The long game

Let’s noodle this.

Beating the virus apparently means spending more money than anyone could imagine. Billions. Trillions. Cash nobody has. All debt.

It’s working. The economy was turned off to stop Covid but all this cash kept things functioning, Thumbs up, baby. But as every family knows, debt doesn’t disappear. There are consequences. Let’s think about that for the next 700 words.

Those CERB cheques, business bailouts and payroll subsidies are all being made with newly-printed money, since Ottawa has no reserves. Ditto in Washington. The more money that’s created, the less all the existing money is worth – which is exactly what the gold-lickers have been yammering about.

But for most people the legacy of the bug will come down to one thing. Inflation. Not out-of-control hyper-pricing. No Venezuela or Zimbabwe. Just steadily higher costs and, yes, rising interest rates. Especially when economic growth resumes with a vengeance later in 2021 (as the vaccine arrives) and thereafter. It’s a reasonable bet central banks will gradually tighten, starting in 2023. By 2025 these sub-2% mortgages we’re seeing will be like the bittersweet memories of your youth.

Could inflation return to, say, 4% or 5%? Of course. GICs might yield four points again. Home loans could rise to 6%. Easy. Not soon, but with the legacy of Covid, abysmal public finances and the insatiable need for debt financing by governments it seems completely logical this is in the cards. Moreover, central banks will be desperate to raise rates in the coming years – to prepare for the next economic plop. If the cost of money doesn’t increase in better times, it cannot be crushed to heal a problem. Those who believe rates will be at zero for a decade simply do not understand.

So, imagine if you could insulate yourself from the increases until, say, 2030. How smart would that be?

Seriously wise.

You now have a rational way to do this, which is the 10-year mortgage. The cost of this borrowing has collapsed in recent weeks to just over 2.5%. That is about 60 basis points more than locking up for a five-year mortgage and almost full point more than going for a one-year term with a low-cost lender who might also sell donairs.

Here’s why this kind of loan makes sense. First, rate protection. There is (in the mind of this pathetic blog) a 100% chance the cost of money will be reasonably higher in 60 months and heroically greater in 120. No way the CBs are staying at these levels for a day longer than necessary. As the economy reopens, repairs, climbs and grows (this is inevitable since pandemics are temporary) so will key lending rates.

Second, qualify for a mortgage once, then forget it. No stress test later. No bankers pocking through your credit history. No worries if you get laid off, retire or lose your mind and start a small business.  And, third, you know what your monthly payment will be for a long, long time. That allows for better planning, saving, investing and getting ready for what lies ahead. In a world of surprises, this is one less.

But there are downsides, too. The 10-year mortgage costs more (slightly) than a shorter one, so you have to play the long game. Over time the savings could be outsized. But if you happen to sell and move in the first five years, a significant penalty will enue – not only the higher interest rate, but a mortgage-break fee that won’t be pretty.

After that, clear sailing. The Canada Interest Act dictates all mortgages become open after five years, so the loan can be paid off in the second half of its life with a penalty equal to only three months of interest. Not so bad.

As you may have noticed lately, people are nuts. They’re treating real estate the way they did toilet paper in March. FOMO has returned, panic buying is everywhere and houses are selling as if there were no recession, no double-digit unemployment and, oh yeah, no global pandemic with our closest neighbour being the epicentre of infection and death. Go figure.

But if you’re buying, refinancing or coming up for a mortgage renewal, seriously consider the decade-long option. The cost has never been lower. The benefits never more obvious. The peace of mind alluring.

Come back in a decade and see. In case I’m daft enough to still be here.

167 comments ↓

#1 binkybarnes on 08.11.20 at 1:22 pm

First?!

Garth, perhaps one day you could do a write-up on what you think of our dollar’s future versus its American counterpart.

Thanks. BB

#2 Captain Uppa on 08.11.20 at 1:27 pm

I am in this exact position right now and am considering the 10 year.

My renewal is coming in Summer 2021, but I can lock in around January/February without any current mortgage break penalty.

#3 Dolce Vita on 08.11.20 at 1:28 pm

Great verve today Garth, silver tongued as usual. Nice. Garth, all for naught if below is true. Please God (or big electron for the deniers) make it true.

As for me, VACCINE NAYSAYER, I am excited even though common sense says ah probably doubtful. In case you have not heard it, out today:

Putin’s Russia has vaccine that works. Vlad had his daughter vaccinated (3 times, to bring her fever down from 37 deg).

I WANT TO HOPE, let it spring eternal.

Italia working on it too, trials done in September, fast tracking production as I type…optimistic or foolhardy?

Who knows. All I know is that if ever a country needed a vaccine more than the 2nd Coming, it would be Italia. I really want that DAMN VIRUS to be in the rear view mirror of humanity.

Canada slow to fast on the uptake of the above (Russia).

Toronto Sun (availing itself from the usual axe murderer, chain massacre news) to this honest take on Russia’s vaccine:

“Russia approves COVID-19 vaccine ‘Sputnik V’ before final trials” (Google it, the URL is a mile long, via Reuters).

Global at first dubious:

https://twitter.com/globalnews/status/1293148293178904577

5 hrs later Putin fanboys:

https://twitter.com/globalnews/status/1293218333484097538

Of course NYT and NBC dissed it immediately. They’re worried Trump will release their vaccines on America now and if it works, Trump will have chance come November. They are so polarized but their country not mine.

——————–

It’s so very good to read that Canada just as wide eyed, hope springs eternal, as a kid would be…me included.

Well written article, fair, by La Stampa this morning (or course translate it) on the Russian vaccine, minutes after Vlad announced it:

“Coronavirus in Russia, Putin: “First to register the vaccine, given a dose to my daughter” (ya I know, dung Google translation but they’re getting better)

https://www.lastampa.it/esteri/2020/08/11/news/coronavirus-in-russia-putin-siamo-stati-i-primi-a-registrare-il-vaccino-somministrata-una-dose-a-mia-figlia-1.39183098?%3Fref=fbpp

——————–

For those of you that can understand Italian, in the above there is the video of where Italia has a vaccine, mass trials, over in September and if successful released that month, etc..

As for me, could not care less if they have to vaccinate me 5 times to get my temperature down, let me sign up now please.

FWIW.

And don’t SHOOT THE MESSENGER, MOI.

#4 baloney Sandwitch on 08.11.20 at 1:29 pm

Great column. What do you think about this idea? I have mortgage free house. What if I remortgage for half a mill for 10 years, invest the half mill in a portfolio of banks, telecom and utilities dividend paying stocks for 10 years. Do you think I will be ahead in 10 years?

#5 the Jaguar on 08.11.20 at 1:34 pm

If people weren’t so intently and myopically focused on rates they might actually review what standard prepayment privileges are available from their kindly ancient warrior Bank. Some of them allow you to repay as much as 20% of the original principal of your mortgage annually in addition to regular contractual payments. (assuming you’re making them, you deferral weasels).
Do the math. You would be paid out in less than 5 years. Ask about portability as well, just in case you want to move to Lunenburg, Nova Scotia and live down the street from Garth and Dorothy. Another reason to worship at the feet of your ancient warrior Bank. Did you know that some of them (Banks) have incredible art collections? True dat. Good to know there are still some institutions in this world that still hold trust, integrity and beauty in high regard. Amen.

#6 BlogDog123 on 08.11.20 at 1:40 pm

I bet somewhere close to “zero” people will go for the 10 year mortgage:

1. [email protected] will talk them out of it. Excuses: Too much hassle. Bank lady won’t know how to tick the 10 year box. Everyone else gets 5 year. So you should too, I guess. Inertia. What’s familiar.
2. People don’t care. Give me the easiest thing to sign on the papers I won’t read before scrawling my signature.
3. Still think variable rate the way to go, short term thinking… Don’t see the long term view or benefit of locking in with historically lowest rates.
4. Forgot to write down the advice in this blog. Spouse with me to sign renewal, just get this pesky thing done and get outta here…

#7 TurnerNation on 08.11.20 at 1:53 pm

Long game indeed:

1. If you guys aren’t believing that property rights are to be slowly dismantled in the New System, look down South. A group in USA was co-opted to riot and destroy cities. This is WW3 and our cities will fall.
Nothing new, same old – what worked then, works now:
https://en.wikipedia.org/wiki/Kristallnacht
“hospitals and schools were ransacked as attackers demolished buildings with sledgehammers.”

2. As always they must target the young minds. The deck is completely stacked against us – media is totally taken over for the New System:

Teen Vogue magazine:
https://twitter.com/TeenVogue/status/1288996556868378624
@TeenVogue
Jul 30
“While we’re working to abolish the police, we must also work to dismantle what the police were put here to protect: property.”

…………
But first the globe must be subjugated. Martial law and lockdowns are a natural public health campaign!
Remember, masks help us open up the economy…but CANNOT prevent it being shut down.
Got it?
Just a few more weeks guys gotta make that curve flatter. The A.I. is monitoring all pockets of resistance. Tailored “news articles” (cough, Cambridge Analytica) will be rolled out to surpress.
Did you know QC has protests against this? Media silent.

FACT: the areas with the strongest most unified culture, thus threatening to the New System, got the most cases:
Quebec; Italy; USA; Australians are pretty tough too – aussi rules..

#8 Piano_Man87 on 08.11.20 at 1:54 pm

Inflation is not going to get that high. Inflation comes from too much consumer demand – people with too much money spending it all over on everything. Businesses cannot keep stock, and with the high demand, they raise prices. Everyone was predicting inflation after 2008 when the US Fed launched all their QE spending. But it never materialized. Because it went to ASSET inflation – it inflated the stock market, not retail consumer prices. Same as now.

If our feds didn’t bail out companies and instead cut 10k cheques instead of 2k cheques for CERB, then we would have inflation. Everyone would be buying a new cell phone, a new car, clothes, etc.

Which also means rates aren’t going up. Same as after 2008. It would destroy the middle class. The central bank has to watch employment numbers carefully. So long as Canadians are in debt up to their eyeballs, we will have perma-low rates. And as long as we have perma-low rates, we will have Canadians going in debt up to their eyeballs. It is a vicious cycle – the incentives are all screwed up. No one cares about housing debt anymore because the housing market is too big to fail in the eyes of Canadians.

Of course rates will rise. Not quickly or sharply. But they will inflate. As stated, CBs cannot afford to keep current levels since there is no line of defense against the next downtown. Get used to it. – Garth

#9 Toronto_CA on 08.11.20 at 1:55 pm

I don’t see interest rates going up materially until 2023, which I think Garth says above.
My mortgage is due to renew in 2022, and I’m going to lock in as long as possible then…
Right now locked in at 1.74%

#10 Bill on 08.11.20 at 1:57 pm

T2 = idiot strikes again. Hes a traitor…eos
We sent our ppe to China and they returned empty planes.

Quebec contractor that was given $382 MILLION by Trudeau has failed to ship any masks so far ¡ The Post Millennial – News, Politics, Culture, and Lifestyle
https://thepostmillennial.com/quebec-based-contractors-was-given

#11 Cat doors and KFC on 08.11.20 at 1:58 pm

We have it totally wrong in Canada. We’re spending all the money on a cat door for an MIA gov gen.

In the UK, they are covering half of your dining experience. Go Boris. Go KFC.

https://www.gov.uk/guidance/get-a-discount-with-the-eat-out-to-help-out-scheme

#12 Pete from St. Cesaire on 08.11.20 at 2:01 pm

Those first 4 paragraphs are a nice summation of a FIAT currency.
As for CERB; in my opinion not only should people be able to collect it for ever more (the government can’t spend months tying to force people into becoming paranoid germaphobes and then just turn it off and say “tough”), but it should also be tax-free. I mean, what is CERB other than a compensation for damages imposed on you by others.

#13 Neo on 08.11.20 at 2:06 pm

“Especially when economic growth resumes with a vengeance later in 2021 (as the vaccine arrives)” – Garth

Garth,

As I’ve said before. A vaccine will be no panacea. It won’t be the cure you and everyone thinks.

https://www.reuters.com/article/us-health-coronavirus-fauci-vaccine/fauci-warns-covid-19-vaccine-may-be-only-partially-effective-public-health-measures-still-needed-idUSKCN2532YX

Fauci says.

“We don’t know yet what the efficacy might be. We don’t know if it will be 50% or 60%. I’d like it to be 75% or more,” Fauci said in a webinar hosted by Brown University. “But the chances of it being 98% effective is not great, which means you must never abandon the public health approach.”

