1989?

FOGS. The latest. Fear Of Getting Screwed. It’s the spawn of FOMO.

Yesterday’s blog discussion on the nature and origins of inflation, national monetary policy, central bank actions globally, pseudo-macroeconomics and political opportunism proved one thing conclusively. Many people are clueless. Not their fault. They’re manipulated and lied to, misled by peer-to-peer social media posts, fibs, plus leaders who’ll tell folks what they desire to hear. Everybody’s a willful victim. Makes bad choices easier to live with. Blame someone else. Might as well be the Bank of Canada. Whatever that is. But they did it. Pepe said so.

Anyway, now we have FOGS.

The fear is entirely based around real estate, since financial markets will recover and by the end of this year portfolios are likely to be positive once again. But not so with houses. The situation there will only worsen as CBs tighten – to do what everyone asked for. Lower prices.

Let’s flip over to Toni for a minute. She lives in Victoria with spouse and kid, renting for $2,800 a month. Family income eight grand a month, two of that goes to daycare. “Thanks to you we always maxed out our TFSAs, RRSPs and our downpayment has grown to $350k, 2/3 is cash, 1/3 is responsibly invested,” she says. Then Toni adds, “Thanks to you we don’t own a house because for the past 5 years my husband and mother-in-law think you’re God of Finance. So I’m packing boxes and you owe me.”

And while Toni does not have the house she craves, she also has zero debt. No mortgage. Liquid assets. And the monthly overhead for rental accommodation is far less than the cost of ownership. Not a bad situation to be in while the economy gets a bit dodgy, rates go up, houses go down and you decided to have kids.

Here’s the question: Their rental will be sold in a few months, so what to do? “Buy a house in this downward spiral at low interest rates or rent at a high price and wait for prices to come down but potentially have a much higher mortgage rate? I think it’s wise,” she says, “to buy something now within our means (even considering bunnypatch). My husband thinks it’s all ridiculous and wants to wait 1 year.”

So, Toni, why is there FOGS spreading through the land? Simple. Too many people bought too much house, often too far away, too quickly with too much emotion and way too much debt. Now the rate tightening cycle has only started and homes are losing 1% or 2% of their value monthly, especially in the burbs and hick towns. Buyers are balking at closing on places worth less than they paid. Recent owners fret about negative equity. People a year from mortgage renewal see a bomb coming.

But don’t just listen to me (God of Finance, that your wise MIL believes), but how about a big-kahoona bank economist like Robert Kavcic?

Here is the conclusion of a paper he published for BMO a few days ago: “As of Q1, when we believe the market peaked, real Canadian home prices sat 38% above trend, the widest deviation in the past 40 years.”

The ‘trend’ he references is the long-term appreciation curve for Canadian real estate. The last time a market strayed above that curve in this fashion was in 1989. The deviation then was identical – 38% – and it took the housing market 15 years to recover.

BTW, that deviation is national. Check out the weirdness in big urban regions, like the GTA, compared to the rest of Canada:

“The most froth has accumulated in the suburbs and exurbs of Toronto. While Toronto prices have risen 41% above trend, exurbs (using markets 1-2 hours outside Toronto) have run ahead by more than 70%. Cottage country has seen a similar surge. Some regions, however, barely look frothy at all. Alberta is a good example where, after five years of declining prices leading into COVID, the market is still just catching up to its long-term baseline. Other markets, such as Vancouver, Montreal and Atlantic Canada are frothy, but not to the extent of Southern Ontario.”

What next? BMO (like everybody) thinks rates will swell a lot in the next seven months. Home prices were “already stretched” versus incomes when mortgages were 2%, he says. So when loans more than double, “it will stretch our valuation metric beyond that seen in the late-1980s.” That means house prices have to fall by about 20% from here just to maintain current affordability. But rates are already rising, putting pressure on everyone. And thus, the price decline will be more significant.

And how long until we see real estate level out?

Price corrections in Canada, Kavcic says, “usually take 2-to-3 years to bottom.” Given that rates are set to inflate all of 2022, that means the housing correction could be in effect until 2025 – the year of the next federal election. A recovery, the economist adds, would take up to five years beyond that point – which is now eight years into the future.

Well, Toni, do you really want to rush into a property that could erode in value for years, not even breaking even until, say, 2030? Especially when buying into a stupid-expensive market like Victoria means you’d end up with scant liquid assets, seriously higher monthly costs and a mortgage of $800,000 – which could face renewal at a higher rate with you in negative equity?

Yup, FOGS. Hubs is right. And his mom. That must sting.

About the picture: “My wife snapped this photo of our newly acquired rescue pup and perhaps you might consider using same for your canine banner features,” says Kris. “8 month young Border Collie full of energy and encouragement to get us off the couch and enjoy the Spring weather exercising with him. Named ” Skipper ” as in Aye Aye Skipper or ” Skip ” as in skip the dishes…doesn’t matter what we call him, he doesn’t come any way… Too many distractions on our property…squirrels, birds, moving leaves, shiny objects etc etc…however he is a wonderful reminder of the simple and joyful things in life. We will sign off with the OSU thank you for all the timely and common sense you dispense.”

137 comments ↓

#1 Truth or Consequences on 05.23.22 at 2:22 pm

You are the clueless one. It’s a well known and simple fact that QE and low interest rates create inflation which is why the CBs are reversing course now. Why do you consistently peddle misinformation and think you are the smartest guy in the room?

I paid $150K for a house that’s now “worth” $1.5 million. That’s inflation thanks to CB rate policies.

And have some respect for P.P. like you always scold the riff raff here when they insult a politician. Stop being a rude hypocrite.

Interest rates do not create inflation. But believe what you want. Or what some guy seeking power tells you. See how that turns out. – Garth

#2 Sam on 05.23.22 at 2:31 pm

OR CB May stop raising rates if inflation peaks and houses resume their upward trend and those who don’t buy now may be paying a lot more in 2025.

Why would that happen? Inflation would surge. The next rate-hiking cycle would be worse. – Garth

#3 rknusa on 05.23.22 at 2:44 pm

re: Now the rate tightening cycle has only started and homes are losing 1% or 2% of their value monthly, especially in the burbs and hick towns.

do you mean 10% or 20%?

As stated, monthly. – Garth

#4 Anti Natalist on 05.23.22 at 2:54 pm

Life is temporary. Inequality is rife. The Canadian politicians don’t care about us.

So why would you bring another being into this world where drug traffickers and murderers get lighter sentences than posting critical remarks of the elite?

Why?

You will be bringing another being into a post-COVID global recession.

#5 Adam on 05.23.22 at 3:00 pm

So, Alberta is negative baseline? In other words, Alberta real estate is underpriced? Alberta sure has a lot going for it these days. High oil prices, the only province without a real estate bubble and MOST IMPORTANT – the two best hockey teams in Canada. What’s not to love about Alberta? Kenney? Oh didn’t you hear, he’s leaving…

#6 Brad on 05.23.22 at 3:20 pm

In 2005 I wrote a (somewhat) famous article called ‘Top 8 reasons not to immigrate to Canada’.

I was ahead of my time. The government essentially made me unemployable in the country. Men wearing dinner jackets knocking at my door warning me not to post anything more on the internet. How I might be breaking the false news law (which was decriminalized in the late 1990s).

So I left and worked in the United States until 2014. I now permanently live in the Philippines.

I would never go back to Canada for any reason: not to live, not to visit, not even a connecting flight.

In the last ten (10) years Canada has gone completely down the drain and is currently a North Korea style dictatorship with colder weather and no love life. No freedom, too expensive, very high income tax . . . too depressing.

I am happy here in Asia, with much friendlier people.

#7 50 YEARS OF MAPLE LEAF INCOMPETENCE! on 05.23.22 at 3:22 pm

Ah yes, 1989, Toni do you remember those days?

When FOGS meant ‘Fear Of Gretzky Scoring’, and the pathetic Make Believes had only been losers for 22 years.

Now it’s 55.

1989. When the term “carjacking” meant lifting your vehicle to change a tire, not a daily crime spree in the Torontoilet.

Don’t buy now, Toni. Garth is right. Keep your cash and be ready to vulch. Be patient. It won’t take 55 years, but maybe 5. And in maybe 10 years time you’ll have positive equity and be able to relax and watch hockey in the living room and see the Make Believes make it to the second round of the playoffs before bowing out. (or maybe 20 years, to be more realistic) Plus, by then Victoria might have its own pro hockey team with an even better record…..

#8 Søren Angst on 05.23.22 at 3:30 pm

Despite my biatching about the CB’s having slathered the global economy with too much for too long at a cost of too little (and they did) I for one:

Am Happy.

Created a nice stocks investment asset bubble for me.

Listening to Garth et. al. + a little bit of me and putting all that into practice my Threadbare Portfolio is still up +10.15% in the past 30 days and when my “yeah oil” dividend sloshes its way into my WebBroker Cash account this week I will be up by a lot more *.

* It would have been a boat load more if it weren’t for MY sh!t for brains, single stock pick, Albatross TWTR purchase. Oh well, you can’t win them all.

Elon can go copulate with a duck.

————————–

Brinidisi 🍸 to the World’s CBs…couldn’t have done it with you.

And good advice Garth today as usual.

#9 Shawn on 05.23.22 at 3:31 pm

Visa Inc. is up 3.6% today

And it’s only just begun … (probably maybe)

Only adventurous investors need get involved. Not all adventurous people need get involved.

Canadian Tire is on sale. Don’t try to get ahead of my order tomorrow morning.

#10 Shawn on 05.23.22 at 3:34 pm

Holidays aren’t that useful for those collecting DB pensions.

Tesla dealers are closed Sundays and Mondays. How independent of them.

#11 crowdedelevatorfartz on 05.23.22 at 3:36 pm

While I know we Boomers had it so much easier back in the day.
I can assure Mills and Gen X….
If you currently hold a big fat mortgage…..

Pray you don’t experience the housing reset of the 80’s.

#12 Doing my Part on 05.23.22 at 3:37 pm

I am almost a lifelong Victorian, 4 months of decent weather a year, overpriced real estate, lots of entitlement and other woke stuff. NDP government and billion dollar museums when you can’t get a family doctor, need I go on.
Alberta is looking better all the time, if I was 40 years younger, I would be on my way.
Go Alberta Hockey.
Slava Ukraine.

#13 Søren Angst on 05.23.22 at 3:40 pm

Garth, if BOM is correct

a lot of people

are going to get financially wounded like us Paleo’s experienced in the 80’s. And it will be because of Cdn RE excesses.

I read some of the Comments and you know, I get the unsettling feeling that many have NO CLUE as to what is coming. Wouldn’t want to wish the 80’s over again on the KIDS.

Alas, we are just at the start of it all…AGAIN.

Keep Blogging and letting them know.

And hey Garth, OPPORTUNITIES supposed to be this week.

Throw a few our way, much appreciated if you do.

#14 crowdedelevatorfartz on 05.23.22 at 3:40 pm

Wow .
Xi’s “reelection” as emperor of China comes up in 6 months and Biden drops a big steamy caca in his lap…

https://www.reuters.com/world/biden-meets-japanese-emperor-start-visit-launch-regional-economic-plan-2022-05-23/

#15 TurnerNation on 05.23.22 at 3:46 pm

You guys gotta look at the long term trends, the Long Game.
On Friday I posted this, it had kicked off March 2020 — still going, the War on the Car (and independence).

