Then there were six

Rate buzz is everywhere this week. Here’s the latest, and what to do about it.

Mr. Bond Market is feeling frisky. The yield on a 10-year US Treasury has jumped from 1.4% a few weeks ago to 1.85% on Tuesday. Same story for shorter bonds. It’s big. Ditto in Canada. Mere months ago a five-year Canada bond as yielding a piteous 0.8%. Now it’s at 1.683%. Yup, doubled.

The market is saying this: inflation is unbridled, hot and we know what’s coming. CBs are behind the curve. Forget Omicron. This is what matters. Rates are about to rise more than all those schmucks realize who took out $1 million mortgages in Chilliwack and Markham.

So the stock market fizzled a bit. The Dow coughed up 600 points for a while and the tech-heavy Nasdaq is down 5% or so on the year so far – which is less than three weeks old. Higher rates take away cheap money which makes people do dumb things like buy real estate they can’t really afford because, you know, it always goes up.

Now, today, two more banks (TD and Laurentian) say the Bank of Canada will start the tightening cycle in one week – next Wednesday morning. In fact a few economists are forecasting six (6!) potential central bank moves in 2022. That would take the 0.25% benchmark rate and vault it to 1.75%, while swelling the prime to just under 3%. From a few months ago to 11 months from now, mortgages would double.

Bond yields have doubled. Mortgages to follow?

What does this actually mean?

First, less consumer spending – probably. A survey out this week from MNP Consumer Debt says people are maxed, stressed and depressed. “Canadians are feeling even more financially insecure this year — likely as a result of the Omicron variant and resulting pandemic fatigue, along with rising inflation and the potential for interest rate increases this year.” Almost half are not confident they can pay basic living expenses this year and 43% worry about their debt level. This is what stupid-cheap rates do.

Less consumer spending hurts equities, since two-thirds of our entire economy rolls on it. So don’t expect another year of 25% growth. Higher rates hurt bond prices, and yet a bond component is important to having a proper B&D portfolio. This is why government bonds should be kept to a minimum, why short durations and a floating-rate bond ETF make sense and, of course, it explains why we told you long ago to hold rate-reset preferred shares. These days they rock.

Now, houses. If mortgages go to 3%, then 4%, how much damage?

In the next few months, none. This is a unique time in history. Never before have we seen a national year/year average price increase of the magnitude we just did (26%). Never before were as many homes sold in a 12-month period (667,000). And never, since giant sloths crawled over Parliament Hill (the first time), have there been this few properties for sale. Existing demand – even with higher mortgage payments knocking many buyers out – will overwhelm existing supply. Plus, as the CB starts to tighten, lots of newbies will panic-buy in order to use their pre-approved cheapo loans. The spring market, probably, will be nuts. Pity on anyone who enters that fray.

But after that, it’s a new world.

The virus will be largely removed from daily life by the early summer, or sooner. Nesting, FOMO and naked real estate aggression should dissipate as people go back to work and their routines. Second, even though buyers have to leap over the stress test hurdle and qualify to borrow at more than 5%, this does not mean they have the cash flow to do so. Not when the cost of everything else in life is escalating. Third, slowing sales and escalating rates will probably yield a lot more listings. When homeowners start to see a market turn, they bolt while windfall profits are still possible. And don’t forget the feds. It looks like Ottawa will be bringing in new rules for investors – jacking up down payments and restricting use of home equity loans – seriously chilling a huge segment of the market. More listings.

Conclusion: if you’ve been thinking of selling, why not do it when competition is slim and prices extreme, with a pool of viciously hungry, hormonal buyers? Go for a long close. Purchase again (if you need to) more leisurely in the summer. As for buyers, realize that in the next few months you’ll pay a premium for a compromised purchase made under serious duress. Sounds dodgy.

About the picture: “Long time reader and lurker here,” writes Alan. “Thank you for so much valuable investment advice over the years. It sure has helped. Here’s our miniature Yorkie puppy Trixie, the day we got her in the autumn, at 3.5 months old.  We paid way too much for her (pandemic fomo brain made us do it) but she’s brought much joy into the household, all 3 lbs of her.”

124 comments ↓

#1 Bankrupting Landlords is good for the Economy on 01.18.22 at 2:56 pm

What about the argument that higher interest rates will trigger a recession and thus, lower rates in the long run? Are we in a permanent recession cycle?

#2 crowdedelevatorfartz on 01.18.22 at 3:00 pm

Sell yer house and rent Ponzie !

I hear Spring in Austria is beautiful.

#3 crowdedelevatorfartz on 01.18.22 at 3:07 pm

@#144 A disaster

“I’m sure your parents bore no scars from that experience at all…no one who grew up during that era had substance use issues, depression, post-traumatic stress disorder, or any other mental health problems because they were ‘fine’.”

+++

Nah.
People from that era didn’t have govt shoulders to cry on.
Or “labels” for the endless “disorders” as excuses.

They dealt with their lot in life stoically because…. everyone was in the same boat and nobody likes a whiner.

They sure seemed happier than the eternal whiners of today…..

:)

#4 ogdoad on 01.18.22 at 3:09 pm

People (except for those who read this blog) are going to feel the pinch for sure. Especially seeing as though ~30% of Canadians are living paycheck to paycheck…I wonder if their kids have RESP’s?

Why would anybody in their right mind want to move houses right now? Except for Leute like poor Angie the millionaire. Might have to loosen the purse strings…the HORROR!

Keep your house kids. Get to know your miserable neighbors and grow a community instead of becoming a SM machine, stuck in your hole watching NF, feeding the flames of inevitability – being an add-on.

Let’s look up – And witness the km wide asteroid that is about to cross our orbit at a scant 1.2M miles. I’m sure NF can be paused or whatever…

Og

#5 Drill Baby Drill on 01.18.22 at 3:17 pm

Trixie looks like a pot scrubber with legs.

#6 Dogman01 on 01.18.22 at 3:18 pm

Ethics & Execution– Alberta’s Conservative tradition

Problem with Conservatives in Alberta is they seem to lose their mind in Power, become short sighted, boys-club mentality. Its is why the Heritage Fund was such a solid idea but the execution over 40 years is a failure.

Best example recently is our Justice Minster’s call to Edmonton’s Police Chief about his distracted Driving Ticket.
https://calgaryherald.com/opinion/columnists/braid-madus-phone-call-to-police-is-cause-for-firing-from-cabinet

The obviously slimy Minister wanted to claim he was being picked on for DWB when instead he was flat out guilty of endangering children by driving while on his cell phone. But as his ego drives the action he could not help himself but call the Chief of Police of Edmonton.
(in Calgary it usually takes a good bottle of Scotch delivered to the officer to get out of a ticket. )

Worst part of this mess is Kenny knew about it in March 2021 and only take it seriously after the Media discloses the shenanigans to the public.
Could you imagine the playground theses guys will have if they had a Provincial Police Force where the police leaders are their personal political appointees.

Conservative ego driven short shortsightedness is why we can’t have nice things in Alberta.

#7 Kirk on 01.18.22 at 3:20 pm

“ if you’ve been thinking of selling, why not do it when competition is slim and prices extreme, with a pool of viciously hungry, hormonal buyers? Go for a long close. Purchase again (if you need to) more leisurely in the summer. ”

I have been thinking about it as I could easily double what I paid for my house in early 2019. However, I do most certainly have to buy another home … and my wife and I are so tired of moving/renovating. My kid goes to a great school, when not locked down, but the lure of a historic windfall is something I think about.

Thinking of GTA to Collingwood (not exactly cheap, but cheaper).

#8 Dogman01 on 01.18.22 at 3:20 pm

Ethics & Execution – the Woke Calgary Mayor

Calgary’s Mayor banned from being involved in Arena replacement.
https://calgaryherald.com/opinion/columnists/corbella-council-voted-in-camera-to-ban-mayor-gondek-from-negotiating-the-next-arena-deal

The problem with the Woke is that they know they are right, they know they have a special entitlement by being Woke to not listen to anyone else. Especially not anyone with any Financial\Technical Knowledge that might put limits or guardrails on their “vision”.
Having experience with Calgary’s Mayor, I suspect after voting against the Arena deal as an Alderman she saw her chance to scuttle it single-handedly by imposing a post deal Climate Fee on the Flames Owners Group. I suspect she is smugly satisfied that she has now “done the right thing”.

It would be some justice if the Flames group made a deal with the pragmatic Tsuut’ina thereby completely undermining the entire entertainment district plans.

The Woke are intolerant because they’re so convinced of their rationality, open-mindedness and enlightenment. They are deceptive as their end justifies the means. Like children who want to be astronauts when they grow up, Childish to the core.

“diversity in nearly all things except thought”

Utopian ideals are not only compatible with callousness they sometimes demand it — the main thing is to maintain one’s own moral purity. – Matthew Crawford

“people who are so intoxicated by a belief in their own superior Goodness pose a greater danger to core rights because they so easily justify power abuses when done by them: ” – Glenn Greenwald

#9 Søren Angst on 01.18.22 at 3:25 pm

Forget Omicron.
-Garth

Ah come on Garth, it’s too juicy a subject.

For instance:

The No Vax dentist with the silicone arm got vaccinated.
https://www.huffingtonpost.it/entry/il-dentista-no-vax-con-il-braccio-di-silicone-si-e-vaccinato-e-ha-riaperto-lo-studio_it_61e67fabe4b05645a6ebb0a9

[Guido Russo had been suspended from the Order of Doctors because he refused to be vaccinated.]