And there you have it..Six feet apart forever is what what an economy makes.

#14 Mattl on 08.11.20 at 2:13 pm

Have to say I’m finding it harder to get excited about my balanced port that is kicking out 6-7% with inflation at 2-5%. Strongly considering going all equities for the next 8-15 years.

#15 Bill on 08.11.20 at 2:19 pm

Garth
Whos pay these trillions back?
Or inflate it away….?
Anyway they dont care as TurnerNation has it correct….sadley.
Until i see different.

I sold my short term gold positions 2 days ago.
Im not a gold bug but there a time and place.

Gold down about a hundred bucks today. I told ya… – Garth

#16 Mattl on 08.11.20 at 2:19 pm

Also, a 10 year mortgage isn’t slightly more expensive. For me it would be a delta of 60 basis points, which is almost 25%. That is a 3K per year premium on a 500K mortgage – 25% is significantly more expensive.

So, don’t. I’m not selling you a mortgage. Just telling you that in 2028 a 2.5% loan might look insanely cheap. – Garth

#17 The other Keith in Calgary on 08.11.20 at 2:23 pm

All that CERB money paid out is now debt. So fine. Lets treat it as a loan to get someone, a lot of someones over a rough patch. How to get it back? Rather than taxing everyone, and every business, lets start by presenting each person with a bill itemizing how much CERB they’ve been paid, and ask for them to start paying it back when they are on their feet again. It’s won’t be this year, and maybe not next year, but a lot of those people are going to get their jobs back, and at least some of them are well paid. It may take some time, decades, perhaps, but that’s ok. In the mean time, nobody that got CERB gets an income tax refund and it gets paid back that way. Or maybe, if the income tax system can do it, starting when they have income again, we charge them a CERB surtax.
(and the blog dogs go crazy…)

#18 50 YEARS OF MAPLE LEAF INCOMPETENCE! on 08.11.20 at 2:34 pm

GARTH IS RIGHT!

Here’s the plan:

1. Buy a place in Toronthole.

2. Get a 10yr mortgage at cheap rates.

3. Invest all the savings in extra life insurance policies.

4. Then – just go to the beach and meet some super friendly Toronturds with their chainsaws!

https://www.vice.com/en_ca/article/889e94/video-shows-two-men-terrorizing-a-crowd-with-chainsaws-in-toronto

You’ll be dead, but….

YOUR FAMILY WILL BE RICH!!!

THEY CAN BUY MAKE BELIEVE SEASON TICKETS FOREVER!

#19 Bill on 08.11.20 at 2:37 pm

This aint about a Bug its about control and loss of your freedoms.
Just look to the south or Auz.
https://mailchi.mp/tomwoods/noem?e=a37e7aa5b8

#20 Overheardyou on 08.11.20 at 2:42 pm

#22 Mattl on 08.10.20 at 3:26 pm
———————-

Then the real issue with your point is not income. It’s the spending habits of the individual. If they’re going take the responsibility of raising a family dependent solely your career income. They should not be jeopardizing their own future and possibly your families by buying real estate they can not afford or spending beyond their means.

You don’t need a new car every 5 years. You don’t need a huge load of debt over your head for 25.

An individual can always live within their means or increase their income by re-training or getting a second job. With the current RE market, it is unrealistic to expect you can buy a home and raise a family without going severely into debt even with a 70K salary especially in a major metropolitan area.

Teachers are great, their certifications and skills can be transferred to other school boards and they have built in pensions. If the individual really wanted to ensure a better standard of living, they can always move to a less expensive locale. Rent a place, save modestly and keep the family expenses under control. They can get ahead of the game in the long term.

Affordability example here withing the GTA, technically commutable too. https://www.realtor.ca/real-estate/22201195/112-b-c-1780-simcoe-st-n-oshawa-samac

My points to people who complain about not being able to have a better life is their lack of responsibility, planning and determination. Expecting a better life with no sacrifices is just naive.

#21 Lambchop on 08.11.20 at 2:45 pm

#5 the Jaguar on 08.11.20 at 1:34 pm
If people weren’t so intently and myopically focused on rates they might actually review what standard prepayment privileges are available from their kindly ancient warrior Bank. Some of them allow you to repay as much as 20% of the original principal of your mortgage annually in addition to regular contractual payments. (assuming you’re making them, you deferral weasels).
Do the math. You would be paid out in less than 5 years.”

________________

My bank allows me to put up to 10% down once a year, as well as double-up every single payment.
Added bonus, every time you make a double-up payment, you can skip a future payment, so it’s like insurance for an unforeseen event. My mortgage is due in early 2022 and I have 3 years worth of payments I could skip if I needed to. No deferrals or Cerb needed, thank you very much.

The interest savings over the life of the mortgage are impressive and go straight into BDP.
Doubling up payments also cuts the length of the mortgage roughly in half, also awesome.
Oh, with accelerated weekly payments.

#22 Faron on 08.11.20 at 2:45 pm

Garth:

As you may have noticed lately, people are nuts. They’re treating real estate the way they did toilet paper in March. FOMO has returned, panic buying is everywhere and houses are selling as if there were no recession, no double-digit unemployment and, oh yeah, no global pandemic with our closest neighbour being the epicentre of infection and death. Go figure.

Yep, data from VIC bears this out. Prices and sales spiked bigly in Vic in July. YoY volume for SFD up 75%. Yes, 75%. However, YTD volume still down by 100 units or 5% relative to 2019. Big jump in listings chasing the demand. Interestingly, there were price cuts in numerous of the most recent listings update sent out by our realtor (our search caps at $800k, so reflects that market segment. BTW 800k in Vic buys you only slightly better than a tear down.)

#9 Toronto_CA on 08.11.20 at 1:55 pm

I don’t see interest rates going up materially until 2023…

I also thought that based on what I read, but analysts seem to be consistently underestimating the strength of the recovery. Bond yields have jumped substantially in the last week of market goodness indicating there may be a shuffle back toward equities causing yields to go up. Taking ZAG as a proxy, bond prices are at decadal highs, so have lots of room to drop and bring yields up along the way. If that happens, it will bring mortgage rates up with the bond yields in the not too distant future. Of course, that is limited by the FED keeping the overnight pinned at zero. But, I think if the curve steepens, the fed may consider a rate hike sooner than we all might imagine rather than introduce yield curve control. Recall that this recovery is V-shaped ;-) and that this is all temporary. That being the case, it’s not impossible for yields to return to near pre-pandemic levels sooner than we think. Whether that is a material increase is debatable. Rates were already low pre-pandemic.

#23 BlogDog123 on 08.11.20 at 2:51 pm

#17 The other Keith in Calgary on 08.11.20 at 2:23 pm
All that CERB money paid out is now debt. So fine. Lets treat it as a loan to get someone,
===

Exactly! It’s called “social benefit repayment”. If you collect EI even for a few weeks and you make too much money that year, they claw some of it back! Same thing with CERB. Skim it off their tax return refund until repaid !

#24 Mattl on 08.11.20 at 2:52 pm

So, don’t. I’m not selling you a mortgage. Just telling you that in 2028 a 2.5% loan might look insanely cheap. – Garth

I get that and I think your advice is good for a lot of people. Just pointing out that 25-40% is not slightly more expensive – that is a steep premium to pay. But if you are maxed out and concerned about the future I get it.

#25 Faron on 08.11.20 at 2:52 pm

Gold down about a hundred bucks today. I told ya… – Garth

Faron ribbingly: Seems like a good time to ask SA if now would be a good time to get into Alacer gold now that it’s 20% off the high it hit when you brought it to my attention…

#26 Coho on 08.11.20 at 2:54 pm

I think we’ve all seen enough over the past couple decades to know that setting and basically forgetting a diversified portfolio and waiting out market crashes/black swan events is safe. Why, because government will always print money to make the too big to fails whole again and markets will soar despite millions out of work/collecting dole and 13% unemployed rates.

Who or what has the trillions to “lend governments”? And if so, how did these individuals and entities acquire such wealth that nations states need to borrow from them. It’s all illusion.

There is always “money” to float economies but not enough to provide adequate services to those most in need.

One might argue that socializing losses for the too big to fails is good for everybody, but essentially it is wealth transfer from the people/ Main Street into the coffers of the Bay Street/Wall Street club that buy back their own stock to keep the game going.

As Garth has advised, do not panic/sell during volatile market fluctuations. In my opinion they are designed to fluctuate money away from perhaps even the most savvy investors. The market game is somewhat rigged and one has to know how to play the game. It’s just that it is never put quite that way.

#27 willworkforpickles on 08.11.20 at 3:01 pm

Is the virus gone yet?
Is Trump through yet?
Is the economic fallout past yet?
Has social unrest run its course yet?
Is the recession over yet?
Those posting here recently in belief a Trump win in November will lead to rioting and looting have likely made an understatement.
They are not wrong but only on the gravity and extent of what to expect with that outcome.
Areas predominately democratic will likely explode into anarchy and chaos all across the US. They would be the first to undergo martial law and order. Areas not predominately democratic would also see extensive social chaos where martial law and order in terms of boots on the ground by then will have been spread too thin to have an effect. Citizens in those areas in such circumstances will take up arms of their own to protect themselves and their neighborhoods on a wide scale.
Couple that with a second very real and potentially greater pandemic wave than the previous along with the first rounds of economic fallout evils of the first Covid-19 bout.
Soon thereafter a malaise of (where the words haven’t been invented to describe) just how ill prepared most are for its outcome, we may yet see a real social and economic perfect storm.
Might the election in November be rigged in Trump’s favor?… a safe bet?

#28 JB on 08.11.20 at 3:04 pm

#9 Toronto_CA on 08.11.20 at 1:55 pm

I don’t see interest rates going up materially until 2023, which I think Garth says above.
My mortgage is due to renew in 2022, and I’m going to lock in as long as possible then…
Right now locked in at 1.74%
…………………………………………………………………
What bank did you get that at?

#29 Linda on 08.11.20 at 3:06 pm

I’m wondering about demographics. Specifically the effect an aging population might have on inflation. The Government of Canada estimates that by 2036 Canada will have between 9.9 to 10.9 million people over age 65. Is there a formula that would indicate when a tipping point might occur that effectively would keep inflation in very low or even negative territory?

#30 Bill on 08.11.20 at 3:11 pm

For TurnerNation
https://www.armstrongeconomics.com/international-news/disease/this-virus-is-causing-psychological-damage-to-the-general-population/

#31 Dave on 08.11.20 at 3:14 pm

When will the first wave of mortgage deferral hit and what will be the impact?

#32 AntMan on 08.11.20 at 3:17 pm

Seeking thoughts on the return of Mark Carney.

#33 Penny Henny on 08.11.20 at 3:33 pm

Niagara Region house sales numbers for July.
New listings down 4.25% YOY
Sales up 38.5% YOY
HPI benchmark price up 13.6% YOY
Days on market unchanged

https://www.niagararealtor.ca/sites/default/files/July%202020%20Media%20Release%20-%20COMPLETE%20%281%29.pdf

#34 truefacts on 08.11.20 at 3:35 pm

If we get 4-5% inflation… Not sure it will happen (older population keeps inflation in check – ex. Japan), but if it does happen, where does one invest?

1. Rate reset preferreds
2. Stocks with built in pricing power
3. Appropriate REITs
4. Real assets (but I don’t do that)

DON’T INVEST IN:

1. Long bonds/GICs
2. High yielding stocks (utilities, etc).

Your thoughts on this Garth? Anyone else???

#35 Keith on 08.11.20 at 3:36 pm

@ #7 TurnerNation

“Long game indeed:

1. If you guys aren’t believing that property rights are to be slowly dismantled in the New System, look down South. A group in USA was co-opted to riot and destroy cities. This is WW3 and our cities will fall.”

The cities in America look like battlegrounds to be sure, at least on the news. The America that most middle class people live in, is a suburban society of gated communities. I can’t help thinking that in a decentralized federal system, with an armed citizenry and where private security personnel outnumber the police by a ratio of at least five to one private property rights still have considerable power.

For a long time in America, there have been and are neighborhood in cities where cops don’t walk alone, where law and order as we know it doesn’t exist. High murder rates, and rampant crime. It even happens in Canada where we sadly have tent cities where the police arrive in a set of four, at a minimum.

When I see the fences of the gated communities in Florida being stormed, and the golf courses and surrounding McMansions being torched, that will be the signal that the Americans with money and votes are under attack.