[email protected] #CityOfTO announces #VictoriaDay weekend #ActiveTO road closures”

So they closed Lakesnore Blvd such that a bunch of Lefties and NDP supporters could ride bikes on a major arterial routes.
Guess what happened. The Gardiner Distressway was backup all the way to Islington. Many miles, Cars, and even GO Transit busses at stand still, burning unaffordable gasoline for hours.

—-

I do not post anything without mainstream news links. No theories only facts.
Life in the Former First World Countries means control over travel/movement.
(Why Kanada still has the QR code — ahead of the biometric digital ID that, unlike your passport, will be linked to whatever medical whim the global government or pharma sales reps have in mind.)

Same same everywhere:

https://www.irishmirror.ie/news/irish-news/dublin-airport-passengers-fuming-return-27037309?int_source=nba
“Passengers at Dublin Airport were fuming at the return of ‘insane’ security queues that stretched out of the building and into the car park over the weekend.
Just weeks ago the airport hired new security staff after it struggled to cope with up to three-hour backlogs since air travel returned to full capacity in March this year.”

#16 Søren Angst on 05.23.22 at 3:51 pm

#9 Shawn

Visa, that’s a lot but no, no more single stock picks for me. Safety in numbers and the liquidity of ETFs/ETNs.

US Mr. Market nice bounce back today but I think it will be up down for months to come as Mr. Market waits to see if the Fed can pull off a “soft landing” while it raises rates.

Turmoil until then.

US GDP this Friday, hope it is good news.

—————–

Still S, good you celebrate the victories when they come. That’s the way to be during times of tumult.

Glass half full.

#17 Zhorgon on 05.23.22 at 4:06 pm

This guy has a good point that RE in Canada is a pyramid scheme. In fact, my kid found a nice apartment in southern France for 450 euro per month, all in. 35 hour workweek, and public transit that works. With better healthcare to boot. He has zero interest in coming back to Canada for exactly these reasons .. Canada has becone a RE obsessed $hthole. More young Canadians will realize this and get the hell out.

https://survivingtomorrow.org/canadas-real-estate-market-is-a-giant-pyramid-scheme-832ea0364c68

#18 juxtaposition on 05.23.22 at 4:21 pm

“But understand CBs will not tolerate double-digit inflation. Nor did they create this evil.” Garth yesterday.

CBs are indeed the only creators of monetary inflation. If you don’t think monetary inflation causes price inflation then you could be counted in the MMT camp.

Please juxtapose Garth quote with this one:

“All-in spending was approaching $13 trillion as of mid-2021. That’s more than the US spent in it’s 13 most expensive wars combined. We use wars because they’re the most expensive things we can think of.”

https://www.nasdaq.com/articles/money-printing-and-inflation%3A-covid-cryptocurrencies-and-more?amp

You confuse fiscal and monetary policy. Most do. – Garth

#19 juxtaposition on 05.23.22 at 4:52 pm

“You confuse fiscal and monetary policy. Most do. – Garth”

Instead of condescending me take a moment to read the nasdaq link. From the 13 trillion ~35% where in the form of QE. Is this not monetary policy?

Also do not deflect. The original point you made is that CBs did not cause inflation. Literally all those 13 trillion were printed by CBs. The part not used for QE still originated from the CBs mostly (because the CBs purchased the bonds created by governments).

Central banks do not print money. They do not create inflation. Low rates encouraging economic expansion and staving off recession (like in a pandemic, duh) make credit cheaper. It’s the borrowing that results in rising prices. Borrowing is future consumption or income brought forward and represented by debt. The CB created no money. Now higher rates are reversing the process since the economy is judged strong enough for the removal of monetary stimulus. Unfortunately, governments have increased their fiscal stimulus, so prices are unlikely to fall while costs increase. – Garth

#20 crowdedelevatorfartz on 05.23.22 at 4:53 pm

@#17 Zardoz

I’m sorry but I can’t take any author named Jarod seriously after the Subway spokesperson debacle……

#21 Wondering Wonder on 05.23.22 at 5:03 pm

Warren Buffet is known to have said that interest rates are gravity on asset prices which include homes,stocks and bonds. When interest rates are low, assets prices inevitably climb.

For past 2-3 years there has been an indiscriminate tide lifting ALL asset prices due to low interest rates. As that tide goes out the zombie corps and poorly profitable businesses (including rental of real estate) will fall like rocks.

Why own a 1M rental home that brings in 4K/month, or let’s say an estimated of 30-35K in rent after taxes, maintenance, insurance, etc… (3-3.5%), when the risk free return rate of bonds approaching those levels or even higher.

It’s currently 11:00pm and people still holding out hoping they can all leave before it closes at midnight.do they not yet realize that everyone is doing the same thing waiting for 11:59pm??

There will be a floor IMO. At least in Ontario! The lowest common denominator for rental income i think is room in a house and bachelor pads for minimum wage earners/gig economy and precarious workers. They are able to bid against each other for a house rent due to the minimum wage going from 11.60 to 15.00 (from Oct 2017 to Oct 2021) per hour which is 30%. IMO rents have a new floor, and the income potential of rental properties will match that. My armchair estimate is that home prices level out at 2017 levels + 30% as a base at 1% overnight lending rate yet fall more significantly as the rush to sell happens at 11:59 as well as continued increases to interest rate + market panic when the lights go out.

#22 Flop… on 05.23.22 at 5:08 pm

“Vancouver close to achieving ’15-minute city’ status, SFU study finds”

I’ve talked about this sort of subject before on here, sometimes jokingly sometimes semi-serious which seems to be about as serious as I can get.

When I say I live in Vancouver, that’s kind of crap, the last time I went downtown was for my second vaccine shot, next scheduled appointment downtown most likely a visit to the Australian Consulate for passport renewal in a few years.

I choose to live about 7 kilometres from Vancouver in the slowly gentrifying village of South Hill.

These guys seem to be focused on just picking up essential items at the grocery store within a 15 minute walk from your door, but I’ve looked into replication of our current scenario and in Greater Vancouver it isn’t always as easy as it perhaps should be.

They count minutes, we all walk at different speeds so I’ll count blocks.

Within a 15 block walk I do my banking, Doctors, Dentist, there’s 2 grocery stores, 3 pharmacies( big boys), probably another 3or 4 ( smaller pharmacies)

Chuck in 2 Dollar Stores, besides the grocery stores the retail stretch is known for its 10+ places to buy fruit and vegetables, there’s Timmys and Subway too, but I don’t visit them much, if at all.

Ethnic eats galore, such is the diversity of the area.

Mrs Flop doesn’t know how to drive so she lives off this strip, I guess Commercial Drive has a similar set up, on the Westside of town I have watched them slowly die as the developers moved in and the families moved out, large swathes of the Westside are now car dependent areas save a few like Kerrisdale and a few streets like 4th Ave.

Broadway?

I don’t see how if the small businesses that struggled through COVID
, got kicked in the crackers with the subway plan are going to survive operating in an ongoing construction zone for the next few decades if the proceed with the plan to turn the area into a secondary downtown with 40 story towers everywhere, no reason to go there either unless The Australian Consulate moves in.

John Horgan is starting to get sloppy in my books, I was pleasantly surprised when the took over, I voted for them to get rid of the corrupt BC Liberals, probably even burned my clothes I wore to the poll, so there was no evidence, but I’ll swing vote with the best of them.

I dislike the BC Liberals immensely but I will vote for them at the next election if the promise to restore the plan of a 10 lane bridge to replace the farcical Massey Tunnel, even though I’ll probably drive over it once a decade.

The people out that way deserve it, needless suffering each day, yeah, some people speculated on real estate thinking that prices would go up when the tunnel replacement was completed, but Covid-19 took care of that and prices exploded South of the Fraser anyway.

It somber, but my neighborhood also features a massive graveyard, Garth Turners Great Grandfather is buried there, and I documented my visit.

When driving home from work, I see people burying loved one’s and then my crappy day at work doesn’t seem so bad after all.

It keeps me grounded…

M47BC

————————————————————

“Researchers found 79 per cent of Vancouver’s population can access a grocery store within a slow, 15-minute walk, while the percentage increases for faster-moving travellers.

Almost all residents — 99 per cent — are within a 15 minute bike ride of a grocery store.

The idea of the 15-minute city — where everyone can meet their essential needs within a 15-minute walk or bike ride — has been used by urban planners around the world since around 2016, according to one of the study’s authors. “

https://www.cbc.ca/news/canada/british-columbia/vancouver-15-minute-city-1.6463022?__vfz=medium%3Dsharebar

#23 Andrewski on 05.23.22 at 5:11 pm

Garth, your patience in responding to the financially illiterate & heavily biased commenters is to be applauded. Happy 2-4 blogdogs!

#24 Shawn on 05.23.22 at 5:13 pm

Well, central banks never forced anyone to borrow a dollar and it was borrowing that increased the money supply. Borrowers including home buyers and governments did this. Pass the popcorn.

#25 Ponzius Pilatus on 05.23.22 at 5:19 pm

#18 Just a position.

You confuse fiscal and monetary policy. Most do. – Garth
—————
So true.
I get a head ache just thinking about it.
So, I just sit on the sidelines and wait this one out.
BTW, The BIG MARY chicken burger Monday special is now 4.99 up from 3.99, about 22% increase.
Now we’re talking inflation.

#26 ElGatoNeroYVR on 05.23.22 at 5:23 pm

#6 Brad on 05.23.22 at 3:20 pm
In 2005 I wrote a (somewhat) famous article called ‘Top 8 reasons not to immigrate to Canada’.
=============
Matter of perspective friend.
After yeasterday’s conspiracy theory post let us explore today the other side of the ( your) argument.
I came to Canada in the 90ˋs from a former East Bloc country.
I can tell you that even in today’s speech environment it is a huge contrast (for the better) to how socialism actually looks like. As much as we like to complain that Canada is a semi-socialist country the reality is somewhere in the middle of crony capitlism and socialism ,with regular small swings around the centre either way.
Fact is that if one tunes the noise and focuses on themselves and is pragmatic you can be quite succesfull and live really,really well quietly amongst the masses and no suits will ever knock on your door unless they’re from the local church or door2door salespeople.
Yes , currently it is a bit thougher environment for the true believer in free speech and fiscal prudence, at the same time it is a huge opportunity to profit significantly as the non-financial educated ,brainwashed and trend followers won’t have a clue what one is up to as long as the proper words are used .
Definitley,from my own perspective Canada is a much better and safer living place then the Philipines where I hear certain areas are prone to kidnapping of naive tourists or expats who flash their wealth ,maybe not as bad as Mexico but still nowere near Canada ,Europe in general and most of the US. I do have Filipino friends and know people who went there to do business ,so first hand sources here,while biased for sure ..still better than just the media.
To each its own ,I am glad it worked out for you and hope many more smart people like yourself leave so those of us that stay have less competition here.
Live long and prosper ,and don’t believe everything you read online or hear ,Canadians just like to complain about everything and go about their daily lives after they vented a bit.

#27 Quintilian on 05.23.22 at 5:28 pm

“Many people are clueless. Not their fault. They’re manipulated and lied to, misled by peer-to-peer social media posts, fibs, plus leaders who’ll tell folks what they desire to hear.”

Sounds a bit conspiratorial.

But that aside, I think most opinions on the board form a consensus with good depth.

I actually I believe that if someone with big brains, say Sail Away and,or, Shawn, could tabulate the opinions and give them a numerical value, then plug them into the standard deviation formula, and plot them on a graph there would be a very low deviation.

Possibly because we “talk past each other” rather to each other.

