The odds

Well, this is interesting. Six more sleeps until our central bank shoves interest rates considerably higher. News comes this week that the average suburban GTA property sale price has dropped from $1.7 million to $1.4 million. The deceleration appears to be running at $100,000 per week in many hoods. Mr. Market giveth. He also sucketh away.

This has led to a wave of terminations of existing listings as sellers recoil from what they perceive as a “financial loss.” It’s human nature being weird again. Any owner accepting an offer for under the peak price paid by some GreaterFool goof two months ago is seen as a loss. So they retreat and hold out for better days. It could be a very long wait.

The mood on Main Street darkens. Thus price declines become a self-fulfilling prophecy.

Two major surveys came out this week that you should note. Pollster Angus Reid found the greatest number of Canadians in 13 years expect to be worse off financially in the months ahead. Almost four in ten say their situation has deteriorated in the past year. No wonder roughly the same number plead with the Bank of Canada to stop its rate-hike cycle, even though that’s the best medicine for decades-high inflation. (And the US Fed just confirmed it’s on the same path.)

Incredibly, 50% of Canadians say it’s now hard to feed their families. One in five are “extremely worried” about their debt. The housing market is becoming terrifying. Says the pollster: “If you’re in a home, if you’re carrying a mortgage, you’re worried abut the resale cost of the overall value of that home over the short and long term. All of that (is) leading to a place where we are seeing 45 per cent of Canadians saying, ‘Look, let’s have the Bank of Canada wait and see a bit (and) not be too exuberant about another interest rate hike.’”

And here’s my pal Nik Nanos with his latest Bloomberg sentiment sampling. He finds 41% think their finances have deteriorated in a year – retreating to 2008-level anxiety. Overall confidence is back to the depths of 2020 – when Covid was going to kill us all. Central to this is the housing market plop. A year ago everyone said they wanted cheaper real estate. But they lied.

Why are these results so peculiar?

Source: Bloomberg; Nik Nanos

First, houses. Prices may be decelerating, but they’re still 15%-25% (depending on the area) ahead of year-ago levels. This is found wealth. Windfall gains. Tax-free. Historic. What’s not to be happy about if you bought when the pandemic hit? Even in Bunnypatch?

Second, financial assets – despite the plop since mid-February and Putin – have done extraordinarily well of late. The three-year advance for a B&D portfolio to this past winter was at least 36%. Now it’s temporarily given back about 7% of that. How is this a crisis?

So the polls and the social media howling and moaning tell us a few things: folks borrowed way too much money, especially to buy real estate, and never budgeted for higher debt-servicing costs. Second, too much net worth was placed in one asset, now the most visible source of perceived losses. A one-horse strategy is never a good idea.

Most fundamentally, we do not have balanced lives. Too little saved. Too much being spent. No reserves. A lack of discipline and planning. Too many folks borrowed against the future, acquiring today what they needed to borrow heavily to get. That makes them seriously sensitive to economic and financial shocks – which we’re experiencing in spades.

The war. Swelling inflation. Interest rates that have doubled and will triple. A possible recession. Gas at two bucks. Shortages and supply chain issues. The demise of WFH and renewed employment costs. Add in a decline in real estate values, and this combination triggers alarm and dismay. Everybody moaned about their kids not being able to afford their first home. But nobody really meant it. In fact with ubiquitous Bank of Mom deposit loans and mortgage co-signings, millions of families increased their real estate exposure. So this is scary.

What could change sentiment, and the path ahead?

Putin gives in, Ukraine wins and the war ends. Odds of that: zero.

Central bankers raise interest rates two or maybe three more times, real estate takes a dump, stocks swing wildly, inflation data moderates and they announce a pause in August. Odds of this: three in ten.

Monetary policy stays aggressive, the benchmark rises, markets wobble and late in 2022 cost-of-living numbers improve. Further rate hikes are put on hold. Stock markets roar higher. Housing values continue to drop with mortgages above 5%. Odds of this: eight in ten.

Now you know.

About the picture: “Meet Rusty, Mabel and Rocky.,” writes Dan. “We adopted Rusty (3 year old Beagle), bought Mabel as a pup (now 1 year old Beagle), and bought Rocky as a pup (12 year old Yorkie/Shih tzu mix).  They have become irreplaceable family members!  And here they are looking at me at the bottom of the stairs (unharmed), after slipping on a toy, wondering, ‘hey, can we have that back?’. “

141 comments ↓

#1 crowdedelevatorfartz on 05.25.22 at 3:39 pm

Bring on the inevitable interest rate rises.
Crush the bloated tick infestation that is the Real estate industry .
Good times.

