Reset, Part deux

It might not be exciting as watching the latest version of Seal Team, but the bond market show has been just as full of blood and grit. On Friday five-year Canadas zipped briefly about 1%. Wow. That’s a three-fold increase in four months. It’s a half-point surge in two weeks. And while the yield backed off a little as the weekend dawned, it still felt like a Predator or Reaper killer drone strike. The target being neutralized: hapless newbie house-hunters.

First they faced relentless price inflation, the return of the flippers and speckers, multiple offers, bidding wars and arrogant, let-them-rent realtor rockstars. Now the days of the 1.5% five-year mortgage are doomed.

On Friday we laid out why the bond market’s in turmoil as debt prices fall, yields surge and investors scoff at central bank assurances inflation’s under control. CBs are losing it. Suddenly there’s too much stimulus – government cash, cheap rates and bond-buying – in addition to the vaccines, mass inoculations, corporate profit plumping, a big drop in infections/deaths and economic reopening.

Despite new borrowed billions every week to buy up bonds and suppress rates, it ain’t working. The cost of money is increasing right along with the debt. It’s evident to anyone buying a house, a two-by-four, a puppy, a boat, a few litres of gas or hiring a plumber that inflation is out of the bag. Wage pressures will follow. Imagine where oil prices go when planes start flying again. Rates will keep rising. Governments that spent wildly beyond their means, banking on historically low carrying costs, could whack us all. From pandemic depression to pathogen excess in a few short months. Who knew?

Ron is a Toronto realtor who’s been chucking properties for decades. This weekend he sent me predictions worth sharing. (I’m unsure if he drives an Audi, but let’s take that risk…)

1) Those living off their house ATM will feel it first. Banks will pull the plug on further lending, and reduce lines of credit. The stress would kick in earlier for some than others, but I figure by 6 months those who needed the LOC in the first place will be feeling the heat. Frequently they turn to the grey market @ 10% or above, then capitulate and dump the house.

2) Affordability takes a nose dive as the cost of money jumps up. That takes the real buyers out of the market. The specs will sit on the sidelines waiting for more blood in the water. Bottom line is demand drops, and supply pops.

3) Many Boomers have been waiting for the Pandemic to list because they were uncomfortable selling with all of those germs hanging around.  Look for thousands of listings to hit the market in April onwards.

4) My inbox if flooded every day with Condo developers offering me a full 6% to sell one of their 2 and 3 bedroom units. In the recent past those sales were done by salaried employees, who cost a fraction of the 6% of sale price. Now they just need to move the product. Thousand more units are coming on stream that were planned before the world changed

5) At our office meeting this week, one of the managers more or less read verbatim the glowing 2021 projection prepared by the Toronto Board. It was so bright, I had to dim the monitor on my computer. Being a good team player, I said nothing, as did the other old timers who have seen this rodeo before, a long time ago.

6) Wild card? When. The sweet spot for a Federal election is between the early economic dead cat bounce that will begin by early May, and the havoc caused by higher interest rates, that kick in after July.  I think the second half of the year is going to be a lot rougher than the first half.

Some practical news flowing from these changes: lenders are being deluged with mortgage applications as people desperately grasp for the lowest rates in Canadian history. TD moved a quarter-point higher on Friday. Others will follow. If you have a variable rate, lock in. If you haven’t pre-approved yet to finance a purchase, do so. It was only a matter of time, after all, before the cost of money started to normalize. All those people in the steerage section who told you higher rates were impossible were snorting hopium.

What else?

Well, it’s March now, going into the eight or ten most frenetic weeks of the year for housing. There have never before been conditions like this – insane-high prices, a global pandemic, mass vaccinations, historic govy spending, central bank intervention, rapid rate changes, crushed affordability, plus the virus, nesting and WFH that erased listings and inflated demand. It’s a new world for buyers. And not a swell one.

But maybe Ron’s right. Inventories could jump along with loan costs. Maybe a slew of smart owners will realize it’s an historic opportunity to be sellers – cashing out at the top then buying into falling prices. Maybe the kids will grasp that it’s better to have a higher rate on less debt than the opposite. Or that FOMO is lethal. Or that the future may look nothing like the present.

Or not.

What a rutting season this will be. Incoming!

139 comments ↓

#1 Flop... on 02.28.21 at 12:09 pm

Got a feeling that with this little buggy thing hanging around late summer, early fall, could be the new hot time of the year for sales.

No data, just feelings, that’s how we do things in Vancouver…

M46BC

#2 TurnerNation on 02.28.21 at 12:15 pm

Any Economists here?
Other people have suggested a reason for these rolling Economic Lockdowns in all the Former First World Countries.
That it is preventing *price Inflation* given that the M2 Money supply was increased by almost 50% this year?
https://fred.stlouisfed.org/series/M2SL

– Put it this way did our rulers ask us what is essential or not to us? Nope.


— My take on that theory:
Where do people spend, re-occuringly, with discretion each year:
– Travel (air and cruise trips)
– Clothing.
– Restaurants/Live entertainment/bars.

What has government specifically banned in all the Former First World Countries?
– Travel.
– Sale of NON Essential goods and clothing.
– Yup yup banned.

This weblog states that Government debt is backed with the power of taxation. Can’t get blood from a stone so why not flood the tax slaves with money, M2? Saving rates have gone up. What step would come next as our government debt hits record highs daily???

….

Courts challenge legality of Poland’s lockdown, encouraging businesses to reopen (notesfrompoland.com)

-Oof, 9-11 was not enough for these people.
DOJ Opens the Door to Seeking New Domestic Terror Powers [news.yahoo.com]

………

Anti Lockdown protests in Toronto intensifying – this v-logger:

https://www.youtube.com/channel/UCFnm7oQPDYhXA-JnXmCszdQ/videos

#3 tkid on 02.28.21 at 12:25 pm

Garth, if you keep posting photos like that one of the Lincoln St Beauty, I may have to move out east. Are there many places out East as beautiful as Lunenberg?

#4 Niagara Region on 02.28.21 at 12:25 pm

Legal trial involving corruption and money-laundering in BC real estate:

https://www.cbc.ca/news/canada/british-columbia/shadow-mortgage-broker-money-laundering-1.5926924?cmp=rss

#5 tkid on 02.28.21 at 12:27 pm

P.S. I agree with Ron’s #6.

#6 DON on 02.28.21 at 12:46 pm

Woke up Sat morning to an 8 cent per litre gas increase.

The paint can i bought i the summer in now 4$ more.

#7 Ballingsford on 02.28.21 at 12:47 pm

Ok, we were one of the ones who decided to buy a new build and we’re at the options phase. What’s the average amount to spend on options?

Is $60,000 over doing it? Getting nervous with the rates starting to rise.

#8 Captain Uppa on 02.28.21 at 12:48 pm

But will CBs raise their key rates? “Forced” is maybe an operative word for past “normal” times. Not sure they will this time around.

And how high can rates really go? 2.5%?! Big whoop.

#9 JRock on 02.28.21 at 12:53 pm

Just signed papers for a 1.45% variable 5 year with one of the big 5. Am I crazy to think that variable rates won’t increase for a few years therefore I’m safe to keep as is? If I changed to a fixed now (before funding) I’m looking at a rate of 1.89% and lose the flexibility of a variable mortgage in case we decided to sell before the term is due. I hate the idea of huge penalties for only a few basis points difference and so called peace of mind. Would appreciate your insight:)

Wrong choice. – Garth

#10 Cottagers STAY THE HELL AWAY! on 02.28.21 at 12:53 pm

“Incoming!”

Better not be.

Thanks to all the selfish, inbred southern hillbillies from the Gta, cottage country Muskoka is now in a Grey Zone lockdown.

https://www.simcoe.com/news-story/10339702-simcoe-muskoka-moves-back-into-lockdown-monday/

Thanks for nothing, you Oakville idiots spreading the virus up here.

There will be NO cottage season in 2021. Write it off.

Behave yourselves responsibly, and maybe 2022 will be time to welcome you back.

Until then,

Just.

Stay.

Home.

#11 Darrell White on 02.28.21 at 12:55 pm

My wife and I left Toronto 10 years ago. Best decision ever.

I hadn’t even heard of the place before we moved here. Bought our house in the 300’s.

Now it in the 900’s. We are on 6 acres with a 2 minute drive to sobeys, banks, McDonald’s etc.

When my wife and I lived in toronto we bickered all the time. We’ve literally had one argument in the past 10 years. Police are not corrupt like TPS. Toronto is a dying city.

#12 Sail Away on 02.28.21 at 1:03 pm

#6 DON on 02.28.21 at 12:46 pm

Woke up Sat morning to an 8 cent per litre gas increase.

————

Hmmm… gas…

I used some to cook an omelet this morning, unless you’re referring to that stuff used in the lawnmower and chainsaw?

#13 Sail Away on 02.28.21 at 1:05 pm

#11 Darrell White on 02.28.21 at 12:55 pm

We are on 6 acres with a 2 minute drive to sobeys, banks, McDonald’s etc.

————

McDonald’s is the best! You, me, Warren and Charlie know.

#14 mark on 02.28.21 at 1:09 pm

You’re talking about microscopic increases in bond prices and mortgage rates they might go up a little but it’s a whole bunch of fuss about nothing rates are never going up to five six seven eight nine percent there’s just too much debt plain and simple.

