The shock

Scotiabank offers a “Power Savings Account” with a premium rate of interest. It’s 0.02%, but to gain that a balance of $5,000 is required. Under five grand on deposit, the rate changes to 0.00%. Chequing accounts at all of the banks, where most people cycle through the bulk of their income, pay nothing.

High-interest accounts? The best rate at any of the Big Six banks is 1.6%. The best bank GIC is 1.8% for a three-year lock (TD, RBC, BMO) while the top payer is Oaken at 2.7% – which takes your money and lends it out as high-ratio mortgages to people you hope to never meet.

The point? Cash is trash, it seems. Savers have been nailed to the cross of Accommodative Monetary Policy, as central banks keep rates low enough to spur economic growth. The latest inflation number for Canada is 2.4%, the highest in a decade and 25% above last year’s number. It also tops the Bank of Canada’s benchmark rate of 1.75%, which means we essentially have a negative interest rate policy.

The implications are legion. Mortgages are too cheap, encouraging rampant debt accumulation, pushing up the value of assets bought with borrowed money and hurting society as a result. What’s the benefit of owning an expensive house when you owe a fortune on it? Also, why pay off a 2.5% mortgage when the inflation rate is about the same? After all, it’s almost free money.

Dawn in Saskatchewan talked with me about that issue this week. Her home is worth $150,000 in a small community and she has $60,000 remaining at 2.39%. She’s been making accelerated payments and annual prepayments, doing everything possible to eliminate debt – at the same time she has zero liquid assets and is 15 years from retirement with no defined benefit pension. The money you’re using to retire a 2% debt could have made 13% in a balanced portfolio this year, I said. When the big R comes you’ll need income more than anything else.

Of course, the inflation numbers understate everything. Food, insurance, gas, home heating fuels, clothes, cars, drugs, kibble – it all costs more than 2% above last year’s levels. The carbon tax alone has impacted much. Savers are being crushed yet again. The old maxims of trashing debt and packing cash into things like savings bonds are junk. Those CSBs are actually gone. Now you have to trust some weird, online outfit with your savings just to make more than the cost of living. And meanwhile all interest is taxable outside a RRSP or TFSA.

A negative real central bank rate is a big problem as inflation rekindles. It’s surpassed the BoC’s target which means a rate cut in 2020 is not in the cards. That would just encourage more borrowing, more spending, asset inflation, a lower dollar and greater imbalance. But a rate hike – normal procedure to cool off rising prices – would be a bitter blow to those legions of Canadians who can barely make existing debt service payments, while corralling economic growth.

Meanwhile the US economy and markets are about to melt up as Mr. Impeached does everything possible to win re-election in November. That could include a China trade deal, more deregulation and quite likely a personal tax cut. The American deficit will erupt, equities surge, wages pop as labour shortages spread and commodity prices jump as the stimulus spreads globally in a post-Brexit world. Yup, more inflation. Washing over us. How will our bank handle it?

This is the big nasty that we’ve been warned about. A rate shock. Once inflation here moves above 2.5%, on its way to three, the Bank of Canada cannot maintain its current 1.75% level. So next year could contain exactly the opposite of what many people think – loan, mortgage, credit card, HELOC and line of credit charges that get fatter, not thinner.

Will that reward savers?

Nah. Fuggedaboutit. The big banks have been under profit pressure lately (check out the quarterly earnings). Higher rates will increase their spreads helping restore the bottom line. Besides, the bankers know they don’t need to give you interest on your chequing account or pad the HISA rate since your behaviour won’t change. When 80% of all TFSA money is in savings accounts and GICs, the die is cast.

Our central bank wisely resisted dropping rates when the Fed cut earlier this year. Three times. But the damage was already done. A nation pickled in debt has continued adding to its pile of obligations. Real estate values have been edging up again. The savings rate sucks. Families and households owe more money than the size of the entire economy. And now we seem to be approaching a policy crossroads.

Governor Poloz, the head banker dude, is gone in a few months. Trudeau will anoint a new one. Many will be surprised.

About the picture: Another pic from the latest version of the Vancouver Police Department’s dog calendar. It showcases members of the force’s K9 unit, who have also become Twitter influencers. Order your copy here for fifteen bucks plus shipping. And remember: dog cops don’t care what your excuse is. Grr.

 

79 comments ↓

#1 joblo on 12.20.19 at 3:40 pm

“Governor Poloz, the head banker dude, is gone in a few months. Trudeau will anoint a new one. Many will be surprised.”

Gerald Buts for the win!

#2 Just snootin' on 12.20.19 at 3:46 pm

“central banks keep rates low enough to spur economic growth”

Central banks keep rates low so corporations can borrow cheap to buyback shares at inflated valuations, methinks.

#3 Yukon Elvis on 12.20.19 at 3:46 pm

Once inflation here moves above 2.5%, on its way to three, the Bank of Canada cannot maintain its current 1.75% level.
…………………………….

Perhaps a few quarter point rate hikes. Nothing major or the economy collapses. Rock meet hard place.

#4 Apostle on 12.20.19 at 3:48 pm

Good post. Well said.

#5 PKP801 on 12.20.19 at 3:51 pm

Given the sheer number of Canadian families that are barely above water or can’t handle a major expense, I am deeply uneasy about the ramifications to savers once those families start needing a tax-payer bailout.

Now bear with me, here. If the majority of Canadian voters (50+1%) are underwater or up to their eyeballs in debt, and IF the population can be bribed with their own (or their neighbor’s) money, wouldn’t a sly and cunning politician see that as a massive voting bloc ripe for exploitation? Wouldn’t a politician figure out some way to bail out those families in exchange for their vote?

My ideal would be to let them flounder, let the chips fall where they may, then clean up afterwards. A painful (but hopefully short) correction to forcibly teach Canadians to live within their means – you buys your ticket, you takes your ride. My fear is that those in charge CAN’T let this happen or risk massive social and economic upheaval, so they’ll move heaven and earth to make sure that doesn’t happen, and those prudent ones who are ‘in the black’ and saved will be punished for their diligence.