#2 TurnerNation on 05.25.22 at 3:40 pm

Control over our travel/movement. Q2 2022 and it’s worse than in Q2 2020.
Kanada’s Kommunist government has special Science. The world has noticed.

.The Globe and Mail reports in its Wednesday edition that the lobby group representing most of the world’s airlines is calling on the Canadian government to drop the remaining travel rules related to COVID-19 in a bid to reduce the delays people face at some airports. The Globe’s Eric Atkins writes that the International Air Transport Association said Canada should ensure there are enough staff at security and customs checkpoints, and that the pandemic-related restrictions be dropped. These include the vaccine requirement, submission of health and travel information on the ArriveCan app and random COVID-19 testing. … © 2022 Canjex Publishing Ltd.


— Latest update from the salesmen.

https://www.ft.com/content/8244af52-26ba-4676-961a-c57f1d4892e8
Pfizer warns of ‘constant waves’ of Covid as complacency grows
Chief executive Albert Bourla launches plan to offer patented medicines at lower cost to poorer nation

https://www.zerohedge.com/medical/moderna-ceo-laments-throwing-30-million-doses-garbage-because-nobody-wants-them
Moderna CEO Stéphane Bancel is complaining about having to ‘throw away’ 30 million doses of Covid-19 vaccine because ‘nobody wants them.’

#3 SunShowers on 05.25.22 at 3:47 pm

Hey Garth, regarding my joke from a few days ago about making a small fortune investing in crypto, here’s one that will probably make your voice jump an octave.

https://twitter.com/TikTokInvestors/status/1494076067669168130

Gotta respect the cojones necessary to offer an interest rate twice as high as Bernie Madoff was.

#4 Søren Angst on 05.25.22 at 3:48 pm

From where you begin with

“So the polls and the social media howling and moaning…”

to the very end, some if not the BEST prose you have ever written on this Blog.

Like a good father explaining to the kids about the mess they have gotten themselves into and what is about to happen because of it.

With probability as well. How does it get better than that?

————-

Brindisi, as I raise a shot glass of Grappa to you Garth.

#5 Brian on 05.25.22 at 3:50 pm

Apparently not. We used to have a sense of humour before we all got woke. – Garth

Watched the new Ricky Gervais comedy special last night on Netflix.

Spilled my coffee down my shirt front again laughing!

#6 Franco on 05.25.22 at 3:52 pm

George Soros said a Davos that the Russian invasion could usher in WWIII and a depression. What do you make of that?

#7 MC on 05.25.22 at 3:56 pm

“..the three-year advance for a B&D portfolio to this past winter was at least 36%. Now it’s temporarily given back about 7% of that. How is this a crisis?”

-i guess its worrisome for some of us who put a large whack of cash in our b&d’s last July and now its below that level… and were hoping to use some of that for living expenses. still a wait and see.

#8 Jim on 05.25.22 at 3:57 pm

The Fed report from April says that 1.9% will be the overnight lending rate by the end of 2022. Mr market seems to be pleased. It looks like the fed is choosing the stock market over keeping inflation in check.

#9 dave on 05.25.22 at 3:57 pm

I’ve spoken to a few Metro Vancouver Developers.

They all expect a slow down and drop in prices for the next 12 to 18 months. After that prices will rise again and surpass current levels. This blip will simply get rid of some of the small real estate players.

If the peak was $1.7M for a crack shack…in the future (24 months +) it will go far beyond $2.5M to $3M before another short correction period. This cycle has always repeated.

#10 Omicron Kenobi on 05.25.22 at 4:00 pm

Odds of my family lineage wiping all of you out?

9.9 in 10

#11 Tim on 05.25.22 at 4:01 pm

As a Millenial who moved to Toronto in 2013, I understand the need to own a home.

Sometimes I question the purpose of life when I can’t even take a dump in peace because the next door neighbours can hear me.

But to overpay $150,000 or more to buy real estate in a bubble. No thanks. That is ten years worth of rent right there just to overbid for a Toronto home.
Fifteen to twenty years worth of rent if you rented ten years ago.

Furthermore, I see no future in Toronto. I’d rather invest my savings, hope I don’t end up like the CBC Q man and get my money away from Canada as soon as I hit 40 in 2034. That is my future. Abroad.

#12 Bipolar on 05.25.22 at 4:03 pm

I felt the Fed announcement was quite positive today. Light at the end of the tunnel! Relaxed about my B&D portfolio. Looks like I will not have to purchase a stress ball.

#13 Mean Gene on 05.25.22 at 4:04 pm

The free market giveth and taketh away, beware what you wish for.

#14 Sam on 05.25.22 at 4:06 pm

Oh wow prices going down $100,000 a week? So in 14 weeks the house will be free?! Woohoo!