You folks are so cute. – Garth

#15 JRock on 02.28.21 at 1:23 pm

Just signed papers for a 1.45% variable 5 year with one of the big 5. Am I crazy to think that variable rates won’t increase for a few years therefore I’m safe to keep as is? If I changed to a fixed now (before funding) I’m looking at a rate of 1.89% and lose the flexibility of a variable mortgage in case we decided to sell before the term is due. I hate the idea of huge penalties for only a few basis points difference and so called peace of mind. Would appreciate your insight:)

Wrong choice. – Garth

Respectfully disagree. Fixed rates are for suckers. Always have been, always will

Then why did you ask for an opinion? – Garth

#16 Linda on 02.28.21 at 1:24 pm

What I’m wondering is, how a decrease in affordability presumably brought on by the increase in mortgage rates are going to do anything but decrease the number of buyers. That having been said, it no longer appears that anyone is bothered by insanely high debt loads. Debt to asset ratio doesn’t even seem to register. People are spending like, well, governments! So what is the plan here? Crowd source your debt when the music stops? Expect the government to 1) bail you out; 2) pass legislation allowing you to walk away from debt (debt forgiveness); 3) do a Robin Hood – take from ‘the rich’ & give to ‘the poor’? Except if you ‘own’ RE you are apparently ‘the rich’ so don’t quite see how that will allow the indebted a way out.

#17 Elcheapo on 02.28.21 at 1:28 pm

All this talk of sailing these past few days made me reach for my trusty Patrick O’Brien books, starting with Master and Commander. If you haven’t tried them I heartily endorse them; I’ve read through the canon four times myself and I think they are a must for sailing enthusiasts. Some have described O’Brien’s writing as ‘Jane Austen for men’!

#18 crowdedelevatorfartz on 02.28.21 at 1:31 pm

@#14 mark
“it’s a whole bunch of fuss about nothing rates are never going up to five six seven eight nine percent there’s just too much debt plain and simple.”

++++

It wont take 5% interest rates to crush people with the AMOUNT of debt they are holding.

A 1% increase in rates should be enough to nuke and pave a great many home “owners” or should I say “home moaners”……

#19 Marc Roger on 02.28.21 at 1:33 pm

Ryan,
I read your blog from yesterday -thanks.
How about writing a sequel in a month?
Love this blog.

#20 Dolce Vita on 02.28.21 at 1:44 pm

“I said nothing, as did the other old timers who have seen this rodeo before, a long time ago.”

“…were snorting hopium.”

THOSE were good. Too funny.

Unfortunately though, accurate.

——————-

You say “higher” Garth but what exactly = higher?

Bond market after a number attempts over the past 10 years cannot seem to poke much above 3% in Canada, 2% and some change in the USA.

Reading what the Realtor with experience says tells me people’s finances are not all that good which means the economy is still weak.

Rates will go up, stratospheric?

I ‘dunno we’ll have to wait and see.

“Rutting season” – not much of a prediction Garth, you know, it is after all Home as ATM Retirement, life of debt servitude, RE mad Canada.

Duh…

#21 The Woosh on 02.28.21 at 1:51 pm

But maybe Ron’s right. Inventories could jump along with loan costs. Maybe a slew of smart owners will realize it’s an historic opportunity to be sellers – cashing out at the top then buying into falling prices. Maybe the kids will grasp that it’s better to have a higher rate on less debt than the opposite. Or that FOMO is lethal. Or that the future may look nothing like the present.

Or not.

——————————————

I’m going to go with “not”. Because you know everyone sells their stocks at the highest point just before a market correction or crash and buys back just before they recover. Laughable!

#22 Comments! on 02.28.21 at 1:58 pm

Hi Garth, can you Yellen and Powell going even more parabolic with bond buying to control the yield curve? Both Fed and Treasury have been pretty successful in doing so since 2008. Or has it now become impossible? There is no doubt that they will do everything in their power from their comments lately.

Thanks.

#23 DON on 02.28.21 at 2:03 pm

#12 Sail Away on 02.28.21 at 1:03 pm
#6 DON on 02.28.21 at 12:46 pm

Woke up Sat morning to an 8 cent per litre gas increase.

————

Hmmm… gas…

I used some to cook an omelet this morning, unless you’re referring to that stuff used in the lawnmower and chainsaw?

????????????

Gas is also short for Gasoline….Go ahead and pour the gasoline into your chainsaw and start it up. I laft you a spelling mustake as a lure.

#24 DON on 02.28.21 at 2:08 pm

I agree with Ron’s assessment especially about the timing of the election right after the ramp in vaccinations.

#25 Rainman on 02.28.21 at 2:08 pm

Putting the house up. I’ll be calling Garth when it sells. :)

#26 mike from mtl on 02.28.21 at 2:11 pm

Rates will not go up – and STAY there. Post-GFC means suppressed rates and more QE for every ‘crisis’.

Should the debtors be under pressure come Q2-Q3, T2 and the free stuff party would have a winning shot in a snap election. Zero down 40, abolish “stress test”, NINJA loans, home buyer grants, you name it. The vast majority of Canadians fetish real estate and ‘own’, you bet they’d rather eat gyproc than see their precious RE tank.

CRE is already shaky and the fire sales haven’t even started, can you imagine all the city / municipality getting also tax starved as well from residential RE? Not gonna happen.

#27 Old Ron on 02.28.21 at 2:13 pm

@ Mark

The only reason rates are around 1% is because the B of C is buying $Billions in bonds every week. If the bank stops who will buy a long bond at such low yields ? Nobody. The private market will demand a significantly better yield, which will increase mortgages immediately.

Secondly, a couple of percentage point rise in rates may seem like peanuts to you, but the trouble is buyers are so heavily leveraged that a few points takes its toll on a fat mortgage.

Basically our disagreement hinges on this one simple question: Will the Central bank continue to prop up the bond market? I have seen compelling arguments both ways. I contend that they will slowly turn off the tap, beginning shortly after the spring election, when the economy bounces off the mat. And ya know Mark, I kinda hope you’re right.

#28 Dolce Vita on 02.28.21 at 2:20 pm

VARIANT World

Doing well on its own, overall…meh.

Feb 21 there were 800 variant cases cumulative, mostly the UK variant.
Feb 28 there were 1,254 variant cases cumulative, ibid.
% increase in 1 week:

57%

Feb 28 new variant cases = 197.
Feb 28 total Covid cases = 1,799.
% of total cases variant:

11%

Gaining steam?

The total Covid cases low since last week or so averaging 2,900 to 3,250 os the 11% probably around 7% or so (no weekend #’s from some Provinces).

——————-

Ya, in it’s own World variants gaining steam. Of overall cases, still low.

I calculate the above since a threat to seeing “Covid delenda est”, will delay a return to normality (more sick and dying before vax’s to the rescue) and of course:

“Optimism the economy will quickly accelerate once the pace of vaccinations picks up.”

#29 TurnerNation on 02.28.21 at 2:26 pm

Are Inter/intra-provincial and city Travel and movement restrictions coming? Why not – many places have this in Europe. Per that crazy plan…
We sure gonna need that UBI right? It’s over. We’re done. In my opinion – Severe government-induced recession coming to Kanada 2022-2024. Life in a UN Smart city. Let’s hope the supply chain shortages don’t worsen.
Don’t act surprised. If you haven’t figured out that every remaining leader no longer is working for us…you will.

Economic engine areas being attacked even more.

Toronto Star:
“That recommendation comes as the government ponders whether to impose stronger public health restrictions on regions with rising COVID-19 case numbers.”

https://torontosun.com/news/provincial/province-ponders-leaving-toronto-peel-in-strict-lockdown
Province ponders leaving Toronto, Peel in strict lockdown
Publishing date:Feb 19, 2021 • February 19, 2021


From DECEMBER 2019:

#9 TurnerNation on 12.30.19 at 4:56 pm
2020-2021 we will face food shortages and rationing. Due to the government/UN’s actions. Remember from history that famines are always man-made.

#30 Linda on 02.28.21 at 2:30 pm

#7 ‘Ball’ – depends on your plans for the future. Are you intending to stay put for a while? If so, I’d advise spending your option money on whatever you know will irk you if you don’t put it in. If you are going to be awash in debt you may as well ensure that you enjoy walking through your door. If however the plan is to move in a relatively brief time period, put the option money into those upgrades that future buyers will be wanting to see, always presuming you know what those might be.

#31 AM in MN on 02.28.21 at 2:30 pm

#14 mark on 02.28.21 at 1:09 pm

You’re talking about microscopic increases in bond prices and mortgage rates they might go up a little but it’s a whole bunch of fuss about nothing rates are never going up to five six seven eight nine percent there’s just too much debt plain and simple.

———————————————————

You need to visit Argentina, or any other number of failed left wing money printing happy countries around the world, but I always use Argentina because of its similarities to Canada in terms of what it produces and exports, and the fact that it was once wealthier than Canada.

The big decision comes when the market fully prices in the fact that the government can NEVER pay the interest costs with tax revenue, it must print more money.

Welcome to the 1990’s… the Crow Rate, star chamber…many may not remember.

Hard decisions await, and the social stability enjoyed during the money printing party will crash harder than house prices.

#32 Austin on 02.28.21 at 2:32 pm

DELETED

#33 Dolce Vita on 02.28.21 at 2:37 pm

VAX Canadense, Threats

VAX’D, Doses etc.