#28 Barcino on 05.23.22 at 5:35 pm

Hello Garth,

once again thank you for the blog.
The information here has helped me a lot over the years.
Look forward to reading it every single day.

#29 Thanks Trudeau on 05.23.22 at 5:37 pm

Canadian real estate is too big to fail.

The government deliberately restricts housing supply while increasing immigration quotas to enrich the Bay Streeters who own rental properties.

Heck, even the Minister of Housing owns a rental property.

Remember when the US economy was slowing down in 2018, the provincial government cut welfare hikes & later froze it for years? It’s to prop up the real estate bubble. Take from the poor to give to the rich.

OMG – Garth

#30 yvr_lurker on 05.23.22 at 5:54 pm

Good advice now to sit tight and wait before buying something. However, there was a period from 2010–2015 when making a major financial stretch to buy a place was (in retrospect) absolutely the correct move to make as compared to sitting around and waiting for prices to come down while collecting 6.5% per annum on investments. Most people who sat on the sidelines during this period in our major cities are well behind those who took the plunge with a little leverage. However, now is not the time to do it. (PhD but not in economics)… wait it out…

Hindsight is useless if you lacked the resources to buy in years past. That is oft forgotten, especially when people opt to have families. (I hear they are expensive). – Garth

#31 Triplenet on 05.23.22 at 5:55 pm

#7 50 years……
Back in the ‘70’s we used to have tranny problems.

#32 Zorro Ideltkos on 05.23.22 at 5:56 pm

“The IS-LM model which stands for “Investment-Savings” (IS) and “Liquidity Preference -Money Supply”” (LM) is a Keynesian macroeconomic model that shows how the market for economic goods , including government spending-fiscal policy, (IS) interacts loanable funds and available credit (LM) or money market.
Commentary on the interrelationship between monetary and fiscal policy requires a depth of knowledge greater than Econ 101.
They are not mutually exclusive. Juxtaposition et al are more correct than our host would have us believe.

#33 Pprasseur on 05.23.22 at 6:02 pm

This is bigger than RE slowing down a little, it’s about a country, like many others, needing a huge amount of money to pay for all the promises, health care, pensions, free education, daycare, and so much more.

Massive immigration and monetary stimulus to encourage consumer spending either no longer sufficient or impossible.

This is reality catching up to us, pure and simple, not going to be fun for the unprepared, that is the majority.

You can console yourself by thinking of all the poor countries threatened by bankruptcy if not famine…

#34 Garth vs. 45 on 05.23.22 at 6:06 pm

A couple of months ago in an interview President 45 said interest rates are heading back towards 21%.
Garth says interest rates won’t explode higher.
Who do you think will be proven right Garth or 45?
My guess is 45.

That nutcase? The one who wanted to put a bullion licker on the Fed board? Puhleese. – Garth

#35 Diamond Dog on 05.23.22 at 6:08 pm

Can’t help but offer some clarification here. Increases in the money supply by itself is not enough to create inflation. It’s only half of the equation. This money needs to end up in the hands of the consumer, right? Not only does this money need to be spread around, consumer confidence needs to be high! I would wager that human behavior (consumer confidence, mass price fixing) is half of a high inflation scenario.

That being said, the U.S. and by proxy Canada, is coming off an “everything bubble”. Do readers think that when we see a convergence of a bubble in real estate, in the stock markets, bond markets and as of late commodities this isn’t going to effect peoples bank accounts and consumer confidence i.e. human behavior? “WE KNOW IT WILL!”

To that end, has the central bank of the U.S. in particular rapidly increased the money supply in 2020? Of course they did. One needs only to look at their balance sheets and add up the MBS’s (some 2.5 trillion) and treasuries they bought to see it (all newly minted money btw). Did cheap and easy credit fuel the everything bubble? It’s a grade 2 question, of course it did! Is the CB of the U.S. complicit in the cause of such high inflation? Of course it is. I will remind, it was Dr. Milton Friedman who famously said (at least in the spectrum of economics) “inflation is always and everywhere, a monetary phenomenon”.

But who is more responsible? Who really controls the central bank of the U.S. and Canada? Our elected officials, that’s who. It’s a democracy after all, right? In a perfect world, in the U.S. as well as Canada, our elected officials appoint our central bankers and governors and from there on in, central bankers are left to run the economy at their own discretion without interference from Washington or Ottawa… in a perfect world.

Is the world perfect? It is not. At times like during a pandemic, CB’s and governments must co-ordinate. This is what democracies and their systems do.

Central banks can also become politicized specifically due to the improper control of the white house specifically. I can’t speak for the politicization of the central bank in Canada but I have strong doubt that it has been politicized. Elect Pierre or Pepe or whatever name fits and that will change not for the better from what Pollievre has already said for the record, that’s guaranteed. What I can say with a high degree of certainty concerning the U.S. is that the CB in the U.S. has been politicized under Trump. Haven’t got the time to get into it, but readers know I want to.

Did the suppression of mortgage rates create or further bloat a housing bubble in the U.S. and by proxy Canada? We know it did. There’s more to this, of course. In Canada, we have the OSFI and CMHC that defines credit terms controlled by our Federal government, policy regs of which I also believe to be an abysmal policy failure. With mortgage rates so low and such cheap credit coming out of the U.S., terms should have been reduced to 20 years, even 15 year terms at least as far back as 2015 and 2019 to keep Canada’s housing bubble from growing so grotesque. So, in terms of housing regulations, even more influential than rates on housing I might add, Trudeau’s policies in housing have been a flop. We have a grotesque housing bubble, what more proof do we need?

But I wander.

When the pandemic hit in 2020, Canada and the U.S. in particular, increased the money supply far more than it should have. Credit became waaay too cheap and easy. The evidence? Try high inflation!!!!!!!!!!!! Try the everything bubble!!!!!!!!!!! Once more, what more evidence do we need? An ultra strong case can be made that the CB response to the pandemic was overblown particularly in the U.S., even in the face of double digit unemployment.

Add the mother of all wealth effects created by a rapid increase in the money supply with a corrupt kleptocratic Trump administration who would do anything to hold power including coups and riots and a politicized U.S. central bank (who appointed Clarissa and his right hand, the VP responsible for monetary policy in the Fed?) and a pandemic opportunity to run smoke, and we get the mess we have today globally.

The U.S. rapidly increased it’s money supply more than most any other nation I can think of globally during the pandemic. The fact that it’s the world’s #1 global superpower that behaved in this way should not be lost on us. To think that U.S. CB behavior wouldn’t influence CB behavior around the world including Canada should also not be lost on us. Couple this with the U.S. CB increasing the money supply by at least 50% more than they should have with political interference to blame (proof is the everything bubble and near double digit CPI inflation) and we now have the inflationary mess we are in with all indications now being the Fed will raise rates to induce recession in an effort to control it. If we at all think that grotesque miscalculations weren’t made right down to the voters, we are sadly mistaken. (it is after all, a democracy right?)

For example, all commodities are priced in U.S. dollars. Are we to think that this alone wouldn’t cause inflation to rise across the globe? The last print of PPI has inflation running in the U.S. at 11% meaning CPI won’t relent. How much inflation is the globe experiencing just from commodities alone?

But again, I wander. I don’t think corruption is at play in Canada at the Federal scene or with Canada’s CB at all. I find it rather opportunistic and immoral to a narcissistic fault to listen to Pierre’s accusations of corruption without proof, time and time again. Most every time Pollievre speaks, it leaves me shaking my head because the Conservative gen pop hasn’t caught on.

I also think the Trudeau government mishandled the pandemic by spending way too much in fiscal stimulus, likely by at least a third to half. I thus find Trudeau in gross error for allowing himself and his government to be so heavily influenced by the U.S. in terms of monetary policy. I can tell readers straight faced, Chretien wouldn’t have been so easily led.

Housing is in a dangerous bubble “under his watch”. Federal debt to GDP now easily over 120% (from 78% in 2020) is a dangerous level also “under Trudeau’s watch”. His government begs to be replaced. But by Pierre? Anyone can make shit up to get elected. I have yet to hear any concrete answers from his mouth that suggest he’s ready to lead the nation out of the mess we are now in. I hear lots of false accusations, though. If lies are fine, it’s a leadership disaster in the making.

Conservatives and by proxy Canada, can do much better than Pierre as a leader of much of anything. Put this way, if I was a PM, Pierre would be a back bencher, it’s all he’s really good for. Simply put, folks that make stuff up are simply not ready for the higher offices of the land.

#36 wallflower on 05.23.22 at 6:10 pm

#1 Truth or Consequences on 05.23.22 at 2:22 pm

I vote him OUT OF THIS ROOM.

If the definition of [real estate agent] is ‘conflict of interest’ then the definition of [Truth or Consequences] is ‘Total A-Hole.’

#37 Zed on 05.23.22 at 6:12 pm

I went to listen to pepe in Montreal sunday afternoon, i was curious, i want change. This won’t be my change. No substance, petty arguments about what he thinks people want, no grand visions. Booting Tiff out and defunding the CBC is very little when we have such a big national debt, not much of an army, money spent left and right…

Freedom of speech, freedom to demonstrate, no mandate…

#38 TurnerNation on 05.23.22 at 6:17 pm

Life in the Former First World Countries. Any surprise that ‘monkeypox’ is only being told as present in these countries? WW3 was declared against our way of live back in March 2020 and it is ongoing.

I mean we had Kanadians in early 2022 even, deputized to demand Domestic Passports of those wishing to sit down inside a Timmy’s and enjoy a coffee. This was our new way of life. Broken and bound.
Yet, in middle of year 2020 (in a deadly ‘demic we were told) you could hop on a plane, no mask, QR code, and fly most anywhere in the world?
Our rulers are roaring with laughter at this sham system they’ve got us following


— Food supply target. Endless…always the meat plants.

https://globalnews.ca/news/8863364/cargill-fire-london/
“Significant damage after fire at London, Ont. chicken-processing plant”


Life in Kanada. What is given as the major local issue? Crime? Density? Taxation? Nope it’s “Mis-information”. This despite wall-to-wall 24/7 fear and sales coverage on the telescreens — since that week in March 2020.
Comrade watch out for ThoughtCrimes and WrongSpeak.

https://www.thepeterboroughexaminer.com/news/provincial-election/2022/05/20/covid-19-misinformation-a-worry-for-peterborough-kawartha-candidates.html
“COVID-19 misinformation a worry for Peterborough-Kawartha candidates
Candidates debate health care, higher education issues at Trent.”

#39 Philco on 05.23.22 at 6:45 pm

#110 crowdedelevatorfartz on 05.23.22 at 9:10 am
@#107 Philco
“LoL! Hows $250. Cause I don’t frequent the bar. Just hang with my awesome neighbors.”

+++

No worries.
My Living Out Allowance will more than compensate me.
Oh and Canada’s daily inflation rate just bumped it to $300.
———————–
Enough to fill the Duramax and get aa 6 pack.

I’m hiring at my property!? It will get your butt whipped into shape :-) No workout required after work.

#40 Concerned Citizen on 05.23.22 at 6:47 pm

It’s well known that QE lowers rates and forces people out the risk curve to try and earn a real return on their money. I think a major reason so many got into real estate investment/speculation is because they couldn’t earn anything in the traditional safety of bonds, and they didn’t want to buy tech stocks for 20 times revenues. So all that money came into real estate, dramatically increasing shelter inflation.

The Fed and other central banks know this is what happens. So to claim that it has no impact on inflation is odd. Just last week Bernanke said that Powell had overdone it, and Mervyn King (former governor of the Bank of England) said the BoE had overdone it. They join just about the entire economics establishment who has been warning for a year that the central banks had overdone and inflation was the result.