#15 crowdedelevatorfartz on 05.25.22 at 4:06 pm

@#9 Dave
“If the peak was $1.7M for a crack shack…in the future (24 months +) it will go far beyond $2.5M to $3M before another short correction period.”
+++
Wishful thinking by Developers with too much skin in the game?
Japanese real estate was the most expensive on the planet….until it wasnt…
That was 1990 … they’re still climbing out of that devaluation hole 32 years later.
Oh, right.
It’s different here…..

#16 Joe on 05.25.22 at 4:08 pm

Look at what the Fed does not says. He’s raised very little since inflation took hold. Almost a year and raised twice only. If he truly wanted to raise rates he would have already. All talk.

#17 Captain Uppa on 05.25.22 at 4:09 pm

Hey Garth,

I have unused HELOC at Prime +0.5.

Should I plow this 30K into my 70/30 portfolio (TFSA – I have the room) or into a new non-registered account at 60/40 … or not at all?

My wife and I have steady, well paying jobs.

Thanks.

#18 KNOW IT ALL on 05.25.22 at 4:18 pm

Great News!!!

“WonderFi Appoints Former Bank of Montreal Executive Torstein Braaten as Chief Compliance Officer”

#19 JSS on 05.25.22 at 4:20 pm

Notable dividend increases:

Scotia bank: + 3%
BMO: +4.5%

When is it a good time to buy Canadian bank stocks? All the time…

#20 Doing my Part on 05.25.22 at 4:21 pm

#9 Dave, so the cycle of doubling repeats after 24 months?
Hahaha

#21 wallflower on 05.25.22 at 4:22 pm

My singular hope is that the whiners volte face on parents.
Seriously, what were the prop/support/enabler ratios on those bad, bad parents?
Better yet, if the parents are on mortgage document, ha! walk away!

#22 Captain Uppa on 05.25.22 at 4:22 pm

Also,

If I am calm with my investing, can I keep a 70/30? I haven’t blinked during recent times or the covid dip.

Or do you still recommend a 60/40.

I am 39. DB pension (wife has teacher DB as well).

#23 cuke and tomato picker on 05.25.22 at 4:24 pm

Excellent blog today we agree with everything you have said today and especially the way you itemized things.
Some people are in for a new reality we have had cheap money for too long and the expectation that they are entitled to low interest rates forever however the easy
way is coming to an abrupt end. It not going to be
PRETTY.

#24 I'mshort_corpdebt on 05.25.22 at 4:25 pm

Mr. Market giveth. He also sucketh away. – GT
——————————————————————–

Yes indeed, and for those who have not yet lived through a very prolonged stock market correction in the making with all the fake wet dog shakes, aka dead cat bounces, always remember – The primary roll of Markets is to create as much confusion, anxiety in order to inflict as much pain upon its participants.

Yeah, still very much short corporate debt and we need to see another 20-25% downward movement by next Xmas. Or else things will never improve and the markets will be sideways bound for many years.

#25 Soviet Capitalist on 05.25.22 at 4:28 pm

Here are my observations regarding financial situations of those who bought vs rent:

1. People with mortgages that I know:
– pay between 1000 – 2000 $/month
– have renovated their decks recently
– bought new SUVs
– bought Jet-Ski

2. People who rent:
– had to move
– their rent went up by 800 $/month

Everybody seem to be worried that an increase of 100-200 $/month for those in category 1 will have a ‘catastrophic’ effect on the ‘economy’. Nobody cares about those from category 2.

#26 yvr_lurker on 05.25.22 at 4:29 pm

I think that many people are stressed out with inflation. If you need to commute with a vehicle (i.e. Langley to Vancouver) the gas price increase is a major effect. Feeding a family is also much more expensive. So if you were living rather close to the break even point, these sudden spikes in so many things is a major worry. It all depends on how close to the cliff you were standing at.

#27 No country for Canadians on 05.25.22 at 4:32 pm

DELETED

#28 Bitcoin Bro on 05.25.22 at 4:34 pm

Of course asset owners are sitting pretty. The next 12-18 months are nothing but a buying opportunity.

But consider the bottom half of the K shape recovery. Food inflation is just 10% officially. In reality, a typical grocery run is probably closer to 20% more expensive for most average folks. Gas prices are ATH… this is a major, major source of stress for our countrymen and women who don’t keep up with personal finance and macroeconomics.

No end in sight to food inflation according to the experts. The readers of this blog won’t be affected… everyone can afford paying 20-30% more for food and still have plenty left for discounted ETFs. It’s the poor folks across the world and this country that gets screwed.

“We’re only nine meals away from anarchy” as the saying goes… I’d say this is probably the biggest underlying reason for all the pessimism and talk of crisis.