#6 Sold Out on 12.20.19 at 3:54 pm

Well Garth, don’t leave us hanging. Will it be Carolyn Wilkins, or Evan Siddall? Or one of the Quebecois guys?

#7 AGuyInVancouver on 12.20.19 at 3:59 pm

Manulife Bank is offering way better rates than those High Interest numbers, but for Chequing!

#8 Linda on 12.20.19 at 4:02 pm

If the actual increase in prices to goods & services is greater than the stated inflation rate, why then is the true rate not being recognized? How can anyone make good financial decisions if the official numbers are not telling the whole story? I can get that the true numbers might spook the herd, but maybe doing just that might get people to think about their financial choices & make better decisions.

#9 Shawn Allen on 12.20.19 at 4:08 pm

Want a higher savings rate?

If you have non-registered cash you can move $100k into various places that pay higher. That way you are protected by deposit insurance in the very unlikely event of a default.

Motive Financial a subsidiary of Canadian Western Bank is at 2.8%.

Laurentian bank has 3.3%.

If enough people move to the places with the highest rates, the bigger players might increase their rates.

If too few move to get higher rates then why should the big banks offer more?

Garth is right. Apathy and inconvenience keep most of us put.

#10 FreeBird on 12.20.19 at 4:25 pm

Maybe we could all move to Wakanda?

#11 Garth is my enabler on 12.20.19 at 4:33 pm

Dear Dorothy,
Garth is one of few left out there who are preaching living life within ones means and being frugal and financially responsible is not mental disability, and one should not be ashamed of. ( there no usual suck up to Garth)

However,
we should all borrow and borrow till we cant no more.
It does not mater. Everybody who borrowed and owes tons of money is better off than me who owes nothing.

It will be in the end leveraged on all of us, borrowers will have had better life than those who saved and lived with no debt.

Look around. Ego madness everywhere. On the roads, shopping malls.
And on TV all that is good, cuz itz me me me me me

#12 Camille on 12.20.19 at 4:40 pm

Rising rates are far from garanteed, higher inflation is desirable to CBs. Tips are the latest darling of the bond world.
Your debt (of explanation) is intriging, what’s up?

#13 jess on 12.20.19 at 4:40 pm

29 Don Guillermo on 12.19.19 at 5:09 pm 33 Sail away on 12.19.19 at 5:18 pm
South Dakota – …”he says it’s more tax efficient.”

…” in the 17th century, judges fought back by creating the “rule against perpetuities”, which limited the duration of trusts to around a century, and prevented aristocratic families turning their local areas into mini-kingdoms.That weakened aristocratic families, opened up the British economy, allowed new businessmen to elbow aside the entrenched powers in a way that did not happen elsewhere in Europe, and helped give the world the industrial revolution. “It’s a paradoxical point, but it wasn’t a bad thing when the scion of some family from out in the counties came down to London and pissed away his fortune. It was redistribution of wealth,” said Eric Kades, a law professor at William & Mary Law School in Virginia, who has studied trusts…..English emigrants took the rule to North America with them, and the dynamic recycling of wealth became even more frenetic in the land of the free. Then Governor Janklow came along. In 1983, he abolished the rule against perpetuities and, from that moment on, property placed in trust in South Dakota would stay there for ever. A rule created by English judges after centuries of consideration was erased by a law of just 19 words. Aristocracy was back in the game.
——————————–

….”trust law that began in South Dakota and spread throughout the US is only a generation old. But the implications are ominous.

Here is an example from one academic paper on South Dakotan trusts: after 200 years, $1m placed in trust and growing tax-free at an annual rate of 6% will have become $136bn. After 300 years, it will have grown to $50.4tn. That is more than twice the current size of the US economy, and this trust will last for ever, assuming that society doesn’t collapse altogether under the weight of this ever-swelling leach.

If the richest members of society are able to pass on their wealth tax-free to their heirs, in perpetuity, then they will keep getting richer than those of us who can’t. In fact, the tax rate for everyone else will probably have to rise, to make up for the shortfall caused by the wealthiest members of societies opting out, which will just make the problem worse. Eric Kades, the law professor at William & Mary Law School, thinks that South Dakota’s decision to abolish the rule against perpetuities for the short term benefit of its economy will prove to have been a long-term catastrophe. “In 50 or 100 years, it will turn out to have been an absolute disaster,” said Kades. “Now we’re going to have a bunch of wealthy families, and no one will be able to piss away that wealth, it will stay in the family for ever. This just locks in advantage.”

#14 ts on 12.20.19 at 4:43 pm

RE#5 PKP801 on 12.20.19 at 3:51 pm

There will be no bailout. Same situation happened in the US in ’08 – homeowners did not receive a bailout. They were left to deal with the consequences on their own. If this were the case, there would indeed be a revolution led by the boomers. Our politicians hopefully are not so inept. No bailout. Prepare – interest rates will be going up – wayyyyyyyyyyyyyyup.

#15 Dave on 12.20.19 at 4:59 pm

Housing is still fairly affordable in Canada. I think we need more immigration to drive house prices and rental prices up further. Isn’t this good for investors? lol

#16 Smartalox on 12.20.19 at 5:00 pm

@FreeBird #10:

Maybe you should move to Wakanda. Apparently trade with the USA is looking good!

US government lists fictional nation Wakanda as trade partner

The US Department of Agriculture listed Wakanda as a free-trade partner – despite it being a fictional country.

A USDA spokesperson said the Kingdom of Wakanda was added to the list by accident during a staff test.

The department’s online tariff tracker hosted a detailed list of goods the two nations apparently traded, including ducks, donkeys and dairy cows.

In the Marvel universe, Wakanda is the fictional East African home country of superhero Black Panther.

https://www.bbc.com/news/world-us-canada-50849559

#17 MF on 12.20.19 at 5:04 pm

So Poloz is leaving, and it’s a tad disconcerting. Just look at what happened when Mark Carney left to reduce England’s interest rates to zero after doing it here and ruining our economy.

I even remember Carney warning the pound would get hammered following the “first” Brexit vote.

Umm isn’t that what you have wanted all along?

Hilarious.

