we are right back to 2016 housing mania and price jumps. I say let it blow. Shoot every house to 3M.

And because money is free we should buy that all time record high priced home. Not me.

Listen, buy a house whenever you want. The fact is I called it in 2010 that rates would stay low for decades (Japan style), rates are going to continue to stay low, and actually go very negative.

The Canadian housing market story will be one of “one too many” which will topple when negative -10% rates won’t even be enough to stimulate someone to buy what will be at such time a 20-year old bungalow in London, ON for 2.1 million because the debt along with demographic shifting has everyone buried. You ain’t getting out of the quicksand.

I am only buying when the big drops materialize, primarily in the financials. I have my ear to the ground and can smell it in the air. The weakness is clear as day. A nice big fat stock market write-down of 40% or more will materialize.

So many experts. So little oxygen. – Garth

#46 crowdedelevatorfartz on 06.28.19 at 9:29 pm

@#24 Dolce
“You’re being lied to. Search the truth it’s liberating.”
+++++

I have no illusions that propaganda is alive and thriving in todays Western Media.
I also agree that our squabbling “leadership” is just as ridiculous as anything Italy can dream ( although Cicciolina was Waaaaay ahead of her time in politics….)

https://www.ibtimes.com/star-porn-whatever-became-italys-cicciolina-1104912

As for the “lies” that Italy’s debt being almost as bad as Greece…….

https://www.timesofmalta.com/articles/view/20190605/business/italy-faces-eu-sanctions-over-high-debt-deficit.711994

I’ll let the EU interest rate “punishment” speak for itself….

#47 crowdedelevatorfartz on 06.28.19 at 9:38 pm

@#34 Yukon Elvis
“It was like a fart in a hurricane…”
+++++
….never…. ever…. waste a fart.

#48 Ace Goodheart on 06.28.19 at 9:41 pm

Just bought another 40k of cdn bank stock preferreds.

Do you lot see the prices on these things?

17 dollars a share for a 25 dollar par value with a 5.5 percent return?

So, another weekend at the cottage.

I am not one of the thousands who are currently waiting in line to get into Burls Creek to watch one of my favorite bands play what might be one of their last concerts.

I left Toronto at 8am this morning and headed up to Muskoka. The grass is long here. The neighbours kids are jumping off their dock. We bought $600 worth of fire works and will be lighting them off on Sunday (everyone leaves Monday so there is no point waiting till Monday night).

As usual, Canada continues in it’s normal, bumbling way.

The carbon tax is dead. It’s an election issue.

Try to win an election by promising to tax people more and see what happens. If we win, you will pay more for everything. Vote for us!

Trump is set to win another term (his last of course, he’ll both be dead and ineligible for another term at the end of his second).

He will play the wounded victim card. And it will work. Kudos to the US socialists for messing up one of the best opportunities to take over the USA that has ever been given to them.

Cardinal rule : don’t create a victim. Epic fail on that one.

#49 PastThePeak on 06.28.19 at 9:52 pm

Fully agree with Garth on the mortgage side. If you are in the market for a house, 5 years are looking good. Money in this manner might not get much cheaper over the next year (fixed mortgage rates not set by the BoC).

But…BoC and an interest rate HIKE? I think Garth is starting to try out the legal weed. Whether 3 or 1, the Fed is likely to cut (Fed *always* responds to an equity market tantrum). And you expect the BoC to hike into that???!!!

Canada has not had a BoC Governor, in my lifetime, that is as low dollar focused as the Plozzer. He single handedly cratered the dollar (and set of the last phase of housing bubble) within months of taking the office. He will never take an overt action that could dramatically raise the dollar.

At best, the Fed might cut once before BoC follows suit -> I give just a little over 0% chance the BoC will raise rates.

#50 Toni on 06.28.19 at 10:03 pm

#16 Alessio on 06.28.19 at 5:25 pm

If the economy is booming why are majority of Canadian 1 paycheque away from bankruptcy? #confused

—–
Indebtedness. Fresh cash goes to interest reimbursement (mortgages, LOC, credit cards, late payments on utility bills), you name it! Followed by negative saving, and so on…

#51 crowdedelevatorfartz on 06.28.19 at 10:06 pm

Well it’s official.