#29 Blobby on 05.25.22 at 4:37 pm

The problem is, all those people who overborrowed… People generally don’t like to admit fault when they do something stupid. They prefer to blame someone else. And of course they’ll blame politicians for letting them buy an overpriced property,

Then all that needs to happen is for some tool to come along, telling them it WAS the politicians fault and not theirs.. and to vote for him, and he will close down the banks, etc etc,

Then Canada is in the same mess as Uk and (soon.. again).. US.

#30 baloney Sandwitch on 05.25.22 at 4:38 pm

“A year ago, everyone said they wanted cheaper real estate. But they lied” – because they forgot that cheaper RE can affect their own net worth.

Just look at Musk trying to wriggle out of the deal to buy twitter. He has been huffing, puffing, and tweeting like the big bad wolf. But a deal’s a deal.

#31 ogdoad on 05.25.22 at 4:47 pm

Odds of me hooking up with Melissa: 1 in 10 (hey, humans have needs after all…we ain’t gettin’ any younger, Mel)

Her brother: surprisingly a little more: Perhaps 3 in 10 (bro, better be open to some ‘live-a-little’ stuff)

Odds that I’ll get a little oxy soon regardless of above: 8 in 10 (what else is there? Driving alone in my tesla or cleaning my 5 bedder?…not while there’s little blues :))

Og

#32 PeterfromCalgary on 05.25.22 at 4:47 pm

The central banks (CBs) needs to tighten to reduce overall demand in the economy. Their job is to tighten monetary policy when demand exceeds what the economy can provide and loosen monetary policy when demand is too far below what the economy can provide. Many smart people think that the tightening started too late. However, CBs seem to be on the right track now.

CBs can’t fix supply problems, they can’t make diesel fuel, grow wheat, and they cannot make supply chains more robust. Those things need to be done by the hard working people and government just needs to get out of the way.

#33 Shawn on 05.25.22 at 4:57 pm

Double Double on DBs

#22 Captain Uppa on 05.25.22 at 4:22 pm
Also,

If I am calm with my investing, can I keep a 70/30? I haven’t blinked during recent times or the covid dip.

Or do you still recommend a 60/40.

I am 39. DB pension (wife has teacher DB as well).

*****************************************
Keep quiet and live among the non-pensioned masses who hate you.

You might find you can grow your investments to provide about as much as your DB by retirement age. In your situation it would be hard to go too far wrong. No need to swing for the fences. Score. Your biggest issue: Will it Tuscany or Provence for your winter trip in retirement. Actually, Maui is great too.

#34 A01 on 05.25.22 at 4:57 pm

Great article Garth… I am still waiting to see cottage country implode once the banks start tightening up the LOC rules and rates spike.

#35 Vancouver Brit on 05.25.22 at 4:57 pm

#9 dave on 05.25.22 at 3:57 pm
I’ve spoken to a few Metro Vancouver Developers.

They all expect a slow down and drop in prices for the next 12 to 18 months. After that prices will rise again and surpass current levels. This blip will simply get rid of some of the small real estate players.

————————————————

Your first mistake was listening to real estate developers in Vancouver….

#36 Sam on 05.25.22 at 4:59 pm

*BOSTIC: MAY MAKE SENSE TO PAUSE IN SEPT., DEPENDING ON ECONOMY

And there it is: the first “pause” hint
Expect many more, and then a hard stop on rate increases.

#37 DaveDorf on 05.25.22 at 5:05 pm

How can there be an 11 in 10 chance of two mutually exclusive things happening?

#38 Armpit on 05.25.22 at 5:10 pm

Price of homes will be relative to what is considered as affordable payments – regardless of interest rates.

For now, prices will recede as Interest rates go up. This will continue until they reach the point where interest rates stabilize and then recede.

We will never see interests rates as low as we did, and it will take a few years for house prices to re-correct and people re-adjust their living styles.

For example :

In the 1950’s, average homes were affordable to single income families. Once purchased, you stayed until kids moved out. Homes were small and children shared rooms with siblings.

In the 1980’s, a families had to have two household incomes for affordable homes. Homes larger with sunken family rooms and Kids had their own room, daycare, and a Commodore 64 to keep them busy while Parents away.

In the 2020’s, Double income, Finished basements, a border, or extended family member, and Airbnb, plus two incomes, and B of Mom. Dogs/Cats/fish outnumber Children.

Oh well…

#39 Mike on 05.25.22 at 5:15 pm

Stocks will be back at March 2020 levels by the end of summer. Housing prices will be cut in half if interest rates actually go up anything close to what is being talked about. The economy is in recession now and awaiting confirmation.