Anyways, this is a decent article with some potential candidates for BoC governor:

https://business.financialpost.com/news/economy/who-will-be-the-next-bank-of-canada-governor-here-are-six-candidates

Be sure to read the comments to get a decent feel for what many people think about the choices presented.

MF

#18 avocado latte on 12.20.19 at 5:09 pm

What if Dawn loaded up on prefs which had a reset/call date similar to her mortgage renewal date? Seems like an ok way to hedge against a mortgage rate increase, while collecting more than double that 2.5% rate.

#19 Sail away on 12.20.19 at 5:26 pm

All I heard in that entire post was “preferred shares… Preferred Shares… PREFERRED SHARES!!!…”

My preferreds have given a 6 month average total return of 8% between asset appreciation and yield since June. An interest rate hike would turn that up a few more notches.

Can’t wait for the holidays. I’ll be wandering around the house in a bathrobe with laptop cackling to my wife about the markets. Such a lucky gal.

#20 MF on 12.20.19 at 5:27 pm

4 ts on 12.20.19 at 4:43 pm

Interest rates going upppppp?

Unlikely.

They have proven to be highly resistant to actually raising the rates to where they are supposed to be.

Rates should have risen in 2013. Why didn’t they? Think about all the pressure the BoC is under: the banks, re cartels, insurance industries, car companies, and who knows who else. This, of course, is in addition to them kind of making it up as they go along. Witness Poloz “warning” us about debt levels and “risks to the economy”….then lowering the rate right after. Twice. When they actually got around to raising, they raised meekly, and, threatened a cut every single time they (wisely) left rates alone.

There is a clear bias downward. It’s like the Dr who feels he should administer antibiotics to make his patients “feel better” even though it’s contributing to a anti biotic resistance, and, the patient has a viral infection anyways.

MF

#21 Stone on 12.20.19 at 5:28 pm

#16 Smartalox on 12.20.19 at 5:00 pm
@FreeBird #10:

Maybe you should move to Wakanda. Apparently trade with the USA is looking good!

US government lists fictional nation Wakanda as trade partner

The US Department of Agriculture listed Wakanda as a free-trade partner – despite it being a fictional country.

A USDA spokesperson said the Kingdom of Wakanda was added to the list by accident during a staff test.

The department’s online tariff tracker hosted a detailed list of goods the two nations apparently traded, including ducks, donkeys and dairy cows.

In the Marvel universe, Wakanda is the fictional East African home country of superhero Black Panther.

https://www.bbc.com/news/world-us-canada-50849559

———

Too bad. I was hoping to buy some vibranium.

#22 akashic record on 12.20.19 at 5:36 pm

Who profits most from flooding the world with cheap money? Who has the greatest financial interest to keep money cheap?

We need to know the answer for these to evaluate the chances of the status quo to continue or change.

Who and how executes the implementation of these primal interests are secondary.

#23 Shawn Allen on 12.20.19 at 5:45 pm

Statistics Canada Inflation Numbers

Garth said: “Of course, the inflation numbers understate everything.” I believe he meant that a lot of the ordinary things we buy are higher than the most recent average official inflation rate of 2.2%.

Linda responded:

#8 Linda on 12.20.19 at 4:02 pm
If the actual increase in prices to goods & services is greater than the stated inflation rate, why then is the true rate not being recognized?

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

No, Stats Can is not hiding inflation. Here is what the first page of their latest release said:

“Consumers pay more for meat compared with 2018
Meat prices rose 5.2% year over year in November, marking five months of increases at or above 4.0%. Consumers paid 6.2% more for fresh or frozen beef, following disruptions to North American supply chains and strong international demand for Canadian beef during the first 10 months of 2019.

Following the end of foreign export restrictions on Canadian pork, consumers paid more on a year-over-year basis for ham and bacon (+9.1%) and fresh or frozen pork (+0.7%) in November compared with October. Price increases for pork products were concentrated in the Atlantic region.”

https://www150.statcan.gc.ca/n1/daily-quotidien/191218/dq191218a-eng.htm

#24 Sail away on 12.20.19 at 5:49 pm

#13 jess on 12.20.19 at 4:40 pm

—————————————

Jess, here in South Dakota, we greet each other with “How Kola”, which apparently means “Hello Friend” in Sioux.

It’s also a semi-secret financial password. Paraphrasing Garth, the overall goal is to become (or remain) filthy rich while exploiting all niches within the official rules of the game.

#25 Mr Canada on 12.20.19 at 5:54 pm

I have an RBC Credit Card, but do most of my Banking at another Bank. RBC sent me an “exclusive” invitation this week for a pre-approved unsecured Line of Credit of $30k at PRIME PLUS 4.49% = 8.44% !! Are they freaking crazy? I have a small HELOC at my primary Bank at prime + 1% , high FICO score, no debt… I don’t expect RBC to get much response on that offer, another reason the banks to pay zero on their savings accounts.

#26 Joseph R. on 12.20.19 at 5:55 pm

#87 GBiddy on 12.20.19 at 12:27 am
#71 Joseph R on 12.19.19 at 9:09 pm

#66 GBiddy on 12.19.19 at 7:38 pm
#58 Joseph R. on 12.19.19 at 6:55 pm

2 GBiddy on 12.19.19 at 5:41 pm
If you find the impeachment process just, and giggle with tingles at the prospect of Trump being sullied or ousted, you, dear sir or madame, are likely a Marxist at heart–and don’t even know it.”
—————————————————————

Can you explain to us how is Trump’s impeachment related to Marx’s model of history?

Touched a nerve, Comrade?

————————————————————————-

No

Ok, you’re either no fun or too smart to take the bait.

I however am neither. So here goes: Marx may have been a great intellect, but as the father of modern communism, he essentially brought into being a political system which, among other great horrors, is precipitated on taking away, outlawing or otherwise preventing universal sufferage.

I equate efforts to overturn elections without letting voters cast ballots with communism (often referred to as Marxism by laymen such as myself). Not academically correct I know, but we’re not pedants here so why split hairs.

As for Marx’s model of history, I’ll let history speak for itself.

——————————————————-

I find your answer quite thoughtful. I have nothing more to add or argue.