A Vancouver developer has decided anyone earning $80,000.00 per year or less will be eligible for subsidized housing….if they are approved by Vancouver City Clowncil to built a 28 story tower on the Broadway corridor…

https://www.vancourier.com/real-estate/opinions-mixed-at-open-house-for-proposed-28-storey-tower-1.23870084

#52 Blackdog on 06.28.19 at 10:13 pm

@#42 Trojan Horse re: “My property tax went up 3%. The water and sewer bill went up 5%. The storm water portion went up a whopping 11%! My transit pass went up 3%. Education portion, up 7%. If you do the math, that’s a 29% total tax increase on my overall municipal tax bill.”

Your math is off quite a bit. You can’t just add up the percentage increase of each item to determine the overall increase.

#53 Blackdog on 06.28.19 at 10:18 pm

@#42 Trojan Horse re: your 29% inflation calculation and subsequent suggestion that “The statisticians at Statscan must be smoking the overpriced government weed!”, no offence, but maybe you should try some. Couldn’t hurt. :)

Your math is off quite a bit. You can’t just add up the percentage increase of each item to determine the overall increase.

#54 Blackdog on 06.28.19 at 10:19 pm

ooops….wish their was an edit function here.

#55 Diversified in Oakville on 06.28.19 at 10:28 pm

#7 Dave.
Advice is to stop spending when you obviously cannot afford it. And bad idea to use RSP money to pay credit card debt.

#56 Tyberius on 06.28.19 at 10:41 pm

Sounds like some here like preferreds (including our host). I’m not sure how they work (or risks vs rewards), but I will looking into them over the next few days.

Any ETFs (focused on preferreds), that anyone might suggest? I imagine it’s a good idea to get 1-2 based in Canada, and 1-2 based in the US.

Anyone? Thx

#57 Trojan House on 06.28.19 at 10:47 pm

#53 Blackdog on 06.28.19 at 10:18 pm

You’re right, I should! Maybe it would make all these increases easier to take…

My point is that every single individual increase on my tax bill was above 2.4%, the lowest being the property tax increase of 3%. Therefore, how do they get an increase of only that amount? Easy, by selectively deciding what gets included in the calculation. Reality paints a much different picture.

#58 PastThePeak on 06.28.19 at 11:11 pm

Off topic, but I read a good quote today:

“You can vote socialism in, but you’ll have to shoot your way out…”

#59 Ponzius Pilatus on 06.28.19 at 11:17 pm

#52 Blackdog on 06.28.19 at 10:13 pm
@#42 Trojan Horse re: “My property tax went up 3%. The water and sewer bill went up 5%. The storm water portion went up a whopping 11%! My transit pass went up 3%. Education portion, up 7%. If you do the math, that’s a 29% total tax increase on my overall municipal tax bill.”

Your math is off quite a bit. You can’t just add up the percentage increase of each item to determine the overall increase.
————–
Blackdog.
Remember, you can’t fix stupid.

#60 Short Commons on 06.28.19 at 11:24 pm

Since 2008 I’ve been hearing ‘experts’ go on about rising interest rates. What has reality brought? Even lower rates!

The world can’t handle moderately high rates. So every time we break into another rising rate cycle, things break down.

#61 fishman on 06.29.19 at 12:32 am

DELETED

#62 kommykim on 06.29.19 at 12:59 am

RE: #16 Alessio on 06.28.19 at 5:25 pm
If the economy is booming why are majority of Canadian 1 paycheque away from bankruptcy? #confused

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

Because the majority of Canadian’s have zero fiscal discipline.

#63 The Great Gordonski on 06.29.19 at 1:02 am

Banks like BNS , RY and TD at 12p/e which take near half thier revenue from US sources ( TD now had more branches in the US than Canada) are still a solid bet.

Agreed on issues like CPD reset pref ETF…solid payer providing cash flow monthly.