If you were to ask me, he probably found this nurse:

Palermo, pretends to vaccinate no vax couple: nurse arrested
https://www.ilgiorno.it/cronaca/palermo-infermiera-no-vax-finti-vaccini-covid-arrestata-1.7250937

Part of a No-Vax cabal to get a Green Pass. Last I read nurse + cabal = €80,000 in fines. RSVP to Court.

——————-

Say what you will but so far, Team No-Vax Italia on the Medals podium, maybe even Gold.

#10 Flop… on 01.18.22 at 3:31 pm

#165 Wrk.dover on 01.18.22 at 2:16 pm
#158 the Jaguar on 01.18.22 at 1:17 pm
Peeps who follow the comments on this blog might notice some who post have a compulsive preoccupation with certain other posters.
__________________________
I’ve tried to older brother the guy all along, but it has been hopeless.
He has an oppositional defiance disorder.

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

My older brother is a shithead…

M47BC

#11 Shawn on 01.18.22 at 3:34 pm

Yes, interest rates are going up.

As I recently said, higher interest rates are a “gravitational force” on the value of stocks and houses and all financial assets. Earnings and rent growth are buoyancy forces.

Let the movie play out…

#12 Blobby on 01.18.22 at 3:40 pm

It seems to me, that every time rates have gone up over the last decade or so, something happens – like a recession, etc which forces them back down again after a short period of time.

#13 Søren Angst on 01.18.22 at 3:46 pm

RE: Forget Omicron.
-Garth

In the “Americani know nothing” Department…

This morning (1030 h CET) CNN article about Djokovic (took a screen shot of it, then Tweeted):

https://twitter.com/bsant54/status/1483362094087028736

2130 h CET search results at CNN for the article (a.k.a., predictable result):

https://i.imgur.com/4DWWl1s.png

#14 Flop… on 01.18.22 at 3:47 pm

A story doing the rounds in Vancouver.

“Who said Vancouver real estate wasn’t exciting…? “B.C. landlord claims that one of their tenants was engaged in full, sexual intercourse in his backyard.””

I’ve always maintained Vancouver real estate sucks…

M47BC

#15 cmccullo on 01.18.22 at 3:48 pm

“And never, since giant sloths crawled over Parliament Hill (the first time)…” That was a nice little zinger. Take no prisoners in 2022!

#16 Tinpot⁷ Economist on 01.18.22 at 3:49 pm

Markets swoon as bond yields rise.

Microsoft thinks we will all live in Sims metaverse.

#17 crowdedelevatorfartz on 01.18.22 at 3:52 pm

I thought the former Premier of New Brunswick and his Doll collections were weird…

Until now.

https://nationalpost.com/news/world/prince-andrew-would-shout-and-scream-if-bedtime-teddy-bear-collection-was-out-of-place

#18 Doug in London on 01.18.22 at 3:52 pm

Higher interest rates could result in bonds and bond funds, equities, and possibly even houses getting cheaper. Bring it on, I LOVE Black Friday and Boxing Day sales any time of year.

#19 James on 01.18.22 at 3:56 pm

#3 crowdedelevatorfartz on 01.18.22 at 3:07 pm

@#144 A disaster

“I’m sure your parents bore no scars from that experience at all…no one who grew up during that era had substance use issues, depression, post-traumatic stress disorder, or any other mental health problems because they were ‘fine’.”

+++

Nah.
People from that era didn’t have govt shoulders to cry on.
Or “labels” for the endless “disorders” as excuses.

They dealt with their lot in life stoically because…. everyone was in the same boat and nobody likes a whiner.

They sure seemed happier than the eternal whiners of today…..

:)
_____________________________________
Surely you are not pointing at the millennials now are you? The Mommy and Daddy wont buy me a house complainer millennial types.

#20 Sail Away on 01.18.22 at 3:56 pm

Microsoft/Activision is shaping up to a nice arbitrage. Worth following if this is your thing.

#21 Søren Angst on 01.18.22 at 4:01 pm

V. good advice today Garth.

I hope Cdn economy and people can absorb the rate increases.

So far. So good.

My Boomer gut says maybe not. Hopefully incremental by the CB. If not, could be looking at a downturn.

As for me, staying with high dividend yield ETFs, ETNs to cushion the ups and downs of Mr. Market this year to come. So far working well, 18% weighted average dividend yield for Dec.

Threadbare Portfolio up about 4.9% for Jan as of a couple of days ago.

Looking like that’s going to halve (or more) by the end of today’s trading day.

You called it: A volatile 2022 Mr. Market.

If Omi truly gone by Summer, I think eek out 2021 gains last Qtr in 2022. Fingers crossed.

#22 Faron on 01.18.22 at 4:06 pm

My older brother is a shithead…

M47BC

Ha! Thanks for the chuckle (although laughing 2 weeks out from broken ribs is still half pain/half pleasure)

#23 AM in MN on 01.18.22 at 4:06 pm

Just think what a mess things will be in a couple years. Even if the BoC were to stop printing money by the wheelbarrow full, the velocity of that already printed but dormant will push the scramble for real products and commodities to even bigger highs.

Maybe then the average Canadian voter won’t care so much about Jr’s hair, or how good they feel about destroying the energy industry while complaining about the prices of the products they need!

#24 Linda on 01.18.22 at 4:06 pm

‘Trixie’ looks like a very content pup. Also tres cute!

Meanwhile in Canada, the official inflation figure for December 2021 will be revealed this week. Inflation is at least partially responsible for Canadians feeling the financial pinch. However the real culprit is acquiring more debt than one can service should rates rise. Believing that ‘the government’ wouldn’t permit such an occurrence was delusional. That presumes total independence from market forces. As 2008 amply proved, the interdependence of financial forces does mean that events in other locales can & do impact our economy. So if the USA has inflation at 7% & their central bank is signaling rate increases Canada will be impacted, like it or not.

#25 crowdedelevatorfartz on 01.18.22 at 4:07 pm

@#19 james
“Surely you are not pointing at the millennials now are you? The Mommy and Daddy wont buy me a house complainer millennial types.”

+++

The name is Fartz not Shirley.

#26 Faron on 01.18.22 at 4:09 pm

Select went crazy there. Sorry Garth.

#10 Flop… on 01.18.22 at 3:31 pm

#165 Wrk.dover on 01.18.22 at 2:16 pm
#158 the Quagmire on 01.18.22 at 1:17 pm
Peeps who follow the comments on this blog might notice some who post have a compulsive preoccupation with certain other posters.
__________________________
I’ve tried to older brother the guy all along, but it has been hopeless.
He has an oppositional defiance disorder.

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

My older brother is a shithead…

M47BC

Ha! Thanks for the chuckle (although laughing 2 weeks out from broken ribs is still half pain/half pleasure)

#27 Søren Angst on 01.18.22 at 4:13 pm

Goldman Sachs say oil to breach USD 100 later this year.

https://www.reuters.com/markets/asia/goldman-sachs-sees-brent-oil-hitting-100bbl-q3-2022-2022-01-18/

Hope so. Have a Cdn ETF and a high risk US ETN for oil.

I think its the kind of market its going to be in 2022. A few bright spots here and there, up down with some gains if a person stays vested, no weak knee sell stuff.

Still think if Omi done with by Summer, could see a repeat of 2021 gains in late 2022.

On euphoria alone.

#28 Nonplused on 01.18.22 at 4:16 pm

#8 Dogman01 on 01.18.22 at 3:20 pm

“It would be some justice if the Flames group made a deal with the pragmatic Tsuut’ina thereby completely undermining the entire entertainment district plans.”

That would be interesting, and greatly enrich the Tsuut’ina. However I think the fatal flaw is there is no way the city would cooperate with the mass transit and utilities required, like say an LRT line to the new venue, if it was outside their tax jurisdiction.

However, it doesn’t really matter. The city doesn’t really “need” a new hockey arena or a new football stadium. The Saddle Dome is old, but it was also ahead of its time. Some say it is still one of the top ten arenas in the league. Because it was built for the Olympics, money was no object. And it is well located. McMahon is what it is, a product of the 60’s, but let’s face it there is only so much money that can be spent on 10 home games that don’t sell out. And it is also well located.
Plus it is a fool’s gambit to bet on the CFL, it seems it is always only one season away from bankruptcy. If Toronto ever gets an NFL team the CFL is done. I wouldn’t invest any serious money in it or build a stadium with a view to the CFL being a major motivation for the construction of it.

#29 willworkforpickles on 01.18.22 at 4:17 pm

Today’s blog post mirrors for the most part, things i have said, gone over and projected to come in the past year or so.
Some of us tinpot macro economists know a little more than your average tinpot macro economist.
Its the ones who make such projections a year or more in advance based on our own (extensive) research who put up with being branded tinpot macro economists and nutbars, but when the economic conditions begin to unfold as we projected … forget it.
Our projections targeting further into the not too distant future, continue to fall subject to the same undermining ill informed scrutiny and disbelief as did those we’ve already made come to pass as projected nonetheless.

The future of economic conditions cannot be gauged scrutinized or predicted.

Well, maybe not by the lazy or those unable to effectively do the research. They will tell you there is no possible way to know what’s to come, or the only economic outcomes possible are those that could favour them best. There are no names for them here.

Those doing research into where the economy is headed don’t usually have the time for them.