Received doses to date 2,441,870
Single jab 1,342,941
Double jab 513,724
Unused 585,205
To be delivered by Apr 4 = 2,223,000

BY APRIL 4TH, double jabbed, per above, all used, into arms of Canadians:

3,553,370

% of 38M = 9% (All Beavers)
% of 32M = 11% (Cdns 15 yrs or older)

THREATS

EU still not a threat to Pfizer vax deliveries to Canada…so far. Seems UK variant gaining strength in more countries like Germany, France, Italia and Spain but vax’s coming so not too much belly aching about vax quantities…mostly variants taking over jitters (variants outpacing vax’ng worries).

I say this since if the EU wants to hog vax for themselves they COULD with export controls in place (haven’t so far, GOOD for Canada) just like the USA and UK HAVE been doing all along and the USA and UK have been of NO HELP to Canada (hogs never prosper).

GOOD NEWS?

Italia reporting April J&J vax deliveries a “few million”, 27M by December. Some HOPE there for Canada in April as 10M doses on order from J&J?

…Keep you updated.

———————

“Optimism the economy will quickly accelerate once the pace of vaccinations picks up.” And of course:

Covid delenda est.

#34 DON on 02.28.21 at 2:41 pm

#8 Captain Uppa on 02.28.21 at 12:48 pm
But will CBs raise their key rates? “Forced” is maybe an operative word for past “normal” times. Not sure they will this time around.

And how high can rates really go? 2.5%?! Big whoop.

****&*****

Does your wife teach math?

and

Do you believe everything the Central Banks say?

Besides…nothing to worry about… prices of EVERYTHING going UPPA.

#35 Dolce Vita on 02.28.21 at 2:49 pm

#13 Sail Away

“McDonald’s is the best! You, me, Warren and Charlie know.”

———————

Canadesi and Americani know NOTHING about good food and drink.

Nada. Niente. Rien.

[but think they do as the nouveau riche, do not know the difference between dung and clay, but read it in a magazine]

Come to Italia and learn about Il Bel Far Niente, La Dolce Vita and

“La scienza in cucina e l’arte di mangiar bene.”

Recall how many of our inventions you lick, twirl, guzzle, slice and lord knows what else you do to our “cucina”.

———————

What you drink, eat in Canada from Italia is barely scratching the surface, not even close. You must live here to know better and Canada does not have our Roundup, GMO and steroid FREE food chain; thus, you cannot emulate the taste of our cuisine in Canada, try as you may.

And of course:

Starbucks, McDonalds delenda est.

#36 WTF on 02.28.21 at 2:53 pm

Assume an existing 25 yr mortgage of 600k (not unreasonable in TO/Van)Perhaps a bit low?

Rate hub posted rate F1.64% 5 Yr = $2437 per month
Assume it doubles 3.28% 5 yr = $2926
Assume it normalizes 5% 5 yr = $3489

Given the average home “owner” is pickled in debt without any extra funds. With debt to income currently at 177%

#37 Roial1 on 02.28.21 at 3:00 pm

#31 AM in MN on 02.28.21 at 2:30 pm

You need to visit Argentina, or any other number of failed “left wing” money printing happy countries around the world, but I always use Argentina because of its similarities to Canada in terms of what it produces and exports, and the fact that it was once wealthier than Canada.

Shows what you know.

Argentina was until reticently a FAR “right” Military dictatorship.
Any “left wingness ” is recent and trying to recover from a government that thew over 35,000 resisters out of the back of airplanes over the Atlantic, with their hands tied.

The debt left by the Generals was astounding.

And the world did NOT say much at all.

#38 LP on 02.28.21 at 3:05 pm

#7 Ballingsford on 02.28.21 at 12:47 pm
Ok, we were one of the ones who decided to buy a new build and we’re at the options phase. What’s the average amount to spend on options?

Is $60,000 over doing it? Getting nervous with the rates starting to rise.
*************************************

I’ll make suggestions but be aware I’m out-of-date with what builders charge for options like this:
– ask for a gas line to the back of the kitchen range even if you now have an electric range (maybe also an exterior outlet near the deck)
– upgrade the ceramic surrounds in the tub/shower and kitchen backsplash
– if you will have a deck, spring for the perma-board surfacing (can’t remember what the brand is called)
– solid surfacing for kitchen counter(s), NOT granite
– premium underpad if you’re going to have broadloom
– a better quality and wider front entrance door

There, I think I just spent $60K. Gosh that felt good!!!

F73ON

#39 enigma on 02.28.21 at 3:10 pm

I am worried about inflation, not from the interest rate perspective but what it means for wealth preservation and buying power. Looks like only the rich and speculators will have a chance to use this “opportunity”. Can the Bank of Canada and the Canadian Government really significantly influence inflation and rates? What are they likely going to do to keep the negative consequences under control? How can those that have only part of their savings in investments, protect against inflation? My current take is to stay invested but to also look how I can spend less and be more frugal, and maybe buy some bigger $$ items earlier than planned?

Salaries may go up but likely less than prices and wouldn’t this likely also bring more job losses as more and more organizations are getting squeezed? More jobs disappearing faster through automation and AP software that needs less people to operate and less intermediaries?

And as such a huge amount of people has mortgages/real estate, isn’t this screwing all those that choose to rent instead of real estate. I assume the government could not let get such an immense number of people get into dire straits and will somehow bail them out.

If I’d bought 14 years ago a Condo what I could have afforded, I’d be in much less desirable financial shape as I am currently. But I wonder, should I buy soon to keep my money save? Or, make sure I have a substantial amount of money in REITs at least? Some parts of the stock markets are overheated and if there is a crash, real estate may get less of an hit (I live in a market that is not overheated – yet). How can the average flexible person prepare themselves to make it half-way unharmed through the next 5-10 years?

My grand-parents and their parents lost all their money during a hyperinflation, still got some stamps from that time, one with a 1 billon overprint for a regular stamp … can it really not happen here?

#40 Dolce Vita on 02.28.21 at 3:14 pm

Last salvo.

Garth, I really enjoyed that real world take by the experienced Realtor.

I like it that you seek out people in the know and the let the rest of us in on what is really going on and likely to happen.

Grazie mille Garth.

——————-

PS:

I forgot to add “The Olive Garden” to my Starbucks and McDonalds

DELENDA EST list

…there are others too but those 3 definitely need a Carthāgō ending (as does Covid).

#41 mark on 02.28.21 at 3:15 pm

AM in MN on 02.28.21 at 2:30 pm

14 mark on 02.28.21 at 1:09 pm

You’re talking about microscopic increases in bond prices and mortgage rates they might go up a little but it’s a whole bunch of fuss about nothing rates are never going up to five six seven eight nine percent there’s just too much debt plain and simple.

———————————————————

You need to visit Argentina, or any other number of failed left wing money printing happy countries around the world, but I always use Argentina because of its similarities to Canada in terms of what it produces and exports, and the fact that it was once wealthier than Canada.

The big decision comes when the market fully prices in the fact that the government can NEVER pay the interest costs with tax revenue, it must print more money.

Welcome to the 1990’s… the Crow Rate, star chamber…many may not remember.

Hard decisions await, and the social stability enjoyed during the money printing party will crash harder than house prices.

†*****************”**********”**”********************

It’s called the big government reset everybody knows including the government that all this debt is not being paid back that will be commingled it’ll be forgiven it’ll be amortized away but there’s no way it’s all being paid back and it’s no there’s no way that interest rates can go through the roof and everybody knows this including the government.

#42 Dogman01 on 02.28.21 at 3:19 pm

Interest rates:

In Camp One: Interest rates will not go up because they can’t.

Government\CB will not let it happen as the plan is to inflate away the debt and they are so indebted they cannot afford higher interest rates on that debt.

In Camp Two: Interest rates will not stay low because they can’t.

Bond Market will force it higher and Government\CB cannot prevent it. Bond market will not accept pathetic rates when Inflation is raging.

Hmmm.
Either way no upside for already issued bonds only downside.

#43 Ace on 02.28.21 at 3:26 pm

The 80s were awesome. Not many remember those days or they just try to forget.. houses going up like crazy, businesses doing amazing. My family bought a house in North York, it went up a little and they got a second mortgage to put a down payment on a business condo.. then both the house and condo went up in price and they were offered double what they paid but refused the offer (it can only go up more right?) .. new cars every year, eating out every other day at nice places. It was fun! …. then Free trade with Mexico, rates went up and new taxes came into to play. Took 8 years of holding on for dear life but Sadly it was all gone by 1997.

#44 Tulips on 02.28.21 at 3:28 pm

Maybe a slew of smart owners will realize it’s an historic opportunity to be sellers – cashing out at the top then buying into falling prices.

I recommend staying balanced, especially if you expect to reenter the real estate market down the road. If you want to cash out, maybe it’s wiser to downsize than to exit completely. Speaking from experience, as I sold my place after the GFC expecting I could buy back at a discount, except I ended up hanging out on the sidelines for a decade before buying back at over twice the price. Rising rates may be inevitable and will put a drag on prices, but who knows what other fuel will be poured onto the fire when that starts to take place? I would not be surprised to see 40 year mortgages reenter the stage as a political play down the road.

#45 Distortions on 02.28.21 at 3:32 pm

Thats the word for where we are now. Thanks to central bankers everything has been distorted by money printing. There is no free market when more and more is being nationalized by the the central planners. If you look at the U.S bond yield rising despite the FED trying to squish it what will they do ? Easy, no choice but to squish harder because if rates rise they cannot pay their debt , they are insolvent. Once the average Joe figures out how their paper $$’s are becoming worthless , Gold Silver and Bitcoin will be heading to the moon.