On stock picking. Look what a good solid stock can do .

http://www.bnnbloomberg.ca/bce-chief-executive-george-cope-to-retire-in-january-2020-1.1280151

10% p/a isn’t punching the lights out, it’s no Cisco, but a good solid return all the same. Cope deserves his golden parachute. I made out like s bandit buying MBT.

#64 MaryEn on 06.29.19 at 1:07 am

#7 I wouldn’t take money from RRSP. As far as I know, if you do so, you have to:
*pay withholding tax (10%) that’s withheld when you make a withdrawal
* pay marginal tax on that in April (5k will be add to your yearly income and taxed which could ended with huge tax!).
* You don’t get contribution room back.

It’s much better to take a LOC, especially with the current interest rates.

#65 Old Dog New Tricks on 06.29.19 at 1:10 am

Perpetuals seem to be doing well and dividend stocks are getting some love. This will most likely turn as interest rates rise. Then rate resets will be back in the spotlight. If interest rates stay low back to perps and dividends.

#66 Stan Brooks on 06.29.19 at 2:32 am

#26 Reality is stark on 06.28.19 at 7:02 pm
Let me get this straight.
Inflation is up 2.4% and my property tax bill went up 8.5%.
Is it possible that inflation is up because taxes overall are up? Is that supposed to be a good thing?
I need to revisit my economic textbooks because something tells me we are being scammed.
Things aren’t better just because we are paying higher levels of tax. Something is very wrong in Denmark.

#22 Shawn Allen on 06.28.19 at 6:18 pm
Cause and Effect

#16 Alessio on 06.28.19 at 5:25 pm asked:

If the economy is booming why are majority of Canadian 1 paycheque away from bankruptcy? #confused

****************************
Maybe the economy is booming BECAUSE so many Canadians spend all they make plus some more. Also that stuff about one pay cheque away from bankruptcy is bogus as long as easy credit exists to bridge any gaps in spending versus income.

No one has to declare bankruptcy when they are making all their payments.

The scheme is very simple.

You have private lenders creating credit currency as loans when no matching deposits exist. Think about it – how can credit grow when savings rates go down and as of lately are practically non-existent?

How can private debt be over 2 trillions when private deposits are less than a trillion? Who is the debt due to?

The bankers association has a very nice fiction story of how banking works on their web site, stating that ‘normally’ banks earn money based on the spread between deposits and loans. Except that is not the complete picture.

Bank of England’s paper describes it clearly – how money comes into existence. Even Shawn Allen is starting to get it.

So you have privately issued credit currencies loaned to you, the interest on which does not exist, a central bank whose solely role is to provide profitable environment for the banks through:
– provision of liquidity,
– QE with solely purpose to convert newly created private credit into official currency
– low rates in order to help perpetuate the scheme

At the end you are owned though loans.
Newly minted credit currencies create inflation.
As a result rates can never go up again. Unless government start spending trillions in deficits which is probably the last phase of the cycle.

Throw in some climate change, cultivate house lust
and false narrative ‘fight for freedom’ noise and voila, the herd is confused, feeling rich and ready to work for that crappy dwelling all it’s life.

The process of excessive consumption through easy credit money with little investments, complete financialization of the economy is irreversible.

Private lenders issuing government money and central bank in charge of the economy are very strange propositions.

At the end people will have to sell assets in order to keep up with the inflation created by credit money that were never earned through sale of assets or work.

The lenders like it, I would too if I was in their shoes. Government is assisting conveniently through creation of stable ‘demand’ for these currency/through taxation.

What can potentially go wrong? Just wait and see.
Booming economy but rates at zero?
Under-reported inflation, ever increasing debt with no savings?

What a bunch of lies. But hey, the sheeple falls for it.

Lending is like cancer, normally the organism immune system fights it and wins. This one is in a terminal phase, spreading everywhere.

We fight it with Tylenol and candy/credit.

#67 Dolce Vita on 06.29.19 at 2:34 am

#46 crowdedelevatorfartz

You mean the UNELECTED Progressive Far Left EU Apparatchiks that do not like Populist Gov’s and will do and say anything to punish them, since they cannot control them?

Come live here for a spell, then we can talk.