#30 Dr V on 01.18.22 at 4:18 pm

22 faron

My older brother is a shithead…

M47BC

Ha! Thanks for the chuckle (although laughing 2 weeks out from broken ribs is still half pain/half pleasure)
——————-

Ya I laughed too. Good to hear ribs are improving.

#31 Wrk.dover on 01.18.22 at 4:27 pm

#10 Flop… on 01.18.22 at 3:31 pm
My older brother is a shithead…
_____________________________

Mines a dick, but he knows something.

#32 twofatcats on 01.18.22 at 4:30 pm

Jan 18 Today’s flipped ‘Principal Residences’

https://www.zolo.ca/welland-real-estate/83-tumblewood-place/lot-10

https://www.zolo.ca/st-catharines-real-estate/14-valerie-drive#sold-history

https://www.zolo.ca/st-catharines-real-estate/27-old-coach-road#sold-history

#33 Billy Buoy on 01.18.22 at 4:34 pm

I’d love to see .50% hike initially yet feel all this talk of a hike that (cough) large is just a smoke screen for a .25% hike to manipulate a relief rally northwards.

Remember the FED is out to protect themselves, not you. Ever.

Mr. Market is starting to wobble already on the speculation. USA, China, EU are slowing down. Hike into a slowdown? They have the perfect cover AGAIN not to. Inflation be dammed.

Remember it’s allllllll just talk until we see them pull the trigger and actually do whats lonnnnnnnnnnnng overdue.

2 and done is still the call.

#34 crowdedelevatorfartz on 01.18.22 at 4:38 pm

Gee.
Federal Govt bureaucratic stupidity is having ripple effects even faster than I predicted….

https://globalnews.ca/news/8519786/grocery-store-closures-labour-product-shortages/

Lets see how fast the Liberalistas change their Bolivarian tune.

Look on the bright side.
Less food = fewer calories.

#35 All lies and manipulated u decide on 01.18.22 at 4:42 pm

Check out building products.
Lumber yard emails me 3 times a year and these are nutty huge compounding numbers.
Products are up 15 to 100% last year. So just tack that on to you million dollar shed you want to buy every year.

To our valued clients, we would like to keep you informed of manufacture price increases.

Jan 3/22
Dow & Celfort XPS Foam…………….10%
Plasti-Fab EPS Foam………………….10%
RockWool (all Products)………………..6%
James Hardie varies from…….7% – 27%
Mouldings…………………………………..15%
Grabber fasteners……………………….15%
Ceiling Tile………………………………….12%

Jan 17/22
Hamilton Products
-Pearl Tex………………………………… 15%
-Pro Tex…………………………………… 10%
-Pails & Boxes……………………………. 3%

Feb 1/22
Grace products……………………………10%
Typar………………………………………….. 7%

Feb 21/22
Roofing shingles & accessories… 6 -10%

March 1/22
Standard Drywall………………………… 8%
54″ Drywall……………………………….. 12%
Tile backer………………………………… 12%
Glasroc/DensGlass Sheathing…….. 12%
Shaftliner………………………………….. 12%
Drywall filler………………………………. 10%
Primers…………………………………….. 10%
Drywall tape………………………………. 10%

April 1/22
Rockwool (all products) ………………10%
Hamilton (all products)………………… 6%

#36 Mattl on 01.18.22 at 4:44 pm

Will be interesting to see how much supply chain issues + increased operating costs impact corporate bottom lines. Labour costs are going to increase dramatically and lots of companies won’t have the inventory to grow over.

Case in point – went to build and purchase a kitchen from Ikea for our basement this weekend. They were out of almost every component including base cabinets! No base cabinets, wtf. Which means, at least for now, they can’t sell kitchens, which represent 15% of their sales by segment. Plus everything else that’s stocked out.

Also was in a Canadian Tire this weekend and they had full rows that were empty, and most shelves were think stocked. I’d guess they were missing 5-15% of their inventory. Pretty hard to beat estimates without inventory (or staff for that matter).

#37 pPrasseur on 01.18.22 at 4:45 pm

Still believe your money printing welfare state is sustainable?

Well good luck with that.

Collapse will happen during the worse of times, exactly when population ageing is peaking and communist health care system is collapsing.

Think brain drain to the US is a problem now? Just wait…

#38 Faron on 01.18.22 at 4:45 pm

#30 Dr V on 01.18.22 at 4:18 pm

Ya I laughed too. Good to hear ribs are improving.

Flop takes the title as funniest commenter, easy.

Thanks! Ribs pretty good as long as I stay on top of the advil/tylenol. Looking forward to getting on the bike soon; maybe later this week. Springlike in Victoria these days.

Did you get some snow travel equipment?

————————

#31 Wrk.dover on 01.18.22 at 4:27 pm

Mines a dick, but he knows something.

He knows that Putin regularly has opposition journalists killed?

#39 TurnerNation on 01.18.22 at 4:56 pm

Re. moving house and switching children’s school.
During grade school (gr. 1-13) I switched schools and/or areas two times. Non-issue for me. Kids are so adaptive. Or, were. See kids had to rely on real social skills. No smart phones.

— The Least Coast – 2/4 provinces are now shut down. Add to BC, ON, QC. Slowly, one scary news story at a time. Gunning for that UBI eh? Who’s next?


— Life in Kanada during WW3. The liquor stores are the new battle grounds. Our rulers must be roaring with laughter as they watch us tax slaves tear each other apart. Divided we Stand; United we Fall.

https://www.blogto.com/eat_drink/2022/01/freeplay-toronto-lcbo/
“Toronto bar owners are calling out the LCBO after they say a store manager recently called police on them for simply trying to return unused products after the province went into lockdown. Arcade bar FreePlay is already out $40,000 over cancelled corporate parties and holiday/NYE events, for which they had stocked up on booze.”

https://montreal.ctvnews.ca/quebec-liquor-store-employee-allegedly-punches-customer-multiple-times-after-mask-disagreement-1.5741834
“Quebec liquor store employee allegedly punches customer multiple times after mask disagreement”


— The question is, how do World Wars end? Always with countries bankrupted with crippling debt; new monetary systems, new regimes installed (The Global QR code). HINT HINT. The New System is run via A.I. – electronic lockdown – via QR code.

#40 Barb on 01.18.22 at 5:00 pm

“First, less consumer spending – probably.”

Yessireebob.
Apart from the sheer desire to get out of Dodge for a week–and get in line for the landborder opening early November–I haven’t even window-shopped for 2+ years.

We have no mortgage, no CC balances, no outstanding bills. Have always been relatively frugal, but two years of virus variants equate to our being reluctant to spend more time than absolutely necessary in any store.

“Almost half are not confident they can pay basic living expenses this year and 43% worry about their debt level. This is what stupid-cheap rates do.”

Stupid cheap rates to blame?
To some degree, yes, however individual responsibility (and maturity) is also a factor.

#41 Faron on 01.18.22 at 5:14 pm

Garth: And never, since giant sloths crawled over Parliament Hill (the first time),

More rib pain, thanks Garth.

#42 Mattl on 01.18.22 at 5:18 pm

#39 TurnerNation on 01.18.22 at 4:56 pm
Re. moving house and switching children’s school.
During grade school (gr. 1-13) I switched schools and/or areas two times. Non-issue for me. Kids are so adaptive. Or, were. See kids had to rely on real social skills. No smart phones.

—————————————————————-

Ya you seem perfectly well adjusted.

#43 Lee on 01.18.22 at 5:25 pm

Landlords are asking ridiculous amounts for rent for houses. Suggests carrying costs are getting the better of them. $4500 for a simple two storey house in Thornhill? Basement not included.

#44 Shawn on 01.18.22 at 5:42 pm

About corporate profits rising as predicted

#36 Mattl on 01.18.22 at 4:44 pm

Will be interesting to see how much supply chain issues + increased operating costs impact corporate bottom lines. Labour costs are going to increase dramatically and lots of companies won’t have the inventory to grow over.

***************************
Agreed, corporate profits could (gasp!) decline.

#45 KLNR on 01.18.22 at 6:15 pm

@#42 Mattl on 01.18.22 at 5:18 pm
#39 TurnerNation on 01.18.22 at 4:56 pm
Re. moving house and switching children’s school.
During grade school (gr. 1-13) I switched schools and/or areas two times. Non-issue for me. Kids are so adaptive. Or, were. See kids had to rely on real social skills. No smart phones.

—————————————————————-

Ya you seem perfectly well adjusted.

lmao

#46 KLNR on 01.18.22 at 6:18 pm

@#43 Lee on 01.18.22 at 5:25 pm
Landlords are asking ridiculous amounts for rent for houses. Suggests carrying costs are getting the better of them. $4500 for a simple two storey house in Thornhill? Basement not included.

landlords are demanding ridiculous rents everywhere in Ontario and getting it. Its called Supply and demand.
i have sympathy for folks who have bad/no credit and need a place to live.

#47 Faron on 01.18.22 at 6:27 pm

#25 crowdedelevatorfartz on 01.18.22 at 4:07 pm

The name is Fartz not Shirley.

In your more floral moments, how ’bout fartzly?

You know, like the herb that Ponzius puts on his spätzle.