#40 Søren Angst on 05.25.22 at 5:15 pm

Now this is not the end.

It is not even the beginning of the end.

But it is, perhaps, the end of the beginning.

——————-

Very few of you have lived thru what is just starting, let alone to its end.

The economy will purge its reckless players, sidelining them economically for a decade or more.

A new economic paradigm will emerge, having nothing to do with what came before it.

#41 Tom from Mississauga on 05.25.22 at 5:18 pm

Today’s post agree 100%. Wonder what consumer confidence is in Ontario compared to Alberta…

#42 Brutal on 05.25.22 at 5:25 pm

@#25 Soviet Capitalist

Anecdotal evidence. Clearly you didn’t read the TorStar article about the couple who are so house poor they can’t even travel out of province on vacation.

Here’s more anecdotal evidence for you:

Everyone I know who owns in Toronto:
– pays $3000/month just for mortgage. Tack on another $1000-1500 for property taxes, insurance, maintenance
– are their bosses bitch because of their mountains of debt
– haven’t taken vacation in years because they are house poor and can’t stop working

Everyone I know who rents:
– work remotely & can quit and get another job easily if their job asks them to go into the office. No mortgage to tie them down.
– travel extensively
– pay less than $2000/month in rent & have portfolios paying them interest & dividends
– are happy & stress free

Just because someone buys a jet ski doesn’t mean they are rich. Could just be piling on the debt.

#43 Earl on 05.25.22 at 5:33 pm

“The demise of WFH…”

You keep saying that but it’s not happening. My whole company is still working from home. The offices are open but coming in is voluntary and most choose not to. There is no indication this will end any time soon and my friends at other companies tell me the same thing.

Go downtown. Look around. – Garth

#44 WTF on 05.25.22 at 5:33 pm

Yes

Sounds Reasonable,

Random Dave
Random Van Developers
Random predictions

I’m all in.

Did you ask your barber if you need a haircut too?

#45 Quintilian on 05.25.22 at 5:34 pm

#9 dave on 05.25.22 at 3:57 pm

“If the peak was $1.7M for a crack shack…in the future (24 months +) it will go far beyond $2.5M to $3M before another short correction period. This cycle has always repeated”

You are way off the mark on this one; Honest Realtor will confer if you doubt my analysis.

Your projections are underestimating, possibly because you didn’t include the demand that will be generated by the 300,00 Canadian Chinese coming back from Hong Kong.

You need to take into account the kind of economic activity that will be generated when they reopen all those Betamax repair shops..

Complicated calculus, and I won’t bother you with the complexities, but I estimate a crack shack will go for 5 to 10M easily, even if rates normalize to around 7%.

#46 This is the best joke ever on 05.25.22 at 5:35 pm

Putin gives in, Ukraine wins and the war ends. Odds of that: zero.

Hahahahahahahaha

#47 Overheardyou on 05.25.22 at 5:35 pm

I wonder if Canadians realize the rate hikes are to save them from further inflation, your mortgage come second to that. Also no one pointed a gun at their head to take on such massive debt.

#48 Tom from Mississauga on 05.25.22 at 5:39 pm

America closes the ring on China and ejects Canada from the Trans Pacific Partnership. We’re a trade competitor and military security freeloader making us a disposable in the new de-globalized world.

#49 espressobob on 05.25.22 at 5:40 pm

Fast money traders are proving to be the norm, while old school investors stay the course.

Playing commodities, meme or the like is simply a mugs game.

Just remember there’s someone on the other side of the trade who might know something you don’t.

Experience trains hard.

#50 crossbordershopper on 05.25.22 at 5:40 pm

in the last 100 years, 4 things ruined the world.
1) illegal drug use, it has killed and hurt so many people, wide spring supply and demand everywhere now with no benefit to anyone.
2) the chinese factories, they reduced all stuff made to just some junk, made cheaply overseas and dumped on us. so by having more we seemed to be better off, but poor quality. no pride of production anymore. I still have my grandmothers quilt made in the 50’s. its fine. took her like a month to make it.
3) the internet, now 8 billion weirdos can all meet and talk to each other and discuss things that were left in the far corner of our collective minds.
4) credit, once you taste debt you like it, just like our diets, the fatty, greassy oil salty sugary food, we all get fat because it tasts good. just like credit, more is better. until you have to pay for it.

#51 Joe Schmoe on 05.25.22 at 5:42 pm

#41 Overheardyou

“RE ONLY goes up!”

followed by: “what do you think of _____ stock?”