#27 Thedood on 12.20.19 at 5:56 pm

#5 PKP801 on 12.20.19 at 3:51 pm
Given the sheer number of Canadian families that are barely above water or can’t handle a major expense, I am deeply uneasy about the ramifications to savers once those families start needing a tax-payer bailout.

Now bear with me, here. If the majority of Canadian voters (50+1%) are underwater or up to their eyeballs in debt, and IF the population can be bribed with their own (or their neighbor’s) money, wouldn’t a sly and cunning politician see that as a massive voting bloc ripe for exploitation? Wouldn’t a politician figure out some way to bail out those families in exchange for their vote?

My ideal would be to let them flounder, let the chips fall where they may, then clean up afterwards. A painful (but hopefully short) correction to forcibly teach Canadians to live within their means – you buys your ticket, you takes your ride. My fear is that those in charge CAN’T let this happen or risk massive social and economic upheaval, so they’ll move heaven and earth to make sure that doesn’t happen, and those prudent ones who are ‘in the black’ and saved will be punished for their diligence.
___________________________________________

A bail out for dummies who can’t do simple math? It’ll never happen. That would encourage EVERYONE to go out and do exactly the same. If the government does it once, it’ll be an expectation among the masses forever.

#28 Long-Time Lurker on 12.20.19 at 6:06 pm

>Here, Smokey.

>This will probably repopularize The Red Hot Chili Peppers.

DECEMBER 17, 2019

Consumption of chili pepper cuts down the risk of death from a heart or cerebral attack

by Istituto Neurologico Mediterraneo Neuromed I.R.C.C.S.

Chili pepper is a common ingredient in Italians kitchens, and over the centuries, it has been praised for its supposed therapeutic virtues. Now, an Italian study shows that people who consume it on a regular basis have an all-cause mortality risk 23 percent lower than those who do not consume it. The study, published in the Journal of the American College of Cardiology (JACC), was conducted by the Department of Epidemiology and Prevention of I.R.C.C.S. Neuromed in Pozzilli, Italy, in collaboration with the Department of Oncology and Molecular Medicine of the Istituto Superiore di Sanità in Rome, the University of Insubria in Varese and the Mediterranean Cardiocentro in Naples.

The study examined 22,811 citizens of the Molise region in Italy participating in the Moli-sani study. Following their health status for an average period of about eight years and comparing it with their eating habits, Neuromed researchers observed that in people regularly consuming chili pepper (four times a week or more), the risk of dying of a heart attack was cut by 40 percent. Risk reduction for cerebrovascular mortality was more than halved.

Marialaura Bonaccio, Neuromed epidemiologist and first author of the publication, says, “An interesting fact is that protection from mortality risk was independent of the type of diet people followed. In other words, someone can follow the healthy Mediterranean diet, someone else can eat less healthily, but for all of them, chili pepper has a protective effect.”….

…More information: Marialaura Bonaccio et al, Chili Pepper Consumption and Mortality in Italian Adults, Journal of the American College of Cardiology (2019). DOI: 10.1016/j.jacc.2019.09.068

Journal information: Journal of the American College of Cardiology

Provided by Istituto Neurologico Mediterraneo Neuromed I.R.C.C.S.

https://medicalxpress.com/news/2019-12-consumption-chili-pepper-death-heart.html

#29 Dazed and CONfused on 12.20.19 at 6:10 pm

“…..That could include a China trade deal, more deregulation…..”

More deregulation under Republican rule?
Yeah, that really worked out well for the investment banking industry in 2008, didn’t it. The proverbial fox guarding the hen-house. Can you say Boeing? Can you say Volkswagen?

Years of printing money out of thin air (quantitative easing), trillion dollar deficits, Cadet Bone Spurs’ Second Amendment toy pistol is running out of magic bullets.

As disgusting as Unhinged 45 really is, I’m rooting for a second term solely to witness the next GFC v2.0 stick to the Orange Orangutang like spaghetti on a wall.

Impeachment will be but a small footnote to his future infamous legacy.

#30 Shawn Allen on 12.20.19 at 6:11 pm

Prefs with

#18 avocado latte on 12.20.19 at 5:09 pm

What if Dawn loaded up on prefs which had a reset/call date similar to her mortgage renewal date?

*****************************
Most rate reset prefs CAN be bought back by the company at $25 upon reset. But they are not obliged to.

Many rate reset prefs are trading well below $25. They may be great investments now. But many will likely never ever return to $25.

Rate reset prefs are good if you are committed to holding for income. Holding indefinitely.

If you want something that matures at a know price on a known date, think bonds and GICs. No free lunch.

#31 Asterix1 on 12.20.19 at 6:16 pm

Home prices are not going up in GTA, it’s a nice illusion. Reality is very different, you are getting more home for your buck and better homes vs a few years ago.

Cash will always be king once the next recession hits. Lots of great homes will be up for sale, at much better valuations.

#32 Bob Dog on 12.20.19 at 6:28 pm

Can anyone explain why this countries money supply is controller by for profit banks run by financial psychopaths. Our money supply is far more important than the armed forces. In fact given government obsession with mass migration, I’d say our military is completely redundant.

We desperately need to nationalize the banks and run the financial system in the best interest of ALL Canadians. Not just foreign and domestic corporations.

#33 HH on 12.20.19 at 6:34 pm

So, when you say we will be surprised by the person to be BOC chief do you mean Morneau?

#34 oh bouy on 12.20.19 at 6:41 pm

@#31 Asterix1 on 12.20.19 at 6:16 pm
Home prices are not going up in GTA, it’s a nice illusion. Reality is very different, you are getting more home for your buck and better homes vs a few years ago.

Cash will always be king once the next recession hits. Lots of great homes will be up for sale, at much better valuations.
_______________________________

hope thats the case but you folks have been saying this for almost 20 years now.

#35 Barb on 12.20.19 at 7:16 pm

The K-9 calendar order didn’t work for me. Their form accepted all my info, but never proceeded to a successful checkout. Similar thing occurred last year.

Too bad I’ll miss out on 12 months’ photos of these highly intelligent and spectacularly loyal dogs.