No one argues that the central banks are entirely at fault here – the supply chain disruptions are a genuine problem – but they certainly do wear a lot of this mess. And the fact they now start walking it back at an absolute glacial pace is infuriating. It shows you quite clearly where their priorities lie IMO, and they aren’t with the average citizen.

#41 juxtaposition on 05.23.22 at 7:01 pm

“Central banks do not print money…. The CB created no money.”. – Garth

You are categorically wrong in stating CBs create (aka issue/print) no money. Take the Bank of Canada as an example.

“Pursuant to the Constitution Act, 1867, the Parliament of Canada has exclusive legislative authority over all matters related to currency and coinage, the issue of paper money and legal tender. Thus far, Parliament has chosen to legislate these issues under the Bank of Canada Act and the Currency Act. These statutes grant the Bank of Canada the sole right to issue bank notes intended for circulation as legal tender in Canada. The Bank of Canada is responsible for supplying Canadians with bank notes that can be used with confidence.” [1]

More consequential than “bank notes” however is the ability of our CB to create “settlement balances” (a type of money) to fund our government through asset purchases (notice the part where it says below “power to create money”)

“Settlement balances (or reserves) are a unique type of money that the central bank creates… Being able to issue settlement balances is a privilege that only central banks have…. It’s important for central banks to be independent from the government. Simply put, the power to create money should be kept separate from the power to spend money.” [2]

Regarding money printing/creation/issuance and its relation to inflation:

“… there is no external limit to the total amount of money the Bank of Canada may create through its asset purchases, other than the impact the additional money created has on inflation.” [3]

[1] https://gazette.gc.ca/rp-pr/p2/2019/2019-05-29/html/sor-dors146-eng.html

[2] https://www.bankofcanada.ca/2020/12/understanding-quantitative-easing/

[3] https://lop.parl.ca/sites/PublicWebsite/default/en_CA/ResearchPublications/201551E

The central bank does not create money out of nothing, nor is it responsible for inflation. Pepe is yanking your chain. BTW way, ‘firing’ the bank boss would accomplish… what? Would rates immediately jack to 10%? What’s the plan? How would Canada roll back international oil prices, deal with a global shortage of diesel fuel or solve the chip drought out of Asia? Yank, yank. – Garth

#42 Captain Uppa on 05.23.22 at 7:01 pm

I overheard some guys in the office (on our hybrid day in) discuss exactly how they are gonna play this downturn.

Want to know what these geniuses came up with?

I paraphrase: “The government won’t let housing go down, buy now with whatever mortgage you can debt”.

God help us.

#43 Lisa McLeod impostor on 05.23.22 at 7:06 pm

@Thanks Trudeau

Why should home owners who were lucky to have profited from their investments in a free society have to pay for the human needs of the poor?

THE BEST SOCIAL ASSISTANCE IS A JOB.

We should not force the home owners to pay taxes for social assistance and healthcare. We can always let the working class pay for this. The rich deserve their wealth.

The poor, working and lower middle class have to work harder.

Doug Ford should have cut the proposed 5% increase and should have paid for tax breaks for the rich.

Sincerely,

A Lisa McLeod impostor

#44 JEFF13 on 05.23.22 at 7:14 pm

“The fear is entirely based around real estate, since financial markets will recover and by the end of this year portfolios are likely to be positive once again”

I enjoy your analyses on real estate, but you refuse to see the issue with the stock market. There is no way up for the stock market, except (and it might happen) if the FED backtrack and go back to QE and lower rates again, which will increase liquidity and credit (which ultimately increase the price of financial assets).

Remind me of this great quote from Upton Sinclair – It is difficult to get a man to understand something when his salary depends upon his not understanding it.

The Fed will not reverse rates this year. Not a chance. And my income from this blog, by the way, is considerably less than zero. – Garth

#45 NOSTRADAMUS on 05.23.22 at 7:26 pm

A BIT OFF TOPIC, WHO CARES?
My father-in-law lives in an apartment complex building that abuts a large outdoor shopping center. The parking lot is crowded seven days a week. It would appear that the economy must be booming with so many shoppers parked out front. Makes me wonder, if some of the cars belong to visitors in his complex who aren’t supposed to be there for long term stays.
The same situation applies to our local hospital which is only one block from an outdoor shopping mall. The mall parking lot is full day and night. I do not for a minute suspect the $6.00 dollar hospital parking fee is a factor. Rather the one block walk would lead me to believe brisk cardiac activity would be the answer.
When it is all said and done, don’t mind me. I’m being my usual contrarian. I’m an observer, not a participant.
Flash back, it only seems like yesterday that Royal LePage was predicting that residential homes in the GTA would cost 10.5% more in 2022. I am really struggling to understand the gymnastics it took LePage to make such a prediction. Steady lads, hold the line.

#46 NorthShoreEng on 05.23.22 at 7:37 pm

Thank you Garth

Toni: good luck to you and your family. Challenging times when trying to rent in victoria.

Having bought/sold/rented in victoria over the past few years, my opinion is you are priced out for anything worth owning (3bd 1bath south of Royal Oak and East of Blanchard). Find another rental and keep saving or move to somewhere you can afford to buy (8k take home? Not going to cut it even if you liquidate assumed 150k tfsa).

Also, not sure why your child care is 2k (1200$ for our son, and had a few options over the last few months).

Devils advocate, to affirm your concerns, (good) victoria homes will have sticky prices (July 2021 assessments the floor) and I guarantee house rent costs stay or go up slightly the next two years (4K for a 4bdroom home).

Don’t forget any costs related to home repairs will also continue rising to the moon, so unless you are handy, again, stick with renting. Can you afford 1500$ Roof de-moss, or a new roof, or replacement appliances…

I again understand your “bitterness”: I had opportunity to buy a 700k 5bdrm home near Saxe point 2013, but was renting a renovated three bedroom house down the block with garage for 1500$….in 8yrs rents now double, home price up 2x+ to July 2021 (3x+ to peak)…woulda coulda shoulda, but rents/homes ain’t doubling again so I personally would not use that memory as motivation.

(We own now, together with the bank. I could never rent something similar for a reasonable price in Victoria, which was why we bought a 1M+ home, but we have 50% more take home income, more assets, and have a use for the space…)

Good luck

#47 Grunt on 05.23.22 at 7:39 pm

IMO what a shitty V wknd here in southern Ontario. The storm and damages. The Woodbine fiasco. The too many shootings & stabbings and traffic fatalities.

In my crap bloor/yonge 70s rental undergoing extensive renos. The lights didn’t go out. No storm damage. Not that it would come out of my pocket. And no tree branches on the ol Corolla beneath.

The future is always opaque. But TI spit some good trends. The Saturday girls are a good read too. Though they could be prettier.

#48 Geoff H on 05.23.22 at 7:50 pm

99% of people who discuss QE have no idea what it even is. They think it’s just central banks “printing” or dumping money in the economy like it’s just a big box that they fill up. Quantitative Easing is simply an asset swap. CB buys bonds from a primary dealer (big bank, for simplicity’s sake). The bank in turn swaps that bond for reserves/deposits. Thank actually loses an interest-bearing asset but receives bank reserves that they can use more fully to lend or as collateral for their operations. No new money is created by the central bank and it is not inflationary. It’s a relatively straightforward monetary operation that has the effective of keeping long-term rates lower while allowing for more liquidity for the banks. Please, please, do not base your political beliefs on a fundamental misunderstanding of our system.

#49 My Body My Choice on 05.23.22 at 7:57 pm

DELETED

#50 Steven on 05.23.22 at 7:59 pm

The fear is entirely based around real estate, since financial markets will recover and by the end of this year portfolios are likely to be positive once again.

—————————————————————–
Toooooo funny!

Yes markets WILL recover when central bankers stop and reverse interest rate hikes and start QE again JUST LIKE THEY HAVE SINCE 2009.

And no reply to my bet Mr. Turner…3 or more interest rate hikes I will donate $100 to a animal shelter of your choice.

Under 3 hikes before they turn around and start reducing interest rates again as the eCONomy cannot stand on it’s own, YOU donate to a charity of my choosing?

Let’s go….I’m ready to put my money where my mouth is.

I’m sure a millionaire like you can spare pocket change of $100 Canadian dollars…if it was rubles that would be something else.

#51 Shawn on 05.23.22 at 8:15 pm

Diamond dog

A “wanderful” comment?

#52 Leftover on 05.23.22 at 8:20 pm

1989? Maybe, let’s hope it’s not 1982.

Looked out over the Satellite Channel today, where freighters anchor waiting for their spot in YVR. Two empty coal boats, one full container ship.

Canadian economy in a nutshell – ship out commodities for a $/lb, to be bought back for $10/lb. Hewers of wood and drawers of water.

#53 yvr_lurker on 05.23.22 at 8:23 pm

Hindsight is useless if you lacked the resources to buy in years past. That is oft forgotten, especially when people opt to have families. (I hear they are expensive). – Garth
—–

What I am saying is that it was a time to really stretch if you had a stable income: don’t listen to any advisors who would shun risk espousing the 60 40 rule in assets/house
rule. It was a time to borrow a little money from family if you could, and rent out the basement suite or take in a student if need be for the first few years. With the huge immigration to Vancouver the people who took this risk are very far ahead.

Now, I agree that such a risk is financial suicide….

#54 Wise Old Owl on 05.23.22 at 8:24 pm

With reference to all the talk about CBS and how much power and control they have.
Consider this scenario.
You live your life along the lines of ” neither a borrower or a lender be”. So therefore you don’t borrow money and you don’t lend money you pay CASH.
So if the CB raises rates even to 21% it doesn’t bother you, you didn’t and don’t intend to borrow any money.
Or the CB lowers rates even to zero it doesn’t affect you, you pay in cash.
Now how much power or control does any CB have over you, none.
If you spend less than you make, pay cash for purchases and use the surplus/savings to invest in a total market ETF index fund

#55 Jason on 05.23.22 at 8:25 pm

#48 Geoff H on 05.23.22 at 7:50 pm

99% of people who discuss QE have no idea what it even is.
—————————————————

Thank you Geoff H.

Why is it predominantly folks on the right who have such strong opinions on things they’re completely ignorant about. Like central banks. Or vaccines. Or freedom for that matter. No wonder Pepe is going to be the new Conservative leader. He appeals to the ignorant, and that’s the bulk of the constituency on the right at the moment.

#56 Wise Old Owl on 05.23.22 at 8:27 pm

You get to sleep well every night.

Hit wrong button too early.

#57 yvr_lurker on 05.23.22 at 8:31 pm

One extra comment about the issue of having children and the associated cost. There is incredible reward for the soul in seeing them turn out well and having all the memorable family occasions. It is, however, a ton of work and there are days when… (will not complete the sentence).

If I was on my own or with a significant other with no kids, there would be MUCH less stress and, frankly, enthusiasm and motivation for saving oodles of $$$. Why bother when there is nobody to pass it on to? Work like a slave for 50 years to leave it to a charity of the Gov’t? Nope…. Only would need enough income for something more basic, and to try to die with zero…. use the $$$ for experiences, adventures with a backpack (no cruises, exotic expensive hotels). Trips that make you use your noodle, and not just stick your wrist out from some manager of an all-inclusive resort to put your little tag on before entering the property. Not my scene….

#58 Blair on 05.23.22 at 8:36 pm

I don’t understand what it means that portfolios will be back to positive by the end of the year. Does it mean that these will be back to pre “correction” levels?