#52 ElGatoNeroYVR on 05.25.22 at 5:44 pm

Random thoughts:
Wow ,gas at $2 ,where is that ? I paid $2.43(premium) at Superstore a few days ago out there south of the Fraser. Now to be fair it was cheaper at Costco but who wants to wait half an hour in the lineup to save 5 bucks a week?
Nah ,buy the car you can affford to drive even at double the price of gas.
I do agree with other posters here that food inflation is more like 20% .
I also state that the reason not many people are panicking about mortgages going up is due to lack of travel. 10-20K per year in saved travel per family leaves a lot of money on the table.
As far as real estate correction and perceived loss ,once a top plateu has been established a floor will be reached and the/a rebound will happen where the old plateau will be the new floor ,kinda like the Elliot Wave if applied to RE.
Inflation will ensure that RE will goup as a trend on a decades long basis.
Buy to live in it and price doesn’t really matter as long as you can meet the payments comfortably.

#53 TheDood on 05.25.22 at 5:51 pm

#25 Soviet Capitalist on 05.25.22 at 4:28 pm
Here are my observations regarding financial situations of those who bought vs rent:

1. People with mortgages that I know:
– pay between 1000 – 2000 $/month
– have renovated their decks recently
– bought new SUVs
– bought Jet-Ski

2. People who rent:
– had to move
– their rent went up by 800 $/month

Everybody seem to be worried that an increase of 100-200 $/month for those in category 1 will have a ‘catastrophic’ effect on the ‘economy’. Nobody cares about those from category 2.
________________________________

New SUVs and Jet Skis? You make it sound like a RE purchase is the ‘road to riches’. I would be willing to bet that more than 50% who bought RE in Canada in the last 5 years will be paying off their mortgage well into retirement, especially if they’re filling their garage up with new trucks/SUVs/Jet Skis/Harleys/Trailers/Toys on leverage.

Oh, and while we’re at it, let’s build a new deck we can sit on for 2 months of the year, just ’cause the neighbors have one – but ours is newer!

RE is a roof over your head whether you rent or own. If you own, good for you, it’s no reason to rub it into the face of persons who rent.

#54 Toronto trans on 05.25.22 at 6:00 pm

What if Adam Vaughan might force the Bank of Canada to LOWER interest rates for the Conservative voter base?

https://financialpost.com/executive/executive-summary/posthaste-stop-hiking-interest-rates-canadians-want-bank-of-canada-to-press-pause-amid-deep-financial-worries

Ah, Adam’s a Lib. (With zero power.) – Garth

#55 Soviet Capitalist on 05.25.22 at 6:19 pm

#42 Brutal on 05.25.22 at 5:25 pm

2000$ / month sounds like a rental for a small apartment.
Someone with kids who wants a better school will be paying > 2500 $/month in rent. Please keep in mind that the rent only goes up while the mortgage only goes down every year.

People that I know with mortgages in the 1 000 – 2 000 $/month bought ~ 10 years ago or earlier. It would be rational to assume most homeowners fall into that category.

My feeling is that the only ones vulnerable to the tiny rate hikes we may see this year are those with multiple mortgages.
I heard there are people with 10-20 units.

I personally know of someone with 3 units.
Bought one for ~300k ~6 years ago, listed it recently for 700k, but would not accept any offers less than 900k.

The truth is, despite what Garth may try to convince you, the financial system is geared towards people getting mortgages. That is good for the banks and so there are heavy subsidies for homeowners and landlords.

#56 Arithmetic Error on 05.25.22 at 6:36 pm

Three in ten plus eight in ten makes 11 in ten. Back to basic arithmetic class!

Sure. Two outcomes occurring together. Makes total sense. – Garth

#57 Happy Gramps on 05.25.22 at 6:43 pm

It’s tiring listening to all the sobbing over price inflation. Hell if those complaining just didn’t gamble their money away, they would be better off. I don’t see any effect, for me, with this inflation. I take transit and bike, so gas as far as I’m concerned should go up to $5/litre, to help clear the roads. I want to see more declines in stocks, etc. so I can pick up a bit more at the distressed prices. My portfolio is still in a positive position.

#58 crowdedelevatorfartz on 05.25.22 at 6:45 pm

@#25 Sovietski Kapitalista
“1. People with mortgages that I know:
– pay between 1000 – 2000 $/month
– have renovated their decks recently
– bought new SUVs
– bought Jet-Ski”

+++

Yes .
The renovations and “toys” are “paid” for with loans called Household Lines Of Credit or HELOC’s.
Just another way the bank gets those mortgage payments back uppa uppa uppa.

Not to worry Sovietski.
The Kapitalista party is almost over.

I think this Summer will be the last kick at the debt can for several years as the interest rates continue to rise, the house prices continue to drop and the “toys’ are a bit too expensive….

Talk to us this time next year about the “rich” mortgage friends you have.