#36 Felix on 12.20.19 at 7:31 pm

Impooch all canines.

#37 WUL (Cheerful for Xmas) on 12.20.19 at 7:39 pm

I took Garth’s pathetic advice a couple of days ago.

My fixed fiver at 2.69 percent small remaining mortgage on my expansive corporeal hereditament in Cowtown came up for renewal.

Got a fixed 5 for 2.64 percent and amortized it to the moon.

More jingle in my jeans to blow on the sunny, bucolic streets of Fort Mac.

#38 Everything is better in USA! USA! on 12.20.19 at 7:43 pm

Why are Canadians so cheap and stingy?

#39 Sail away on 12.20.19 at 7:46 pm

#32 Bob Dog on 12.20.19 at 6:28 pm

We desperately need to nationalize the banks and run the financial system in the best interest of ALL Canadians.

————————————–

No. That is a terrible idea.

Also factually incorrect since that would definitely not be in my best interest and I’m a Canadian.

#40 Everything is better in USA! USA! on 12.20.19 at 7:48 pm

I find it hilarious when you compare USA with Canada. I mean comparing with a superpower and rich country is not fair. I can easily a Canadian from an American just by the outlook. SAD!

#41 Sail away on 12.20.19 at 7:51 pm

#35 Barb on 12.20.19 at 7:16 pm

The K-9 calendar order didn’t work for me. Their form accepted all my info, but never proceeded to a successful checkout. Similar thing occurred last year.
Too bad I’ll miss out on 12 months’ photos of these highly intelligent and spectacularly loyal dogs.

—————————————-

Sorry to hear that, Barb. As another option, my engineering firm puts out a calendar we call “The boys of Engineering”. Also highly intelligent subjects.

Can I send you one as a holiday gift? Gratis, of course.

#42 Ponzius Pilatus on 12.20.19 at 8:00 pm

#122 Sail Away on 12.20.19 at 11:00 am
#114 Keith in Rio on 12.20.19 at 10:22 am

Sail Away……

In the previous thread, you asked me for the business case for investing in foreign real estate.

It’s dirt cheap compared to NA, much cheaper to buy than rent down here, but, I don’t need a business case to buy a place where I am going to live the rest of my life.

I’m married to a Brasilian, speak the language now, and have permanent residency. The way I see it, if I am going to live in a third world country, which Canada is rapidly becoming, I’d prefer to be in Brasil. We’ve got a beach within walking distance and it’s 25-50 degrees every day.

The rest of the negatives people read on the internet about leaving Kanaduh, only exist in fertile imaginations or are easily manageable.
——————————–
Thanks, Keith, that makes sense.
Any recommendations for long-term, 1-2 month rentals in your area? Maybe the condo you’re vacating?
————-
Keith,
How much are the strata fees in your favela?
And do they allow Airnb?

#43 WUL (Astounded) on 12.20.19 at 8:01 pm

Jess @ 13

Not the dread “rule against perpetuities”. I had to learn that at law school 40 years ago. Never expected to see it here.

It is easier to memorize the Williamson Ether Synthesis.

I faked it and have never needed it.

I still call it the “rule against purple tooties”.

Your unlearned friend,

WUL

#44 Suburban Bob on 12.20.19 at 8:07 pm

Some are saying things could turn ugly next year already.

80% chance of recession in 2020.

https://www.theglobeandmail.com/investing/article-canadas-most-famous-economist-thinks-theres-an-80-per-cent-chance-of/

#45 Asterix1 on 12.20.19 at 8:15 pm

#34 oh bouy on 12.20.19 at 6:41 pm

hope thats the case but you folks have been saying this for almost 20 years now.
___________________________________________

Its always the case, RE and the economy always follow cycles. That will never change. What has changed, is that the RE industry are trying to make us believe that they no longer apply.

Not sure who “you folks” are. I own a property (bought 11 years ago downtown Toronto) and have held numerous REIT’s. It’s just pretty clear where this is all going.

#46 Nonplused on 12.20.19 at 8:25 pm

The carbon tax, which is really just a big increase in the HST, is a desperate tax grab by a desperate government, nothing more.

But for the 50% or more of people who live paycheck to paycheck, it will be more than that. It will cause them to have to “ration” their expenditures even more than they already do. Remember, most people don’t have the money to pay any more tax. They are borrowing money to get by as it is.

And it seems to me rationing fuel in a winter country is cruelty at its utmost. One could argue that the objective is to get people out of their F150’s and into a Corolla, but the people who are already driving Corollas will be impacted too.

Ever notice how taxis have already gotten small? Gone is the leg room you use to expect to ride in the back seat. The Prius is extremely popular among taxi drivers because when you are putting 150,000 km a year on a car the batteries do actually pay for themselves. So what does Turdeau actually think raising fuel costs even more will accomplish, other than making it that much more expensive to take a cab? (It’s already pretty expensive and most people avoid it if they can, including driving when they probably shouldn’t.)

And making seniors pay more to heat their humble abodes in a winter climate seems criminal to me. Raising the cost of food seems criminal to me. Raising bus fare seems criminal to me. But all these things and everything else will cost more.

—————-

Trump hasn’t been impeached yet. All that has happened is the articles of impeachment have been voted on by the house. Until the articles are sent to the senate, the trial hasn’t even begun. And now Pelosi is saying she may delay sending the articles to the senate until she is assured it will be a “fair trial”. Wait, what? You mean like the one in the house, where the Republicans got no witnesses and were denied most of their questions? I suppose they can do that in the house because the articles of impeachment are more like a criminal charge by the prosecution, so they can say whatever they want, but at this point it is just a charge and it is not a conviction until the senate rules. Since the case is based entirely on clairvoyance and has no witnesses to any actual crimes, it is likely the vote in the senate will be as partisan as the one in the house, which means there is no chance Trump gets impeached.

The Democrats have kind of shot themselves in the foot. I suppose going into the 2020 elections with Hillary Clinton in the lead among Democrats even though she is not running and already lost to Trump once is making them desperate. I think this whole impeachment thing is a tactile admission by the Dems that they know they are going to lose big in 2020. Real big. But I am guilty of mind reading a bit too by saying that.