And stop name dropping in Italian. You’re a WASP and make a right bullocks of the language and its romance subtleties.

Speaking of WASP’s there is another country that wants the hell out of the EU for the same reasons Italia elected its populist Gov. Difference though, Italia is trying to work within the EU to reform the Unelected Far Left parts.

As for Greece, you might want to check their GDP growth over the past 2 years.

Lay-off the Progressive Far Left N. American MSM click bait.

Peruse Will Rogers oft used “read in the newspapers” quote from the 1920’s. Not much has changed since then.

#68 Dolce Vita on 06.29.19 at 3:04 am

PS:

Happy Canada Day, Canada.

Here in Italia I still can’t resist making pancakes drenched in delicious Québec Maple Syrup, using “Farina Manitoba” in my pizza dough recipe (Roundup taint and all) and making air baked McCain “Forno Country – Taglio Rustico” fries (they are the best).

There are some things worth preserving that this Canadian cannot resist even in the land of Michelangelo, da Vinci, Pavarotti, Machiavelli, Dante…and the list goes on and on.

I also go out of my way to buy Jell-O pudding mix, Heinz Relish and Betty Crocker cake mix even though I can bake from scratch like nobody you know, for example, making this today for lunch tomorrow with my relatives (substituting the store bought Italian Savoiardi style biscuits with fresh baked Pan di Spagna):

https://ricette.giallozafferano.it/Zuccotto-senza-cottura.html

Yes, it tastes as good as it looks, better. I am from Friuli so for me Tiramisu is common (we invented it) and Zuccotto is not (grazie Toscana).

You can’t beat the Canadian out of the Canadian and on that note:

VIVA IL CANADA…PER SEMPRE.

#69 Dolce Vita on 06.29.19 at 3:41 am

PS, PS on #56 Dolce Vita (or whatever number I got slotted):

Baking & Conoscenti Want to Be Tip:

If tackling Tuscan Zuccotto in Canada (any Zuccotto recipe), NEVER, EVER forget to drench the living daylights out of the Pan di Spagna with:

Alchermes.

It would be a travesty not to, since the 8th Century and it comes from the Emilia-Romagna region (Italia’s culinary heart land, Bologna et. al.). Zuccotto is not Zuccotto without Alchermes.

You will thank me.

In YVR for a Summer jaunt, I would drive to Sacramento, CA and buy it from Corti Bros. (this brand from Padova):

https://cortibrothers.com/products/luxardo-alkermes-for-baking-and-cooking

Near impossible to find in Canada. Dilute to 70% by weight with water for the drenching.

In Italia, Amazon.it has it, cheap, about €10 on average.

More advanced but delicious Zuccotto recipe I have made many times (my YVR friends lined up at the door during Summer for this – time consuming to make but worth the effort in spades…uses Semifreddo*…and no, it’s not the simplistic Baked Alaska):

http://blog.giallozafferano.it/sissiincucina/lo-zuccotto-toscano-di-luca-montersino/

————————————–

*Other new Conoscenti Want to Be Tip.

#70 The Great Gordonski on 06.29.19 at 4:59 am

While you were sleeping The Donald hit a home run with China. Can anyone say “Melt Up” !!

Wasn’t there a couple of dogs here recently who were selling everything and going to cash? Bad move. Oh well.

The Million Dollar Idea will now be “Where do U have to be profit for the next six years of Trumponomics? Gawd damn, I just love that guy. By inertia I’m doing 30% ++ in my passive accts….every year he’s in office. You just have to be in, you don’t even have to try.

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#72 Frank Rotiroti on 06.29.19 at 7:12 am

The end of recessions is upon us. These are my famous last words. They said the same thing just before the .com bust. Something is around the corner that will hurt many very badly.

Agree. It’s called ignorance. – Garth

#73 TomMac on 06.29.19 at 7:20 am

Preferred shares are, as you say Garth, very unloved. All classes. Straights should rise with falling rates but they aren’t. There are rate resets with minimum resets- also falling like stones. Yields well north of 5% and after tax equivalent over 7%. Problem is they’re very illiquid and when a few nervous nellies sell, the pricing gets hammered. But agree, they are mouth watering at the moment.