#48 NOSTRADAMUS on 01.18.22 at 6:32 pm

A BOLD REAL ESTATE PREDICTION (2022)
There will be more, as in many , many, more private real estate sales. A statistic that is never, ever reported by the real estate cartel, ( the great manipulator of statics). I suggest the numbers surged last year as homeowners closed their doors to Omicron refugees. In addition to frenzied viewings and cashed in on Red Hot Demand. I suspect tens of thousands of sellers chose to sell their properties privately, confident that huge buyer interest meant that they could achieve their target price without the hassle of an open market sale. Buyers were keen to purchase property before it hit the market last year in the hope of avoiding bidding wars which could ramp up the price by hundreds of thousands of dollars. The benefit for the sellers, obviously, the saving of outrageous real estate commission dollars. As to establishing an asking price, no big problem, engage the services of a Real Estate appraiser, prior to offering the property privately. You might even want to share the appraisal with your purchaser. This will lend credibility to the sale price. To me this looks like a win- win proposition. Sleep tight my little beauties.

#49 DON on 01.18.22 at 6:34 pm

Willworkforpickles

…Well, maybe not by the lazy or those unable to effectively do the research. They will tell you there is no possible way to know what’s to come, or the only economic outcomes possible are those that could favour them best. There are no names for them here.

Those doing research into where the economy is headed don’t usually have the time for them.

***********
Exactly, do your own research. Just observe without bias. No one saw the 2009 cliff except for the few that were watching closely.

From what I have been reading if they don’t raise rates to fight inflation then we have a whole lot of other issues. Double edge sword with inflation now ‘soaring’ the word thatrecently replaced transitory and peak inflation. They are fully aware of what can happen if they don’t get a handle on it.

Last time they raised rates inflation was not in a soaring mood. Lesser of the evils.

#50 Linda on 01.18.22 at 6:43 pm

#43 ‘Lee’ – it has been noted that renters have been subsidized by landlords due to rents not being sufficient to cover all the costs of ownership. This blog talked about the financialization of RE. Seems to me that landlords have decided it is past time to raise rents not only enough to cover all costs but to actually profit from the asset in question. Given the huge increases in price for purchase of RE not really a surprise that the price for renting it is going up too. I wonder if there are now blind bidding ‘auctions’ to rent a place?

#51 Where My Booster Bonnie on 01.18.22 at 7:20 pm

I am way past the 7 month mark. Willing and able to get one, but there are none to be found.

Bonnie bee busy bending the knee to the green light movement protest in BC – gyms are now magically safe places to be and have been reopened. Yah!

Hospitalizations at record high, with huge medical facility reduction of services. Some outright closures. Everyone and their dog is sick.

You are right Garth. Summer will be a turning point because that is probably when boosters in BC will become available. AFTER everyone has caught covid.

#52 TurnerNation on 01.18.22 at 7:21 pm

Shout out to Smoking Man somewhere. Everyone, see the Batman head and Camel-tow within the Bond chart above?

— For Dolce & the Doomers. A recent Covid IFR chart.

https://www.medrxiv.org/content/10.1101/2021.07.08.21260210v2
“..using the most recent updates of these reviews and their respective databases as of November 23, 2021. ”

> This is supposed to be the chart of final results: https://i.redd.it/an6d47ttahc81.jpg


— Feds spending 19 million a week on needless testing. But the hospital capacity guys? We cannot just expand it you know. Impossability!

“The Financial Post reports in its Tuesday edition that Canada’s two main airlines and its biggest airport are calling on the Canadian government to end mandatory COVID-19 testing at airports and shift those resources to where they are needed most. The Post’s Pamela Heaven quotes an open letter from Air Canada, WestJet and Toronto Pearson International Airport saying, “As every person travelling to Canada must take a PCR test prior to getting on a plane inbound to Canada and must be fully vaccinated, there is no good public health rationale for a second test upon arrival.”… The CBC reports that it now has the capacity to test more than 20,000 arrivals daily. The government pays for these tests, which range from $143 to $188. The letter says that in the most recent week of reported data, more than 123,000 tests were taken at Canada’s airports” (stockwatch.com)

— 6 months later…what has changed.

#24 TurnerNation on 08.28.21 at 1:06 pm
Things which have the permanency in Kanada:
1. Fictional ‘State of Emergency’.
2. Flags at half mast
3. CV Rules. Always the rules Comrade.

#53 kc on 01.18.22 at 7:35 pm

111 AB on 01.16.22 at 12:20 am

Some shelves are bare here in the grocery stores of Medicine Hat too. What in blazes is wrong with that ridiculous junior and his minions? It is quite unsettling to see ones own Federal government ( even if we didn’t vote for) hell bent on destroying ones own country. Really distressing. The policy to force trucker’s to get the vaccine is incredibly shortsighted and without logic. God help us all.

***********

Just wait.. stock up now if you can. I can see a bitter trucker strike coming very soon, and this will cripple this country….

people who thought that others who have been stock piling supplies for the past couple years were crazy??

Just wait…..

***********

34 crowdedelevatorfartz on 01.18.22 at 4:38 pm

Gee.
Federal Govt bureaucratic stupidity is having ripple effects even faster than I predicted….

https://globalnews.ca/news/8519786/grocery-store-closures-labour-product-shortages/

Lets see how fast the Liberalistas change their Bolivarian tune.

Look on the bright side.
Less food = fewer calories.

**********

Wife goes shopping every week for staples… she says that the stores are getting more and more bare. Frozen Veggies in stores seem sold out also … (we will be ok,well stocked, food, bullets, supplies & good neighbours)

We don’t shop for anything any more as we have all our supplies we need, we don’t eat out and amazon still delivers…. good luck people….

We are heading into a Venezuela style melt down …

I remember when we swapped squirrel recipes on here years back…. and told about best ways to plant peas….

go to your seed store and stock up if you know how to plant things.

cheers

#54 willworkforpickles on 01.18.22 at 7:39 pm

#49 DON
“Last time they raised rates inflation was not in a soaring mood. Lesser of the evils.”
………………………………………………………………………………………………………..

Hardly anybody mentioned national debt levels and what continuing spending will do to the economy going back 18 months and further. They said i was nuts to think that would have a negative effect with regard to inflation and stagflation to come as a fallout side effect to it.
Unsustainable debt levels were being created taking us to the point of no return of a debt death spiral and still are.
My response then (over 18 months ago) was … I’ll just keep on with the research and i didn’t expect to hear from any of them when this all begins to unfold in a couple of years time.

#55 crowdedelevatorfartz on 01.18.22 at 7:42 pm

@#47 Faron.
“You know, like the herb that Ponzius puts on his spätzle.”

+++

You had me worried there for a minute until I googled it.

#56 crowdedelevatorfartz on 01.18.22 at 7:49 pm

Canada ranked 6th most miserable country….

https://financialpost.com/globe-newswire/fraser-institute-news-release-higher-inflation-and-higher-unemployment-make-canada-6th-most-miserable-country-among-35-advanced-economies

It all started downhill after Ponzie moved here…..
While Austria climbed up the misery index…
Coincidence?

#57 Elon Fanboy on 01.18.22 at 7:49 pm

#27 Soren Angst “Have a Cdn ETF and a high risk US ETN for oil.”

—————-

USOI ?

I’ve got that one. The dividend on that is nuts, all over the place, 32% annually based on last month’s payout, lol.

I have a small position in that with my ‘play’ money.

Fun to watch the insane dividends come in but it would be scary to hold a large amount in it.

#58 Gene He on 01.18.22 at 7:54 pm

People who bought houses in Canada in last year or so will be verry sorry. Houses south of the boarder are much cheaper and its a better place to live (If you actually hold a job). Canada only superior for the welfare and free stuff like medicare.

#59 Stealth on 01.18.22 at 7:55 pm

Thank you,

Hypothetically speaking what would happen if rates drop instead, like in China?

Meaning if this “testing of the economic brakes” doesn’t end well.

Thanks

#60 I don’t know on 01.18.22 at 8:00 pm

#49 DON on 01.18.22 at 6:34 pm

It didn’t matter how much research one was doing about the economy in 2020, no one saw the pandemic coming. That’s called a black swan event, and they happen once every 10-20 years without any predictability whatsoever.

We are actually on the other end of the most recent of such events (2020), with some obviously lingering issues -supply chain disruptions being the biggest one of course. But the economy proved to be much more robust than anyone expected. Bears will point to monetary policy as the main reason for this, but this is proving to be an increasingly narrow view that purposefully ignores the systemic response of the economy since 2020. We can see this unfolding in real time as the reopening continues, and the economy’s response to omicron has been to simply shrug it off and keep powering forward despite record case numbers.

Beware permabears hoping the rise in interest rates will justify their missing out on the last 12 years of investment gains (and probably the next 12 years moving forward). The inflation we are seeing now is largely (but not exclusively) a result of a broken supply chain that will adapt in time. Inflation is higher because it’s usually measured year/year, and last year was particularly low as well. The comparisons to the 70’s and 80’s are not appropriate since we didn’t just have a massive re-organization of the financial system like Nixon leaving the gold standard. Hard to have continued runaway inflation when the USD is exactly where everyone runs to during times of distress. That also won’t change any time soon since no one else’s currency can be trusted to the same extent. Why? Not because the US is that good, but because everyone else is that bad.

Interest rates will rise. No one disputes that. The result will be a reduction in inflation readings, but definitely no reversal and drop in prices. In terms we care about on this blog, expect some minor volatility in markets as they adjust, then the resumption of the upward price momentum. Why not? The realization that more people working, making money, and buying things is a positive in the end. Housing stock in far flung areas without the economy to support the increase in prices they’ve seen recently may drop a little, same with condos that are often used as investment vehicles. Listings for these types of homes will definitely rise. Prices will respond. If there are people expecting to buy a detached home in a sought after urban area at a discount, there is little chance of that happening. Prices may not rise 30% year over year, but they will continue to go up. If anyone can afford to (like Angela yesterday), now is as good of a time as ever to buy (with dirt). That will always be the case.