#59 My Body My Choice on 05.23.22 at 8:37 pm

DELETED

#60 David on 05.23.22 at 8:45 pm

Diamond Dog, well stated.

On a side note I was all for PP back when he was the finance critic but in all honesty having a background in economics I cringe everyone he comes up with another stupid slogan. A definite no at this point unless his strategy is to sway the dummies with simple minded slogans and come around more towards the middle come 2025. Who knows, all I can say he definitely has a following amongst my antivax freedumb supporting friends that unfortunately don’t really have lucid grasp of actual current events.

#61 Ponzius Pilatus on 05.23.22 at 8:49 pm

#51 Shawn on 05.23.22 at 8:15 pm
Diamond dog

A “wanderful” comment?
—————-
Yep,
“Wandering” all over the place.

#62 crowdedelevatorfartz on 05.23.22 at 8:56 pm

@#39 Philco
“I’m hiring at my property!? It will get your butt whipped into shape :-) No workout required after work”

++++

So am I.
Newsflash.
Everyone is hiring…all…across ….Canada….and no one wants to work after CERB and WFH.
It’ll take a deep economic slowdown and recession to wipe the smug smile off a lot of people’s faces.
Time for a lot of 20-30 year old kids to cut the umbilical cord and actually move out…before the bank repo’s the parents’ unaffordable, high interest, mortgage monkey.

The next 2-4 years should be amusing for people that have never experienced a multi year real estate downtown and fighting for a job….any job…..
The 1980’s were so much fun.

#63 Ustabe on 05.23.22 at 9:00 pm

Garth: I’m sort of feeling sorry for you right now…what a mess.

All of you subject matter experts on BoC and monetary policy need to read up on a little history. John Diefenbaker was PM and he hated Coyne, then head of the central bank. So being the sturdy conservative man he was he fired Coyne.

Now Dief had led the Progressive Conservatives to 3 successive election victories but this little turf war he entered into was noticed around the world, quite literally.

In short order our dollar fell as did our stock market.
A year later he lost his majority, a few months later a confidence motion cost him his government.

Done and dusted.

PP is playing with fire on this and he is relying on ignorance to push it forward. I see here that he is right, folks who do not know the past all too willing to carry water for a charlatan.

Reason #107 that the Conservative Party of Canada will not form government anytime soon.

#64 baloney Sandwitch on 05.23.22 at 9:18 pm

Great post today Garth. Having experienced 1989 crash (I bought my first house then and managed to lose about 40% when I sold it in 1995). The Toronto market bottomed out around 1996. So, it will take 3 – 6 years for the market to bottom based on that experience. Unlike stocks, house prices are sticky because FOMO and FOGS are gooey things.
btw – here is the Kravic report Garth referred to – good read. Thanks again Garth.
https://economics.bmo.com/en/publications/detail/5b2b71c9-dfb6-4d2d-927e-25edf11e4f52/

#65 Ponzius Pilatus on 05.23.22 at 9:44 pm

#59 crowdedelevatorfartz on 05.23.22 at 8:56 pm
@#39 Philco
“I’m hiring at my property!? It will get your butt whipped into shape :-) No workout required after work”

++++

So am I.
Newsflash.
Everyone is hiring…all…across ….Canada….and no one wants to work after CERB and WFH.
It’ll take a deep economic slowdown and recession to wipe the smug smile off a lot of people’s faces.
Time for a lot of 20-30 year old kids to cut the umbilical cord and actually move out…before the bank repo’s the parents’ unaffordable, high interest, mortgage monkey.

The next 2-4 years should be amusing for people that have never experienced a multi year real estate downtown and fighting for a job….any job…..
The 1980’s were so much fun.
——————
You think anyone will wanna work for dinosaurs like you two?
Time to retire.

#66 T Rex and the dinosaur clique on 05.23.22 at 9:45 pm

T2’s unshakeable coalition is about t’ get shook.

Turns out NDP voters can’t afford and don’t want t’ drive around in a bunch a’ toddler plug in crap battery cars.

They want gas for the family pick up.

Who woulda thought it? Buncha union workin’ good ol’ boys can’t be sold on the W.E.F. all electric nightmare.

Gas costs too much.

And the Jagger is gettin’ pressure from below.

Watch out.

Buncha Jimmy Hoffas versus the green peace crew.

Bring a towel stuff’s about t’ start hittin’ the fan….

#67 Faron on 05.23.22 at 9:53 pm

Only came back with 3lbs of morels yesterday. In an hour’s rando search with my favourite engineer.

Devoted some to omelette with manchego on toasted aforementioned 80% hydration sourdough. Butter, coffee, hound and mutt snuggles were intermixed before a hike out through the phlox and bitterroot.

May use Ustabe’s techniques to put some by.

#68 meslippery on 05.23.22 at 10:12 pm

It seems Garth is not a fan of P.P.
However given a choice of T-2 and P.P. it hands down P.P
I mean T-2 his record is just awful.
Bank rates have been low for many years and Garth said house price is inverse to interest rates.
I somewhat agree but sometime’s building house’s is like trying to build pipelines. Supply and demand but it’s not a free market, I mean if your just needed money to build house’s we would have all kinds everwhere.Just like pipelines. If not for red tape and T-2 we would be in better shape.

#69 Charity on 05.23.22 at 10:18 pm

Oh Lordy Garth you speak with experience on every financial topic but my question is have you ever licked bullion? Lol
Me thinks you may be a closet gold guy.
But joking aside just like everything in exeters pyramid does bullion not play a part in everyone’s portfolio after you have so much?

#70 PeterfromCalgary on 05.23.22 at 10:23 pm

It is highly unusual for a previous FED Chair to criticize the current FED Chair’s actions. But that is just what happened with former Chair Ben Bernanke.

1. Forward guidance delayed response to inflation.
2. FED didn’t tighten after American Rescue plan because they didn’t understand unemployment figures were not a good reflection of Job market strength due to COVID19.
3. Believed supply shocks were transitory so they delayed responding to inflation signals.

You can watch the CNBC interview here:

https://www.youtube.com/watch?v=jOU0hlVkrEk&ab_channel=CNBCTelevision

Mistakes were made which we need to learn from. I am sure a lot of academic papers will be written on this. Hopefully, our understanding of how monetary and fiscal policy should react to global emergencies in the future improves because of this.

#71 Satori on 05.23.22 at 10:25 pm

#22 Flop… on 05.23.22 at 5:08 pm
“Vancouver close to achieving ’15-minute city’ status, SFU study finds”

————————————
15 minute walks sound great, until you get to the 20 plus people in a line up for groceries that’s a mile long, unless you shop at midnight… just live there during another pandemic. Horrid!!! 60 people in line ups for groceries, outside in the rain.

All I can say, so glad I moved. And city traffic, takes me 5 minutes to drive to anywhere now, whereas in Vancouver, a 5 minute drive is 25 minutes because of the traffic… and lets not add in the line-ups.

Been there, done that.

#72 Satori on 05.23.22 at 10:50 pm

#30 yvr_lurker on 05.23.22 at 5:54 pm
Good advice now to sit tight and wait before buying something. However, there was a period from 2010–2015 when making a major financial stretch to buy a place was (in retrospect) absolutely the correct move to make as compared to sitting around and waiting for prices to come down while collecting 6.5% per annum on investments.
————————————————–
You’re Right.

A friend invested $400,000 only 4 years ago, and sold (for a profit of 60,000/year). Selling their townhouse for $640,000. I wish my investments made that much…

Anyways, this likely why most everyone is ‘yahoooing’ and celebrating that RE will go down 50% so then they will get everything at fire sale prices and they can make up for all the years they kicked themselves they didn’t buy RE sooner.

For one simple reason: Regret.

Hindsight is 20/20 ….but regret is present, knowing you were capable of seizing an opportunity, but were paralyzed by fear and indecision. And unfortunately, Regret is much stronger that gratitude… that is why dead people receive more flowers than living people do.

#73 Ponzius Pilatus on 05.23.22 at 10:51 pm

#71 Satori on 05.23.22 at 10:25 pm
#22 Flop… on 05.23.22 at 5:08 pm
“Vancouver close to achieving ’15-minute city’ status, SFU study finds”

————————————
15 minute walks sound great, until you get to the 20 plus people in a line up for groceries that’s a mile long, unless you shop at midnight… just live there during another pandemic. Horrid!!! 60 people in line ups for groceries, outside in the rain.
————————
What line ups are you talking about?
For me pretty much everything is within a 15 minute walk.
No line ups.
Many stores have self check outs now.
Are the instructions at the self check outs to complicated for you?

#74 FatiguedBuyer on 05.23.22 at 10:58 pm

The problem with not buying for Toni is that the rental market in Victoria is bloody awful, especially if you have a pooch. People facing eviction have some very tough choices to make but it’s not as simple as the finances make it out to be.

#75 Philco on 05.23.22 at 11:09 pm

#29 Thanks Trudeau on 05.23.22 at 5:37 pm
Canadian real estate is too big to fail.

The government deliberately restricts housing supply while increasing immigration quotas to enrich the Bay Streeters who own rental properties.

Heck, even the Minister of Housing owns a rental property.

Remember when the US economy was slowing down in 2018, the provincial government cut welfare hikes & later froze it for years? It’s to prop up the real estate bubble. Take from the poor to give to the rich.

OMG – Garth
———
Lol you should be in comedy dude.
You think because you failed and RE left you were behind its the planning of the rich??? CB ect.
Funny.
When i moved to Van had nothing. $500 a month to get by on. Craft dinner and tuna for 2 yrs.
When houses were $250,000 in Van I thought it was insane..I decided before then i would bust my ass to get ahead. 1989 was my first shed..
You silly buggers blame everyone else.
Most are chicken shit…?t Then they look in the review mirror and its every screwed them.

Garth better you than me :)

#76 The Regulator on 05.23.22 at 11:09 pm

Fertilizer doubled in price, diesel at record highs, and natural gas to dry grain going up should be our wake up call. Does Canada have a strategic grain reserve any more? A book I read predicted a days wage for a loaf of bread. We’ll see.

#77 The Regulator on 05.23.22 at 11:15 pm

Farm tractors are self driving nowadays. You can relax and watch a movie while you harrow the field. Now, if we could only get them to run on unicorn farts, we’d be set. By the way, city slickers, tractors run on diesel ;)

#78 KLNR on 05.23.22 at 11:20 pm

friend of mine bought in north Toronto peak market ’89.
he’s still living there and the house is worth (even with a huge crash) an obscene amount of money. most folks who bought a home to actually live in don’t spend much time worrying about fluctuations.

#79 The Regulator on 05.23.22 at 11:35 pm

Why does Alberta ship all its oil south at a discount, when all of Canada could benefit from a stable, reliable supplier….oh ya, Canaduh doesn’t want out dirty oil. But the Americans will take it. God bless ’em. After all, American companies made Alberta’s oil patch. Thanks.

#80 Investx on 05.23.22 at 11:36 pm

“Interest do not create inflation”.

“It’s the borrowing that results in rising prices.”

Yes, borrowing made easier by lower interest rates.

#81 Ponzius Pilatus on 05.23.22 at 11:42 pm

#76 The Regulator on 05.23.22 at 11:09 pm
Fertilizer doubled in price, diesel at record highs, and natural gas to dry grain going up should be our wake up call. Does Canada have a strategic grain reserve any more? A book I read predicted a days wage for a loaf of bread. We’ll see
—————————-
Tones of Ukrainian grain can’t get out due to Russian blockades.
Putin says he will let the grain move, if sanctions are lifted.
Sanctions always seem to hit the innocent bystanders.