#36 Ronaldo on 08.11.20 at 3:43 pm

I recall back in the early 80’s when mortgage rates hit about 23% and people were still running to get a mortgage fearing the rates would go higher. So you see, people were just as daft then as they are now. And yes Garth, I expect you will still be here. You’re having too much fun.

#37 Bill on 08.11.20 at 3:48 pm

DELETED

#38 Brian Ripley on 08.11.20 at 3:54 pm

“…people are nuts. They’re treating real estate the way they did toilet paper in March.” Garth

My 6 big metro chart is up with July data comparing SF Detached house prices in Vancouver, Calgary, Edmonton, Toronto, Ottawa and Montréal.

http://www.chpc.biz/6-canadian-metros.html

Real estate wilding has broken out in central Canada.

I have not seen reports of drive-by bidding yet, as was popular in Vancouver circa 2016, but no doubt it’s on somebody’s dance card.

#39 Sail Away on 08.11.20 at 3:56 pm

#25 Faron on 08.11.20 at 2:52 pm
Gold down about a hundred bucks today. I told ya… – Garth

Faron ribbingly: Seems like a good time to ask SA if now would be a good time to get into Alacer gold now that it’s 20% off the high it hit when you brought it to my attention…

————

Huh, I read that as ‘Faron being deliberately obtuse’. As always, Padawan, no good deed goes unpunished.

Sort of like when our kids were little and we’d suggest they might want to bring a raincoat on a hike. If they chose not to, and they got wet, suddenly it was all our fault for not forcing the issue. So hard being the boss.

#40 Ronaldo on 08.11.20 at 3:56 pm

#4 baloney Sandwitch on 08.11.20 at 1:29 pm
Great column. What do you think about this idea? I have mortgage free house. What if I remortgage for half a mill for 10 years, invest the half mill in a portfolio of banks, telecom and utilities dividend paying stocks for 10 years. Do you think I will be ahead in 10 years?
——————————————————————
Likely double in that time so even with the cost of the mortgage which you can write off, you should be sitting pretty.

#41 Ronaldo on 08.11.20 at 3:59 pm

I mean, what is CERB other than a compensation for damages imposed on you by others.
——————————————————————
Especially 15 year olds, right?

#42 MF on 08.11.20 at 4:18 pm

“Of course rates will rise. Not quickly or sharply. But they will inflate. As stated, CBs cannot afford to keep current levels since there is no line of defense against the next downtown. Get used to it. – Garth”

-Meh. Getting tiresome. That’s what we heard in 2015, 2016, 2017, 2018 from the central banks.

Rates “rose” a wimpy amount and then were dropped to zero the first excuse there was. So much for slow and relentless up.

Looks like a luiquidity trap of epic proportions. I’m no gold bug, but harsh criticism of the zero interest rate policy is 100% warranted. Total incompetence.

MF

Low rates helped keep the pandemic crisis from becoming a Depression crisis. Saved your ass. Be grateful. – Garth

#43 PetertheSeparatistfromCalgary on 08.11.20 at 4:20 pm

Garth I would like to add something to your great article. Although reader discretion is advised because this is a Stephen King type of scary.

Title: “Inflation ate my Take Home” by Mr. Taxman

Inflation will be an easy way for politicians to raise taxes without doing anything. They just have to wait until inflation causes middle class people to slip into higher tax brackets.

#44 Moko on 08.11.20 at 4:27 pm

Hi Garth,

I would like to disagree with you on this. I don’t think the government is in a position to increase rates for a long time. In my opinion, there’s a few reasons for that:
1. Rising deficits. Higher rates means the governments debt service costs would be colossal. The governments would have to deploy further fiscal measures to ensure the economic engine doesn’t stop. We’re probably going to see these deficits grow over the next few years.
2. Record consumer and corporate debt. Central banks have kept rates low since 2008 despite the economy fairing well for the last few years. We’re at record consumer and corporate debt levels with the problem worsening due to COVID. The finances of all the people buying houses right now or companies issuing debt are not going to improve for years to come. Any increase in rates is going to come at great economic cost that I’m sure the central banks/ governments wouldn’t like to bear.
3. Economic Growth – The central banks have used tools we would’ve never thought of before to keep the economic engine going. It’ll be very optimistic to think the economy is going to get back to it’s pre-covid trend level in the next 4-5 years.

The central banks have flooded the market with liquidity and are basically acting as market makers to keep the flow of money going. Unfortunately, we’ve tackled the problem of high debt with more debt. I honestly think the central bankers are going to let inflation run its course. We’ll see real assets gain during the time and the wealth inequality will worsen.

I don’t think they have a way out of this debt bubble.

I’d really appreciate your views on this Garth.

I gave them. There is a zero chance rates will not increase as the recovery takes hold. But believe what you wish. BTW,’the government’ does not set monetary policy. – Garth

#45 the Jaguar on 08.11.20 at 4:32 pm

@#32 AntMan on 08.11.20 at 3:17 pm
Seeking thoughts on the return of Mark Carney.

I’ll bite since you’re throwing ‘chum’ into the sea water and it’s not yet time for my El Presidente Martini.

Mark Carney, from Fort Smith , NWT/Alberta border, similar to other peeps from small western towns ( Jordan Peterson, Fairview, AB, Chrystia Freeland, Peace River, AB) is a pretty smart cookie. Like the other two, he has established himself as a ‘cut above the rest’. Not one to hang back with the brutes.
That said, he’s fallen into the trap of believing his own publicity of late. He doesn’t project ‘humble servant’ anymore, somewhat understandable given how far he climbed up the food chain.
So why would he settle for ‘Finance Minister’ under an inferior intellect (T2) who would immediately commence handwringing the moment the spotlight went off him and over to Carney. Makes no sense to me.
I think he sees himself more as the great white knight to ride back into Dodge (Canada) and save ourselves from ourselves, but only in the role of PM.

Mr. Carney is the only adult in the room at the PMO. – Garth

#46 april on 08.11.20 at 4:41 pm

#30- some say Armstrong is a conspiracy theorist…. alot of truth in his writings but also alot of…. ?? What do you folks think?

#47 Howard on 08.11.20 at 4:44 pm

We’ll have to wait to fresh polls, but I think Biden may have just lost the election.

Kamala Harris is a cringey “woke” propagandist. Just yuck. He couldn’t have picked a worse VP in my opinion.

#48 Howard on 08.11.20 at 4:49 pm

Low rates helped keep the pandemic crisis from becoming a Depression crisis. Saved your ass. Be grateful. – Garth

——————————–

What?

I thought it was the stimulus cheques and mortgage deferrals that did that?

Aside from people who were renewing their mortgages, who exactly has benefited from ZIRP?

Credit flowed, and did not freeze. If it had, your grocery store would have been empty. The CBs did that. – Garth

#49 Howard on 08.11.20 at 4:56 pm

#32 AntMan on 08.11.20 at 3:17 pm
Seeking thoughts on the return of Mark Carney.

———————————–

It would actually be fitting for things to come full circle and for him to be welcomed into Trudeau’s cabinet. The two of them together can finish off Canada but good. Morneau was too hapless to get the job done.

Carney deserves your respect, anonymous Internet troll guy. – Garth

#50 Bill on 08.11.20 at 5:05 pm

#46 april
If you followed him for 20 years like I have you would know his models have been more accurate then anyone else’s predictions. He’s know’s how the system works. Just like 2009 certain individuals looted the treasury. Its happening again…greed and control needle is off the charts. The general direction of society is easy to see. Anyone in power is untouchable and will never be held accountable. They just install a fall guy. You will never hear T2 udder a word against the CCP in all their abuses. Who does T2 work for then? He’s lining his pockets right in front of you.
A note on the US of A…no one will accept a loss with the upcoming election. Its going to end BADLY. I fear for my family down there.
MA is just trying to protect / warn people.

#51 MF on 08.11.20 at 5:05 pm

Low rates helped keep the pandemic crisis from becoming a Depression crisis. Saved your ass. Be grateful. – Garth

Grateful? Lol.

Interest rates at these levels is what created the housing bubble that is putting so many at risk of being over leveraged. We hear about here day in and day out.

It’s what has created massive inequality in society. It’s what led to social unrest in the streets down south. It’s what has led to so much debt in the world.

Interest rates should have been normalized a long time ago, and they weren’t. Dropping interest rates so someone else can deal with it later was the easy, wimpy route. My generation is going to be that “someone”. We are already seeing the effects. I’m not grateful for anything about that policy. The opposite, actually.

MF

#52 Millennial Realist on 08.11.20 at 5:05 pm

#47 Howard

We’ll have to wait to fresh polls, but I think Biden may have just lost the election.

Kamala Harris is a cringey “woke” propagandist. Just yuck. He couldn’t have picked a worse VP in my opinion.

—————————————————————

Howard is completely wrong.

Biden was under pressure to pick someone fairly boring and quiet who could “help him govern”.

In reality, he needed someone who would be feisty and popular enough to bring out previously bored Democratic and Independent voters, someone who could “help him win”.

It’s definitely a shorter term strategy (but better than Trump who has none at all). But nothing matters if they don’t get the Orange Menace out of the office first. That’s the objective.

This should work. Younger voters will make certain of that. Trumpster boomers are fading in their influence at the polls.

Biden’s chances of a win just doubled IMHO.

It’s gonna be fun hearing her rip into Trump in the weeks ahead!

#53 Billy Buoy on 08.11.20 at 5:06 pm

10 year sounds great to be able to sleep soundly at night yet what % of people anymore think long term?

Rising interest rates? Someday…I guess the FED would just have to print even MORE as I can’t even imagine what a .25% increase would do to the USA’s debt and ours. What a luxury….Problems that we create at the Central banks…just create more digits out of thin air. Don’t you wish you and I had a magic printer?

The 1% benefited most from ZIRP. They ALWAYS DO and ALWAYS WILL…The game is rigged, the good guys lost years ago…get used to it…it’s NOT going to change in our lifetimes. EVER.

Gee I wonder why CB’s worldwide had to bail out the too big to fail companies ? (many zombie companies who should have been dead and gone for eons only kept alive by stock buybacks and ZIRP.)

Give thanks to the almighty holy power of the FED and CB for keeping your grocery stores open. Remember they want us to be GRATEFUL for the scraps they throw to us “little people” not in the “Club.”

#54 Drew on 08.11.20 at 5:10 pm

2008 was followed by 10 years of good times and interest hardly went up at all until last year. Why would the next 10 years be different when there’s even more debt?

#55 TN on 08.11.20 at 5:12 pm

#baloney Sandwitch

Refinancing at below inflation rate and investing in a balanced portfolio is a no brainer. A balanced portfolio will return 5-6% an annum and at today’s low rate of borrowing, you are making a nice profit on the spread. The stock market will hit new all time high shortly and has increased over 50% since the Covid crash. Market will be atleast 15% higher by the end of this year.

#56 Faron on 08.11.20 at 5:12 pm

#42 MF on 08.11.20 at 4:18 pm

Rates “rose” a wimpy amount and then were dropped to zero the first excuse there was. So much for slow and relentless up.

Looks like a luiquidity trap of epic proportions. I’m no gold bug, but harsh criticism of the zero interest rate policy is 100% warranted. Total incompetence.

MF

Low rates helped keep the pandemic crisis from becoming a Depression crisis. Saved your ass. Be grateful. – Garth

Not total incompetence MF. Rates stayed low because:

A: Despite the raging stonkmarket, the recovery was pretty fragile until the late 20-teens. Recall that the GFC was a yuge hit and it took a lot to dig out of that hole. It wasn’t until the end of the Obama era that the economy had real momentum despite what the S&P may have been whispering in your ear.

B: Rates are used as a control on inflation when the econ is getting overhot. Higher rates put downward pressure on inflation, so until the target of ~2% is met, rates will be kept low because such pressure is not needed right now. At all.

C: Given B, there was some talk amongst economists and within the US fed of allowing inflation (in the mid 20-teens) to spike a bit above 2% (order 3ish percent) to drive up wages that have been stagnant for decades now and to drive up labour force participation. I think of this as a burning-in of a hot economy. So, again, rates were kept low in pursuit of that goal which is pretty egalitarian if you ask me.

Thus, low rates weren’t Machiavellian even if some of their effects are. Generally speaking, central banks are non partisan (for a very good reason) and care about the health and smooth functioning of the economy as a whole (of which, the stock market is just a single dimension in that hyperdimensional space). A healthy economy is the fuel for better overall well being of the citizenry. Unfortunately for those uninvested in equities or RE, those low rates have a side effect of higher equity prices and to greater demand for home ownership/RE investment.