#46 justice on 02.28.21 at 3:37 pm

The 1% elite in Toronto better bribe the Toronto Police more to benefit the rich class. The welfare cuts that are coming next year will create anarchy and a French Revolution:

https://www.reddit.com/r/toronto/comments/lujrhj/why_toronto_is_taking_action_against_a_carpenter/

#47 Brian Ripley on 02.28.21 at 3:37 pm

HOUSING STARTS PEAKED IN:

CANADA QC ON AB BC
1976 1987 1973 2006 2019

DROP SINCE:

Peak -26% -36% -29% -52% -23%
2020 -8% -13% -4% -3% -9%
2011 +4% -2% +16% -9% +31%

And on my long term housing chart since 1956 we can see that relative to the 4Q 2020 Census estimates, starts nationally have been in a downtrend of lower highs and lower lows from the mid 1970s to the mid 1990s. Since the mid 1990s, national starts have put in higher lows but LOWER HIGHS: http://www.chpc.biz/housing-starts.html

On my Inventory chart: http://www.chpc.biz/sales-listings.html
…current (JAN 2020) supply is in some cities at MULTI-DECADE lows.

At current bubble prices and especially with the absurd absorption rate wilding that has taken place (2016-2017 and 2020): http://www.chpc.biz/mar-moi.html
…even if supply via (soon to be?) insolvent owners increases, there appears to be still lots of FOMO buyers ready to overbid.

To further bolster this argument, see also my Employment Class of Worker chart on this page: http://www.chpc.biz/earnings-employment.html#Rate

The JAN 2020 data on which ‘class of worker employed’ increased the highest Y/Y …

… yes that’s right: the “FIRE” sector (Finance Insurance Real Estate and Leasing).

#48 westcdn on 02.28.21 at 3:37 pm

It was still a good week. I know things will not last. I move to things that are promising. Hope is not something I invest but I have missed. Just count on me showing up for tomorrow. Show me a plan and I will decide, you will not get money me for free. Some chicks are excluded.

I kept my mind on lobster women. Guys got soaked in restaurants.

#49 Sail Away on 02.28.21 at 3:45 pm

#40 Dolce Vita on 02.28.21 at 3:14 pm

I forgot to add “The Olive Garden” to my Starbucks and McDonalds

———-

We greatly enjoy authentic Italian Olive Garden cuisine.

Buffalo wings and jello dessert are favourites, or, in Italian: really buona.

#50 Captain Uppa on 02.28.21 at 3:52 pm

#15 JRock on 02.28.21 at 1:23 pm
Just signed papers for a 1.45% variable 5 year with one of the big 5. Am I crazy to think that variable rates won’t increase for a few years therefore I’m safe to keep as is? If I changed to a fixed now (before funding) I’m looking at a rate of 1.89% and lose the flexibility of a variable mortgage in case we decided to sell before the term is due. I hate the idea of huge penalties for only a few basis points difference and so called peace of mind. Would appreciate your insight:)

Wrong choice. – Garth

Respectfully disagree. Fixed rates are for suckers. Always have been, always will

Then why did you ask for an opinion? – Garth

———————————

Can’t he just lock in his variable after this first mythical big CB hike?

#51 yorkville renter on 02.28.21 at 4:01 pm

Maybe the kids will grasp that it’s better to have a higher rate on less debt than the opposite

This x1000… my buying mantra. I’d rather buy $800k @ 4% than $1.1mm @ 1.5%. $300k is a BIG chunk of change!!!

#52 DON on 02.28.21 at 4:03 pm

#42 Dogman01 on 02.28.21 at 3:19 pm
Interest rates:

In Camp One: Interest rates will not go up because they can’t.

Government\CB will not let it happen as the plan is to inflate away the debt and they are so indebted they cannot afford higher interest rates on that debt.

In Camp Two: Interest rates will not stay low because they can’t.

Bond Market will force it higher and Government\CB cannot prevent it. Bond market will not accept pathetic rates when Inflation is raging.

Hmmm.
Either way no upside for already issued bonds only downside.

**************
So the assumption is that governments are not refinancing at lower rates for longer terms.

#53 Leftover on 02.28.21 at 4:06 pm

Using the 5X income test most lenders apply, a young couple earning $140k a year are eligible for a $700K mortgage. Throw in some savings and the Bank of Mom, that’s where the $1 million “starter” house comes from.

At 2.25% (big, bad, TD) that mortgage payment is about $3,000 a month, plus taxes, plus utilities, insurance, etc. Let’s say $4,000 a month to live.

Maybe that mortgage rate becomes 4%. Now the payment is $3,700, plus, plus, and it costs nearly $5,000 a month to live in that house.

Just numbers, but getting from A (2.25%) to B (4%) reduces purchasing power by at least 20%. Almost exactly how much RE has gone up in the past year.

Now throw in Ron’s point #3, boomers deciding en mass to sell, “thousands of listings” in his words, because Covid fears die down.

Kinda sounds like sitting tight until 2022 would be a good idea.

#54 Doug in London on 02.28.21 at 4:11 pm

Once again I’m reminiscing about days gone by here in the time tunnel. While we won’t see a return to the high interest rates of 1981, a repeat of 1989-90 isn’t entirely out of the question. Say, has anyone heard that new song Blue Sky Mine by Midnight Oil, from Australia? How about Diamond Mine by Blue Rodeo?

#55 Doug in London on 02.28.21 at 4:18 pm

@Sail Away, post #12:
Yes, gas. I hear my gas furnace running right now. As for the stuff you run your lawnmower and chainsaw with, isn’t it called petrol? Oops, my mistake. I’ve been reminiscing about being in Queenstown, NZ 5 years ago today, where they call it petrol. Anyone for bungee jumping?

#56 Ponzius Pilatus on 02.28.21 at 4:34 pm

#35 Dolce Vita on 02.28.21 at 2:49 pm
#13 Sail Away

“McDonald’s is the best! You, me, Warren and Charlie know.”

———————

Canadesi and Americani know NOTHING about good food and drink.

Nada. Niente. Rien.

[but think they do as the nouveau riche, do not know the difference between dung and clay, but read it in a magazine]

Come to Italia and learn about Il Bel Far Niente, La Dolce Vita and

“La scienza in cucina e l’arte di mangiar bene.”

Recall how many of our inventions you lick, twirl, guzzle, slice and lord knows what else you do to our “cucina”.

———————

What you drink, eat in Canada from Italia is barely scratching the surface, not even close. You must live here to know better and Canada does not have our Roundup, GMO and steroid FREE food chain; thus, you cannot emulate the taste of our cuisine in Canada, try as you may.

And of course:

Starbucks, McDonalds delenda est.
————–
Agree about Starbucks and McDonalds etc.
But I find the Italian obsession with food bordering on insanity.
If you’re watching the Food Network, it’s all about Italian food and chefs.
CNN is running a show ” Searching for Italy” with Stanley Tucci.
I like Italy, so I watch the show.
But it’s mostly about food, and how great the food is.
Little about history and politics.
Regarding McDonalds and Italy:
We were in Florence and walked by a McDonalds and out came a big Texan with his two kids and he said to them “now you finally had a good meal”.

#57 wallflower on 02.28.21 at 4:36 pm

Two tips for
#7 Ballingsford on 02.28.21 at 12:47 pm

Always pay for your ‘options’ (upgrades) out of pocket. Never let these go into your final bill of sale – you will pay property tax for these upgrades if you do not pay out of pocket, ie higher property taxes than base price

Upgrades are not much value for resale value but may be valuable for sellability – slow market, good – hot market, no upside to having bought the upgrades

#58 Ponzius Pilatus on 02.28.21 at 4:46 pm

#55 Doug in London on 02.28.21 at 4:18 pm
@Sail Away, post #12:
Yes, gas. I hear my gas furnace running right now. As for the stuff you run your lawnmower and chainsaw with, isn’t it called petrol? Oops, my mistake. I’ve been reminiscing about being in Queenstown, NZ 5 years ago today, where they call it petrol. Anyone for bungee jumping?
————–
In Portugal they call diesel gasolina.
Was a few seconds away from filling my gasoline rental up with diesel, when the guy on the other pump yelled stop.
The stuff you learn while travelling.

#59 Ponzius Pilatus on 02.28.21 at 4:51 pm

#50 Captain Uppa on 02.28.21 at 3:52 pm
#15 JRock on 02.28.21 at 1:23 pm
Just signed papers for a 1.45% variable 5 year with one of the big 5. Am I crazy to think that variable rates won’t increase for a few years therefore I’m safe to keep as is? If I changed to a fixed now (before funding) I’m looking at a rate of 1.89% and lose the flexibility of a variable mortgage in case we decided to sell before the term is due. I hate the idea of huge penalties for only a few basis points difference and so called peace of mind. Would appreciate your insight:)

Wrong choice. – Garth

Respectfully disagree. Fixed rates are for suckers. Always have been, always will

Then why did you ask for an opinion? – Garth

———————————

Can’t he just lock in his variable after this first mythical big CB hike?
—————–
Not that easy.
We switched over from variable to 5 year fixed.
Took them about 10 days to approve.
Switched bank, though.

#60 Ambi and Vasu on 02.28.21 at 5:04 pm

we see the listings already edging up in Durham Area.

It was about 3 to 5 listings (Bungalows) earlier on mid week days which has now gone to 8 listings and more….

#61 Papabear on 02.28.21 at 5:05 pm

Why do TurnerNation’s posts make me picture an old man who forgot to take his pills and goes on rants about nothing coherent?
Make some sense, man!