#61 Faron on 01.18.22 at 8:02 pm

#55 crowdedelevatorfartz on 01.18.22 at 7:42 pm

@#47 Faron.
“You know, like the herb that Ponzius puts on his spätzle.”

+++

You had me worried there for a minute until I googled it.

Nothing to be afraid of. Now, his Knödel I would watch out for.

There’s an Austrian restaurant that just opened up in Victoria. The braised rotkohl is to die for.

#62 Faron on 01.18.22 at 8:21 pm

#20 Sail Away on 01.18.22 at 3:56 pm

Microsoft/Activision is shaping up to a nice arbitrage. Worth following if this is your thing.

Hey, you have Ross Gerber on your side. And essentially everyone on the internet knows about this “arbitrage”. What could possibly go wrong?

#63 DON on 01.18.22 at 8:23 pm

#54 willworkforpickles on 01.18.22 at 7:39 pm
#49 DON
“Last time they raised rates inflation was not in a soaring mood. Lesser of the evils.”
………………………………………………………………………………………………………..

Hardly anybody mentioned national debt levels and what continuing spending will do to the economy going back 18 months and further. They said i was nuts to think that would have a negative effect with regard to inflation and stagflation to come as a fallout side effect to it.
Unsustainable debt levels were being created taking us to the point of no return of a debt death spiral and still are.
My response then (over 18 months ago) was … I’ll just keep on with the research and i didn’t expect to hear from any of them when this all begins to unfold in a couple of years time.

*******
Yup. Now they are worried about wage price spiral. Do nothing to contain prices and volia…

Why is oil going up with all the lockdowns etc?

#64 Max the Tax on 01.18.22 at 8:31 pm

Dog pictures to show to get into restaurant instead of vax pass?
https://edmonton.ctvnews.ca/alta-restaurant-ordered-to-close-for-accepting-dog-pictures-instead-of-proof-of-vaccination-1.5744752

Garth are you behind this?

#65 DON on 01.18.22 at 8:35 pm

#59 Stealth on 01.18.22 at 7:55 pm
Thank you,

Hypothetically speaking what would happen if rates drop instead, like in China?

Meaning if this “testing of the economic brakes” doesn’t end well.

Thanks

***********
Just a note…not an answer to your question but some perspective.

China dropped its rate 10 basis points to 2.85%.

“To help boost the economy the People’s Bank of China (PBOC) said it was lowering the interest rate on 700bn yuan (£80.6bn; $110bn) worth of one-year medium-term lending facility loans to 2.85%. It was the first such cut since April 2020.”

#66 Wrk.dover on 01.18.22 at 8:52 pm

#53 kc on 01.18.22 at 7:35 pm
go to your seed store and stock up if you know how to plant things.
_________________________________

$200 mail order placed last week is on the way.
Supplies do run out during normal times.

Hint: this is not a task for Amazon sourcing .

#67 NAGA on 01.18.22 at 8:56 pm

I am sure I missed the news – how did “Dolce Vita” become “Soren Angst”? From such a positive name down right depressing ..but the writing has not changed – but because of the messenger/writer they sound way more negative and depressing.

#68 Ponzius Pilatus on 01.18.22 at 8:57 pm

#27 Søren Angst on 01.18.22 at 4:13 pm
Goldman Sachs say oil to breach USD 100 later this year.
———–
All I can say “Goldman Sucks”.
They have been part and parcel of every financial calamity, starting with the Great Depression.

#69 Flop… on 01.18.22 at 9:05 pm

You guys playing Wordle yet?

My wife said pick a word with five letters that makes things harder.

That’s Easy.

Whenever I want to make the game Wordle harder I always start with the word Ponzi…

M47BC

#70 X on 01.18.22 at 9:06 pm

Still not convinced Tiff will increase rates yet.

I think the economy with more jobs than people, can handle it. I think the RE market here that simply has too much fuel on the fire can handle higher rates. I think with an inflation rate double what the BoC finds acceptable that rates should go up as well.

Stil not convinced Tiff is Tuff on RE or inflation.

#71 mike from mtl on 01.18.22 at 9:07 pm

#51 Where My Booster Bonnie on 01.18.22 at 7:20 pm
I am way past the 7 month mark. Willing and able to get one, but there are none to be found.
/////////////////////////////////////////////////////////////////

Plenty of juice to go around back east – a gratis Garlic necklace with every booster.

You’re perfectly welcome to have mine since T2 has open orders spanning years.

#72 Ponzius Pilatus on 01.18.22 at 9:16 pm

#47 Faron on 01.18.22 at 6:27 pm
#25 crowdedelevatorfartz on 01.18.22 at 4:07 pm

The name is Fartz not Shirley.

In your more floral moments, how ’bout fartzly?

You know, like the herb that Ponzius puts on his spätzle.
————
Yes.

#73 Inadequate on 01.18.22 at 9:27 pm

Hoping to see a 5 year mortgage rate at 3-4% soon. We walked away from a bidding war on a house in 2021, refusing to sink more than 50% of our networth in 1 singles asset. Our dividend pays the rent and then some.

#74 NAGA on 01.18.22 at 9:29 pm

Investing in 2022 – What to do at this juncture?

I graduated in 1979. Decided to enroll in an investing course and read up on Morty Shulman’s “How to beat inflation” book.

Back then I decided that since most rich people got that way by investing in RE – I decided to follow this path – not enough time to also study and keep up with the markets.

Now over 40 years later – given the results (8 digit RE portfolio) it was the right strategy.

The times were different, high inflation, high interest rates relatively low individual and govt debts.

Today – starting from very low (-ve) interest rates, inflation making noise signalling it wants to go higher, but individual, corporate balance sheets, and govts are all head deep into debt.

At my age its worthwhile enjoying the next few months and perhaps a year or so watching from the sidelines.

Told my kids in their early 30’s they have SFD home, married and job – to study the market and be ready to pounce when the times is right in the future.

I reminded them that patience in investing is a virtue, and rule no 1 is not to loose capital.

There is a factor that I am not yet digesting/understanding. The stats have shown for some time that approx 70% of the Canadian households “own a home”. There has been a lot of buying – but population and family formation alone do not explain all the buying – even if we allow for bank of mom for the kids to get into the market. This 70% has been so for over a decade. In 2000 50% of those households had no mortgage. Today I think those that do have one is significantly higher.

Garth has told us that foreign buying is minimal (less than 5%). So it seems to me that a lot of households must have been buying second and third properties. We know being a landlord is not an easy ride. Most have been relying on capital appreciation and I have seen first hand single family houses being bought – sat empty for over a year to be resold at a good profit – no value added – even with no shitty renovation.

So the economy is fragile – yes it looks good now – any rate increases could result in major brakes applied to this fragile economy. It took a decade of stagflation in the 70’s before inflation took off into the double digits, and then ouch interest rates up to 21% in 1980/81. This was a real death to the market. But from my recall no sales – but prices did not tumble as the replacement costs were higher than the selling price.

The art and science of forecasting is fraught with many surprises – not many have a good track record. Even fewer have the guts to deploy their own capital based on their own forecasts.

Those that do and are correct immense reward. Those that do and are wrong immense regret.

If I was just graduating now – I would be Alberta bound and buy as soon as I landed. Close second choice La Bel Provence!

A last comment about the roaring 20’s. Well 100 years later everything moves much faster. We probably had a 1 year of roaring 20’s – that represent the 10 years of 100 years ago.

#75 Ponzius Pilatus on 01.18.22 at 9:36 pm

I had a conversation with a woman the other day.
Very smart.
She was well travelled, and so I was talking about taking a Baltic Cruise and visiting St. Petersburg, one of the most beautiful and culturally significant Cities in the World.
To my surprise, she said “I would never go there, I hate the Russians”.
As you can see, ignorance and prejudice is still rampant.
Even affects smart people like Faron.
Well, I will still go ahead and and book a Viking cruise this spring.

#76 Wrk.dover on 01.18.22 at 9:46 pm

#67 NAGA on 01.18.22 at 8:56 pm
I am sure I missed the news – how did “Dolce Vita” become “Soren Angst”?
__________________________
Dolt Vito became Sorry Ass

#77 Love_The_Cottage on 01.18.22 at 9:55 pm

#43 Lee on 01.18.22 at 5:25 pm
Landlords are asking ridiculous amounts for rent for houses. Suggests carrying costs are getting the better of them.
____
Maybe. Or maybe it suggests there is very little supply and strong demand and the landlord will charge as much as the market will bear. If the prices are ‘ridiculous’ then no one will rent the place.

#78 Ponzius Pilatus on 01.18.22 at 9:57 pm

#73 Inadequate on 01.18.22 at 9:27 pm
Hoping to see a 5 year mortgage rate at 3-4% soon. We walked away from a bidding war on a house in 2021, refusing to sink more than 50% of our networth in 1 singles asset. Our dividend pays the rent and then some.
—————-
I think you did the right thing.
One of our relatives is hellbent on buying a 1bed-room rental.
He quotes the recent data that 1-beds in Vancouver are renting for 2,300.
The average price is about 550k.
So he thinks the rent will cover the mortgage.
So far he put in 3 offers.
Not even close, about 15 offers for every apartment.
No conditional offers are back.
What can go wrong?