#82 Satori on 05.23.22 at 11:49 pm

#73 Ponzius Pilatus on 05.23.22 at 10:51 pm
#71 Satori on 05.23.22 at 10:25 pm
#22 Flop… on 05.23.22 at 5:08 pm
“Vancouver close to achieving ’15-minute city’ status, SFU study finds”

————————————
15 minute walks sound great, until you get to the 20 plus people in a line up for groceries that’s a mile long, unless you shop at midnight… just live there during another pandemic. Horrid!!! 60 people in line ups for groceries, outside in the rain.
————————
What line ups are you talking about?
For me pretty much everything is within a 15 minute walk.
No line ups.
Many stores have self check outs now.
Are the instructions at the self check outs to complicated for you?
————————
PP, awe you are so cute, but like you, not everyone lives in Surrey. One day, take the sky train to downtown Vancouver, if you are close to one…a street called Robson Street. It’s like one of the main streets in Vancouver. I guess you haven’t been outta Surrey in a while, that ok, you stay where you feel safe.

#83 Jonathan Swift on 05.23.22 at 11:51 pm

I suggest that the impoverished Canadians might ease their economic troubles by selling their children as slaves to rich gentlemen and ladies living in Rosedale, Bridle Path & Westmount.

#84 Ponzius Pilatus on 05.23.22 at 11:55 pm

77 The Regulator on 05.23.22 at 11:15 pm
Farm tractors are self driving nowadays. You can relax and watch a movie while you harrow the field. Now, if we could only get them to run on unicorn farts, we’d be set. By the way, city slickers, tractors run on diesel ;)
———————
In my youth, I help out on my uncle’s farm in summer.
He had a tractor that had a crank in front to start it.
Had to be careful that it did not rip your arm off if you held on too long.
We used horses, too.
To pull the hay wagon.
Hard work, but I loved every minute.

#85 Ponzius Pilatus on 05.24.22 at 12:03 am

#79 The Regulator on 05.23.22 at 11:35 pm
Why does Alberta ship all its oil south at a discount, when all of Canada could benefit from a stable, reliable supplier….oh ya, Canaduh doesn’t want out dirty oil. But the Americans will take it. God bless ’em. After all, American companies made Alberta’s oil patch. Thanks.
——————
Americans would sell their first borns for a barrel of oil, no matter how dirty.

#86 Dr V on 05.24.22 at 12:25 am

65 Ponz

“You think anyone will wanna work for dinosaurs like you two? Time to retire.”
—————————————————

When is the last time you tried to hire anybody Ponz?

Most young people today come for an interview with two
questions:

1) How much will I be paid?
2) what are the benefits?

Nobody seems to ask about the future opportunities of
working here.

Very shortsighted, and little entrepreneurial spirit.

#87 Dr V on 05.24.22 at 12:34 am

54 WOO

“Now how much power or control does any CB have over
you, none.”
———————————————

And what happens if your income stream dries up because your customers cant get credit to run their business and hire you or your company or purchase your
product?

Understand and do not underestimate this effect.

#88 Cascade Rivers on 05.24.22 at 12:38 am

DELETED

#89 millmech on 05.24.22 at 2:30 am

#72
Why over pay, if you are correct and a 50% decline means I can buy my home for $180k,looks like one tenth of the Ktown beater priced at $1,800,000.
Smart money buys on sale which I am patiently waiting for and will willing pay cash, although a $160k mortgage at 7% is $1150/mth and the Ktown special at $1,300,000 is only going to be $9000/mth at the same interest rate.
Choices, choices.

#90 dosouth on 05.24.22 at 3:22 am

“Many people are clueless. Not their fault. They’re manipulated and lied to, misled by peer-to-peer social media posts, fibs, plus leaders who’ll tell folks what they desire to hear. Everybody’s a willful victim. Makes bad choices easier to live with. Blame someone else.”

Must disagree. No one to blame but themselves, their need to be engorged on FOMO and the refusal to learn life lessons. Mum and Dad will fix it.

Having said that I believe that other than ‘the past may predict the future’ (unless someone cancels that too),
past results may well be mirrored but things will change faster for good or bad but time frames, will not be the same and gov’t in whatever form of the day, will interfere yet again. IMHO

#91 under the radar on 05.24.22 at 5:17 am

Hindsight never made me a dime. With a little insight, some hard work and luck I did much better.

#92 Jay (not that one) on 05.24.22 at 8:11 am

The analysis certainly seems to suggest that things are worse than they’ve ever been. The governments and central banks don’t have the breathing room that they would have back then, so at first glance it sure looks like they will be forced to just let stagflation happen.

Long before I found this pathetic blog, at the very least I looked at the average interest rate. Prior to this period of unusually accommodative Central Bank policies, the average mortgage was 8% over a time span of decades. I was sure when structuring my finances that I would be capable of weathering 8%. I’m really surprised at the number of people who never thought that far ahead, or maybe never thought that far behind.

One thing to keep in mind with inflation is that they don’t calculate inflation the same way today that they did in 1981. If they did, there’s a good chance that we are experiencing the highest inflation ever. Politicians don’t realize it, but people who don’t have their butlers to the shopping for them understand.

Unfortunately, it’s going to make sense in the near future just make sure to stock up on actual stuff before stuff becomes unavailable. These are still the good times, I suspect that in 6 months a lot of people are going to miss the days back when you could get a month worth of staple food for $100.

#93 crowdedelevatorfartz on 05.24.22 at 8:16 am

@#77 Regular
“Now, if we could only get them to run on unicorn farts, we’d be set. ”

+++
If they ran on cow farts you would have a self sustaining farm and no need to buy marked fuel.

#94 crowdedelevatorfartz on 05.24.22 at 8:25 am

@ Ponzie’s Pabulum Pals
“You think anyone will wanna work for dinosaurs like you two?
Time to retire.”

+++
Nah, I’d see you on my morning walk every day.
I’d rather work.
Apparently there are dinosaurs all over Canada.
Since I see “Help Wanted ” on every company van, every storefront, every restaurant, factory, airline, on and on and on.
“The Great Resignation”?
Pffft.
CERB and its results.

I can’t wait to see what a Universal Basic Income produces.
As Dean Wormer once said to Otter in Animal House,
“Fat, stupid and lazy is no way to go through life.”

#95 Ponzius Pilatus on 05.24.22 at 8:40 am

#86 Dr V on 05.24.22 at 12:25 am
65 Ponz

“You think anyone will wanna work for dinosaurs like you two? Time to retire.”
—————————————————

When is the last time you tried to hire anybody Ponz?

Most young people today come for an interview with two
questions:

1) How much will I be paid?
2) what are the benefits?

Nobody seems to ask about the future opportunities of
working here.

Very shortsighted, and little entrepreneurial spirit.
———————-
Not my son and his University friends.
All of them have decent paying summer jobs, and one even runs his own window washing business, employing 3 other students.

#96 Robert S. on 05.24.22 at 9:09 am

For years you said that the bank of Canada, not raising interest rates was driving up the price of RE in Canada. Now that Pierre says it, it’s no longer your contention? Sorry Garth, I’m super lost right now. I think you owe this blog an explanation.

For years I reminded people of the inverse relationship between house prices and interest rates. I told you cheap money was the primary reason for the bubble, not a supply problem or dudes from China. And I told you it would turn. I was right on three counts. All Pepe is doing is smearing the bank leadership and offering no alternative, because there’s none. Rates must rise now that the pandemic has passed and the economy’s running hot as it reopens. I owe you nothing. – Garth

#97 crowdedelevatorfartz on 05.24.22 at 9:30 am

@#95 Ponzie
“All of them have decent paying summer jobs, and one even runs his own window washing business, employing 3 other students.”

++++

Watch out for that kid Ponzie.
That could be another Fartzy in the making.
I used to be a window washer.
Not the boring residential crap like those university kids dabble in..
Real work.
High rise towers, office buildings and the like.
Are you his accountant?
How’s the business doing?
It hasnt stopped raining since February.

#98 Vik on 05.24.22 at 9:51 am

“The fear is entirely based around real estate, since financial markets will recover and by the end of this year portfolios are likely to be positive once again”

I doubt that. The stock market depends on cheap money. As interest rates rise and the central banks tighten their balance sheets, the stock market will continue to fall. As they say, “don’t fight the Fed”.

The market moves more on economic output and profitability. Do not be so simplistic. – Garth

#99 Bitcoin Bro on 05.24.22 at 9:55 am

Central banks do not print money. They do not create inflation. Low rates encouraging economic expansion and staving off recession (like in a pandemic, duh) make credit cheaper. It’s the borrowing that results in rising prices. Borrowing is future consumption or income brought forward and represented by debt. The CB created no money. Now higher rates are reversing the process since the economy is judged strong enough for the removal of monetary stimulus. Unfortunately, governments have increased their fiscal stimulus, so prices are unlikely to fall while costs increase. – Garth

Semantics, no?

Kind of like saying it’s not the liquor that killed the alcoholic, it was the alcoholic’s choice to drink every day that killed them. Fair enough I guess. But when there’s booze everywhere and it’s basically free and it gets many people very rich, at what point do you question the environment and not the individual choice?

Also, just look at the major benchmark indexes on a 100 year scale. A relatively slow and steady rise to the top right of the chart. Then 2008 hits and the curve spikes substantially. The S&P more than quadrupled from 08-21′. 13 years. It took 50+ years for it to quadruple from the middle of the century to the 08′ crash.

I suppose you could choose to believe that the “real” economy just found a new gear. Or maybe, just maybe it had something to do with a decade-plus of CB “QE” (not literally printing money, you’re right but close enough) and basically, free credit are the primary culprit in inflated asset prices and specifically real estate.

What I said. – Garth

#100 Sail Away on 05.24.22 at 10:01 am

@#95 Ponzie

“All of them have decent paying summer jobs, and one even runs his own window washing business, employing 3 other students.”

——-

I ran a lawn care business in summers during university, hiring students. Ready source of labour. Our business seemed to increase exponentially when the young, fit workers worked with their shirts off. Strategy.

Sold it for a decent amount when I left to a second-year business student who has since expanded to three states. Lots of good stories.

#101 Quintilian on 05.24.22 at 10:13 am

“Rates must rise now that the pandemic has passed and the economy’s running hot as it reopens.”

Wrong, just because they “should” does insure they will.
10 year T running for cover again.

#102 SunShowers on 05.24.22 at 10:28 am

Hey Garth, comments seem to have been wild these last 2 days! How about a joke?

How can you end up with a small fortune by investing in cryptocurrency?

Start with a large fortune!

#103 Sail Away on 05.24.22 at 10:33 am

Kicking off another bumpy market week. Nasdaq crazy volatile. Fertilizer, mining, waste management and oil have maintained decent value through these choppy waters. Miners as a whole +25% since August, including div.

My B&D Heloc borrow-to-invest, had I kept it, would be down -7.64% from sell point, or -2.37% from original June 2021. Not bad. Glad I exited.

Who called the bottom last week? News flash: it wasn’t. Decent entry point, though.

Wonder if that guy talking about borrowing $30k did it just as markets fell off a cliff? Hope not. Good lesson if he did.

#104 Brian on 05.24.22 at 10:37 am

First we made the rich insanely rich
Then we showered the poor with inflation
And now we’re manufacturing a recession to slow demand

We are the US Federal Reserve and we are here to help.