And anyway has anyone really thought this through? Is a President Mike Pence any better? Or do they immediately move to impeach him too?

——————

As I stated yesterday, it is the government of Canada that is on shaky ground, not the US. We could be voting again before the US November elections. But nobody in the world really cares about that. Canada is a prosperous country (or it was), but despite its large land mass it is small economically. Maybe about half the size of California. The problem the Turdeau has is that he now has to kiss butt for both the NDP and the PQ. A man with a wife and a mistress has to spend a lot of money to keep it up. (I know! It’s not sustainable. They both play off each other for more more more.)

Last warning: make a crudity of a political leader’s name again, and your comment will not be published. We are above that. – Garth

#47 Everything is better in USA! USA! on 12.20.19 at 8:40 pm

I feel very sorry for Canadiana. They work so hard and get paid so little. I know how tight they are after paying the ridiculos mortgage$$$$. They are barely left with chump change. To add insult to the injury they can hardly afford to buy food and clothes. So trun to credit cards and reverse mortgages. SAD! Canada is a great country for people who like to sit on their ass and collect benefits. You only live once, come to USA! oh wait.. I forgot it’s not so easy to come here. If it was, the whole country would move to U.S. LOL

#48 oh bouy on 12.20.19 at 8:53 pm

@#45 Asterix1 on 12.20.19 at 8:15 pm
#34 oh bouy on 12.20.19 at 6:41 pm

hope thats the case but you folks have been saying this for almost 20 years now.
___________________________________________

Its always the case, RE and the economy always follow cycles. That will never change. What has changed, is that the RE industry are trying to make us believe that they no longer apply.

Not sure who “you folks” are. I own a property (bought 11 years ago downtown Toronto) and have held numerous REIT’s. It’s just pretty clear where this is all going.
_________________________

Sure ok.
‘some’ folks have thought it was pretty clear for years now. is now the time for a correction? possibly.

#49 Sail away on 12.20.19 at 9:11 pm

I have a brother who strongly believes in the hand of fate guiding his actions.

Last December, he noticed (or was led to notice, apparently) that Netflix dropped 12 points in one day, so liquidated 50% (Gah!) of his portfolio and began swing trading NFLX.

His last sell was yesterday; his overall swing-trade return for the year through 20 trades on one single stock was 27%, for around $140,000 USD. He bought a Tesla, put everything back in index-tracking ETFs, and is even more convinced in the hand of fate.

Who am I to argue?

#50 Yanniel on 12.20.19 at 9:17 pm

Tangerine’s checking comes with no fee and its rate is 0.15%. EQ Bank’s HISA has a rate of 2.30% (no account fee either). Still pitiful but generous in comparison with the Big Six.

Dividend swaps are becoming popular as a replacement/complement for core bond holdings. The idea is capturing the dividend yield but without the volatility of the market. In ETF form there are tax benefits as you would get taxed in the form of capital gains.

#51 Shirl Clarts on 12.20.19 at 9:21 pm

#40 Everything is better in USA! USA! on 12.20.19 at 7:48 pm
I find it hilarious when you compare USA with Canada. I mean comparing with a superpower and rich country is not fair. I can easily a Canadian from an American just by the outlook. SAD!
^^^^^^^^^^^^^^
Evidently, grammar is a differentiator.

#52 Ponzius Pilatus on 12.20.19 at 9:28 pm

For me, peace of mind and a good night’s sleep has always been important to me.
So I go with Mark Twain: “I don’t worry about the rate of return on investments, but about return of investments”
My wife, though is more aggressive with her money, so it all balances out.

#53 dosouth on 12.20.19 at 10:03 pm

Guess I just wanted to say that the actual CPI really means nothing anymore with removal of things that actually makes sense. Government doesn’t wonder why we don’t believe nor do they care as long as the media keeps spewing out what the uninformed want to hear. At least Tangerine gives me a few bucks every month in interest…Just sayin

#54 Adam Einsen on 12.20.19 at 10:07 pm

I noticed that my bagels have gone from $3.00 for half a dozen to $4.50 in one year. If that isn’t inflation. I should file a discrimination claim on the grounds of being poor. Price increases adversely affect the poor more than the higher incomes.

Don’t get me started on how the prices of Kosher salt, Pareve-certified cheese and other food produce (except pork) are rising rapidly.

#55 Bytor the Snow Dog on 12.20.19 at 10:29 pm

#43 WUL (Astounded) on 12.20.19 at 8:01 pm sez:

“Jess @ 13

Not the dread “rule against perpetuities”. I had to learn that at law school 40 years ago. Never expected to see it here.

It is easier to memorize the Williamson Ether Synthesis.

I faked it and have never needed it.

I still call it the “rule against purple tooties”.

Your unlearned friend,

WUL”
—————————————-
You read Jess’ posts? I’m sure the vote here is 99% scroll wheel.

#56 Sail Away on 12.20.19 at 10:57 pm

#52 Ponzius Pilatus on 12.20.19 at 9:28 pm

For me, peace of mind and a good night’s sleep has always been important to me.
So I go with Mark Twain: “I don’t worry about the rate of return on investments, but about return of investments”
My wife, though is more aggressive with her money, so it all balances out.

———————————————-

The thing is… old Sam was not a very good investor. Witty, yes; canny, maybe not. He said things like that probably because of painful experience. Look into it.

#57 Barb on 12.20.19 at 11:25 pm

#41 Sail away on 12.20.19 at 7:51 pm

“As another option, my engineering firm puts out a calendar we call “The boys of Engineering”. Also highly intelligent subjects.

Can I send you one as a holiday gift? Gratis, of course.”
—————————————————–
Thanks, but it’s unnecessary to be reminded of a VW suspended beneath a bridge.

#58 Stan Brooks on 12.21.19 at 1:40 am

Of course, the inflation is much higher than reported, specially in food and housing, utilities – the true cost of living.

The ‘good news’ for all inflation proponents is that it will accelerate faster even further while wages are stagnant, driving cost of living ever-higher which in turn will stimulate further borrowing, which will keep interest rates low for a very long time, that higher cost of living and doing business will further stimulate outsourcing, ….

going in circles down the toilet, this is what our debt driven ‘economy’ is.