Pref ETFs are plenty liquid. They have a par value. Pay big. Low taxes. On sale now. Doubters may regret. – Garth

#74 dharma bum on 06.29.19 at 7:50 am

In contrast, high-yielding, blue chip-quality preferreds are (like me) cheap and attractive. – Garth
——————————————————————–

THAT’s why they’re “preferred”!

Get it?

Ahahahahahahahahahahahaha

I’m here all week…try the veal.

#75 oh bouy on 06.29.19 at 7:59 am

@#58 PastThePeak on 06.28.19 at 11:11 pm
Off topic, but I read a good quote today:

“You can vote socialism in, but you’ll have to shoot your way out…”

_________________________________

LOL, you think thats a good quote?
What are you 7yrs old?

#76 oh bouy on 06.29.19 at 8:14 am

#16 Alessio on 06.28.19 at 5:25 pm
If the economy is booming why are majority of Canadian 1 paycheque away from bankruptcy? #confused
________________________________________

the majority aren’t one paycheque away from bankrupcy.

The doom on here is palpable.
Get out and enjoy the sunshine folks.

#77 PastThePeak on 06.29.19 at 9:02 am

#70 The Great Gordonski on 06.29.19 at 4:59 am
While you were sleeping The Donald hit a home run with China. Can anyone say “Melt Up” !!
+++++++++++++++++++++++++++

It will go higher, but the prospect for a Fed rate cut goes down, and Mr. Market doesn’t like that. We shall see how much of a boost this gives after a couple days. Monday is likely to be big for sure.

#78 paulo on 06.29.19 at 9:05 am

#7 dave

Use your line of credit and than pay it off-

#79 Russ on 06.29.19 at 9:47 am

Dolce Vita on 06.29.19 at 3:04 am

PS:

Happy Canada Day, Canada.

Here in Italia I still can’t resist making pancakes drenched in delicious Québec Maple Syrup, using “Farina Manitoba” in my pizza dough recipe (Roundup taint and all) and making air baked McCain “Forno Country – Taglio Rustico” fries
====================

Hey Dolce,

A little early there with the wishes, it’s still the month of June in Canada.

I’ve got a couple days of sailing (regatta weekend) and then we takes Monday off for the “stat”.

#80 not 1st on 06.29.19 at 10:04 am

For the life of me I will never understand some people.

Trudeau puts an across the board carbon consumption tax that hits everything and then applies the GST to it yet. Raises the aggregate cost of living and inflation by a significant amount and cuts the revenue coming from our energy sector. Blocks a pipeline that could have made the govt 50B in revenue – now will never be built. People eat it up and applaud doing something on climate change. Doug Ford makes some minor cuts to autism and library funding you know to try and whittle down that $350B debt and people get the pitchforks and torches out.

#81 Bob Dog on 06.29.19 at 10:46 am

Another big win for globalization. What’s a few hundred lives to an MBA. The ceo makes 40 million a year due to the savings in software engineering.

https://www.bloomberg.com/news/articles/2019-06-28/boeing-s-737-max-software-outsourced-to-9-an-hour-engineers

#82 jess on 06.29.19 at 11:08 am

update to the largest bribery case in history! odebrecht case

(A June 25, 2019 investigation by the International Consortium of Investigative Journalists and the Miami Herald has revealed that “Odebrecht’s cash-for-contracts operation was even bigger than the company has acknowledged, and involved prominent figures and massive public works projects not mentioned in the criminal cases or other official inquiries to date.”)

https://gfintegrity.org/the-odebrecht-case-the-role-of-social-mobilization-and-journalism/

#83 Flying Foxtrot on 06.29.19 at 11:12 am

Garth, you are slowly selling me on the preferred shares – my big question is how do you weight US Preferred vs Canadian Preferred in a portfolio? Do you use both? What about international markets?