#57 GMan on 08.11.20 at 5:28 pm

With the Canadian government leveraged so much how will they fair when interest rates increase after 2021? Will they print even more money to pay the interest on the debt? Of course they will raise taxes but that won’t be enough and may result in killing economic growth and tax revenue. So If it’s not hyperinflation what’s the Long-term outcome here Garth?

#58 PBrasseur on 08.11.20 at 5:32 pm

Stocks are a reasonable edge against inflation.

Don’t take my word for it, this is a quote from Buffet’s mentor, the great Benjamin Graham.

Worked for me!

#59 Faron on 08.11.20 at 5:35 pm

#51 MF on 08.11.20 at 5:05 pm

Respectfully, consider that the low rates were and are a necessary evil. WRT real estate, there are non-CB ways of having prevented Canada’s RE bubble. Stiff cap gains taxes on non-primary residences for one. Earlier and stronger foreign buyer taxes. Earlier and stronger spec taxes. Those latter two items helped begin to deflate the Vancouver RE bubble when implemented. It’s unconscionable that the Canadian credit bubble was allowed to inflate thusly especially after watching the US go through the very same process followed by destruction in ’08. The bubble here has been enabled by low rates, but could have been prevented by government. Unfortunately, politicians like GDP and the growth in private debt helped cause the apparent growth in the GDP. There was no political will to stop the mess because it made enough people feel wealthy that politicians could still get elected, but none of that needed to happen in any rate environment. Blame the politicians.

#60 Howard on 08.11.20 at 5:46 pm

#56 Faron on 08.11.20 at 5:12 pm

Thus, low rates weren’t Machiavellian even if some of their effects are. Generally speaking, central banks are non partisan (for a very good reason) and care about the health and smooth functioning of the economy as a whole (of which, the stock market is just a single dimension in that hyperdimensional space). A healthy economy is the fuel for better overall well being of the citizenry. Unfortunately for those uninvested in equities or RE, those low rates have a side effect of higher equity prices and to greater demand for home ownership/RE investment.

————————————–

Zombie companies approching 20% of enterprises, propped up by Fed purchases of junk bonds, sounds very healthy. Maybe the Fed will begin purchasing share directly and raise that number to 40%. This is what happens when failed companies are not permitted to go bust.

https://www.ai-cio.com/news/attack-zombies-potential-deadbeats-almost-20-companies-says-db/

There has been much talk lately of the Fed letting inflation run hot – i.e. refuse to use interest rates as a tool to tamp it down, essentially the opposite of what Paul Volker did in 1982. If I recall correctly you are a self-declared defender of “the poor” and a believer that middle taxpayers should fund their vices, so how does your strange love of central banks square with their desire to trash everyone’s purchasing power and raise the cost of living?

#61 Bill on 08.11.20 at 5:47 pm

DELETED

#62 mansters on 08.11.20 at 5:48 pm

What happened at the end of 2018 after the fed tried to keep raising rates to prepare for the next downturn?

#63 Johnny Chase on 08.11.20 at 5:54 pm

BEFORE YOU GET A 10 YEAR MORTGAGE:

Speak to a mortgage broker. Something like 9/10 people will break their mortgage before the term expires. The cost to break a 10 year mortgage is HUGE.

Understand this and get the bank to tell you what the break fee is if you sell in year 3 or 5 before you sign.

As stated. – Garth

#64 islander on 08.11.20 at 6:00 pm

https://www.rollingstone.com/politics/political-commentary/covid-19-end-of-american-era-wade-davis-1038206/

“putting it into perspective” – worth a read…

#65 AH ... those were the days ... on 08.11.20 at 6:02 pm

#36 Ronaldo on 08.11.20 at 3:43 pm
I recall back in the early 80’s when mortgage rates hit about 23% and people were still running to get a mortgage fearing the rates would go higher.

when the price of houses out here on the west coast fell like a rock from heaven. Best time ever to buy in my lifetime … if you had a job you could count on or better yet … cash. And you didn’t need much of it.

#66 the Jaguar on 08.11.20 at 6:04 pm

“Mr. Carney is the only adult in the room at the PMO. – Garth”

Agreed. He’s also charming, has good looks, a good tailor, and world respect. Unbeatable if he decides to step up. Would be good for the Conservative Party regardless of who leads that Party.

#67 the Jaguar on 08.11.20 at 6:04 pm

Dang it. That was meant to read ” would not be good….”

#68 Faron on 08.11.20 at 6:06 pm

#39 Sail Away on 08.11.20 at 3:56 pm

…Padawan…

Had to google that. Late model Star Wars, blech. Only thing worse is Lord of the Rings IMO.

Anyhow, easy tiger, it was a rib. I haven’t read all the posts I missed last week, but it looked like a lot of constructive stuff from SA. Kudos. I’ll try to keep the Echo on the road and murder hornet mode in the off position.

#69 Howard on 08.11.20 at 6:16 pm

#54 Drew on 08.11.20 at 5:10 pm
2008 was followed by 10 years of good times and interest hardly went up at all until last year. Why would the next 10 years be different when there’s even more debt?

———————————-

Because unlike previously, more of the money is now being showered on the populace which raises M2 money supply. Which may seem great until you understand that if rates do not rise to keep up with the ensuing inflation, you have a rapidly devaluing currency and rising cost of living unless salaries rise concurrently (which they won’t). This situation can be left unremedied in a dictatorship, but not in a democracy.

#70 Comrade on 08.11.20 at 6:19 pm

#32 AntMan on 08.11.20 at 3:17 pm
Seeking thoughts on the return of Mark Carney.

My questions is what is happening with Tiff Macklem, we haven’t heard much about/from him since taking the post. Is he being replaced by Mark, or Mark remains in advisory role?

Either way, I think having Carney in the mix is a good thing, a) he has great track record and qualifications, and b) he has great network throughout the world based on his past experience

#71 Trippy on 08.11.20 at 6:32 pm

The bullion lickers love this environment because real rates are negative.
Even if rates get raised by central banks, they will remain below inflation for a very long time. This is the 1970’s all over. Nixon was broke. Printed money. It took Volker to shut the taps off finally a decade later. It was a decade plus of losses in stocks after inflation. Bonds got decimated.

History repeats, just not exactly.

#72 Linda on 08.11.20 at 6:35 pm

#34 ‘true’ – a good point. Where does one invest to preserve & hopefully grow capital? If markets continue to have high volatility, what if anything beyond balanced & diversified can those who invest do to protect themselves if they are depending on their investments to produce income to live on in retirement? Presumably there will be times when withdrawals must occur regardless of how the market is performing.

#73 prairie person on 08.11.20 at 6:36 pm

Went for a walk today. House in neighbourhood that sold about four years ago for 450, was fixed up and flipped for 650, now for sale again, 850. I’m amazed. I know people who have lost their jobs, both people with individual businesses and who work(ed) for a large corporation. No money coming in except for the govt pogy thats been offered. No buying 850,000 houses on that. Seems a crazy split, self help groups for all the people who have so little money that they try to help each other out with items they don’t need and people who can still do bidding wars for houses. Demand and supply doesn’t seem to have much to do with prices.

#74 Masks really do make some people more attractive on 08.11.20 at 6:39 pm

#53 Billy Buoy on 08.11.20 at 5:06 pm
10 year sounds great to be able to sleep soundly at night yet what % of people anymore think long term?

Rising interest rates? Someday…I guess the FED would just have to print even MORE as I can’t even imagine what a .25% increase would do to the USA’s debt and ours. What a luxury….Problems that we create at the Central banks…just create more digits out of thin air. Don’t you wish you and I had a magic printer?

The 1% benefited most from ZIRP. They ALWAYS DO and ALWAYS WILL…The game is rigged, the good guys lost years ago…get used to it…it’s NOT going to change in our lifetimes. EVER.

Gee I wonder why CB’s worldwide had to bail out the too big to fail companies ? (many zombie companies who should have been dead and gone for eons only kept alive by stock buybacks and ZIRP.)

Give thanks to the almighty holy power of the FED and CB for keeping your grocery stores open. Remember they want us to be GRATEFUL for the scraps they throw to us “little people” not in the “Club.”

//////////

This X100!

Are we supposed to believe that CB’s bursting at the seams with ex-Goldman-Sachs pirates is just a coincidence?

#75 Bill on 08.11.20 at 6:52 pm

US of A is in a revolution. Like I said there a political war going on.
http://www.kereport.com/2020/08/11/the-riots-here-is-what-we-think/

#76 Reximus on 08.11.20 at 7:01 pm

#31 Dave

When will the first wave of mortgage deferral hit and what will be the impact?

____________

Zero, the months of inventory is at historic lows. Way too many buyers

#77 Sail Away on 08.11.20 at 7:02 pm

Hey Ace and NoName: how timely is this, eh?

https://www.google.com/amp/s/www.forbes.com/sites/daviddawkins/2020/08/10/elon-musk-beats-jeff-bezos-to-us-air-force-contract-as-billionaire-space-race-blasts-off/amp/

There is still time to become one of us Musk-oteers!

#78 conan on 08.11.20 at 7:09 pm

I think Conservatives should be asking themselves why Mark Carney did not consider their party? And, while you are doing that , ponder why Rona split the scene, even Garth bolted.

Serious question.

#79 wallflower on 08.11.20 at 7:09 pm

#63 Johnny Chase on 08.11.20 at 5:54 pm
BEFORE YOU GET A 10 YEAR MORTGAGE:

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

Heh dude – guess who these readers are?
By and large the 1/10.

Preach to the 9/10 – wherever they are.

#80 crowdedelevatorfartz on 08.11.20 at 7:15 pm

I was busy busy BUSY today!
Couldnt get away from quotes , quotes, QUOTES!

Did you all miss my zippy one liners and incredibly astute observations?

Only Ponzie raised his hand (very disappointed MF).

Anywho.
I see Trudeau has back peddled on his dissing of Morneau and is eating crow( or is that cake in the upper crust of Trust Fund society?)….
I expect they will be seen somewhere tomorrow hugging and back slapping for all the world to see….
God bless predictable politicians.

#81 Nonplused on 08.11.20 at 7:16 pm

Well, gold got monkey hammered today… It was probably ahead of itself anyway. Chart still looks good. But if there is no hyperinflation coming it needed to cool off.

————————–

“But for most people the legacy of the bug will come down to one thing. Inflation. Not out-of-control hyper-pricing. No Venezuela or Zimbabwe. Just steadily higher costs and, yes, rising interest rates.”

Well, we’ve had inflation since 1971 so I don’t see why it wouldn’t continue. Central banks are pretty good at it. And they don’t like deflation one little bit, because credit collapses and bank runs are not fun for anybody. But I think we go over 2% for a while. Maybe as high as 5% for a couple of years. At that point rates will start to rise to tamp it back down.

Austerity is probably coming down the line too, because as rates rise the government debt will become harder to service. They will try to raise taxes, but as I’ve argued here ad-nauseum there just isn’t that much left to tax that ain’t taxed already. It won’t make enough difference. Rounding error really.

So here is what my magic 8-ball tells me is coming. They say you can forecast what will happen or when but not both, but I’m going to anyway:

-There will be no effective vaccine, just like there is no vaccine for the common cold or AIDS. But the pandemic will pass anyways. Timeline 2 years but the worst should be over by Christmas. Somewhere out there it’ll become something we live with.

-Inflation is going to 3-5% for 2021-22. Trust me that is better than a bank run. Don’t hold too much cash.

-Life will start to return to normal in the early part of 2021. By 2022 airlines will be back to normal.

-RV sales will crater in 2021 because everyone that wants one will have one and people will come to realize there isn’t enough campgrounds.

-Interest rates will start to rise in late 2021 to early 2022 because central bankers know that if you let expectations for inflation get out of hand real problems can result. Inflation will still be over 2% in 2023 but by then it will be clearly on the way down whilst rates will be on the way up.

-Gold is going to new highs, probably $2500, but not much more. It will reflect inflation, not pandemonia. Timeline: 2023.

-Crypto currency will still be with us but it, like gold, is not a true investment so it isn’t going to take over the world. We are probably at peak crypto now.

-As the economy recovers, oil is going back to $60 plus inflation. Timeline: 2022. Shale oil will never recover because it never made any sense at any price before and now investors know that. Efficiency will be the new name of the game. The Toyota Corolla will remain the world’s best selling car and may even extend its lead. Motorcycles and scooters will sell like hotcakes anywhere it doesn’t snow.