As I said countless times: inflation of necessities of at least 8 -10 %, maybe more for a decade or two, combined with stagnant net wages in nominal terms (deeply negative in real terms) and zero interest rates as inflation roars and the economy stagnates.

It has been pretty much the experience in the last 5-6 years that now accelerates fast.

Poor young people, savers and retirees who will have to pay the price for this idiocy with depleted savings, no retirement and no jobs.

This while the while world literally booms, there is no crisis except in a few debt ridden resource colonies where the housing turned to mania.

The BoC’s boss plaid his role quite well as did his predecessor, trying to maintain poker face as the wheels were coming off his debt driven bandwagon ponzi scheme literally counting the days for his retirement leaving the embarrassment of the failure to the next poor schmuck.

It will be spectacular and smelly as it starts hitting the fan.

The carbon tax and record cool winters will just add insult to injury as everything of importance goes up fast in price.

Higher taxes to sustain the ‘loonie’ combined with inflation of necessities…. fun, fun to watch.

Cheers and take cover. And load on lubricant.

#59 Stan Brooks on 12.21.19 at 2:06 am

https://www.scotiabank.com/content/dam/scotiabank/sub-brands/scotiabank-economics/english/documents/scotia-flash/scotiaflash20191220.pdf

Canada’s Economy Has Stalled, Case For Rate Cuts Grows
 The evidence that the economy is rapidly weakening is broadening
 Retailers have had no volume growth in two years…  …with Q4 tracking the biggest decline since 2008
 GDP growth has stalled out in the final quarter of 2019
 There is a strong case to look through a backward inflation overshoot…
 …as slack widens with disappointing data…
 …and creating a case for rate cuts in 2020H1 to stay on the inflation target
 The BoC will be pressured to revise its forecasts next month

That with record deficit, roaring inflation and close to zero interest rates!

Cheers,

#60 Rexx Rock on 12.21.19 at 2:24 am

The BOC will cut rates back to 0.25%.In two years will be the time to renew your mortgage! Japan,EU,UK,USA. Its going to happen because it is needed to service the debt when money is basically free.

#61 Stan Brooks on 12.21.19 at 2:24 am

#51 Shirl Clarts on 12.20.19 at 9:21 pm
#40 Everything is better in USA! USA! on 12.20.19 at 7:48 pm
I find it hilarious when you compare USA with Canada. I mean comparing with a superpower and rich country is not fair. I can easily a Canadian from an American just by the outlook. SAD!
^^^^^^^^^^^^^^
Evidently, grammar is a differentiator.

Grammar will not help you at the grocery store.

Being ‘sophisticated, educated’ and poor is evidently not the equivalent of being smart.

Keep living in your brain frozen/with delusion of ‘superiority’/small dick complex/ bubble.

Cheers,

#62 jane24 on 12.21.19 at 2:59 am

I have been following you Garth since you wrote columns in the Toronto Sun in the 1980s. Your advice then was to buy the biggest house possible with the biggest mortgage you could carry and let the rising RE market make you rich. Money should be invested in stocks you said and paying off the mortgage. Sounds like those times are coming around again.

#63 Westcdn on 12.21.19 at 4:54 am

My youngest played soccer and my oldest rugby! They both stars and quick. I worried about the eldest as she would run in the teeth of defenders and some of them were monsters compared to her. She started just after she got braces. Don’t worry she said as she showed me her $2 mouth guard. I let her travel with the senior women team – God only knows what they taught.

I tried my hand at options and made good money – great leverage but it looks like my last trade is going to punish me. There is still time to save my butt… I say you only bet with what you can lose.

#64 crazyfox on 12.21.19 at 5:28 am

https://globalnews.ca/news/6311572/canada-inflation-november-2019/

Yeah… I caught the same thing on Canuck inflation a couple nights ago. Inflation’s impacts can’t be overstated. I was wondering when it would come, thinking Canadian overnight rates would move up over the next year while the U.S. remained flat myself, with Trump facing an election year with his stooges in place.

We can see it in grocery stores, at the pumps… incomes are out pacing inflation and will contribute as inflation lags behind wages and none of this is good for a nation that has consumer debt at 102% in Q3 this year. Does this number put Canada at risk to an economic shock from rate creep? The quick answer is yes, we lead the OECD pack, and it’s related to real estate values:

https://www.cnbc.com/2017/11/24/canadas-household-debt-levels-higher-than-any-other-country-report-says.html

Unfortunately, the link above is not out of date. We can’t discount a government’s power to tax, there’s headroom to move up but we are exposed to higher rate hikes, without question:

https://en.wikipedia.org/wiki/OECD#/media/File:Payroll_and_income_tax_by_country.png

#65 Just snootin' on 12.21.19 at 8:04 am

#79 Mississauga Mel on 12.19.19 at 9:38 am

Thanks for book reference on Canada by Nader. Will check it out. Only a few shopping days left.

#66 Felix on 12.21.19 at 8:48 am

Despicable.

A selfish mutt stealing Christmas gifts donated for underprivileged children.

https://www.cnn.com/2019/12/20/us/police-dog-stealing-toys-trnd/index.html

Where will the canine curse end?

Impooch them all.

#67 Steven Rowlandson on 12.21.19 at 9:35 am

It should pay to save but it does not. In the light of this it can’t be worth the effort to tax the interest on savings accounts….

#68 Dharma Bum on 12.21.19 at 10:08 am

#39 Sail away on 12.20.19 at 7:46 pm
#32 Bob Dog on 12.20.19 at 6:28 pm

We desperately need to nationalize the banks and run the financial system in the best interest of ALL Canadians.

————————————–

No. That is a terrible idea.

——————————————————————-

Yes. This is horrible…this idea!

https://www.youtube.com/watch?v=uSudkID3zJM

By the way, there’s no reason to worry about the economy. Don’t you remember? There’s a new magical minister of middle class prosperity. We’re ALL gonn prosper!

Yayyyyyyyyyy!!!!