More seriously though, about rising rates. What is the most the Bank of Canada has raised it in a single year?
I also have my doubts that it would get so high as to come to a boiling point before the next monetary/economic crisis hits and the BoC decides to stop raising or cut them again.

#62 Habitt on 02.28.21 at 5:20 pm

Shocking and predictable. Lol interest rates going up! Who could have guessed? Will it continue and how much higher will they go? Keep guessing. You’ll eventually be right. Good grief

#63 AM in MN on 02.28.21 at 5:22 pm

#37 Roial1 on 02.28.21 at 3:00 pm

—————————————————–

The military only came to power in Argentina after a couple decades of the Peronists destroying the economy of what had been a wealthy nation.

It’s what happens when the money printing stops, check out Germany in the late 1920’s…

The Peronists came to power on a wave of populism that they could bring wealth equality to the masses. Socialism never spreads the wealth, it only ever destroys the wealth and spreads the misery.

Much like today, print the money and buy “Social Justice”. What happens when no one wants what comes out of the printing press? Usually, in a panic, a desperate people seek a strongman.

The solution is to move towards the principles of British Common Law, as laid out in 1689. Personal freedom, private property rights and the rule of law, and sound money, bring peace and prosperity.

#64 Flop... on 02.28.21 at 5:23 pm

I recently put up this post on here analyzing a sale in my hood.

https://www.greaterfool.ca/2021/02/21/brain-bug/#comment-768033

The globe and mail thought it was an interesting enough sale too, and got a journalist to do their version.

https://www.theglobeandmail.com/real-estate/vancouver/article-six-offers-for-cedar-cottage-duplex-unit-in-vancouver/

I can hardly tell the difference.

One is a fluff piece, the other a piece by Flop…

M46BC

#65 Cici on 02.28.21 at 5:31 pm

#17 ElCheapo

It’s a new vast new world and lots of women like sailing too.

Also, lots of guys like reading Janet Austen.

Just thought I’d let you know.

#66 Kat on 02.28.21 at 5:31 pm

I remember my parents selling their house by the skin of their teeth with the first Alberta recession it was just after my brother died in a car accident so plenty of trauma to remember even as a 6 year old. Then moving to Ontario and rates went through the roof and no work we lived with my grandparents who sadly were not the kindest people but necessity I suppose.
I do not think a lot of people remember that rates can jump and work can dry up with no money from daddy government to help out. The lack of common sense and the heavy desire for unattainable life styles wanted right this second is truly baffling to me, sure we want to own a house and maybe we missed the boat however taking on life altering debt to do so has never made sense. Maybe most have not lived through large enough life changing events to see how quickly circumstances can change.
Also cottager guy, my brother sounds just like you when he is off his medication for schizophrenia, absolute paranoia. Seriously get a life no one cares.

#67 You ever been to ... on 02.28.21 at 5:34 pm

#35 Dolce Vita on 02.28.21 at 2:49 pm
Canadesi and Americani know NOTHING about good food and drink.

Nada. Niente. Rien.
—————————————————–
Nick’s spaghetti house? You usta getta free bread.

#68 Don Guillermo on 02.28.21 at 5:51 pm

#65 Cici on 02.28.21 at 5:31 pm
#17 ElCheapo

It’s a new vast new world and lots of women like sailing too.

Also, lots of guys like reading Janet Austen.

Just thought I’d let you know
***************************************

Oh my, on every topic there’s always someone playing the SJW card. It’s so 2015.

#69 Cici on 02.28.21 at 6:09 pm

#68 Don Guillermo

Sorry Don, social justice and gender stereotyping are two entirely different things.

#70 Bobi on 02.28.21 at 6:09 pm

#58 Ponzius Pilatus on 02.28.21 at 4:46 pm

In Portugal they call diesel gasolina.
Was a few seconds away from filling my gasoline rental up with diesel, when the guy on the other pump yelled stop.
The stuff you learn while travelling.

Didn’t learn much on that trip.
In Portugal diesel is gasoleo, and most people know it as diesel. Gasolina is gasoline.

#71 Ustabe on 02.28.21 at 6:16 pm

We greatly enjoy authentic Italian Olive Garden cuisine.

Olive Garden is to Italian food as Michael Jackson was to Black people. A pale imitation.

#72 Alex on 02.28.21 at 6:24 pm

#10 Cottagers STAY THE HELL AWAY! on 02.28.21 at 12:53
You should educate yourself on Total deaths in Canada and PCR testing using credible sources (no conspiracy theories) like stats Canada and FDA/CDC where you will see that more people died in 2019 compared to 2020 when an additional cause of death (covid) was addedd, and that PCR test can be positive on ANY pasto or present viral or bacterial infection. Then read a bit more about a Chinese study on 10 million people with conclusion that asymptomatic people do not transmit. Then think one more time if you will continnue to base your conclusions and what was told on mainstream media (not just about this, in generally as well). Then stop BS and blaming others for something that is in front of your nose

#73 COW MAN on 02.28.21 at 6:24 pm

Government Policy reflects those who elect them. If the electorate does not care about debt, they elect governments that don’t care about debt either.

When the electorate cares the government will care. Until then party on.

#74 Sail Away on 02.28.21 at 6:31 pm

#17 Elcheapo on 02.28.21 at 1:28 pm

All this talk of sailing these past few days made me reach for my trusty Patrick O’Brien books, starting with Master and Commander. If you haven’t tried them I heartily endorse them; I’ve read through the canon four times myself and I think they are a must for sailing enthusiasts. Some have described O’Brien’s writing as ‘Jane Austen for men’!

————–

Thanks!

I haven’t read them and am always on the lookout for good books. Even better with sailing.

#75 Roial1 on 02.28.21 at 6:40 pm

#63 AM in MN on 02.28.21 at 5:22 pm

The military only came to power in Argentina after a couple decades of the Peronists destroying the economy of what had been a wealthy nation.

What do you think Peron was, or should I say Coronal Peron to give his full title.
From the 40s it was ALWAYS A military power. Even when elected. No one else was allowed to really run.

#76 Kato on 02.28.21 at 6:43 pm

#23 DON on 02.28.21 at 2:03 pm
#12 Sail Away on 02.28.21 at 1:03 pm
#6 DON on 02.28.21 at 12:46 pm

Woke up Sat morning to an 8 cent per litre gas increase.

————

Hmmm… gas…

I used some to cook an omelet this morning, unless you’re referring to that stuff used in the lawnmower and chainsaw?

????????????

Gas is also short for Gasoline….Go ahead and pour the gasoline into your chainsaw and start it up. I laft you a spelling mustake as a lure.
_____________________

Our man Sail is a Tesla owner, I believe. And you don’t count as a Tesla owner if you don’t chime in about how your car doesn’t have a gas (or petrol) tank.

#77 45north on 02.28.21 at 6:56 pm

5) At our office meeting this week, one of the managers more or less read verbatim the glowing 2021 projection prepared by the Toronto Board. It was so bright, I had to dim the monitor on my computer. Being a good team player, I said nothing, as did the other old timers who have seen this rodeo before, a long time ago.

reads like a scene from a movie

#78 Nonplused on 02.28.21 at 7:03 pm

#39 enigma on 02.28.21 at 3:10 pm

“Salaries may go up but likely less than prices and wouldn’t this likely also bring more job losses as more and more organizations are getting squeezed? More jobs disappearing faster through automation and AP software that needs less people to operate and less intermediaries?”

I don’t see the argument for wage inflation in the medium term. With unemployment at near 10% and the immigration taps about to be opened (maybe 6 months from now?), automation, and all the rest it will be a long time before we have anything resembling a labor shortage in Canada. Maybe we get a $15 minimum wage but that should put downward pressure on the job market, not upward. The money has to come from somewhere and prices can only go up so much so there will be downward pressure on wages above $15 and many people who earn minimum wage now will simply have their jobs eliminated.

The funny thing about inflations is that nobody has any money but prices go up anyway.

Wage driven inflation is different, because that is indicative of a healthy growing economy that is producing jobs faster than people. But we haven’t seen that since the ’60’s. Ever since then inflation has been driven by scarcity, costs, increased debt, and taxes. I don’t see that changing any time soon. Canada and indeed the world is no where near a labor shortage and globalization means that any localized labor shortages that arise get met largely with offshoring. That’s why most of our fancy new windmills and solar panels and phones (and even skis!) get manufactured in China, not here.

—————————-

The Folly

So while we are busy adding complexity and thus lowering reliability to the grid by adding wind and solar on mass, guess who produces 30% of the world’s CO2? China. Sure, they have basically cornered the solar market and are making great inroads into wind, but that is for export. You can basically assume that for the foreseeable future any reductions in CO2 production made in the “west” will be offset by increases from China. And have you checked how much their stuff costs now? My Chinese made K2 skis certainly were not cheaper to buy than when K2 was still making them in California. Or how about an iPhone? “Designed in California, Made in China” mine says and it was the better part of $1000 for something that is only supposed to last 3 years. Maybe if Apple made them in California they wouldn’t be printing quite as much cash, but I don’t know if it could even be done because Foxconn has captured the supply chain.

#79 FLHTK on 02.28.21 at 7:20 pm

If interest rates even go to 4% the economy is pooched! All these people with million plus mortgages will be chucking the keys at the bank, the banks will be having fire sales, maybe I’ll sell then and get into a bigger pad! Higher interest rates not good for the recovering economy at all I cant’t see it that much higher then 3% but hey I heard the 80’s and 90’s interest rates were awesome!!