#59 Reality is stark on 05.25.22 at 6:49 pm

We need Paul Volker desperately today more than ever to annihalate inflation.
Let’s get ahead of the curve.
Current wage demands will make us uncompetitive.
Those with Helocs will need to pony up a few extra bucks, so what. Stop trying to borrow your way to prosperity.
Learn a lesson.

#60 Shawn on 05.25.22 at 7:17 pm

Food Deflation is Here:

A few weeks ago I reported on Water melons at Safeway for $17.99. (Right at the front door. Might as well have put a big sign saying, “This is an expensive grocery store” A couple weeks later they were $11.99.

Today $7.99. That’s a 56% reduction from the original crazy price. And it’s a 33% reduction from the $11.99.

I just bought a few things. Almost everything I bought was on sale. I passed on a few things that were priced too high. When everyone does this, prices tend to drop.

#61 Faron on 05.25.22 at 7:39 pm

What if an economic slowdown stifles demand just as or before the CBs are pumping rates and all of this inflation talk… proves wrong? Where would the collective you be then? Are you positioned for that possibility?

#62 Shawn on 05.25.22 at 7:42 pm

Costco reports earnings tomorrow.

It’s always a powerhouse. Probably another strong quarter. Share price got a little crazy at about 50 times earnings last month. Closer to 35 times now. Pay up for quality?

I had to pick Canadian Tire at about 8.5 times earnings. But have a little Costco too.

#63 Truth or Consequences on 05.25.22 at 7:46 pm

Go downtown. Look around. – Garth

Well that certainly proves it.

Why do I bother? – Garth

#64 Faron on 05.25.22 at 7:47 pm

Beto O’Rourke is on-point regarding the horrible killings in Texas yesterday. The guy is fired up and passionate unlike most Democrats in the US about, well, anything. Meanwhile the Cruzes and the McConnells complain about making the safety of their constituents a “political” issue. Wake up.

Lessee, state with some of the least restrictive gun laws and that falls at the bottom of spending in mental health services somehow, miraculously, has two of the deadliest mass shootings in US’s godawful history of mass shootings. No brainer.

Also interesting how the anti-women’s choice crowd harkened back to some kind of imagined constitutional originalism in the apparent R v W decision while wouldn’t consider harkening back to the clear historical intent of the 2nd amendment and it’s near irrelevance today.

#65 Faron on 05.25.22 at 7:49 pm

Oh, and it’s extremely likely the IDF killed Shireen Abu Akleh.

https://www.cnn.com/2022/05/24/middleeast/shireen-abu-akleh-jenin-killing-investigation-cmd-intl/index.html

Interesting that Al Jazeera, who had reporters that took the fire in that shooting as eye witnesses, “somehow” blamed the IDF. Almost as if they kinda knew who was shooting at them and where the bullets were coming from. I guess having reporters on the ground isn’t good enough for certain commenters here.

#66 Love_The_Cottage on 05.25.22 at 7:54 pm

#43 Earl on 05.25.22 at 5:33 pm
“The demise of WFH…”

You keep saying that but it’s not happening. My whole company is still working from home. The offices are open but coming in is voluntary and most choose not to. There is no indication this will end any time soon and my friends at other companies tell me the same thing.

Go downtown. Look around. – Garth
___________
Really? TTC and Go-Train parking lots are 1/3 full. TTC at 52% of pre-COVID levels. The office building that I could be working at is still at 25% at the most (I’ve been there 3 times this year). It’s not a ghost town, but to assume that what you’re seeing is the start of a 100% return is confirmation bias at it’s best. WFH was a long term trend before COVID and you continue to ignore this fact.

Actually TTC ridership at at 57% of pre-pandemic levels. That’s up from 14%. Like I said. Get out of your jammies and go downtown. It’s alive again. – Garth

#67 Boer on 05.25.22 at 8:00 pm

The Canadian economy is one big Ponzi scheme.

Kudos to the dudes who are planing to leave this colony for retirement.

Money talks in third world countries. I don’t want my life savings to be spent paying criminal defense lawyers because someone got woke and falsely accused me for spite.

It happens a lot, but armed men in uniform tell the accused not to post their ordeal online. Canada, eh lol

#68 Love_The_Cottage on 05.25.22 at 8:01 pm

#34 A01 on 05.25.22 at 4:57 pm
Great article Garth… I am still waiting to see cottage country implode once the banks start tightening up the LOC rules and rates spike.
________
Cottage country price increases were crazy, but one of the trends is boomers retiring and moving out of the city. I’d love to see prices drop in Muskoka so I can make the move myself but I don’t think it’s going to happen.

#69 Shawn on 05.25.22 at 8:11 pm

God?