#79 Doug t on 01.18.22 at 10:20 pm

I’m starting to think that people don’t care about much of anything consequence wise anymore – politics meh, economy meh, Covid meh, work ethic meh, its just like MEH more and more often – something on the horizon? Meh

#80 Sail Away on 01.18.22 at 10:24 pm

#62 Faron on 01.18.22 at 8:21 pm
#20 Sail Away on 01.18.22 at 3:56 pm

Microsoft/Activision is shaping up to a nice arbitrage. Worth following if this is your thing.

———

Hey, you have Ross Gerber on your side. And essentially everyone on the internet knows about this “arbitrage”. What could possibly go wrong?

———

Yeah, yeah… you know better than me or Ross Gerber or Elon Musk or Jordan Peterson or probably anybody that ever lived. It’s even remotely possible you’ll actually be correct at some point. I mean, heck, you’ve only been giving provably bad investing advice here for… what, a short three years so far?

Even a blind squirrel, they say.

#81 cramar on 01.18.22 at 10:32 pm

And in the U.S. RE market:

Mortgage rates jump again, causing headaches for homebuyers

https://www.cnbc.com/2022/01/18/mortgage-rates-jump-again-causing-headaches-for-homebuyers.html

30 year up to 3.75%

“Buyers of the median-priced existing home (around $350,000) are now looking at monthly payments of about $125 more than they would have been just a few months ago. That may price some out of the market, especially first-time buyers on the lower end.”

Not many $350k homes in Canada.

#82 DON on 01.18.22 at 10:45 pm

#60 I don’t know on 01.18.22 at 8:00 pm
#49 DON on 01.18.22 at 6:34 pm

It didn’t matter how much research one was doing about the economy in 2020, no one saw the pandemic coming. That’s called a black swan event, and they happen once every 10-20 years without any predictability whatsoever.

We are actually on the other end of the most recent of such events (2020), with some obviously lingering issues -supply chain disruptions being the biggest one of course. But the economy proved to be much more robust than anyone expected. Bears will point to monetary policy as the main reason for this, but this is proving to be an increasingly narrow view that purposefully ignores the systemic response of the economy since 2020. We can see this unfolding in real time as the reopening continues, and the economy’s response to omicron has been to simply shrug it off and keep powering forward despite record case numbers.

Beware permabears hoping the rise in interest rates will justify their missing out on the last 12 years of investment gains (and probably the next 12 years moving forward). The inflation we are seeing now is largely (but not exclusively) a result of a broken supply chain that will adapt in time. Inflation is higher because it’s usually measured year/year, and last year was particularly low as well. The comparisons to the 70’s and 80’s are not appropriate since we didn’t just have a massive re-organization of the financial system like Nixon leaving the gold standard. Hard to have continued runaway inflation when the USD is exactly where everyone runs to during times of distress. That also won’t change any time soon since no one else’s currency can be trusted to the same extent. Why? Not because the US is that good, but because everyone else is that bad.

Interest rates will rise. No one disputes that. The result will be a reduction in inflation readings, but definitely no reversal and drop in prices. In terms we care about on this blog, expect some minor volatility in markets as they adjust, then the resumption of the upward price momentum. Why not? The realization that more people working, making money, and buying things is a positive in the end. Housing stock in far flung areas without the economy to support the increase in prices they’ve seen recently may drop a little, same with condos that are often used as investment vehicles. Listings for these types of homes will definitely rise. Prices will respond. If there are people expecting to buy a detached home in a sought after urban area at a discount, there is little chance of that happening. Prices may not rise 30% year over year, but they will continue to go up. If anyone can afford to (like Angela yesterday), now is as good of a time as ever to buy (with dirt). That will always be the case.

**********

Ummmm not 2020 I was referring to the Great Financial Crisis 2009. Some golkx saw that coming but folks like you didn’t.

Your research sounds like the crew at Zerohedge. In fact I have seen all your arguments there…they have changed their tune recently.

Inflation is largely the cause of too much money printing. Raising rates a little bit will not tackle inflation hence the overnight spike in rates back then. If you had done your research you wouldn’t seem so out of touch.

Only a sales person would think that now is a good time to buy. Do you hear yourself if people like Angela can afford…how many people like that are left to fuel the craze?

#83 Sam on 01.19.22 at 12:01 am

Can you give an example of a – short durations and a floating-rate bond ETF. TIA

#84 Dave on 01.19.22 at 12:02 am

Garth, you primarily speak to the rate increase impacting mortgages… what’s the exposure for all those who have used their homes as an ATM via HELOCs? Contagion risk potential?

#85 Calvin Quick on 01.19.22 at 12:09 am

Announcing an end to the China Virus by summer is an act of desperation, cognitive dissonance. That would mean an opening of Parliament and a continued face to face lambasting of Trudeau in full view of the public. That won’t be allowed while Justin’s numbers ( outside of the super genius seats in the GTA ghetto) are being measured against the thickness of slug slime trails.

It must be worse than a witch trial to cut that Chequers every month for the high rise office but, since mitigation isn’t mandatory you’ll have to suck it up. Latest scuttle but is federal workers never return to office work. And when civil service workers form 21% of the work force and vote bloc like desert tribes to force democracy into the toilet, The Wuhan Flu is here to stay.

#86 Faron on 01.19.22 at 3:37 am

#80 Sail Away on 01.18.22 at 10:24 pm

Just trying to keep up with your proverbially bad reccos. Tough act to follow. GK, EM, and JP — fine company there.

Anywho, the whole of the financially-bent internet was talking about this “arbitrage opportunity”. Have fun.

#87 Bronze Bullet on 01.19.22 at 3:51 am

https://wowa.ca/bank-of-canada-interest-rate

BoC interest rates. Range bound between 0.25 and 1.75 %(absolute peak) since 2010. Average 1 %.

How exactly that will change with the current state of debt is clear – it will not as it can not.

6 increases to 1.75 % – it was there in 2018.
I bet rates will not increase to 2 % even with inflation roaring in double digits.

Central bankers will find an excuse – recession, labour market to keep it capped and lower at first opportunity.

2,3,5 million dollar shacks in GTA coming in a heartbeat.

Another 1.5 decades of this coming. They will call it Japanification, focusing on zero rates, skipping the skyrocketing inflation.

#88 under the radar on 01.19.22 at 5:05 am

Ukraine – Have no fear Ms. Joly has arrived to make things better. Perhaps she will offer some WW2 pistols from our state of the art cache of weaponry. Embarrassing .

#89 Hal Sure on 01.19.22 at 5:10 am

I think BOC and OFSI are freaking out at the renegade leaders maniacal obsession on climate politics. Both have said that on every calculation the Trudeau government is on track to tank the economy and send most companies into bankruptcy. GDP is expected to implode. Is this why the smart money won’t invest in Canada?

#90 willworkforpickles on 01.19.22 at 6:38 am

The Fed will go ahead and taper their asset purchases and raise interest rates to counter inflation.
The tiny Fed hikes in 2022 are not going to have the counter inflationary effect sought after to appease the masses with abating rising prices as it is for the most part imaginary without significant rate increases.
And not so when inflation goes stag-flationary turning into inflation/stagflation.

Stagflation, as i said here almost 2 years ago will become part of the fallout consequences to come as the runaway epic debt increases do in turn become highly inflationary.
Will it (stagflation) get up and gain momentum as the Fed (temporarily) tapers?
With inflation running high as it is with the real (non artificial) growth rate slowing…, the real unemployment level, which includes those no longer looking for work within official statistics close to 100 million US now staying persistently high , this in itself spells nearing stagflation.
Inflation/Stagflation.

Jobs going begging to be filled notwithstanding as part of the picture of economic health, as they don’t offer enough pay to lure the unemployed back to work that could reduce the unemployed stat.

Prices are rising because of the increased money supply and dollar devaluation which is not yet being reflected in the Dollar Index.
The reality is that inflation created from rampant debt re-distribution is the cause of supply chain disruptions, not the result of supply chain disruptions…contrary to the mainstream media misrepresentation that puts all the blame on supply chain disruptions as such.
Stagflation is a form of recession-inflation brought about by rampant debt distribution culminating in all of these points in unison at the same time unfolding..
The GDP has declined significantly in the past couple of years despite the fact that the US money supply and inflation have spiralled ever higher.
With this rising barometer the majority of necessities in the U.S. will not be affordable for most people very soon. Within a year or so.
The Canadian economic picture is reflective of the US and so it goes.
A steady decline in production, high (real) unemployment – along with the steady upward momentum in prices points to a stay of stagflation to come.
All the blame when the chit hits the fan will be/is being put on covid19 , global lock-downs and the supply chain bottleneck…anywhere but where it truly belongs.

Where the blame belongs is with the Fed who should be held accountable for a downturn that will come again by 2023.
13 years of stimulus and bailout measures along with near-zero interest rates and they blatantly shift blame away from themselves and heap it on the pandemic.
This to cover their hides , perhaps to continue further down the road of destruction which they will. Most definitely will.
Nonetheless a massive retail buying spree in 2020 and 2021, from freely distributed covid19 generated trillions (piled on) put mega fresh dollars into the economy as we all know too well, thereby chasing less goods and causing prices to spike much higher.