Vote for us!

Oh wait, you can’t.

In reality, low rates helped fuel real estate insanity, which mostly benefitted the middle class. Funny how you left that part out. – Garth

#105 Robert S. on 05.24.22 at 10:55 am

For years I reminded people of the inverse relationship between house prices and interest rates. I told you cheap money was the primary reason for the bubble, not a supply problem or dudes from China. And I told you it would turn. I was right on three counts. All Pepe is doing is smearing the bank leadership and offering no alternative, because there’s none. Rates must rise now that the pandemic has passed and the economy’s running hot as it reopens. I owe you nothing. – Garth
_______________________

But it’s only one facet. Still zero places to rent and super high rents – if you can’t rent either, it’s not just interest rates. Pierre included supply side, which is still absent from the blog. Surely adding more supply, while diminishing available credit through rising rates would accomplish more than 1 or the other. Not sure why you’re so hard on so many people. Even hard on the people who support you on this blog. Do you think you fans are stupid because they have a different opinion than you?

Canada has never built more housing units annually than now. We do not have a supply problem, when two small rate hikes increase listings by more than 40%, without a single new completion. – Garth

#106 The Regulator on 05.24.22 at 11:00 am

#93 – elevatorfarts : Henry Ford envisioned farm tractors running on alcohol, which would be produced on farm. Self sustainability. His vehicles could run on alcohol too. Prohibition derailed that idea… Hmmm. It’s like they planned it that way. Cities ran their street cars on electricity, electric cars were invented long ago too. Edmonton had electric trolley buses, switched to diesel, now back to electric buses at huge cost. Who benefits? Did marijuana threaten the pharmaceutical cartel, hence, prohibition?

#107 Dharma Bum on 05.24.22 at 11:12 am

#94 Crowdie

I can’t wait to see what a Universal Basic Income produces.
As Dean Wormer once said to Otter in Animal House,
“Fat, stupid and lazy is no way to go through life.”
——————————————————————————————————

I dunno.

Worked for me!

https://www.youtube.com/watch?v=vgn0O0yuEls

#108 Barb on 05.24.22 at 11:18 am

“Hundreds of jobs available at Banff and Jasper. Their applications for TFWorkers won’t have workers arrive until next year”, according to this morning’s news.

Doesn’t bode well for tourism.
Maybe a room discount for cleaning our own hotel rooms?

#109 Faron on 05.24.22 at 11:31 am

Lots of good stories

Cool, maybe you will tell us one someday.

#110 Goodman on 05.24.22 at 11:38 am

Biden says” amazing transition” as people starve for gas and related food inflation. Poland calls out Norway for being predatory charging triple price for their gas as Russia is cut out. Norway also is a big problem for Canada as they pay protestors to malign our energy complex. I guess they don’t like the competition. But Norway, charging triple? Isn’t that war profiteering? No word from DAVOS about that.

#111 mike from mtl on 05.24.22 at 11:38 am

Well speaking of negative trends… Fed talks down the markets and hikes just 50bps result: already in a bear market teetering to recession. That was fast.

Some strong economy based on solid data?

I’d be extremely surprised we’d be at least in the black by years’ end.

#112 Philco on 05.24.22 at 11:40 am

#62 crowdedelevatorfartz on 05.23.22 at 8:56 pm

Thank god for some imigration. Locals dont wanna work.
Thats mostly service jobs.
Ive got a lineup of great guys fortunately.
Cutting lumber and building from the ground up 18k sq ft.
The best trades guys in this one horse town…maybe its 2 now.

South of town 4000 ft of some of the best water front on the coast 190 Acres 13 mil. Already has the breakwater for a harbour. Peeps from van are keeping their boats up here for 30% the cost. Further south another piece ultra rich family putting 40 mil into. These guys dont care where the economy’s at. This place has blue sky.

RE in areas will see pain but my research shows a bear market fir equitys. The stock market looks like a mine field too me now
Good luk CEF Im off to the site to break acouple more ribs.
Dont sweat the small stuff.

#113 Sail Away on 05.24.22 at 11:41 am

Al Jazeera has lost a huge amount of credibility jumping up and down proclaiming the IDF shot journalist Abu Akleh when there is no evidence of such.

I generally find Al Jazeera fairly balanced. But this is loopy. Sigh. Another news source hits the manure pile.

#114 Dr V on 05.24.22 at 11:47 am

95 Ponz – I didn’t say they weren’t working. I said they were missing opportunities.

I can wash my own windows, but I can’t repair an elevator.

#115 Philco on 05.24.22 at 11:50 am

#104 Brian on 05.24.22 at 10:37 am
You wrong bro.

But maybe this will make ya happy :-)
https://news.bharattimes.co.in/the-top-50-richest-people-have-lost-more-than-half-a-trillion-dollars-this-year/

#116 Dr V on 05.24.22 at 12:11 pm

52 Leftover

” Hewers of wood and drawers of water.”
—————————————————–

“The phrase ‘hewers of wood and drawers of water’ comes from the Bible, but it was the Canadian economist Harold Innis who used it in his 1930 book, The Fur Trade in Canada, to describe our traditional economic dependence on resource production.”

Remarks from some fellow named Poloz.

https://www.bankofcanada.ca/2016/11/hewers-wood-hewers-code-canada-expanding-service/

#117 Ponzius Pilatus on 05.24.22 at 12:21 pm

105 Robert S. on 05.24.22 at 10:55 am
For years I reminded people of the inverse relationship between house prices and interest rates. I told you cheap money was the primary reason for the bubble, not a supply problem or dudes from China. And I told you it would turn. I was right on three counts. All Pepe is doing is smearing the bank leadership and offering no alternative, because there’s none. Rates must rise now that the pandemic has passed and the economy’s running hot as it reopens. I owe you nothing. – Garth
_______________________

But it’s only one facet. Still zero places to rent and super high rents – if you can’t rent either, it’s not just interest rates. Pierre included supply side, which is still absent from the blog. Surely adding more supply, while diminishing available credit through rising rates would accomplish more than 1 or the other. Not sure why you’re so hard on so many people. Even hard on the people who support you on this blog. Do you think you fans are stupid because they have a different opinion than you?

Canada has never built more housing units annually than now. We do not have a supply problem, when two small rate hikes increase listings by more than 40%, without a single new completion. – Garth
——————
I agree, no supply problem.
But we have a vacant property problem, which no one wants to admit to.
But it’s coming to the surface, as specu-investors are getting scared.
Also gotta count the pre-sales, which are due for a lot of hurt.

#118 Ponzius Pilatus on 05.24.22 at 12:29 pm

#108 Barb on 05.24.22 at 11:18 am
“Hundreds of jobs available at Banff and Jasper. Their applications for TFWorkers won’t have workers arrive until next year”, according to this morning’s news.

Doesn’t bode well for tourism.
Maybe a room discount for cleaning our own hotel rooms?
———————
Happening.
We had that on our trip East recently.
Personally, I don’t mind.
No big deal if you just stay for a few days.
And I don’t like it when they tuck in the sheets too much ,anyway.

#119 Brian on 05.24.22 at 12:30 pm

#115 Philco
Um, I think you’re wrong Bro! But what’s a 500 Billion loss when you made 5 Trillion!

Billionaires made $5 trillion in the past year—and their wealth is growing at an ‘unprecedented’ rate

https://www.cnbc.com/2022/01/19/worlds-billionaires-made-5-trillion-dollars-over-the-past-year.html

#120 Dr V on 05.24.22 at 12:36 pm

103 Sailo

“Kicking off another bumpy market week. Nasdaq crazy
volatile.”
—————————————

Hmmm. The “Hewers of wood and drawers of water” seem to be holding up well.

#121 Shawn on 05.24.22 at 12:57 pm

Wholesale Trade up in Canada?

Statistics Canada estimates (their report in not yert final) that in April, wholesale trade revenues were up 0.2%

In particular: Food, beverage and tobacco products were up +0.7% in April.

Is this just seasonal? No the figures are seasonally adjusted.

Does this mean that volumes were DOWN given that prices were up around double digits versus last year? No, this report is in “current dollar” meaning it’s as if prices were the same as last report.

Is this year over year or just the change since March? That’s a great question since StatsCan inexplicably does NOT make that clear. I HATE such ambiguity. It is inexcusable. But by convention, when they don’t say it means compared to just last month.

I find it very hard to believe that Canadians consumed even 0.7% more food beverage and tobacco in April versus March. Is no one cutting back in the face of higher prices? They buy the same volume? And they have money to do that despite vastly higher costs for gasoline?

Something’s gotta give here?

Well they did say:

• Miscellaneous goods: -7.7%. So miscellaneous goods, whatever those are, were down a huge 7.7% in volume terms in one month? I guess you don’t want to be a retailer of miscellaneous goods.

#122 Shawn on 05.24.22 at 1:00 pm

Wholesale Trade figures

https://www150.statcan.gc.ca/n1/daily-quotidien/220524/dq220524c-eng.htm?CMP=mstatcan

#123 Quintilian on 05.24.22 at 1:14 pm

More Canadian businesses file for bankruptcy as economy reopens

“He says the financial support provided by the government through the COVID-19 pandemic helped delay the surge in bankruptcies. The last of the federal COVID-19 support programs for businesses came to an end this month.”

https://ca.finance.yahoo.com/news/more-canadian-businesses-file-for-bankruptcy-as-economy-reopens-110012157.html

#124 Guillaume on 05.24.22 at 1:21 pm

Hi Garth, is it possible to tell what could be the consequences of rates increase on the public debt and future government spending ? Same as what is happening to real estate ? Thanks for your thoughts and sound advice

#125 west coast on 05.24.22 at 1:22 pm

i used to laugh when people to me, it’s different here in victoria. i had been reading this blog and believed it was not different. that was 10 years ago. conclusion: it is different here. there is so much money in this city, real estate drives it. my advise toni, buy when you can afford, because it will not drop much here in victoria, like it will in other places in canada.

#126 Bdwy on 05.24.22 at 1:34 pm

Stocks cant catch a break again.

Maybe early but took several nibbles in costco here.

Sold it at 550. Hit 600. 431 today.

Maybe early but we will see. Customer base has plenty to spend thru inflation.

#127 Faron on 05.24.22 at 1:41 pm

#103 Sail Away on 05.24.22 at 10:33 am

Who called the bottom last week? News flash: it wasn’t

Don’t think anyone did. Sounds like you know when it will happen, so why didn’t you wait until then to buy? Also, markets opened on Monday.

#120 Dr V on 05.24.22 at 12:36 pm

Hmmm. The “Hewers of wood and drawers of water” seem to be holding up well.

Defensive and resource stocks are always the last to go in a recession/downturn should one materialize.

#128 Dr V on 05.24.22 at 2:10 pm

119 Brian

The articles differ in that the wealth gained was by some 2700 billionaires while the wealth lost was by 50. Look at the incredible sums
Lost by the richest.

And of course they still generally own what they owned before, just the yardstick of market valuations has changed.

#129 Barb on 05.24.22 at 2:27 pm

Received this email re oil production countries (apparently a cut-n-paste from FB):
Maybe things will change as soon as T2 gives the pipeline to our Indigenous folks…

“So let me get this straight.

It takes between 21 to 35 days for a Russian oil tanker to get to US ports to be offloaded.
It takes between 35 and 60 days for a tanker from the Middle East to make the same trek.
It takes about 10 hours to load the tanker and up to 24 hours to unload. If it has to wait in port to get to an unloading dock, it can take up to 3 days.