#80 KLNR on 02.28.21 at 7:25 pm

@#72 Alex on 02.28.21 at 6:24 pm
#10 Cottagers STAY THE HELL AWAY! on 02.28.21 at 12:53
You should educate yourself on Total deaths in Canada and PCR testing using credible sources (no conspiracy theories) like stats Canada and FDA/CDC where you will see that more people died in 2019 compared to 2020 when an additional cause of death (covid) was addedd, and that PCR test can be positive on ANY pasto or present viral or bacterial infection. Then read a bit more about a Chinese study on 10 million people with conclusion that asymptomatic people do not transmit. Then think one more time if you will continnue to base your conclusions and what was told on mainstream media (not just about this, in generally as well). Then stop BS and blaming others for something that is in front of your nose

don’t feed the troll.

#81 Ustabe on 02.28.21 at 7:25 pm

#73 COW MAN on 02.28.21 at 6:24 pm

Government Policy reflects those who elect them. If the electorate does not care about debt, they elect governments that don’t care about debt either.

When the electorate cares the government will care. Until then party on.

Truth.

The same thought philosophy can be applied to the Conservative Party of Canada. Until the general population says this is no longer Canadian conservatism and we won’t stand for it the CPC will not be forming a majority government.

Somehow somebody allowed Scheer to be replaced with O’Toole?

What is Thumb Boy on about during this time of multiple political stresses? Shutting down the next Olympics. “Nice to meet you, now back to work” is his catch phrase when he should be making political bank right now. Videos with him standing in front of a porta potty, frat boy yattering about how he’s going to put Justin in there.

I have zero idea whether the Toronto Sun is fake news or not but Warren Kinsella has a pretty good opinion piece on line right now. Lots of infighting and positioning going on too I am told by my one single Ottawa source left from the old days.

Think about this…Sheer had two years to let Canadians get to know him and his platform and he still lost. Thumb Boy has less than six months and his own caucus doesn’t know what the platform is.

Ladies and Gentlemen, your Conservative Party of Canada.

#82 S.Bby on 02.28.21 at 7:34 pm

Regular gas is $1.50 litre in Burnaby BC. A few months ago it was $1.20 or lower.

#83 Nonplused on 02.28.21 at 7:36 pm

#40 Dolce Vita on 02.28.21 at 3:14 pm

“I forgot to add “The Olive Garden” to my Starbucks and McDonalds”

Why the hate for McDonald’s? If you had bought when they first listed you would have experienced Amazon type gains. You’d be too busy floating around on your yacht and eating fine Italian food to be posting here.

Things have to be taken in context. McDonald’s and Subway (and others) became great successes because people on the go needed cheap, fast food. Target market identified, target market supplied, profits enjoyed.

If you have kids that play sports and go on tournaments, the golden arches are always a welcome sign in a town you are passing through. Tastes the same wherever you are, cheap, quick, the kids love it like a bag of Doritos, and you are on your way.

I read Ray Kroc’s book. Seemingly by happenchance he went from selling milkshake mixers to a $600 million dollar fortune (which in 1984 was a big deal) simply by observing what people wanted and what worked and delivering it. How many of your Italian chefs have done that? The Olive Garden guy maybe but other than that I think it is pretty close to zero.

You can look at something like McDonald’s which is a world wide brand now and say “Meh” because you wouldn’t eat there. But that’s not how to invest.

#84 George S on 02.28.21 at 7:45 pm

from some post near the start:

“You’re talking about microscopic increases in bond prices and mortgage rates they might go up a little but it’s a whole bunch of fuss about nothing rates are never going up to five six seven eight nine percent there’s just too much debt plain and simple.

You folks are so cute. – Garth”

Never say never.

Long time ago when the mortgage interest rates were 14% there were quite a few people saying that mortgage rates could never go higher. When the rate was 16% we considered ourselves lucky to be able to negotiate a private mortgage for 14%. The highest I remember was a 23.5% floating rate. You could get a 5 year term deposit at 17.5% at one point.

#85 The West on 02.28.21 at 7:55 pm

The folklore of the Breton Woods Accord goes something like this: Hayek and Keynes drew “fire watch” together on the rooftop of Oxford during the war years 1939 – 1945 keeping watch of the skies for German bombers coming in from the south. They would argue ferociously about the failings of England’s Imperial Economics and the destruction of the world brought on by Europe’s Colonial ambitions. They were the cream, the true educated who understand that “politics” is doggy-do; economics runs the world and its measurement alone can predict with great accuracy the “liberties” and “opportunities” afforded any given society, country or civilization. Keynes held dear that “equality of outcome” was the most important function of an economy and would serve to “strengthen social resolve in the face of diversity, thereby ensuring the good of a nation was always the driving force behind economic policy”. Hayek (a good student of Austrian Economics) would always point out that “centralization which granted itself the sole responsibility of ‘doing what was best’ had, and would always, fail every time because the laws of scarcity rendered institutions ineffective in doling out equality.”

Hayek’s book (which has been largely ignored by the western establishments of the world) was aptly called: “The Road to Serfdom.” He correctly predicted the fall of the USSR (with amazing accuracy in later publications: The Constitution of Liberty) and his literature was extensively studied by Deng Xiaoping, who saved the CCP from the same fate as the USSR through economic revisions….

Congratulations to the citizens of the western world! We have arrived at the end game of John Maynard Keynes’ economic experiment. Nothing is affordable, the economy is fake and centralized authorities have intruded into our lives to “ensure the best outcome for our country”.

Don’t worry though, just vote for the color you like. The clown, the dipper, the environmentalist or the tool. And, be very thankful you have a voice in your government…

Printing press goes brrrrrrrrr

#86 Re-Cowtown on 02.28.21 at 7:58 pm

I recently did a calculation on our house price in SW Calgary. Over about 20 years, general inflation accounted for about 1/3 of the price increase. The rest dovetailed neatly into the crash of interest rates. The monthly payment stayed about the same, as it was all most people could afford on a relatively flat earnings basis, but the crash in rates allowed the purchaser to assume a mountain of debt, therefore the price of the house skyrocketed.

Are houses more expensive than 20 years ago? Price wise, absolutely, but affordability is about the same, as the payment is about the same. The difference is that the buyer is now in extreme jeopardy in a rising interest rate environment.

Garth hit the nail on the head; the moisters, mills and Mr. Socks don’t see the five alarm danger posed by rising interest rates on the accumulated mountain of debt. They think it can’t happen to them. Same as the environmentalists couldn’t see the fire hazard of all the accumulated deadfall in the California hills. Then one day, a spark, and whoosh! It all goes up in smoke.

You can either have a bunch of small fires over a period of years , all under control (sporadic background personal bankruptcies) or a massive conflagration which may result in systemic failure. One or the other. But either way, the deadwood will be removed.

#87 KLNR on 02.28.21 at 8:03 pm

@#81 Ustabe on 02.28.21 at 7:25 pm
#73 COW MAN on 02.28.21 at 6:24 pm

Government Policy reflects those who elect them. If the electorate does not care about debt, they elect governments that don’t care about debt either.

When the electorate cares the government will care. Until then party on.

Truth.

The same thought philosophy can be applied to the Conservative Party of Canada. Until the general population says this is no longer Canadian conservatism and we won’t stand for it the CPC will not be forming a majority government.

Somehow somebody allowed Scheer to be replaced with O’Toole?

What is Thumb Boy on about during this time of multiple political stresses? Shutting down the next Olympics. “Nice to meet you, now back to work” is his catch phrase when he should be making political bank right now. Videos with him standing in front of a porta potty, frat boy yattering about how he’s going to put Justin in there.

I have zero idea whether the Toronto Sun is fake news or not but Warren Kinsella has a pretty good opinion piece on line right now. Lots of infighting and positioning going on too I am told by my one single Ottawa source left from the old days.

Think about this…Sheer had two years to let Canadians get to know him and his platform and he still lost. Thumb Boy has less than six months and his own caucus doesn’t know what the platform is.

Ladies and Gentlemen, your Conservative Party of Canada.

ya the ‘conservatives’ both provincial and federal rarely present much of a platform. they mostly just wait ’til the electorate votes them in for the sake of change, nothing more.

#88 Captain Uppa on 02.28.21 at 8:10 pm

Hey Garth … your best buddy, David Rosenberg, says these bond yields will retreat and inflation is a pipe dream. You shocked?

#89 Rowdie on 02.28.21 at 8:11 pm

The Central Bank will keep producing money to keep the interest rates down, so, the RE prices stay high. The government feeds off the revenue of house taxes here in Canada. When the bonds go up it affects the stock exchange. It is so uncertain right now how things are going. More money pouring in from the government the more scarier it gets. You wonder who is going to pay? You guessed it, the citizens of Canada.
The federal debt is in the trillions, and once the liberals have their majority, we are going to be hit with mammoth taxes. Heard there may be a federal election coming this Spring.

#90 Ponzius Pilatus on 02.28.21 at 8:12 pm

#70 Bobi on 02.28.21 at 6:09 pm
#58 Ponzius Pilatus on 02.28.21 at 4:46 pm

In Portugal they call diesel gasolina.
Was a few seconds away from filling my gasoline rental up with diesel, when the guy on the other pump yelled stop.
The stuff you learn while travelling.

Didn’t learn much on that trip.
In Portugal diesel is gasoleo, and most people know it as diesel. Gasolina is gasoline.
———-
You’re right.
It’s been a while ago.
The point is that I almost filled up a “petrol” car with gas oleo. (diesel).
Don’t be a hair splitter.