#84 crowdedelevatorfartz on 06.29.19 at 11:33 am

@#67 Sweet Life
“Lay-off the Progressive Far Left N. American MSM click bait.”
+++++
Unelected EU govt?
You smoking Canadese pot?
I guess you were busy during the latest EU elections?
A Maltese newspaper is North American Click Bait?
Bwahahahaha.
Whatever.
The numbers dont lie and fiscal reality of incompetent populist govt. awaits the Economic hammer from Brussels.
Keep regaling us with recipes while Rome burns….
Speaking of reality.

Have they jailed the rescuer for saving all those refugees off Lampadusa yet?
How many people did she save? 25? 30?
And Italy is trying to make an example of her…..sad.

Lunga vita ai soccorritori rifugiati !

#85 crowdedelevatorfartz on 06.29.19 at 11:52 am

@Dolce Vita.

I hope you be able to read this click bait propaganda when your power comes back on.

https://www.reuters.com/article/us-europe-weather/wildfires-and-power-cuts-plague-europe-as-heatwave-breaks-records-idUSKCN1TU0H0

One wonders how the cyclists will survive the Tour de France if this Saharan heat wave continues.

Just a lovely 20 c in Vancouver. Time for a bike ride

#86 Tony on 06.29.19 at 12:54 pm

What’s this a joke? Five year Canadian mortgages will be one percent (even) or less by the end of 2021. There’ll be 4 interest rate cuts in America the last will be April 2020. Then rates in America will push upwards from May 2020 to September 2020 (gold will take a steep drop between those months. Then the interest rates will push sideways into the November election. After the 2020 election interest rates will fall off a cliff. By the end of 2021 Canadian mortgage rates for a 5 year mortgage will be around 1 percent maybe slightly less. If you’re looking to buy gold buy it in September 2020.

#87 Trojan House on 06.29.19 at 12:55 pm

#59 Ponzius Pilatus on 06.28.19 at 11:17 pm

You can’t fix an idiot either – idiot.

#88 Tony on 06.29.19 at 12:59 pm

Re: #82 Flying Foxtrot on 06.29.19 at 11:12 am

Wait ’til April 2020 to buy preferred shares. The U.S. stock market should fall in the second half of 2020.

#89 Tony on 06.29.19 at 1:11 pm

Re: #76 PastThePeak on 06.29.19 at 9:02 am

I don’t know what news you read but Trump struck out at the meeting. That was already 100 percent priced in the market. The odds of anything were basically zero going into the G20 summit meeting. The very worse case scenario didn’t happen. I don’t construe that as good news.

#90 Stan Brooks on 06.29.19 at 2:29 pm

https://positivemoney.org/how-money-%20works/how-banks-%20create-money/


“When banks extend loans to their customers, they create money by crediting their customers’ accounts.”

Sir Mervyn King, Governor of the Bank of England 2003-2013 (Speech)

And Martin Wolf, who was a member of the Independent Commission on Banking, put it bluntly, saying in the Financial Times that: “the essence of the contemporary monetary system is the creation of money, out of nothing, by private banks’ often foolish lending” (Article).

By creating money in this way, banks have increased the amount of money in the economy by an average of 11.5% a year over the last 40 years. This has pushed up the prices of houses and priced out an entire generation.

But ‘inflation’ is sub 2 %… Sure.

#91 Al on 06.29.19 at 9:51 pm

‘In other words, if you have skill, you’ll do better.”

You should inform the majority of fund managers on this Earth…cuz… they do worse (than the index).

#92 Aag50 on 06.29.19 at 11:18 pm

Age 52 – rapid decline in mental ability and not able to do good investment decisions..
Garth – is it true? From your personal experience?

#93 expat on 06.30.19 at 2:59 pm

Dublin-Based Exchange Bitsane Vanishes With Users’ Funds

Ireland-based cryptocurrency exchange Bitsane has apparently vanished, taking as many as 246,000 users’ crypto deposits with it. The news was reported by Forbes on June 27.

This is why Facebook Libra or a derivative will take over crypto.

There are so many scammers in Crypto Facebook will provide legitimacy.

Having Zuck running Crypto isn’t any better but stability in this thing is critical.

Who you gonna buy from, Chuckie’s bitcoin wonderful website or Facebook?

Duh