-Trump wins in November. It’ll be the battle of the VP’s and so the real battle, we now know, is Pence vs. Harris. Slam-dunk. How the dems came up with a VP that has an even more sketchy background than Biden is anyone’s guess. But they did it. Pence on the other hand is every soccer mom’s dream husband. He’s so clean his farts don’t even smell (or so I’ve been told).

-Come Nov. 4 or whenever the results finally get announced, there will be huge riots, but then they will go away completely as it settles in that Trump has to leave at the end of his second term so there is no point.

-The stock market will not collapse.

#82 Montana Bob on 08.11.20 at 7:30 pm

https://www.bnnbloomberg.ca/cmhc-head-pleads-with-canadian-banks-to-avoid-risky-mortgages-1.1478723

I don’t really understand this guy…
Banks are not doing anything which is against regulations. Banks are giving mortgages, CHMC insures them. If CHMC insure mortgages which are risky, that is CHMC problem. Indirectly taxpayers problem. If CHMC cannot function, government should dismantle it and every responsibility will be on banks. Then, they will be very cautious when they give mortgages.

#83 SoggyShorts on 08.11.20 at 7:30 pm

#117 n1tro on 08.10.20 at 10:13 pm
#148 SoggyShorts on 08.10.20 at 1:48 am

That’s just not realistic. If you are estimating something to within 2 decimals, it’s not really an estimate, is it?
Don’t get me wrong, I think it was a bad estimate, but absolutely no one gave any estimates on it using decimals.

#149 SoggyShorts on 08.10.20 at 1:57 am
It’s also not how people talk in general.
When I see a price tag of $19.97 and my wife asks how much it is I say $20. It’s inaccurate, but close enough for the purpose
———————-
I think you proved the point I was making. No one gave any concrete numbers (decimals or not) but rather, very wild guesses, with rounded numbers.

An “estimate” is based on something that has happened to give a guideline as to what could happen. ie. How long will Project B take to complete? Well based on Project A which was very similar, it will take X amount of time.
*******************
Again, round numbers does not mean it is a wild guess.
If project C is similar to
project A at 32.5h, and
project B at 48.5h
Wouldn’t normal people give an estimate of “between 30 and 50h depending on ______” ?Especially while speaking?

Her numbers could have been pulled right from a place where no sun shines, I’m not arguing that.
Also the range “30-70%” is far to close to “0-100%” for my tastes.
However, I still find your assertion that “all round numbers are untrustworthy” is silly.

#84 Longterm on 08.11.20 at 7:38 pm

For those interested in what the data and the best modelling scenarios is suggesting for 2021 and beyond with respect to Covid, here’s the summary in Nature. It may be helpful to reflect on this information with respect to your investment and other life options rather than rely on hubris and oft repeated mantras about how pandemics are temporary what the range of data-driven scenarios might mean for how the economic situation might play out.

https://www.nature.com/articles/d41586-020-02278-5

Every pandemic has been temporary. None permanent. Fear is eternal, however. – Garth

#85 Masks really do make some people more attractive on 08.11.20 at 7:40 pm

#77 Sail Away on 08.11.20 at 7:02 pm
Hey Ace and NoName: how timely is this, eh?

https://www.google.com/amp/s/www.forbes.com/sites/daviddawkins/2020/08/10/elon-musk-beats-jeff-bezos-to-us-air-force-contract-as-billionaire-space-race-blasts-off/amp/

There is still time to become one of us Musk-oteers!

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

The stock split pump will lead to an epic dump!

#86 MF on 08.11.20 at 7:43 pm

Faron on 08.11.20 at 5:12

My man Faron,

I have to disagree with a few things.

First off, inflation is far from 2% or whatever is reported. I know the CPI, but everything people care about (housing, rent) is way up higher than what is reported.

Also, why not just keep interest rates at zero forever? It’s like holding your breath, you can do it for a while, but eventually your have to come up for air.

Low rates distort the entire economy, and the longer they stay, the worse the distortions. It’s also harder to lift off afterwards because the lingering effects (debt) become harder to manage with higher rates. This is where we are now. Keeping rates low for so long hoping for phantom inflation from a poor source was bad management for this reason. Where’s the exit? Like Garth mentioned we do need some kind of a vision for future shocks. Besides, the whole time (in the mid 2010’s) we were repeatedly told the economy was “rebounding nicely”. Were they just lying? What were they waiting for? Why didn’t they raise even a little earlier? Why did they wait so long? It all points to bad policy.

On the topic of politicians. Like we saw with the fed in 2018 with Trump, how independent are central banks really? Dropping rates again in 2018 or so was just pandering and dumb. More bad policy.

MF

#87 Flop... on 08.11.20 at 7:43 pm

Hey, would you look at that.

I finally filled out my bingo card…

M46BC

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

#65 Flop… on 05.30.20 at 8:54 pm

I don’t know how long ago it was, let’s go with 3 or 4 months ago, that I said that Joe Biden should pick Kamala Harris as his V.P

Nothing I have seen the last week changed that opinion.

Even though they don’t necessarily need some of her attributes as they already have the vote covered, it could help after what happened last time.

Blackish and Brownish.

Female.

55 years old, (not a dinosaur)

West coaster.

Ticks a lot of boxes.

So I guess they’ll find a way to mess it up and go with one of the Golden Girls…

M45BC

#88 Flop... on 08.11.20 at 7:50 pm

Every pandemic has been temporary. None permanent. Fear is eternal, however. – Garth

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

You want to see fear at the moment?

Go and stand on the corner of 33rd Avenue and Cambie St. in Vancouver.

Had to wash the fear and the tree sap off my windshield when I got home.

Seriously considering another route, it appears to be so contagious and out of control.

The fear, that is…

M46BC

#89 crowdedelevatorfartz on 08.11.20 at 7:52 pm

hmmmm
Alleged enabler to Jeffery Epstein,
Ghislaine maxwell wants to be taken off “suicide watch” and allowed to go into the general population.

https://www.bloomberg.com/news/articles/2020-08-11/ghislaine-maxwell-complains-about-treatment-while-in-u-s-jail

She, an uber rich socialite, is charged with sex crimes involving minors and she wants to be released into the general population……

I think the suicide watch should continue for a while longer.

She wont last 10 minutes in general pop.

#90 tccontrarian on 08.11.20 at 7:58 pm

“Those CERB cheques, business bailouts and payroll subsidies are all being made with newly-printed money, since Ottawa has no reserves. Ditto in Washington. The more money that’s created, the less all the existing money is worth –
– which is exactly what the gold-lickers have been yammering about.”

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

So, what you’re saying is…
the bullion-lickers have got it right?

Us vs them – always:

Bullion-Lickers vs Fiat Fondlers.
Debtors vs Creditors
Landlords vs Rentiers
Dogs vs Cats (Felix)
Shorts vs Longs

The list is endless. I just try to humbly enter the 1%-er space, so I can experience the world as Garth does. Gold is a vehicle (and my GLD put options were nicely up today, but I think I sold some too early)

My ‘goldbug’ friends refused to sell when I suggested – now will watch 40% of their gains evaporate. Oh well…

TCC

#91 Bill on 08.11.20 at 7:59 pm

Gong show south of us Canuckle heads.
Turn up the sound….lol
https://twitter.com/realDonaldTrump/status/1293285949917495300

#92 Do we have all the facts on 08.11.20 at 8:07 pm

The value of the Canadian dollar usually increases as the price of our most valuable export increases but recent increases in oil prices have not had a significant impact on the value of our dollar.

Is it possible that the prediction of below average GDP growth for Canada circulated by the IMF might be tarnishing our reputation. Many pundits have suggested that the Intrinsic value of the $CDN is over 80 cents US and yet it has hovered around 76 cents for the last year and a half except for a brief dip in March.

Does anyone have any idea what external or internal factors are keeping the value of our currency from increasing as our economy recovers.

#93 Howard on 08.11.20 at 8:17 pm

#78 conan on 08.11.20 at 7:09 pm
I think Conservatives should be asking themselves why Mark Carney did not consider their party? And, while you are doing that , ponder why Rona split the scene, even Garth bolted.

Serious question.

———————————–

Probably for the same reason people like Joe Oliver and Chris Alexander, among others, joined the Conservatives a decade ago instead of the Liberals.

Mark Carney is a Keynesian globalist. Why would he join a conservative party of patriots? The wealthy elites in Canada have usually been Liberals.

Rona Ambrose was tired of public life.

#94 DrC on 08.11.20 at 8:17 pm

There is (in the mind of this pathetic blog) a 100% chance the cost of money will be reasonably higher in 60 months and heroically greater in 120.

They didn’t increase much the cost of money since the crisis in 2008. What makes you sure that the money will increase in price after 10 years? Afterall the medium economic cycle goes for about 10 years… so considering we had higher rates in 2008, in 2030 I’d expect negative interest rates.

#95 CL on 08.11.20 at 8:19 pm

“As you may have noticed lately, people are nuts. They’re treating real estate the way they did toilet paper in March. FOMO has returned, panic buying is everywhere and houses are selling as if there were no recession, no double-digit unemployment and, oh yeah, no global pandemic with our closest neighbour being the epicentre of infection and death. Go figure.”

The real pandemic is Canadian real estate, not COVID.

You have repeatedly said credit was tightening, with FOMO, clearly it has not nor is it.

#96 willworkforpickles on 08.11.20 at 8:19 pm

#76
The qualified greater fool pool of buyers left out there isn’t as great in numbers anymore as you think.
When they run out and distressed sellers prove down the line to be in greater numbers, a price correction will ensue.
As long as governments quit meddling to the detriment of their nations long term futures, the deferral cliff looming on the horizon will soon come.
Roughly 20% of mortgage holders in Canada according to the CMHC who deferred their mortgages will be forced out.

#97 IHCTD9 on 08.11.20 at 8:22 pm

#29 Linda on 08.11.20 at 3:06 pm
I’m wondering about demographics. Specifically the effect an aging population might have on inflation. The Government of Canada estimates that by 2036 Canada will have between 9.9 to 10.9 million people over age 65
——-

I wouldn’t worry about demographics too much. Canada is already in a Government controlled demographic system. Natural population growth went negative way back in 1975. Right now, the Canadian fertility rate is a miserable 1.5 per woman. We’ve been totally reliant on foreign immigration for growth 45 years already, and it’s going to stay that way. All that needs to happen is tweaking the rules for who gets in, and who doesn’t.

It’s a little crass, but cutting back on family reunification and dropping the upper age limit pretty much fixes the problem. Even now, hopeful immigrants to Canada start losing points for every year over age 35 that they are. It’s a bit of a meat market – but that’s the whole point. Age, language, education, job offers, experience – if you don’t bring ‘em, you don’t get in – simple as that.

Trudeau likes to say “diversity is our strength”, the reality is an education, useable english/French, youth, and a job offer in hand is our strength. Especially youth.

If you want to worry about something, worry about the day our economy is so destroyed by Trudeau type bird brain ding bat politicians, that not even 3rd world folks are interested in coming here. Or if the USA ever gets rid of their 1st come 1st serve immigration policy and adopts a points system similar to our own. That would be the worst thing to ever happen for quality immigration in Canada.

Worry about the US/Mexico border someday finally being effectively sealed up. The USAs’ best on planet Western fertility rates would end right there, because it’s all those illegal hispanics getting it on like they’re cast in “The Game of Thrones” keeping new meat on the conveyor. Then the US will have to compete with us, and they’ll win…

#98 Gary on 08.11.20 at 8:33 pm

#92, The Canadian Peso is depreciating because
Ottawa has joined the currency debasement regime, printing money with ALL other Central Banks. All fiat paper will be worth less as politicians will spend, and pass the debt onto the taxpayer and next generation.

My nine year old does a better job of managing her piggy bank than our finance minister.

#99 Vince on 08.11.20 at 8:47 pm

The feds don’t have to raise rates. The pandemic was proof that they could print an unlimited supply of money without consequences. Rates will be at zero forever. Perhaps even negative.

#100 Nonplused on 08.11.20 at 8:49 pm

Turns out that the crowd that still uses air cooling and push rods don’t care ’bout covid either:

http://www.hideoutnow.com/2020/08/smash-mouth-lead-singer-says-f-that.html

If covid really is a killer, this doesn’t bode well for HD. Lots of estate sales coming up. And customized motorcycles are really hard to sell (I know this from watching Pawn Stars). Nobody thinks you customized it the way they want to customize it, if they want to customize it at all.