#91 Ed on 02.28.21 at 8:18 pm

#17 Elcheapo on 02.28.21 at 1:28 pm

All this talk of sailing these past few days made me reach for my trusty Patrick O’Brien books, starting with Master and Commander. If you haven’t tried them I heartily endorse them; I’ve read through the canon four times myself and I think they are a must for sailing enthusiasts. Some have described O’Brien’s writing as ‘Jane Austen for men’!

————–

Thanks!

I haven’t read them and am always on the lookout for good books. Even better with sailing.

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

New one by an old fart “The Philosophy of Sailing”

https://www.amazon.com/Philosophy-Sailing-Offshore-Search-Universe/dp/0997253118

I hate books but it was a binge read.

Old guy solo’s from Cali to Hawaii & back and waxes poetically while remaining humorous & entertaining.

I thought I was the only person that heard boat voices talk to me after weeks offshore.

#92 crowdedelevatorfartz on 02.28.21 at 8:20 pm

@#84 George s
” The highest I remember was a 23.5% floating rate. You could get a 5 year term deposit at 17.5% at one point.”

$$$$$$

Careful,
You will be accused of being a money grasping, environment destroying, job hogging, Boomer who is stuck in the past and doesnt understand the future…

Even though we have seen history repeat

#93 red_falcon on 02.28.21 at 8:30 pm

The wise and almighty KeKe Cats has made the following proclamation to those heavily indebted and pickled full of debt:

You’ve made your bed, now lie in it.
This expression is commonly used as a response to people who have been complaining about problems, they have brought on themselves.

#94 Pay to Play on 02.28.21 at 8:43 pm

DELETED

#95 crowdedelevatorfartz on 02.28.21 at 8:44 pm

Hmmm.
A US govt agency on a financial “death spiral” due to unsustainable govt. employee medical and pension liabilities….

https://www.reuters.com/article/us-usa-postal-service-congress/u-s-postal-service-on-death-spiral-without-urgent-reform-chief-idUSKBN2AO187

One wonders where the money in Canada will come from in the future with our doubling of federal debt in one year.
Not to mention our rapidly ballooning Provincial debt and our rising municipal debt…..
I know.
Lets raise taxes and print more money!

#96 Sail Away on 02.28.21 at 8:49 pm

We just had some delicious Italian food from Costco: the new meal pack of pitas, sliced lamb, red onions and cherry tomatoes. Thumbs up!

#97 crowdedelevatorfartz on 02.28.21 at 9:31 pm

@#90 Petulant Pouter
“Don’t be a hair splitter.”

++++
Irony escapes you.

#98 BCWally on 02.28.21 at 9:32 pm

I have to hand it to you Garth, you are the first high profile financial manager to call it what it is. The central banks have lost control and the faith of the world investment community.
Tiff knows it, and he’s not “wooden” but showing the best poker face he can. It must be a very uncomfortable position to be in.
The central banks have really only one course if they wish to restore that faith and that is to defend the value of the currency they represent.
Anyone who has been around long enough reading this will understand what that truly means. I believe Ron the realtor understands all too well.
Sometimes there is no joy in wisdom.

#99 Ponzius Pilatus on 02.28.21 at 9:33 pm

#96 Sail Away on 02.28.21 at 8:49 pm
We just had some delicious Italian food from Costco: the new meal pack of pitas, sliced lamb, red onions and cherry tomatoes. Thumbs up!
—————-
Sailo is trolling again.
But, just in case, someone thinks that pita, sliced lamb, red onions and tomatoes is an Italian dish, it is not.
It is Greek.
Dolce will be outraged.

#100 50 shades of gay on 02.28.21 at 9:36 pm

#3 tkid on 02.28.21 at 12:25 pm

Garth, if you keep posting photos like that one of the Lincoln St Beauty, I may have to move out east. Are there many places out East as beautiful as Lunenberg?

________________________

Yes, just continue further east for approx 35,000 kms. You will know it when you see it.

In fact, it’s so beautiful, we write “beautiful” on our license plate…not that we needed to remind anyone!

#101 MF on 02.28.21 at 9:40 pm

crowdedelevatorfartz on 02.28.21 at 8:20

Actually, I think most younger people would welcome higher rates.

The only people who benefit from lower and lower rates are existing asset owners, who usually are older people.

Even though I don’t believe it in it, this is part of the logic behind the rise of Bitcoin and why it is supported by a lot of younger people. It’s supposed to be decentralized and independent of zirp and QE.

MF

#102 Hang Fog on 02.28.21 at 9:41 pm

DELETED

#103 neo on 02.28.21 at 9:49 pm

#11 Darrell White on 02.28.21 at 12:55 pm
My wife and I left Toronto 10 years ago. Best decision ever.

I hadn’t even heard of the place before we moved here. Bought our house in the 300’s.

Now it in the 900’s. We are on 6 acres with a 2 minute drive to sobeys, banks, McDonald’s etc.

When my wife and I lived in toronto we bickered all the time. We’ve literally had one argument in the past 10 years. Police are not corrupt like TPS. Toronto is a dying city.

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

You made the exact same comment on a BlogTO post. Hmmmmm….

#104 Yukon Elvis on 02.28.21 at 9:53 pm

#96 Sail Away on 02.28.21 at 8:49 pm
We just had some delicious Italian food from Costco: the new meal pack of pitas, sliced lamb, red onions and cherry tomatoes. Thumbs up!
………………………

We just had some delicious Italian food from Canadian two fer one: the new meal pack with pepperoni, mushrooms, and extra cheese. And a beer. Burp!

#105 millmech on 02.28.21 at 10:09 pm

Reading “Nudge” by Richard Thaler & Cass Sunstein, just reading about Choice architects and how they use information and peer pressure to nudge society to make certain choices.
No wonder everyone is buying houses like crazy, our society “nudges” it and reinforces it how can you go wrong when everyone else around you is right.

#106 Keith on 02.28.21 at 10:11 pm

@ #64 Flop

Analyse this one:

https://www.straight.com/news/vancouver-real-estate-home-across-trout-lake-listed-17-million-sells-870000-over-asking-for-26?utm_source=facebook&utm_medium=social&utm_campaign=hootsuite&utm_content=the%20georgia%20straight&fbclid=IwAR3IY5rAPCnWs_NLtJJid5nY1qncmC-fp73fAixjushs8cyreDAljGbzgZI

#107 millmech on 02.28.21 at 10:14 pm

Next up is The Human Animal by Weston La Barre, looking forward to this one the most as it has been moving up to the top of the to read list.

#108 Sail Away on 02.28.21 at 10:23 pm

#99 Ponzius Pilatus on 02.28.21 at 9:33 pm
#96 Sail Away on 02.28.21 at 8:49 pm

We just had some delicious Italian food from Costco: the new meal pack of pitas, sliced lamb, red onions and cherry tomatoes. Thumbs up!

————

Sailo is trolling again.

But, just in case, someone thinks that pita, sliced lamb, red onions and tomatoes is an Italian dish, it is not.
It is Greek.

Dolce will be outraged.

————

There you go splitting hairs

#109 One and Done on 02.28.21 at 10:37 pm

The ‘great reset’ will have to take a back seat as the market smells the end of the bond sell off. That massive increase in the 10 year yield was unprecedented for a decade and impossible to increase going forward at the same rate.

That little glimmer of hope – a measly 25 basis point increase in mortgage rates by one bank, TD – will be dashed this week as everyone piles into equities again.

This reminds me of the ‘march to higher rates’ in 2018 and 2019 with five .25 basis point increases in rates that were supposed to soften the market – and the market ignored them as prices continued their upward trajectory.

This is the same old, same old….if anyone thinks this will soften the panic real estate buying, they will be waiting a long time.

#110 westcdn on 03.01.21 at 12:22 am

My father hired a New Zealand faller. He would jump around after falling a tree. My father asked what the problem was – snakes. Dear old Dad said there is nothing to worry.

He did decide to run over a large garden snake with his bike on a dirt road in Saskatchewan. It raised up to bite him on the ankle.

He was trying to impress some gals with his horse riding. The horse threw him and he ended with a broken leg. He liked to dance on weekends and would drive for miles to attend. He spent a lot time in fights and few could beat him.

He was driving home and lost control. He was forced to walk home and the cast disintegrated – hurt like hell. Winter is a bitch in Saskatchewan. Both parents
got the honor of living through the 30ths there.

Saskatchewan did produce a lot of soldiers for WW2 and they were mean – per my uncle Fred. He was a sergeant and took care of his men while butchering those who dared to appose him.

#111 Michael in-north-york on 03.01.21 at 12:41 am

#10 “Cottagers”

Finally it happened! Now YOU are the HOTSPOT. Behave yourself responsibly, stay in your neck of the woods, and DON’T SPREAD THE BUG! No big city trips for you.

You. Just. Stay. Home.

#112 Steve French on 03.01.21 at 1:00 am

Just listened to Larry Reagh’s latest over at Howe Street Radio’s “This Week in Money”

What the heck.. i think my brain was rotting just listening to his interview. Old Larry has been locked down in his basement a bit too long, because he’s totally gone off the deep end.

A sample of his questions on his “investment” show to his conspiracy-theory peddling guest.

– Why is Bill Gates trying to form a 1 world goverrment?
– How much fraud is there in Canadian municipal elections?
– Is Canada running out of food?
– Was Covid created by the world elites to manipulate the stock market?
– When should Canadians start to flee the country?

What in the word is he going on about?

This guy makes Smoking Man seem like a paragon of rationality and sanity.