The average tanker burns 2,625 gallons of diesel fuel per hour. 22.38 pounds of CO2 are created from burning 1 gallon of diesel fuel.
So, in one hour, a tanker ship hauling oil to a refinery in the US creates 58,757.5 pounds of CO2 per hour. Averaging the travel time of the tankers, that’s 27.67 million tons of CO2 per trip.

In comparison, your car creates between 6 and 9 tons per year.

Without going into all the equations of how many tankers come to the US per year, let alone our exports, will someone please explain to me how drilling our own oil and moving it through pipelines, along with importing oil from Canada via pipeline will not be more environmentally “green” for the world.

Please explain to me why buying oil from another country is good for the environment??

Or better yet how buying oil from another country is better than pumping our own oil??
There’s nothing green about this other than these elites are lining their pockets with green.”

Hmmmm. Food for thought.

#130 millmech on 05.24.22 at 3:04 pm

#103 Sail Away
Doing just fine , bought monthly dividend payers(DE.V) and they are paying the freight and then some, can easily wait out a dip in the markets. Running with a 20 yr time frame and deducting interest payments so all is well.
Still buying 2k of dividend payers every pay day and will continue to do so all the way back up, Tesla will be a good buy at $200 and looking forward to that before EOY. I wonder how all those Tesla bagholders are feeling down around 50% while I have lost maybe 10% on my picks during the same time frame.

#131 Diamond Dog on 05.24.22 at 3:09 pm

The central bank does not create money out of nothing, nor is it responsible for inflation. Pepe is yanking your chain. BTW way, ‘firing’ the bank boss would accomplish… what? Would rates immediately jack to 10%? What’s the plan? How would Canada roll back international oil prices, deal with a global shortage of diesel fuel or solve the chip drought out of Asia? Yank, yank. – Garth

Money is created through the issuance of new debt. It’s not something for nothing as you state Garth, quite true. In the same breath, when CB’s buy their own treasuries and buy MBS’s to suppress mortgage rates, this increases the money supply, suppress bond yields and stimulate the economy (wealth effects). Governments running deficits in effect also increase the money supply through the issuance of new debt (see 1 minute 40 sec from Powell):

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

I think where folks get confused is they equate a rapid increase in the money supply to an increase in inflation. Monetarists in the last century sure thought that way. They were historians and saw a fairly consistent pattern throughout history in nations across the globe relating to an increase in the money supply and inflation (or decrease leading to deflation) but they were also smart enough to realize that there are exceptions and they pointed these exceptions out. In other words, increases in the money supply in general lead to increases in inflation but this isn’t by any means a golden rule.

Take for example, the GFC. The bond fallout of the U.S. housing crisis bailouts totaled something like close to 5 trillion. In 2012 alone, people’s wealth in m2 rose to 10% yoy. People’s average net worth in the U.S. rose by nearly 20k from 99k to 119k in one year. That’s a near 20% increase in one year. Why was there no inflation?

https://www.longtermtrends.net/m2-money-supply-vs-inflation/

Because people’s average wealth at the height of 08′ was worth 159k. Previous losses created a consumer behavior that made the masses miserly regardless of 1 year gains meaning consumer behavior trumps increases in the money supply.

Fast forward to today and we see supply chain shocks as a result of pandemic disruption coupled with the everything bubble created as a consequence of CB stimulus, i.e. buying their own treasuries and MBS’s. A rapid increase in the money supply was just the half of it. In the U.S. alone, some 2.5 trillion in MBS’s and a further 4 trillion in treasuries if I recall correctly, was created by the Fed buying it’s own treasuries. Add in U.S. Fed deficit spending and it was close to 9 trillion during an off year GDP of 20.5 trillion was it? When the dust settled, it was something like 42.3% or so I’ve heard in 2020 alone from a credible economist and the ball park numbers compute. That’s an asinine rapid increase in the money supply just in the U.S. .

We put these numbers together with the supply shock that’s coming and try to square it with “transitory inflation” forcing us to ask, “does the Fed know what it’s doing”? Because they are either lying to us bald faced when they say transitory, or they are clueless. Rest assured, the Fed knows what it’s doing. And they slow rolled their own response also knowing exactly what they were doing. They overshot increases in the money supply by a gazillion miles and did it anyway knowing what would follow (high inflation and a future triggered Fed response to induce recession).

Why did the Fed do it? Political interference. Trump wanted to win the next term at any cost. There’s no moral compass there. He appointed Clarida:

https://en.wikipedia.org/wiki/Richard_Clarida

and Quarles:

https://en.wikipedia.org/wiki/Randal_Quarles

… who have both since resigned in scandal. Both of these men were Trump appointees in charge of monetary policy within the Fed and bent to Trump’s will. The who and why here should not be lost on us.

The U.S. Fed reserve was politicized under Trump. I can’t prove it, but the fact that the money supply was increased by the percentage that it did even during a pandemic speaks large volumes all by itself.

As for Pollievre, to suggest that our CB has been politicized is difficult to believe. For one, while Trudeau racked up a $341 billion dollar deficit (I think it was) in 2020, it’s been a while since I looked at the numbers, guessing here but if one includes MBS’s that Polos and Macklem also bought, our own Canadian money supply increased by somewhere in the low 20’s. Like I said earlier, we overshot by 1/3rd to 1/2. The U.S. was far more adversely effected by the pandemic than Canada but even so, overshot by at least 1/2. In our case, I think it was solely bad judgment (political pressure to borrow from the U.S. had a great deal to do with this bad judgment). In the case of the U.S., it was political interference, a politicized Federal reserve.

It would be wise at this juncture for Canadians to acknowledge our differences in how our CB governors are chosen in comparison to the U.S.. The U.S. runs Fed chair and governor appointments through the Senate for a vote. In some ways straight from the start, U.S. Fed reserve appointments are already politicized.

In Canada, PM’s appoint our BoC governor but almost always, these appointments come by way of recommendations within the BoC itself. In Canada, it’s not politicized in the way one might think because of the way BoC governors have been selected historically, because it’s “in house”. I believe this distinction is utterly lost on Pollievre.

The mere fact that Pierre Pollievre accused our current BoC governor Tiff Macklem as being politicized or controlled by Trudeau defies logic in part because he was appointed by Trudeau in June of 2020. This comes as large amounts of Federal spending had already come by way of lock downs. Macklem would have also continued the policies of Polos for weeks if not months following his own appointment, so the timelines by themselves do not favor Pollievre’s smear.

What Garth says here also speaks volumes. “BTW way, ‘firing’ the bank boss would accomplish… what? Would rates immediately jack to 10%? What’s the plan?” – Garth

As Garth states, this will not fix pandemic supply shocks or magically jack rates which, if anyone has noticed, is coming by way of monthly half point rate hikes regardless. So what’s the plan? Fire a CB for doing his job, this is it?

This is a video of Pollievre doubling down on stupid just 3 days ago:

https://www.youtube.com/watch?v=BIiWr1gB2M0&t=10s

For one, when a government incurs deficit spending of $341 billion, the CB has “no choice” but to issue bonds. Like, none. Does anyone in their right mind think any governor of Canada in it’s history is going to allow the Federal government to go broke or say no to emergency spending, especially during a pandemic? CB’s are obligated to explain risks to government policy, that’s beyond question but there is no way of really knowing the levels of communication or what was said directly (one could ask).

Otherwise, it’s looney tunes what Pollievre is saying here. Pierre either completely misunderstands the role that a BoC governor is obligated to perform or has grown so lost from being so accustomed to smearing people or both, that he can’t recognize his own misguided hypocrisy. The fact that he has the support he has makes it doubly painful to watch.

It’s one thing to be a critic or a bitch. It’s quite another to have working solutions to complex problems. To analogize, it’s one thing to accurately describe an ugly wound, but it’s quite another to know how to heal it. Simply put, just based on Pollievre’s critiques alone, I don’t think Pollievre has a clue.

#132 Russ on 05.24.22 at 3:24 pm

The Regulator on 05.24.22 at 11:00 am

#93 – elevatorfarts : Henry Ford envisioned farm tractors running on alcohol, which would be produced on farm. Self sustainability. His vehicles could run on alcohol too. Prohibition derailed that idea… Hmmm. It’s like they planned it that way. Cities ran their street cars on electricity, electric cars were invented long ago too. Edmonton had electric trolley buses, switched to diesel, now back to electric buses at huge cost. Who benefits? Did marijuana threaten the pharmaceutical cartel, hence, prohibition?
======================

Hi Reggie,

You’re close, 2 outta 3 ain’t bad.

The Big Pharma wasn’t so big in the ol’ days for the hemp prohibition but the cotton industry surely was a big player.
The wife is a natural fibre snob. She will be happy to hear I learned something from her studies.

trigger warning on item #3 (not my quote)

https://www.greenlifeorganics.com/cbd-blog/why-was-hemp-outlawed-in-the-united-states

And Vancouver had a great electric bus system for decades after the trolleys were taken off route. I wouldn’t call it great now.

Cheers, Russ

#133 TheDood on 05.24.22 at 3:43 pm

#125 west coast on 05.24.22 at 1:22 pm
i used to laugh when people to me, it’s different here in victoria. i had been reading this blog and believed it was not different. that was 10 years ago. conclusion: it is different here. there is so much money in this city, real estate drives it. my advise toni, buy when you can afford, because it will not drop much here in victoria, like it will in other places in canada.
___________________________

I would debate this. There is no industry in the entire province of BC that pays a salary which supports RE purchase at current price points. The only thing different in Victoria is that retirees (with money) move there to retire and escape the brutal winters evident in most other parts of Canada. Victoria will not be spared as more rate hikes occur. Don’t fool yourself. The RE party in Canada is over.

#134 Adam Smith on 05.24.22 at 5:58 pm

@#4 Anti Natalist

You okay buddy?

Life is what you make of it, and is actually pretty great. People had kids when they had Mongolian hoards beheading the entire village right next to them. Pretty sure our kids can handle an economic recession that will be over before they enter grade school.

#135 west coast on 05.24.22 at 6:05 pm

#125 west coast on 05.24.22 at 1:22 pm
i used to laugh when people to me, it’s different here in victoria. i had been reading this blog and believed it was not different. that was 10 years ago. conclusion: it is different here. there is so much money in this city, real estate drives it. my advise toni, buy when you can afford, because it will not drop much here in victoria, like it will in other places in canada.
___________________________

I would debate this. There is no industry in the entire province of BC that pays a salary which supports RE purchase at current price points. The only thing different in Victoria is that retirees (with money) move there to retire and escape the brutal winters evident in most other parts of Canada. Victoria will not be spared as more rate hikes occur. Don’t fool yourself. The RE party in Canada is over.
————————————-
i used to think the way you do. have you lived in victoria over the last 25 years? there is more than retirees here with money. you have to take a look at everything that goes on on the island. furthermore, baby boomers here have so much money in re, they just lend cahs, cough cough, to their kids for a down payment. here on the west coast, many houses also have basements suites that help out with the mortgage. that is not the case in say, somewhere like ottawa, where house prices are only slightly less these days. you can debate all you want, but like i said, it is different here.

#136 Tony on 05.25.22 at 9:27 am

Re: #16 Søren Angst on 05.23.22 at 3:51 pm

Obviously the GDP will be positive this Friday in America. I’m betting on .8 percent positive. I still can’t believe this talk about recession in America.

#137 Tony on 05.25.22 at 9:40 am

Re: #111 mike from mtl on 05.24.22 at 11:38 am

My guess is the next recession in America will be in the year 2028.