Anyway, another prediction:

-HD goes bankrupt again. The era of the large displacement lawn-mower engine is over, and they don’t have a foothold in the smaller displacement water-cooled engines that have taken over. every. single. market. segment. Plus their fan base is getting too old to ride, and already has a bike. A customized bike.

The V-Rod should have been the future of HD. Modern technology and design, scalable to smaller and even single cylinder displacements. By all accounts a brilliant bike. But they just couldn’t sell it. You can’t blame them for trying though. They did see the future, they just couldn’t get on the escalator. They ignored the entry level market for way too long. They are attempting to produce a dual-sport now, but it is way to big and way too late.

#101 crowdedelevatorfartz on 08.11.20 at 8:59 pm

A money grab retreat for gullible people or something else…?

https://thebreaker.news/business/golden-touch-salt-spring-to-surrey/

#102 Sail Away on 08.11.20 at 9:08 pm

#85 Masks really do make some people more attractive on 08.11.20 at 7:40 pm
#77 Sail Away on 08.11.20 at 7:02 pm
Hey Ace and NoName: how timely is this, eh?

https://www.google.com/amp/s/www.forbes.com/sites/daviddawkins/2020/08/10/elon-musk-beats-jeff-bezos-to-us-air-force-contract-as-billionaire-space-race-blasts-off/amp/

There is still time to become one of us Musk-oteers!

————–

The stock split pump will lead to an epic dump!

————–

?????

SpaceX is a private company. Hence no silly stock games. Just quality Elon all the way.

#103 Russell Johnson on 08.11.20 at 9:15 pm

Haven’t commented in a while but I’ve noticed my street with mostly government employees home all day every day flying drones and playing with kids in the yard but the savings alone of not driving cars and buying coffee or lunch is the equivalent of a substantial raise. This along with being the banks favorite customer may explain the run away market. I’ve never seen houses sell so fast but the small business owners have had their retirement values drop significantly with no buyers for business lining up. These are the people who may be selling. I swear that Amazon is playing this tune, what with the plexi glass and masks to deal with they don’t stand much of a chance.

#104 TurnerNation on 08.11.20 at 9:23 pm

It’s weird seeing people slip into their Obedience Masks in order to transact commerce. You must have the Mark,
For good measure stand on your Mark too, 6-6-6 feet apart.
See people are Unsafe. Only these hard new prison rules might Keep us Safe. I reckon so.
Many are used to their bondage; it is a familiar task by now to serve the New System. Checking the daily numbers; performing the purifying Purell rituals. Teach the kids, this is the way to go. Banish germs and unbelievers you must.

Keeping up the illusion. And that what it is. Magic – whipped up by the telescreen.

Normalcy in the New System:
– Healthy people are sick and must be quarantined.
– Savers are abnormal and punished via low rates.
– Extreme Debtors and spendthrifts are rewarded with new Bling. Buy now pay..later/never. The bankers’ pets.
– Children are the target. Never to know the Old System. Individual rights are selfishness. (These have been removed from the New System.
We are one – 6 feet apart but Together!! I love the New System and my unseen rulers Keeping Us Safe.

Let’s await tomorrow’s numbers. We shall read them in hushed awe. Reverence. Revering.
Let us TskTsk the heathens gathering in their unclean large groups. Putting us all at risk.
Rest well, the CV gods shall smite them. In two weeks time!! Always two weeks.
The savior needle is coming. Any time now.

#105 Capt. Serious on 08.11.20 at 9:30 pm

First time home buyers should not underestimate the value of not having to re-qualify for 10 years. That’s amazing for planning when you have a big initial mortgage amount.

#106 Longterm on 08.11.20 at 9:32 pm

#84 Longterm on 08.11.20 at 7:38 pm

For those interested in what the data and the best modelling scenarios is suggesting for 2021 and beyond with respect to Covid, here’s the summary in Nature. It may be helpful to reflect on this information with respect to your investment and other life options rather than rely on hubris and oft repeated mantras about how pandemics are temporary what the range of data-driven scenarios might mean for how the economic situation might play out.

https://www.nature.com/articles/d41586-020-02278-5

Every pandemic has been temporary. None permanent. Fear is eternal, however. – Garth

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

Indeed. But there’s temporary as the gnat attention span of the market sees temporary [vaccine next year, done and dusted], and there’s multi-year temporary in the grand sweep of history. The former is hubris with scant evidence, the latter has the potential for vast structural changes to society and economies as have past pandemics. Hope for the former, think about and take mitigating steps for the latter as the picture clarifies.

#107 Idiocy on 08.11.20 at 9:33 pm

to comment # 92 Do we have all the facts

An inhospitable environment for foreign direct investment caused by a government that is hostile to resource development, infrastructure and business in general.

High corporate tax rates, over regulation and low and declining productivity rendering the country uncompetitive.

Structural deficits, a reliance on mass immigration to increase GDP while strangling the productive GDP growers.

I could go on, but the issues are pretty self evident.

#108 DON on 08.11.20 at 9:39 pm

@Jag and Garth

Come in as the Finance Minister and make his way to PM. He brings credibility and experience. Good political save for the Liberals. Rebulid the party before the conservatives get their act together.

#109 drongo on 08.11.20 at 9:42 pm

@#91 Bill on 08.11.20 at 7:59 pm
Gong show south of us Canuckle heads.
Turn up the sound….lol
https://twitter.com/realDonaldTrump/status/1293285949917495300–
—————————–

gong show indeed.
If it wasn’t so sad it’d be hilarious.
I feel sorry for the average american.

#110 NoName on 08.11.20 at 9:44 pm

#77 Sail Away on 08.11.20 at 7:02 pm
Hey Ace and NoName: how timely is this, eh?

https://www.google.com/amp/s/www.forbes.com/sites/daviddawkins/2020/08/10/elon-musk-beats-jeff-bezos-to-us-air-force-contract-as-billionaire-space-race-blasts-off/amp/

There is still time to become one of us Musk-oteers!

In an announcement Friday (Aug. 7), U.S. Space Force and Air Force officials said SpaceX and ULA have won military launch contracts potentially worth billions to launch national security payloads over the next five years, with ULA receiving 60% of the satellite launch contracts and SpaceX receiving 40%.

If i got it right, ULA got firmed this up some time ago when they decided to drop russian engines in favour of blu org be4 engines…

https://www.space.com/pentagon-picks-spacex-ula-national-security-launches.html

#111 SAY NO TO MASKS on 08.11.20 at 9:47 pm

TORONTO – Members of an anti-mask group have taken down an intersection’s stop signs to remove what they call a culture of fear towards oncoming traffic.

For years, the red octagons have terrorized locals by requiring them to legally stop their cars at a four-way intersection, say protesters.

“If it weren’t for these stop signs, people would not be so afraid of driving,” said Jeremiah Putnam who blames Bill Gates for setting up the traffic signs. “The local government is using fear tactics of t-bone collisions to control the population.”

Protesters pointed to frightened drivers who constantly darted their heads back-and-forth whenever they approached the intersection indicating a crisis of confidence and demise of democracy.

As the posted warnings were taken down to chants of ‘Stop the Signs,’ activists demanded that the local government admit to the over 400 conspiracy theories on why the signs were first erected.

“People should have the freedom of choice and not have to listen communist traffic engineers to tell you when a light is green,” said a former People’s Party candidate holding a sign declaring ‘I will not stop for anyone!’ “My car, my choice.”

In related news, a truck hurtling towards the intersection didn’t see the protesters either.

#112 Doug in London on 08.11.20 at 9:52 pm

I’ve read in many sources, not just here, that interest rates will go up sooner or later. The upside? If you have any of those rate reset preferred share ETFs the value per unit will likely go up. In the mean time relax, put your feet up, and let those generous dividends roll in.

#113 IHCTD9 on 08.11.20 at 10:03 pm

#82 Montana Bob on 08.11.20 at 7:30 pm
https://www.bnnbloomberg.ca/cmhc-head-pleads-with-canadian-banks-to-avoid-risky-mortgages-1.1478723

I don’t really understand this guy…
Banks are not doing anything which is against regulations. Banks are giving mortgages, CHMC insures them. If CHMC insure mortgages which are risky, that is CHMC problem. Indirectly taxpayers problem. If CHMC cannot function, government should dismantle it and every responsibility will be on banks. Then, they will be very cautious when they give mortgages.
——

Dude, read that article again – and slow it down this time.

Siddall is appealing to banks directly to cut back on risky mortgages because in the wake of CMHC’s recent restrictions on high risk borrowers, private insurers have stepped in to cover said high risk borrowers.

Siddall clearly states the CMHC’s ability to cover an SHTF Mortgage event has been weakened due to the lost revenue on these risky loans now taken up by the private insurers.

So, if these risky loans backed by private insurers end up defaulting en-masse and end up affecting the banks, the CMHC is still on the hook. This is what Siddall is alluding to when he says “The national mortgage insurance system shouldn’t be used to help people “buy homes with negative equity,”.

IE. the banks would not be insuring these risky mortgages via private insurers if the CMHC wasn’t there to bail them out if said insurers went bankrupt in a mortgage market meltdown – which they would. Instantly.

The CMHC restrictions were implemented to cut down on risk to the banks. The banks sidestepped this by employing the private insurance companies. Siddall then directly speaks to the banks who are circumventing the actions taken by the CMHC.

#114 Entrepreneur on 08.11.20 at 10:04 pm

I am not a fan of Mark Carney, kept the interest rates too low for too long. People around him even said to raise the rates.

I suppose which side of the tracks one is one to benefit from the low interest/high house price (isn’t that ignoring the fundamentals of creating a community.)

Watched that video that Jess sent in about a community in Portland, how some people do not know their neighbour, stopped conversing.

Our communities are dying too. People that bought in are only interested in their investment, not their neighbours.

People are calling our communities “Wall Street” around here.

I agree with #42 & #86 MF…the destruction of our communities. A one-sided master plan, not for the people as a whole to be productive and caring.

Do the leaders really know the damage they have caused overall?

#115 Bill on 08.11.20 at 10:16 pm

#104 TurnerNation
——————————-
The gov specializes rewarding failure….look at Bombardier

#116 cuke and tomato picker on 08.11.20 at 10:16 pm

Baloney Sandwich EXCELLENT QUESTION.

#117 Masks really do make some people more attractive on 08.11.20 at 10:22 pm

#102 Sail Away on 08.11.20 at 9:08 pm

There is still time to become one of us Musk-oteers!

————–

The stock split pump will lead to an epic dump!

————–

?????

SpaceX is a private company. Hence no silly stock games. Just quality Elon all the way.

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

If SpaceX is privately held, how do you profit?

By owning over-priced TSLA, which magically allows Elon’s musk to rub off on you?

#118 TurnerNation on 08.11.20 at 10:25 pm

^ Correcting my previous post. I mean Freedom Masks.
Apologies to those which might have offence, taken.

Try this: for a week turn off your telescreen; visit no ‘news’ sites – with their predictive polls. ‘80% of people hate freedom’ – and read only this pathetic weblog. I do.
Most of my news comes via this Comment section.
If it ain’t Blog Dog lyfe I’m not following.

#119 Pegger on 08.11.20 at 10:36 pm

Given the low rates, would it make sense to break a mortgage to get a better rate? I have 3 years left on a fixed 5-year at 3.34% with First National, with $170,000 remaining. I’d be game for signing up for a 10-year given the low rates currently on offer, but I’m not sure it makes sense.

#120 Ronaldo on 08.11.20 at 10:38 pm

Nice little correction in the pm’s today but AU is still up 31% ytd. HEP up 22.7% and pays a nice 4.9% div. AG is up 62% ytd and my GPR is up 95%. So far so good.

The energies have had a nice rebound since mid March and keep an eye on copper and base metals over the next few months. Lots of good bargains. The next ones to hum.

#121 Tyler Durden on 08.11.20 at 10:45 pm

If you’re with a Big Bank, you can also take the mortgage with you if you move to a new house. There’ll be a calculation if you’re adding more to it and a proration of the rates but if you’re not adding to it, you should be able to carry over the exact same rate.