Howe Street Radio…. providing Canada’s dumbest investment advice, since 1992.

#113 crowdedelevatorfartz on 03.01.21 at 8:11 am

@#107 MF
“Actually, I think most younger people would welcome higher rates.”

++++

Perhaps for the first year.
But its hard to get a mortgage when you’re in your 3rd year of unemployment.

#114 crowdedelevatorfartz on 03.01.21 at 8:20 am

@#106 Keith

$2.6 million for what is essentially a ‘Vancouver Special”?
All it proves is there are really stupid people out there.

Interesting to note even the REALTOR was warning of the foolishness of Bidding Wars.
This bubble is ready to……….. pop.

#115 Wrk.dover on 03.01.21 at 8:23 am

When the fraternal order of Goldman Sachs alumni decides that the no interest rate policies that they alone invented, instituted and regulate World wide, have no more benefit to their very own personal grand scheme, watch out!

Or, more likely;

Canadian RE idiocy aside, now that publicly traded companies regularly borrow money to buy their own stocks, it does looks like the no interest policy perversion has over matured. Will the companies continue and and given enough time, borrow enough to own 100% of their own shares on credit rather than through shareholders?

Then what? Who then holds the bag? A printing press?

Oh to have money in a time when there is not enough money to go around! But still get no return…

Happy Monday Morning, Planet Earth!

#116 Tron Light on 03.01.21 at 8:35 am

UBI is not far off:

https://parl.ca/DocumentViewer/en/43-2/bill/C-273/first-reading

#117 50 YEARS OF MAPLE LEAF INCOMPETENCE! on 03.01.21 at 9:22 am

#11 Darrell White

“When my wife and I lived in toronto we bickered all the time. We’ve literally had one argument in the past 10 years. Police are not corrupt like TPS. Toronto is a dying city.”

But you forgot about the Make Believes – what an incredible 53 year + streak of consistency!!!

And the shootings there are incredible – all you need to do is buy life insurance, and your family will be RICH!!

Toronthole is Number One!!

#118 Dharma Bum on 03.01.21 at 9:24 am

Bond yields going up.

House prices going down.

Mortgages going up.

Bond prices going down.

Gasoline prices going up.

Airfare prices are going down.

Lumber prices going up.

That is how things look today. Will they look the same tomorrow?

Impermanence is the only constant.

#119 Flop... on 03.01.21 at 9:51 am

#114 crowdedelevatorfartz on 03.01.21 at 8:20 am
@#106 Keith

$2.6 million for what is essentially a ‘Vancouver Special”?
All it proves is there are really stupid people out there.

Interesting to note even the REALTOR was warning of the foolishness of Bidding Wars.
This bubble is ready.

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

Yeah, this one has been doing the rounds the past couple of days.

All I will say about this one is for East Vancouver it does have a great location and its block size is 0.13 as opposed to the standard 0.18.

The realtor is that article speaking common sense is none other than Adam Major, one of my main sources for real time price confirmation during The Pink Snow Project.

He stepped up because he realized Vancouverites deserved real-time information on such an important decision in life, and continues this on today with his real estate website Zealty.

Good things have been achieved on this blog, but most people don’t realize as they are too busy having their daily bun fights…

M46BC

#120 Flop... on 03.01.21 at 10:15 am

Standard block size should read 0.08 acre…

M46BC

#121 Sara on 03.01.21 at 10:16 am

#119 Flop… on 03.01.21 at 9:51 am

“Good things have been achieved on this blog, but most people don’t realize as they are too busy having their daily bun fights… ”

Watch out for those rock hard buns! They’ll knock you off your feet for sure.

#122 Dan in Nanaimo on 03.01.21 at 10:38 am

Go with the flow and if being a debt slave is what you so desire, always remember this – there will always be institutions to encourage and support you to live beyond what you can actually afford. Think of it like trying a powerful drug for the first time only to end up becoming a junkie.

In the end only your mental sanity and physical health will matter.

But for now, embrace the dystopia and wear it proudly.

#123 Ponzius Pilatus on 03.01.21 at 10:38 am

2. TurnerNation on 02.28.21 at 12:15 pm
Any Economists here?
————————
Must be kidding.
Steerage is filled up to the rafters with them.
CEF is the leading economist.
He reads “The Economist”

#124 Bdwy on 03.01.21 at 11:18 am

With the hyper printing of dollars driving all assets to the moon, i would suggests if people are paying 50k for some encrypted, electronic bits, then houses can double from here.

Of course not, without a quadrupling of incomes. – Garth

#125 IHCTD9 on 03.01.21 at 11:20 am

DELETED

#126 Bdwy on 03.01.21 at 11:28 am

All I will say about this one is for East Vancouver it does have a great location 

………..
across from the park is nice, could be closer to the nice part of the drive and the street is busy not quiet….BUT… the skytrain running along the backyard every few minutes? Hope the buyers are deaf .

I hear the damn thing and im a mile away

#127 Dem ented fr ea ks running Peel Public Health on 03.01.21 at 11:56 am

https://torontosun.com/news/provincial/experts-call-peel-guidelines-to-place-children-in-solitary-quarantine-cruel-punishment/wcm/0f44aaaa-7d93-403b-9296-31ea2f16f6df/amp/

What’s your take on this Garth? Huh..

Psychological torture of Children now, what if someone did this your DOG?

You wouldn’t accept it, it’s ok to do it to Children in liberal Canada!!

#128 crowdedelevatorfartz on 03.01.21 at 12:27 pm

@#120 Flop
“Standard block size should read 0.08 acre…”

++++

And the buyer shouldn’t be over 0.08 alcohol

#129 Brett in Calgary on 03.01.21 at 12:56 pm

My brother and his wife — historic house lust lecturers — are selling their place in Calgary. Here we go…

#130 WTF on 03.01.21 at 1:04 pm

#127 Dem ented fr ea ks running Peel Public Health

Well if this is a sampling of the daily insane drek that Garth has to wade through I have even more respect for him.

My god get help, this is a finance blog not some nutbar redditt convo about your pet grievance. Where do you lunatics come from? Oh wait cottage country!

#131 Faron on 03.01.21 at 1:06 pm

#106 Keith on 02.28.21 at 10:11 pm

@ #64 Flop

Analyse this one:

Sketch ball. The thing has vinyl siding for cripes sake. WTF

#132 crowdedelevatorfartz on 03.01.21 at 1:28 pm

@#123 Persnicketty Ponzie

“CEF is the leading economist.
He reads “The Economist””

++++

As opposed to you …..just looking at the pictures?

#133 Faron on 03.01.21 at 1:34 pm

BTW, thank the Aussie central bank for the rally today! Murmurings of a major CB stepping up bond purchasing was enough to quell some fear. I hear they like Vegemite Sammiches.

Still, although bond fear dropped Friday, it hasn’t moved down today even though VIX et al have. So rates will probably continue to be spooky to equities given that bond fear tends to spill over. Word on the street though is that this rally should have legs and be quite epic owing to all the fiscal support coming down the line. Lasting until about mid April when tax realities and the reopening economy divert attention away from equity buying.

#134 Fred on 03.01.21 at 1:36 pm

https://www.bnnbloomberg.ca/trudeau-s-tighter-covid-19-rules-hit-canada-s-economic-growth-1.1570339

ya think?

Prime Minister Justin Trudeau’s claims there isn’t a trade-off between Canada’s strict lockdowns and economic growth will be tested this week with the release of new output data.

LOL, reap what u sow Canada

#135 Sail Away on 03.01.21 at 2:15 pm

Wisdom from Charlie Munger and Epictetus:

“Life will have terrible blows in it, horrible blows, unfair blows. It doesn’t matter. And some people recover and others don’t. And there I think the attitude of Epictetus is the best. He thought that every missed chance in life was an opportunity to behave well, every missed chance in life was an opportunity to learn something, and that your duty was not to be submerged in self-pity, but to utilize the terrible blow in constructive fashion. That is a very good idea.”

-Charlie, 2007

#136 bdwy on 03.01.21 at 2:41 pm

Sketch ball. The thing has vinyl siding for cripes sake. WTF
—————
hey, watch it!

In east van vinyl has historical and architectural significance.

i’ve painted my house thrice while my OG italian neighbour’s vinyl just keeps chugging along and it was old when i got here.

specials give the very max sq ft w decent bones, the reno is recent and hot. siding can be changed but many dont care so much about ‘traditional’ north american looks. they do love the land underneath and this is a big chunk.

if zoning goes up to 4-6 stories like neighbouring grandview has a dev will pay 4m in a few years as an assembly.

#137 Gravy Train on 03.01.21 at 3:11 pm

#134 Sail Away on 03.01.21 at 2:15 pm
“Life will have terrible blows in it, horrible blows, unfair blows. It doesn’t matter. And some people recover and others don’t.[…]” You might like this variation on a theme:
“They are not long, the weeping and the laughter,
Love and desire and hate;
I think they have no portion in us after
We pass the gate.
They are not long, the days of wine and roses:
Out of a misty dream
Our path emerges for a while, then closes
Within a dream.” — Ernest Dowson (1867-1900)

#138 David Pylyp on 03.01.21 at 3:53 pm

We should include a letter to let the SELLERS know about our lovely family!

Lets bake them cookies and Muffins as further inducement….

UMMM No

Why? Have a look

https://davidpylyp.blogspot.com/2021/03/including-buyers-letter.html

Toronto Realtor
David Pylyp

#139 Drew on 03.01.21 at 6:43 pm

Let them rise!