As I’ve said before,… if and when the trillions of dollars being held overseas come flooding back into the US, inflation will spiral higher in unison with existing inflation.
Aside from a taper adding an additional threat of a flattening yield curve in treasury bonds , foreign investor confidence anticipating a dropping dollar index could well set off waves of unloading and dumping bonds and dollars by them and central banks.
What will that do to interest rate policy then.
You’ll just have to stay tuned…but they (rates) won’t be going down.

Massive inflation, stagflation, even food shortages are on the rise.

A craftier than ever smoke and mirrors show to cover much more debt creation will be engineered.

Paltry interest rate increases will not have the desired effect over inflation until substantial interest rate increases are forced into effect down the road.

#91 Wrk.dover on 01.19.22 at 7:04 am

Can consumer inflation walk hand in hand with asset deflation.

I’m looking the dip for TSFA, and the Shopify five year curve really points out something or other. ( It’s 7% of ZCN )

#92 Baker Hammer on 01.19.22 at 7:19 am

How the mighty have fallen. In a few short years Canada has dropped from first in world rankings to ” 6th most miserable”. Thank you Justin Trudeau, you did a marvellous job of shoving Canada into the toilet , but for who do you work for why understands gentle nature and to turn our laws against us.?

iPolitics.ca: Canada ranked 6th-most miserable country by think tank.
https://ipolitics.ca/2022/01/18/canada-ranked-6th-most-miserable-country-by-think-tank/

#93 the Jaguar on 01.19.22 at 7:55 am

Yes, Jaguar… There really is a Santa Claus.

Snippet from this morning’s NP. Front page features an article written by guess who? Ever heard of Jordan Peterson?, lol. Within the article there is a reference to a recent speech by another person with a link to the full speech where the writer takes on ‘Woke’ in a meaningful way based on experience. Here is a small excerpt:

” The fight for equality and against discrimination has turned into aggressive dogmatism bordering on absurdity, when the works of the great authors of the past — such as Shakespeare — are no longer taught at schools or universities, because their ideas are believed to be backward. The classics are declared backward and ignorant of the importance of gender or race. In Hollywood, memos are distributed about proper storytelling and how many characters of what colour or gender should be in a movie. This is even worse than the agitprop department of the Central Committee of the Communist Party of the Soviet Union.”

Both the article and the speech are well worth the read.

Well Garth. Thanks for the hospitality, but given the imminent explosion of heads I think I will begin packing my suitcase again. Time to head back to the beach, but to be clear ‘Nadie se rinde aqui’. I’ll show myself out.

#94 thebarold on 01.19.22 at 7:57 am

Don’t try to time the market is good advice for the stock market and your principal residence. If it’s your cottage or chalet or the farm, sure. But don’t day trade your castle.

Never suggested. However anyone (as stated) who has contemplated selling, the timing could hardly be better. – Garth

#95 crowdedelevatorfartz on 01.19.22 at 8:02 am

@#88 under the radar

“Ukraine – Have no fear Ms. Joly has arrived to make things better. Perhaps she will offer some WW2 pistols from our state of the art cache of weaponry. Embarrassing .”

+++
Yep, an International joke.
I’m sure the murderous dictator running Russia is quaking in his boots.
Never underestimate the ability of the current Liberal dilettantes in charge to posture, pose, lecture and perform.

Look on the bright side.
At least our cringeworthy fearless leader Trudeau and Freecash weren’t there dressed as sword wielding Cossacks mounted on horseback.

But the year isn’t over yet.

#96 crowdedelevatorfartz on 01.19.22 at 8:19 am

Gee.
Greece has received it’s first shipment of brand new military jets.

https://www.reuters.com/world/europe/greece-receives-first-rafale-fighter-jets-france-2022-01-19/

After 25 years of dithering….has Canada even decided who jet’s we’re buying?

As the world grows more dangerous by the day and China, Russia and apparently Greece leave us in the dust.

#97 crowdedelevatorfartz on 01.19.22 at 8:30 am

Rising inflation.
Low unemployment.
Contract negotiations pending.
Years of low wage increases.

Will 2022 be the Year of the Strike?

https://www.cbc.ca/news/canada/newfoundland-labrador/st-johns-airport-limited-flights-staff-1.6319189

#98 Wrk.dover on 01.19.22 at 8:51 am

#95 crowdedelevatorfartz on 01.19.22 at 8:19 am
Gee.
Greece has received it’s first shipment of brand new military jets
___________________________________

Did you see the episodes of Ice Pilots, where the Buffalo crew risky flew an old water bomber all the way over there, then the Greeks ignored the screaming alarm whistle as they belly landed with the gear up on a test flight?

#99 ogdoad on 01.19.22 at 9:06 am

#92 Baker Hammer on 01.19.22 at 7:19 am

Haha, no $hit!?

Og

#100 crowdedelevatorfartz on 01.19.22 at 9:24 am

@#98 Wrk.dvr

Yep.
But my concern is our world ranked jet pilots will eventually be sent up against state of the art enemy jets, missiles, radars, etc etc etc in…. 40 year old CF-18’s bandaged together with used parts and jets from the Australians as they upgrade their fleet to F35’s.

“Sacrificial lambs to the slaughter” comes to mind.

25 years of talk talk talk has led to a decrepit air force that no allied country can actually rely upon.

All as our entire military is purged of it leadership in endless sexual assault allegations and trials led by a lawyer appointed to head the military inquisition.

The only leaders left are the politically correct, nodding, lickspittles that have learned to keep their eyes averted and their mouths shut.

Ironically, Stalin couldn’t have purged his military more effectively than what the two PM Trudeau’s have done..

#101 KLNR on 01.19.22 at 9:26 am

@#92 Baker Hammer on 01.19.22 at 7:19 am
How the mighty have fallen. In a few short years Canada has dropped from first in world rankings to ” 6th most miserable”. Thank you Justin Trudeau, you did a marvellous job of shoving Canada into the toilet , but for who do you work for why understands gentle nature and to turn our laws against us.?

iPolitics.ca: Canada ranked 6th-most miserable country by think tank.
https://ipolitics.ca/2022/01/18/canada-ranked-6th-most-miserable-country-by-think-tank/

if this comments section is any indication
i’d say we’re #1

#102 crowdedelevatorfartz on 01.19.22 at 9:41 am

@#101 KLNR
“if this comments section is any indication
i’d say we’re #1”

+++

Touche’
:)

#103 crowdedelevatorfartz on 01.19.22 at 9:52 am

Anyone been to a grocery store lately?

The fresh produce sections are emptying out.

https://nationalpost.com/news/canada/securing-the-supply-chain-or-breaking-it-clash-over-trucker-vaccine-mandate-grows

I give the brainless weasels in the PMO’s office about 7 more days before they back peddle real fast on the Trucker Covid rules.

Long term strategic thinking isn’t in the politically correct vocabulary.

But, you can be sure, it won’t be our fearless leader standing on the podium admitting he was wrong.

It’ll be some other lackey spewing generalities about “synergies” and “empowerment” that will take the hit..

When are the Conservatives going to get a new leader?
We need another election to get these incompetent’s out of office….. before we have to start eating dogs… like the Venezuelans.

#104 Ponzius Pilatus on 01.19.22 at 10:06 am

Had our Neighbourhood Watch meeting at the local pub.
10 of us, many immigrants. Mostly Middle class.
Caring about the community they live in.
Not much to report on the crime scene.
But everyone was excited about the latest Assessment numbers.
About 30 % up from last year!
There was lots of talk about getting a rental property, and letting the renters “pay the mortgage”.
A few already had a pre-approved mortgage.
Looks like this thing still has some legs.

#105 Ponzius Pilatus on 01.19.22 at 10:12 am

#92 Baker Hammer on 01.19.22 at 7:19 am
How the mighty have fallen. In a few short years Canada has dropped from first in world rankings to ” 6th most miserable”. Thank you Justin Trudeau, you did a marvellous job of shoving Canada into the toilet , but for who do you work for why understands gentle nature and to turn our laws against us.?

iPolitics.ca: Canada ranked 6th-most miserable country by think tank.
https://ipolitics.ca/2022/01/18/canada-ranked-6th-most-miserable-country-by-think-tank/
———————-
Yeah,
The Fraser Institute “Think Tank”.
Just love those boys.
But mostly they are more tanking than thinking.
Heard CEF is an honorable member.
That would explain a lot.

#106 Observer on 01.19.22 at 10:13 am

#83 Sam on 01.19.22 at 12:01 am
Can you give an example of a – short durations and a floating-rate bond ETF. TIA

^^^^^^^^^^^^^^^^^^^^^^^

XSB – short, ZST – super short, CAFR – floating rate

#107 James on 01.19.22 at 10:22 am

DELETED

#108 Sean on 01.19.22 at 10:46 am

Interest rate hikes are coming, but may crash many debtors before they impact inflation.

If you’re not maxed out, why not borrow at 4% when inflation is 10%? It’s like getting paid to borrow!

Stagflation is likely in 2022 and it won’t be pretty.

#109 Wrk.dover on 01.19.22 at 11:22 am

#100 crowdedelevatorfartz on 01.19.22 at 9:24 am
@#98 Wrk.dvr

Yep.
But my concern is our world ranked jet pilots will eventually be sent up against state of the art enemy
_______________________________

Good think our leader isn’t as mouthy as me….
Dooogh! (Homer Simpson)

#110 Millennial 1%er on 01.19.22 at 11:40 am

Stop pretending like you can predict the future, garth

But it’s entertaining. – Garth

#111 kc on 01.19.22 at 12:02 pm

103 crowdedelevatorfartz on 01.19.22 at 9:52 am

Anyone been to a grocery store lately?