#69 NoName on 12.21.19 at 10:23 am

#64 crazyfox on 12.21.19 at 5:28 am

Unfortunately, the link above is not out of date. We can’t discount a government’s power to tax, there’s headroom to move up but we are exposed to higher rate hikes, without question:

There is a hed room to tax or move rates? How can you say something like that knowing that majority of canadians are 200cad away from abis.

Now that iam talking about taxes and inflation, 20 yrs i was making half per hour, half what i do now, but todays total is not 2x more what was 20 yrs ago, and everything i pay for is 3-4 more expensive than back then from housing cost to food and trinkets. I have to admit that tvs are 2x bigger for 1/2 price. My housing was less than 1k all included, now just prop. tax and utilities add up to that amount.

Cost of leaving is nowhere near what is officially stated.

There is no room left for anything, unless they do augusto and they bring in chicago boys, so we can finance big mac over 10 months.

#70 Dharma Bum on 12.21.19 at 10:34 am

#9 Shawn Allen

Want a higher savings rate?

If you have non-registered cash you can move $100k into various places that pay higher.
——————————————————————-

I don’t get why people that actually have saved money sitting in 0% bank accounts simply don’t just buy bank shares instead.

They seem to steadily climb in value over time, and pay a consistently decent dividend.

Bank stocks have always been a pretty solid, good returning investment vehicle. Proven out year after year after year. Income and growth in the long run. (Sure, they falter every once in a while, but that’s when you pick up some more…duh.)

Is the average Joe-saver out there really that dumb and unaware?

Must be.

#71 IHCTD9 on 12.21.19 at 10:35 am

These folks mortgaged up the wazoo are euchred.

Mortgage debt in Canada is over 1.5 Trillion, so there will be no effective bailout from the government for these people. That level of debt represents 40 grand for every living Canadian working or not. The gov may talk about debt “relief” for Canadians, but when it comes time to actually do something; it’ll be a rebate for 100.00 phased in over 5 years or some similar joke.

The government itself is just as ****** as these home owners are. There is not enough room in Canadians’ budgets to tax sufficiently. If rates are forced up there will be blood in the streets, either that or some very unorthodox measures taken by debtors to keep their homes.

Not enough rich folks to soak in this country, just about everyone else is broke, a growing group know how to dodge and avoid.

#72 Sail Away on 12.21.19 at 11:28 am

#71 IHCTD9 on 12.21.19 at 10:35 am
These folks mortgaged up the wazoo are euchred.

Not enough rich folks to soak in this country, just about everyone else is broke, a growing group know how to dodge and avoid.

——————————————–

How Kola, my friend.

#73 Boris Corbyn on 12.21.19 at 12:54 pm

#59 Enlightening report from Scotiabank. Thanks for the link. I’m betting it won’t be available on Monday morning.

An economy based on pot and taking money from the gvt at 1.75% and lending it to overstretched peasants at %19.99…

The last time I saw similar signs was northern rock in 2008 (google it) of course this couldn’t happen in Canada?

#74 Dumb Wealth on 12.21.19 at 11:17 pm

Make $80k but still broke? Read these stories from the working poor in Canada:

https://dumbwealth.com/tales-of-the-working-poor/

#75 Mr. Nirp on 12.21.19 at 11:32 pm

Our friend just put another $1.4trillion into the economy. There is no way he will lose the next election. Market melt-up x 1000

https://globalnews.ca/news/6325342/donald-trump-spending/

https://www.usatoday.com/story/news/politics/2019/12/20/trump-signs-1-4-trillion-spending-bill-raise-age-tobacco-sales/2666117001/

https://thehill.com/policy/finance/budget/475487-trump-signs-14-t-spending-package-averting-shutdown

#76 maxx on 12.22.19 at 8:07 am

#11 Garth is my enabler on 12.20.19 at 4:33 pm

“……However,
we should all borrow and borrow till we cant no more.
It does not mater. Everybody who borrowed and owes tons of money is better off than me who owes nothing.”

Can’t say I agree with you GIME. Those in debt have sleep problems, their thinking is altered 24/7 and the stress levels are manifest everywhere, perhaps most especially on our public roads. They’re not happy, not comfortable and certainly not where they could be.

“It will be in the end leveraged on all of us, borrowers will have had better life than those who saved and lived with no debt.”

I know people with excess debt and their “better life” is a mirage. All they seem to think and talk about is money and how they’re worried about retirement.

“Look around. Ego madness everywhere. On the roads, shopping malls.
And on TV all that is good, cuz itz me me me me me”

True. Best place to be is having enough FU money that you never miss a nights sleep. You needn’t listen to anyone’s take on life or anything else, for that matter. Save early and save constantly. Your lifestyle might not be “designer”, but your bank balance sure as he!! will.

Play your own game.

#77 maxx on 12.22.19 at 9:01 am

@ #17

Looks like Upper Canada is steamed…..yet again.

I think that a PhD from Princeton can handle larnin’ public speaking.

#78 Matt on 12.22.19 at 2:34 pm

“When the big R comes you’ll need income more than anything else.”

I’m 50% through an $800k mortgage at 2.39%, for a couple more yrs at least…all things being equal (they’re not but for a blog comment we’ll keep it that way) do you suggest not doing accelerated payments and re-allocating to Equities? thanks

#79 Chris Hanson on 12.24.19 at 11:20 am

Actually, central banks screwed borrowers alot too because if interest rates were at even more normal levels, say 5% to 6% mortgage rates, they could actually have money left over for saving, investing.

Now, borrowers are paying at least $400,000 to $500,000 more for a house, condo that it is really worth which is between $2,000 to $2,400 a month in extra mortgage payments. They are also paying alot of more CMHC premiums and much higher property taxes etc. This is at least $100,000 to $150,000 more in 25 years.

Borrowers as most Canadians most uniformed and clueless when it comes to basic economics are also so much in debt that they got so duped and continuing to get duped that it is causing at time high divorces and stress.

Many of these borrowers public sector, government workers pensions are at risk because of low interest rates, higher fees in the pension fund and higher risk taking in them. As long as they think they are winning but are not, they will be still living in fantasy land.