#122 Ronaldo on 08.11.20 at 10:46 pm

#103 Russell Johnson on 08.11.20 at 9:15 pm
Haven’t commented in a while but I’ve noticed my street with mostly government employees home all day every day flying drones and playing with kids in the yard but the savings alone of not driving cars and buying coffee or lunch is the equivalent of a substantial raise. This along with being the banks favorite customer may explain the run away market. I’ve never seen houses sell so fast but the small business owners have had their retirement values drop significantly with no buyers for business lining up. These are the people who may be selling. I swear that Amazon is playing this tune, what with the plexi glass and masks to deal with they don’t stand much of a chance.
—————————————————————–
In the very early years of my working careers and living in Vancouver a client and I got into a discussion about the great depression. He was just a teenager at the time. I asked him if he remembered how things were at the time. He told me that his father had a good job with the government so their family never really were affected by the whole thing. He did say that what he did recall was that there were quite a few people coming to their door looking for food.

#123 the Jaguar on 08.11.20 at 10:47 pm

@#108 DON on 08.11.20 at 9:39 pm

Can’t see it, Don.
Carney is a rock star in financial circles. He even gained the respect of the Brits who like nothing better than finding fault with foreigners…

Why would he sully his pristine reputation and Hollywood leading man good looks by saddling up with T2 and the rest of his wrecking crew of cabinet appointees, who were only appointed based on identity politics versus being best qualified for the job (with a few notable and obvious exceptions).

He’s back in Canada. Offers sage advice to the sitting government on how to restart our sickened economy and then waits until the Ethics Commissioner lowers the boom on T2. Non confidence vote, T2 has to step down, and just like the old Simon & Garfunkel tune it becomes ” Where have you gone Mark Carney, our nation turns it’s lonely (and broke) eyes to you….woo, woo, woo……
Chrystia will finally have someone she can look up to in more ways than one.

#124 Ace Goodheart on 08.11.20 at 10:57 pm

Tesla share holders:

Space-X is a private company.

Space-x is not owned by Tesla.

Tesla share holders have no interest in Space-X

Repeat after me………….

#125 Dave on 08.11.20 at 11:02 pm

I don’t like this advice. Variable is almost always the cheaper option…plus there is more flexibility for accelerating payments and transferring the mortgage. Low rates are here to stay for the foreseeable future. Even if/when they rise the velocity of the increase will be very deliberately slow and extremely well telegraphed in advance.

Go variable.

#126 millmech on 08.11.20 at 11:25 pm

https://www.reddit.com/r/PersonalFinanceCanada/comments/i7tpha/canadian_bank_forcing_employees_back_to_work/

So all the people hoping for the WFH utopia might be in for a bit of a surprise, hopefully they did not purchase yet as buying 2-3hrs out of city/work center could be a real long daily commute.
What happens if/when one spouse gets called back to the city? Will they uproot the family again or take the hit for the family and come home on weekends only? Resentment issues at home and at work will be raising its ugly head, good career for HR and family counselling in the near future I am willing to bet.
At the plant I am at as of Sept 8th everyone is back in their offices, no exceptions.
Even in this thread there is talk of bank downsizing coming in the new year, with all the deferrals the only way to keep profits up is to cut positions.

#127 Don Guillermo on 08.11.20 at 11:33 pm

#66 the Jaguar on 08.11.20 at 6:04 pm
“Mr. Carney is the only adult in the room at the PMO. – Garth”

Agreed. He’s also charming, has good looks, a good tailor, and world respect. Unbeatable if he decides to step up. Would be good for the Conservative Party regardless of who leads that Party

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

This is the first time this government has picked someone based on their qualification instead of their gender, race, sexual preference or religion. Very sad and 5 years too late.

#128 Don Guillermo on 08.11.20 at 11:47 pm

#78 conan on 08.11.20 at 7:09 pm
I think Conservatives should be asking themselves why Mark Carney did not consider their party? And, while you are doing that , ponder why Rona split the scene, even Garth bolted.

Serious question.

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

I think he realizes that the current black faced groping corrupt politicians will keep winning elections with the current woke Canadian potters and poetic electorates and he really wants to help our country in spite of our selves. Serious problem. He will be disappointed. Sadly, this country is done.

#129 Lorne on 08.11.20 at 11:48 pm

#47 Howard on 08.11.20 at 4:44 pm
We’ll have to wait to fresh polls, but I think Biden may have just lost the election.

Kamala Harris is a cringey “woke” propagandist. Just yuck. He couldn’t have picked a worse VP in my opinion.
…………
An opinion not widely shared……in fact, the exact opposite is likely the case!

#130 T on 08.12.20 at 12:03 am

#52 Millennial Realist on 08.11.20 at 5:05 pm
#47 Howard

We’ll have to wait to fresh polls, but I think Biden may have just lost the election.

Kamala Harris is a cringey “woke” propagandist. Just yuck. He couldn’t have picked a worse VP in my opinion.

—————————————————————

Howard is completely wrong.

—————

Unfortunately Howard is not wrong. Biden just handed Trump another 4 years.

Kamala isn’t seen as capable of taking over as president if Biden is unable to complete his term.

#131 AM in MN on 08.12.20 at 12:27 am

#8 Piano_Man87 on 08.11.20 at 1:54 pm
Inflation is not going to get that high. Inflation comes from too much consumer demand

—————————————————

No it doesn’t, it comes from money printing. Take the wealth of a nation and divide by the dollars in circulation. Now double the amount of dollars in circulation but keep the actual amount of real wealth constant, and you see what needs to happen to prices to balance things out.

The creditors as well will demand a rate premium to keep ahead of the money printing. If the tax collection less spending doesn’t leave enough to pay the interest, and thus more money printing is required to pay the interest, that is known as a debt-death spiral.

The consumer demand issue relates more to something called “velocity”. It can be held in check for while, especially is banks tighten lending standards despite the interest rates, but eventually the dam breaks, hard assets like houses jump in price, but then the inflation takes over without the ability for governments or business to give pay raises to compensate, and you can figure the rest out from there.

Your grandchildren will thank you…..

Note that the BoC is tied in directly with the Fed. The left is ascendant politically right now, and they want to print $3T quickly to bail out the local governments and their bankrupt government worker pensions. Check out something called MMT. (Modern Monetary Theory….nothing modern about it)

Ilhan Omar just won a resounding victory tonight for her primary, in a district with half a billion or so in burnt out buildings and property owners who can’t get out fast enough. This is who will soon be in charge of economic policy. I don’t think it’ll take 10 years.

#132 Dan Salamani on 08.12.20 at 1:23 am

Speculating on normalcy a decade from now? You’d better batten down the hatches if Trudeau and his globalist fanatic backers get their way. Marc Carney isn’t the nice guy he started out to be, he’s morphed into an entirely different and unrecognizable person. Don’t let the CBC sell him as ‘Mr Nice Guy”. He’s not that guy. Thats why he was promptly fired from the BOE when the new government came in. He was the anti Britain point man for the bad guys who wanted to swallow Britain whole.

It looks like Morneau is a slow moving impediment to the scheme and Trudeau’s backers are bringing in the uber globalist fanatic ( Marc Carney) who recently got fired from the BOE for trying to undermine the global economy of competing nations in favor of a one world government.

If I were a psychologist I wouldn’t hesitate to look for a history of Carneys mental illness. He’s a dangerous whack job whose insanity has grown into full blown paranoia. Carney is on board with a complete destruction of industrialization and a replacement of government elites.

Trudeau is weak minded and easily swayed with donations and glory. Gerald Butts has him wrapped around his wrecking ball finger. But Gerald is small fry picking localized issues, a nobody. Marc Carney is far more influential as he is a point man for the global troika and he’ll eat Trudeau for a snack.

https://troymedia.com/business/the-sky-is-always-falling-in-mark-carneys-world/

But as Trudeau fails the globalists are panicking and doubling down on killing any resistance that Canadian voters might muster. The globalist scheme is to kill the economy of Canada with division and strife so that we can’t reorganize ourselves into a nation.

#133 morrey on 08.12.20 at 1:30 am

“Cash nobody has. All debt”

Who owns the Money?
Who creates the Money?
What is Money?

#134 David Allen on 08.12.20 at 2:58 am

You’re so right about the price inflation that has to come , it already has. As an avid price watcher in my local grocery stores , it is food prices that are starting to take off. Even the sausage roll for lunch that cost $1.99 last week is suddenly $2.19; last week’s Tuscany ham which was 2.29 for 100grams , is suddenly $3.55 for 100 grams at my local
chain supermarket. Game on!

#135 NEVER GIVE UP on 08.12.20 at 4:11 am

#7 TurnerNation on 08.11.20 at 1:53 pm

=================================
Turner….Try waking up at 5:00 am.

Watch the sunrise.

Stop living in Fear.

It is still a beautiful world…if you want it to be.

#136 Stan Brooks on 08.12.20 at 6:42 am

Homo ignorantus continues to live in an imaginary world and to ignore reality.

I already posted a link to M2 increasing 12.5 % in the last 12 months.

M2 increase defines monetary inflation.

CPI ‘inflation’ is heavily manipulated and shows nothing.

Even in US a big Mac has moved from 5.50 to 8.50 in just a few years.

Roasted chicken dinner shrunk by 30 % and doubled in price in the last 4-5 years in a major Canadian fast food chain.

Even the ethically challenged financial minister realizes how dangerous is the current money expansion while the clueless T2 wants to continue spending money we don’t have. We won’t have savings, just debt made out of nothing real, a credit expansion not based on savings but newly created ‘deposits’ that do not represent past labour.

We are facing pretty much baked-in inflation of 200-300 % in the next decade of everything that matters, maybe except housing. These 12-15 % yearly M2 increase might become permanent feature while wages are capped and rates are at zero.

I would be very afraid.

Cheers,

#137 Steven Rowlandson on 08.12.20 at 7:09 am

If government can approve of LGBT, feminism, extreme real estate prices or rents and using cannabis it should come as no surprise that it would approve of and enjoy borrowing ,spending and not paying back endless amounts of the official currency. We have criminally irresponsible governments and not just in Canada.

#138 cto on 08.12.20 at 7:26 am

CPI
just an innocent question…
Clearly our biggest, hugest, giant piece of the pie cost as individuals is having a roof over our heads. its our biggest cost in life.
What % is housing in CPI?

#139 Dharma Bum on 08.12.20 at 7:40 am

All this talk about mortgage rates, while half the world’s population doesn’t have toilets or sewage management systems.

See? I’m socially conscious.

I watch Netflix shows too!

#140 Carney & Conservatives on 08.12.20 at 7:43 am

#114 Entrepreneur on 08.11.20 at 10:04 pm

I’m also skeptical about Mark Carney. My recollection is that he kept rates too low for too long and knowingly goosed the housing market. If I recall correctly, the Conservatives are to blame for that too, as they had increased the amortization period from 25 years all the way to 40 years, and even allowed zero down payment. They kept the party going and going….

#141 Users should pay CERB & EI-like benefits on 08.12.20 at 7:45 am

#17 The other Keith in Calgary on 08.11.20 at 2:23 pm
#23 BlogDog123 on 08.11.20 at 2:51 pm

People who took CERB should be the ones to pay it back rather than spreading THAT burden to the rest of us. We’re talking $80-something billion dollars (each person could have received a max of $12k “free money”)! And what about the cheaters that could number in the millions? CRA better have the legal tools to penalize them big time.

When the details of the parallel EI-like system get announced for the people who don’t qualify for real EI (because they didn’t pay into it), the government had better also set the expectations that those people will have to pay the employee and employer share of EI-like premiums retroactively. It’s only fair. After all, people who will get real EI after CERB actually paid premiums and their employers did too. It would be blatantly unfair to let those who don’t pay into EI also get to collect a parallel benefit.

EI is only supposed to pay 55% of your best 15 weeks of earnings. That will work out to less than $2k/month in some cases. The government had better not raise the amount of benefits in those cases to try to match CERB, or our premiums will be going way up in the future.

We need to write to the federal government and let them hear us. If the collective voice is big enough, maybe they will get the message that the free money needs to stop rolling and it’s time to collect from the users.

#142 Captain Uppa on 08.12.20 at 7:52 am

New Zealand Central Bank basically says negative rates are coming.

Link: https://www.reuters.com/article/us-newzealand-economy-rbnz/new-zealand-central-bank-expands-bond-buying-flags-negative-rates-as-nation-locks-down-again-idUSKCN258079

#143 Sail Away on 08.12.20 at 7:57 am

#117 Masks really do make some people more attractive on 08.11.20 at 10:22 pm
#102 Sail Away on 08.11.20 at 9:08 pm

There is still time to become one of us Musk-oteers!

————-

The stock split pump will lead to an epic dump!

————-

?????