The fresh produce sections are emptying out.

https://nationalpost.com/news/canada/securing-the-supply-chain-or-breaking-it-clash-over-trucker-vaccine-mandate-grows

I give the brainless weasels in the PMO’s office about 7 more days before they back peddle real fast on the Trucker Covid rules.

Long term strategic thinking isn’t in the politically correct vocabulary.

But, you can be sure, it won’t be our fearless leader standing on the podium admitting he was wrong.

It’ll be some other lackey spewing generalities about “synergies” and “empowerment” that will take the hit..

When are the Conservatives going to get a new leader?
We need another election to get these incompetent’s out of office….. before we have to start eating dogs… like the Venezuelans.

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

When the convoy’s of trucks arrive in Ottawa, they need to circle all the streets that circle the PM’s house, and the parliament buildings. Form truck rings and stop all traffic from coming and going. park there for days…

Grind to a halt the capital…

It is about time something like this is happening to wake up the clowns who think they can roughshod the population of this country.

My hat is tipped to these brave souls and lets fight a good fight.

#112 dragonfly58 on 01.19.22 at 12:08 pm

Not sure if its too many viewings of Top Gun or what ? But a war for a Western country involving a “state of the art enemy ” is a missile war. Both faster and capable of pulling far higher G forces than a manned aircraft.

#113 Sail Away on 01.19.22 at 12:18 pm

Re: arbitrage

Microsoft’s Activision acquisition, closing Jun 2023, could be a fine Buffett-esque arbitrage, as it meets the following criteria:

-Publicly announced
-Friendly acquisition with motivated parties
-A 4.4% ($3B) penalty for non-completion will be paid ATVI if unsuccessful
-Acquiring company has excellent reputation
-No major regulatory hurdles

So, a high probability of completion in 18 months. ATVI is currently trading 15.8% below the acquisition price.

***

Let’s examine one arbitrage play:
Borrow $1M @5% to invest in ATVI
Collect $1,158,000 in 18 months
Pay $75k interest/deduct $37.5k @50% tax for total $37.5k int.
Total 18mo return=$121k

And that’s for doing almost nothing while using other people’s $. Something to watch.

#114 leebow on 01.19.22 at 12:55 pm

#101 KLNR

Yep, this steerage is whining all the way to the bank.

#115 IHCTD9 on 01.19.22 at 1:04 pm

#103 crowdedelevatorfartz on 01.19.22 at 9:52 am
Anyone been to a grocery store lately?

The fresh produce sections are emptying out.

https://nationalpost.com/news/canada/securing-the-supply-chain-or-breaking-it-clash-over-trucker-vaccine-mandate-grows

I give the brainless weasels in the PMO’s office about 7 more days before they back peddle real fast on the Trucker Covid rules.
___

This one may go down as T2’s biggest gaffe yet. That’s really saying something. Prices in the grocery store are already well on the way to crazy-town. Now they’ll get even worse. I was in yesterday to get some mushrooms that were on sale – already gone. Bins full of soft wrinkly peppers with about 2 days of life left. Short on bananas.

Come the trucker border block, we will feel the impact within days as every store runs some kind of JIT delivery scheme. ~40-50% US drivers are not vaccinated.

We might have to start getting used to frozen veggies..

#116 fishman on 01.19.22 at 1:59 pm

Of course it would be a millennial telling a boomer that its pretence to predict the future. And he’s right, sort of. Take top chess players. They are smart as far as intelligence goes compared to the general population. But not statistically significant. What the chess masters excel at is pattern recognition. After a few moves, as like the future, the exponential combinations are incomprehensible. Pattern recognition development is one of the few endeavours where oldsters have a fighting chance against the youngsters. Like Garth says, its entertaining. Being right & winning is fun. You gotta smile to yourself when you tell the kid, “I told you so”.

#117 8.5% to 9.5% Reverse Mortgage Rates Coming on 01.19.22 at 2:11 pm

I’m am born in India where interest rates are much higher than here and Canadians forgot the past or are too young to even know what higher interest rates mean. Those Canadians that love to put all their net worth in physical real estate and now need to go the desperate route of getting a reverse mortgage will soon in coming years see 8.5% to 9.5% reverse mortgage rates and higher fees.

In case you did not like math in school and learn, understand compound interest and how it works, a $400,000 reverse mortgage balance today will be $800,000 in 12 years, 2034 current 6% reverse mortgage rates but at even 8.5% will be $1,064,674 by 2034 and $1,188,582 by 2034 at 9.5% reverse mortgage rates. Good luck.

#118 crowdedelevatorfartz on 01.19.22 at 2:51 pm

@#104 Ponzie’s Preapproved Pals

“There was lots of talk about getting a rental property, and letting the renters “pay the mortgage”.
A few already had a pre-approved mortgage.
Looks like this thing still has some legs.”

+++

Not to worry Ponzie.
You send them over to the Greaterfool and Uncle Fartzy will straighten them out…

#119 Sail Away on 01.19.22 at 3:21 pm

Ah, Jordan Peterson, eloquent as ever, with a treatise and call to action. Jag, Vlad gets a positive mention as well.

https://www.msn.com/en-ca/news/other/jordan-peterson-why-i-am-no-longer-a-tenured-professor-at-the-university-of-toronto/ar-AASWdwp?ocid=msedgntp

#120 Shawn on 01.19.22 at 3:57 pm

Sail Away arbitrage

#113 Sail Away on 01.19.22 at 12:18 pm
Re: arbitrage

Microsoft’s Activision acquisition, closing Jun 2023, could be a fine Buffett-esque arbitrage, as it meets the following criteria:

-Publicly announced
-Friendly acquisition with motivated parties
-A 4.4% ($3B) penalty for non-completion will be paid ATVI if unsuccessful
-Acquiring company has excellent reputation
-No major regulatory hurdles

So, a high probability of completion in 18 months. ATVI is currently trading 15.8% below the acquisition price.

***

Let’s examine one arbitrage play:
Borrow $1M @5% to invest in ATVI
Collect $1,158,000 in 18 months
Pay $75k interest/deduct $37.5k @50% tax for total $37.5k int.
Total 18mo return=$121k

And that’s for doing almost nothing while using other people’s $. Something to watch.

*********************************
You lost me at borrow $1 million.

I might be close to a 1% guy but I am miles from the ability to borrow $1 million on a stock bet. Kudos to those in a position to borrow $1 million against a stock.

Imagine the stress for most mortals borrowing $1 million on a stock arbitrage that might now pay off. The spouse is not going to agree. This is for big players like apparently Sail Away. Best wishes.

But it does all sound logical and yes potentially a Buffett type thing.

EXCEPT: Buffett would not do this with borrowed money, probably not even in his earliest days when arbitrage was more like minimum 50% annualized on his own money. He liked much shorter time periods. Those pretty much no longer exist.

A typical reader here could throw in $10k of his own money if he likes this arbitrage. Entertainment and probable profit without betting the farm.

#121 SoggyShorts on 01.19.22 at 4:07 pm

#36 Mattl on 01.18.22 at 4:44 pm
Will be interesting to see how much supply chain issues + increased operating costs impact corporate bottom lines. Labour costs are going to increase dramatically and lots of companies won’t have the inventory to grow over.

Case in point – went to build and purchase a kitchen from Ikea for our basement this weekend.
*********************
Hated the sofa in the place I’m renting down here so I started shopping around. Slim pickings, lots of 4-6w waits. Then I found out Mexico has Ikea!
So I checked out their website, and they carry basically the same 5 sofas and 5 colours as Canada. But they have 0/25 kinds available. Not a single sofa in stock.

#122 Sail Away on 01.19.22 at 4:22 pm

#119 Shawn on 01.19.22 at 3:57 pm

Sail Away arbitrage

Buffett would not do this with borrowed money, probably not even in his earliest days when arbitrage was more like minimum 50% annualized on his own money. He liked much shorter time periods. Those pretty much no longer exist.

———

Actually, Buffett regularly used leverage up to around 25%, as noted here:

https://accelerateshares.com/blog/warren-buffett-and-charlie-mungers-favourite-investment-strategy/

Munger was far more aggressive.

This one is worth tracking, watching, and maybe partaking because it will have close to total transparency due to size of the deal. The price will probably jump to near full value upon securities approval, which might happen much sooner than the buyout date. Risk is quite low with the $3B non-completion security.

#123 Peter Kook on 01.19.22 at 5:16 pm

“… things have also murdered the work ethic.”

LOL
Seems that Garth experience is limited to a private, small companies, where the owner works together with employees.

In real life, in bigger companies (owners are virtual) the ‘culture’ and the ‘work ethic’ boils down to ‘manager is always right’, “you are dispensable and replaceable”, and “shut up and keep smiling”, etc. etc.

Work ethics… stop kidding me

#124 Joy on 01.19.22 at 7:45 pm

Get ready for 8% to 9% reverse mortgage rates. Your $300,000 balance will be $600,000 at today’s rates in 12 to 12.5 years. When we see 8% to 9% reverse mortgage rates in the next couple of years, get ready for $800,000 to $900,000 reverse mortgage balances. Oh yes, there goes your best inflated physical real estate back to the bank, lender Canadians.