SpaceX is a private company. Hence no silly stock games. Just quality Elon all the way.

————-

If SpaceX is privately held, how do you profit?

By owning over-priced TSLA, which magically allows Elon’s musk to rub off on you?

————-

Yes, indirectly. Watching Elon’s incredible success with his private company shows his genius.

Tesla’s public ownership has been a bone of contention as the public monkeys jump and scream while Elon plays the long game. It’s nice to see he has finally wrested back control and crushed the shorties.

Bet on winners. SpaceX is a huge winner. Also buy Google since they own 7.5% of SpaceX.

#144 Shannon State on 08.12.20 at 8:15 am

https://www.bnnbloomberg.ca/-1.1478881

Trudeau seems like a complete idiot to most of us over 40. But he appeals to the Mills who have no real world experience outside Moms bsmt.

So, is Trudeaus idea of economics coming from the brain dead demographic he wants represent? He’s not a Mill by a long shot, but, he has a serious case of Peter Pan Syndrome and many of his moves are straight out of the comic books.

Is Canada being run by clueless goofballs who think Reddit, eToro and Robin Hood are investment strategy? It seems so. Waddle Quack Duck.

No matter how impossible the insane notions of a Trudeau, Carney, Greta etc might be, remember this, none can read a balance sheet and none have ever run a lemonade stand through the summer. These are the same people who chortle over Buffet having missed the secrets of day trading. Sure, day trading. Doesn’t this sound like the Trudeau government? Kids with unearned bank accounts?

#145 crowdedelevatorfartz on 08.12.20 at 8:16 am

Oh where oh where has our Governor General gone?
Did they build that “secret stairway” after all?
Is that why we dont see her?
Or is she just hiding, like Trudeau, from all that bad press?

https://thepostmillennial.com/the-governor-general-spent

$250,000 to “investigate” the possibilities of installing a secret stairway in Rideau Hall for her Highness the GG.

Oh and just be sure it comes with a cat door…..

#146 crowdedelevatorfartz on 08.12.20 at 8:23 am

@#135 Never Give Up
“Turner….Try waking up at 5:00 am.
Watch the sunrise…..”

++++
Where do you live?
Its August 12.
Sunrise is at about 6:00am now.
Summer solstice is waaay behind us.

#147 crowdedelevatorfartz on 08.12.20 at 8:31 am

@#132 Dan Salami
“If I were a psychologist I wouldn’t hesitate to look for a history of Carneys mental illness. He’s a dangerous whack job whose insanity has grown into full blown paranoia. Carney is on board with a complete destruction of industrialization and a replacement of government elites.”

++++

My goodness,
So much delusional paranoia jammed into one paragraph.

And the Full Moon isnt for another 3 weeks.
Impressive.

I hear aluminum foil is on for half price now that Trump is taxing it at the border.

You should load up.

#148 Do we have all the facts on 08.12.20 at 8:33 am

#107 Idiocy

Self evident you say. All I am hearing from a wide range of economists these days is that Canada is poised for a dramatic recovery in 2021. When I tried to determine the possible reasons for this recovery I found weaknesses in nearly every economic sector.

I get that an injection of $400 billion has mitigated the damage to our economy caused by the Covid 19 lockdown but I had trouble finding the metrics necessary to generate substantial growth of Canadian GDP in 2021 and beyond.

When I noticed that the value of our dollar did not increase as oil prices began to rise I began to wonder if the optimism expressed by many ‘experts’ might be overstated.

To say I am a bit confused these days would be an understatement since my mind is wired to interpret factual information and facts do not appear to support a very optimistic forecast for Canada under current conditions. This is why have been reaching out to contributors to this blog for information that I seem to be missing.

I am not pessimistic by nature and have spent hours trying to identify where significant growth of Canadian GDP might come from. Growth generated by debt seems to have run its course and unemployment may remain above 8% of the labour force for some time. This will have an impact of the amount of disposable income in circulation and on domestic consumption.

Optimism seems to be based on forward guidance that interest rates will remain at current levels through 2023 and a continuation of asset purchases by the Bank of Canada. This looks more like desperation than a sound foundation for economic recovery.

If there are facts that I have missed I will gladly book my seat on the bandwagon of recovery.

#149 Do we have all the facts on 08.12.20 at 8:42 am

#138 cto

26.8 % including water, fuel and electricity

#150 Sail Away on 08.12.20 at 8:55 am

#139 Dharma Bum on 08.12.20 at 7:40 am

All this talk about mortgage rates, while half the world’s population doesn’t have toilets or sewage management systems.

————-

So? Neither do dogs. It’s crazy the amenities we consider essential.

#151 TurnerNation on 08.12.20 at 9:15 am

#30 Bill we are living in an open air Debtors prison too. Nut-houser by proxy. Never have so many owed so much to so few (the big banks)? Borrowing a turn..

Schlock pickers might focus on PLC.TO, Park Lawn. For years they’ve been buying up the Funeral home and cemetery industry in N.A. I’ll be a good customer one day. Anyway with so many living in fear this cannot be good for life expectancy.
What would our elite rulers do? Well we are simply Liabilities to them – the faster we depart the more their corporate and government pensions will save.

Seeing as all of our culture is created for us why were Zombies pushed so hard? My city had a zombie walk parade few years ago. Look around now and you see drugged out faceless, non-thinking zombies all over.
Phase 1 – the Compliance Stage – is going very well folks.
What might Phase 2 bring? Look to Down ‘under for their test bed currently?

#152 Stan Brooks on 08.12.20 at 9:24 am

#147 Do we have all the facts on 08.12.20 at 8:33 am

All the ‘growth’ will come from understatement of inflation.

For example:
Inflation at 8 %, reported at 2 %, real economy shrinking by 3 %, reported nominal ‘growth’ of 3 %.

Voila, welcome to the future.

With the shepple caught in the debt trap with no savings and utilizing any artificial line of credit available including HELOCs just to survive, where will the spending boost come from?

Money printing… so expect tsunami of inflation that will not be reported and will openly be lied about.

Cheers,

#153 NotLegalAdvice on 08.12.20 at 9:36 am

I’ve been waiting for this blog! Thanks Garth! 10 year mortgage is going to be locked in by month’s end.

#154 Flop... on 08.12.20 at 9:52 am

#150 TurnerNation on 08.12.20 at 9:15 am

Phase 1 – the Compliance Stage – is going very well folks.
What might Phase 2 bring? Look to Down ‘under for their test bed currently?

//////////://///

Hey TN.

This needs to be said.

The media hasn’t exactly covered its self in glory with its COVID coverage.

Victoria, Melbourne in particular is a bit of a mess.

Most of the other states are doing great.

I have been watching Aussie Rules football each weekend, with tens of thousands of fans in the stands.

That will take a long time to happen in North America.

No mention of this in international media.

Available for any Canadian to witness on TSN, if only for a minute to see the crowds in attendance at the arenas.

Focus on the positive, ignore the negative.

This has been the TSN turning point…

M46BC

#155 TurnerNation on 08.12.20 at 9:53 am

Memories of (Sir) Blog Dog Carney. Off to meet the Queen.
Tiff – the new guy – was likely fast sculling his way toward a Harvard rowing scholarship, or something else so terribly upper crust, while our Forum Host was picking dead rodents out of the brewery line’s glassware. Or how I imagine in it.
‘There’s nothing half way about it. Ex says it all’!?

Ontariowe is getting a new major highway. Want to bet housing developers were behind this one? It is to intersect prime farmland err houseland in the 905:

https://news.ontario.ca/mto/en/2020/08/ontario-making-travel-easier-across-york-peel-and-halton-regions.html

Now, years ago, here I oft repeated that we will no longer be given any new infrastucture for free – see the new bridges in BC. Tolled. Let’s see how this highway plays out. Free or tolled.

#156 Montana Bob on 08.12.20 at 9:57 am

113 IHCTD9 on 08.11.20 at 10:03 pm
I think there is disconnect somewhere there.
If risky loans are backed by private insurers, why is CMHC on hook ? CMHC can decline insurance for those and it will be bank issue. CMHC can make their own policy and insure what passes their own regulation. Obviously CMHC did not do their homework properly and they were insuring everything. And now they are afraid that they have to cover a lots of defaults. How come circumvented risky loans are still insured by CMHC ?
I guess CMHC has more information and data and they know much more than what they publicly say.
To me this looks like perfect storm.

#157 YVR Expat on 08.12.20 at 9:59 am

>> Could inflation return to, say, 4% or 5%? Of course. GICs might yield four points again. Home loans could rise to 6%. Easy.

******

How much did rates rise after 2008 crisis?

#158 willworkforpickles on 08.12.20 at 10:23 am

Insured mortgages have been steadily declining since 2015. According to CMHC about 160000 (20%) of deferrals that are uninsured could be headed for default after the monthly deferral payment holiday ends.

#159 willworkforpickles on 08.12.20 at 10:36 am

160000 distressed uninsured sellers hitting the market all at once? (2021)
Wouldn’t that be a smash hit. Million dollar homes in the mix that didn’t qualify for default insurance maybe back on the market at half price.
The non greater fool birds of prey with cash money are circling giddy with glee.

#160 Damifino on 08.12.20 at 10:43 am

#130 T

Kamala isn’t seen as capable of taking over as president if Biden is unable to complete his term.
——————————

Considering the current holder of the office, ‘capability’ seems quite irrelevant to the job.

#161 Ron on 08.12.20 at 10:59 am

“Of course rates will rise. Not quickly or sharply. But they will inflate. As stated, CBs cannot afford to keep current levels since there is no line of defense against the next downtown. Get used to it. – Garth”

—————————–

Garth, you need to throw out your old textbooks and see how the world has changed. Boom ‘n bust cycles are over. It’s done. Put a fork in it.

#162 Ronaldo on 08.12.20 at 1:22 pm

#149 Sail Away on 08.12.20 at 8:55 am
#139 Dharma Bum on 08.12.20 at 7:40 am

All this talk about mortgage rates, while half the world’s population doesn’t have toilets or sewage management systems.

————-

So? Neither do dogs. It’s crazy the amenities we consider essential.
—————————————————————–
So funny and so true. I grew up in rural Sk. on a farm where we had no plumbing (outhouse). No electricity (Coal oil lamps). No running water (ran to the well for it). Wood heat. My job to fill the woodbox everyday and chop the kindling at age 6. No telephones. School two miles away and we walked. In winter we hitched the horse up to a sleigh or caboose when temp was seriously below zero. (like 40 degrees). No snow days back then. No CRV’s and a trip to town involved 4 in the back of the truck and 4 inside. There was not much money but we never had a shortage of food. Families back then actually knew their aunts and uncles and cousins unlike today and they were an important part of growing up. We were content with what we had unlike today. Am sure a lot of older boomers and those before us can relate to this.

#163 Ronaldo on 08.12.20 at 1:27 pm

#147 Do we have all the facts

Here is something that may be of interest to you.

https://fred.stlouisfed.org/series/M2V

#164 Montana Bob on 08.12.20 at 1:35 pm

#158 willworkforpickles on 08.12.20 at 10:36 am
Well, according to data which is available, about 720k mortgage holders asked for deferral. 35% are in Ontario. If 160k mortgages are deferred and uninsured, that means that 56k are in Ontario. Which roughly means that 4.5% in Ontario mortgage holders which asked for deferral is uninsured.
Well, not all of them will have severe issue, but, it will be interesting.
Point is, when SHTF, no one will buy so fast. They will wait for next year, because next year could be even better deal.

#165 Ronaldo on 08.12.20 at 1:49 pm

#144 crowdedelevatorfartz on 08.12.20 at 8:16 am
Oh where oh where has our Governor General gone?
Did they build that “secret stairway” after all?
Is that why we dont see her?
Or is she just hiding, like Trudeau, from all that bad press?

https://thepostmillennial.com/the-governor-general-spent

$250,000 to “investigate” the possibilities of installing a secret stairway in Rideau Hall for her Highness the GG.

Oh and just be sure it comes with a cat door…..
—————————————————————–
She is not the first and won’t be the last. Out of control egos.

#166 willworkforpickles on 08.12.20 at 5:40 pm

#163 Montana Bob
I’m leaning more towards the top end of the scale property owners than the actual CMHC stats i use just for reference.
Those with money to burn laying in wait to pick up discounts in the coming correction are focused mainly on million dollar homes with deferred mortgages headed for the cliff and distress as none are insured.

#167 Shannon State on 08.12.20 at 11:15 pm

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