The United States, arguably the most sophisticated and advanced nation on earth officially believes in god.

And officially they believe in this god to the exclusion of all other gods. You can’t make this stuff up. Whoops I mean wow, you CAN make up anything. The man with the nuclear codes is sure he has this god on his side.

They also seem to believe that “the founders” some 250 years ago should be given great deference regarding decisions today.

#70 You know Val on 05.25.22 at 8:22 pm

Garth, it’s Math Sreet not Main Street ..jysh.. there’s the Blow.!

#71 Flop… on 05.25.22 at 8:23 pm

If I had a dollar for every time someone asked if I was a Kiwi, I wouldn’t have to work anymore.

As long as I wasn’t paid in New Zealand Dollars, that is.

That’s like drinking 2% beer, and American Dollars are like 140 proof moonshine…

M47BC

“Kiwis shows the world the way with interest rates.

Adrian Orr, the New Zealand Reserve Bank governor, could be the last central banker in the world with a brain and a spine after hiking rates by 50 basis points on Wednesday.”

#72 crowdedelevatorfartz on 05.25.22 at 8:26 pm

Totally off the subject of Finances.

Has anyone heard of the possible Tao Herculaneum meteor storm on May 30-31st?

This may be a big zero OR the biggest meteor storm in over 100 years.
Earth may pass directly through the remnants of a Comet that broke apart back in the early 1990’s

https://www.townoflaronge.ca/the-meteor-explosion-of-the-new-tau-hercules-is-possible-on-may-30/

The Perseides meteor shower every year in August is about 10 meteors per minute.

If this comet tail shower is as good as some astronomers expect…..

Possibly 40 meteors PER SECOND. 2400 per minute. or over 100,000 per hour……..

Crazy if it actually works out.
I hope the ISS and most of Elons satellites are ready for this.

Or it could be a big zero. Like our Prime Minister.
Astronomers are very excited.

If you live on the east of North America 1am may 31st
If you live on the west coast 10pm May 30th

#73 Ustabe on 05.25.22 at 8:34 pm

#67 Boer on 05.25.22 at 8:00 pm

The Canadian economy is one big Ponzi scheme.

Kudos to the dudes who are planing to leave this colony for retirement.

Money talks in third world countries. I don’t want my life savings to be spent paying criminal defense lawyers because someone got woke and falsely accused me for spite.

It happens a lot, but armed men in uniform tell the accused not to post their ordeal online. Canada, eh lol

Funny but at almost 74 I have never, ever, not once had to pause and worry about having a defense lawyer handy.

Nor am I at all concerned about armed men in uniform coming for me.

Certainly less often now but all my adult life I have bounced pretty close to the edge on occasion too…but do enjoy your paranoia.

#74 DON on 05.25.22 at 8:36 pm

#61 Faron on 05.25.22 at 7:39 pm
What if an economic slowdown stifles demand just as or before the CBs are pumping rates and all of this inflation talk… proves wrong? Where would the collective you be then? Are you positioned for that possibility?

*********
Is the assumption that a slowdown would be short lived with no job loss?

#75 Linda on 05.25.22 at 8:50 pm

Rusty, Mabel and Rocky. Now that’s my idea of a threesome!

Yeah, life is tough for kids these days with everything going on. Back in my days, most of us knew how to hotwire a car from what we learned in shops class so this wasn’t really a big problem. Besides, the only interest I paid anyone back then was Johnny B Good in grade 13. He’s my hubby now and as a matter of fact he’s in the garage working on our latest vehicle that he picked up sometime last night.

#76 Midnight’s on 05.25.22 at 9:01 pm

DELETED (Anti-vaccine)

#77 Dr V on 05.25.22 at 9:23 pm

37 Dave

Scenario 1

Central bankers raise interest rates two or maybe three more times [A], real estate takes a dump [B], stocks swing wildly[C], inflation data moderates[D] and they announce a pause in August[E]. Odds of this: three in ten.

Scenario 2

Monetary policy stays aggressive, the benchmark rises [A], markets wobble[C] and late in 2022 cost-of-living numbers improve[D]. Further rate hikes are put on hold[E]. Stock markets roar higher. Housing values continue to drop [B] with mortgages above 5%. Odds of this: eight in ten.
————————-

So the only real diff I see is ” Stock markets roar higher”
(after wobbling) in scenario 2.

So not exactly “mutually exclusive”

You neglected the key point. Timing. – Garth

#78 Odds of stagflation? on 05.25.22 at 9:33 pm

Since we are pulling odds out of the hat, let me ask the blog dogs…

Odds of stagflation? I give it 8/10 (right at par with Garth’s goldilocks bet) What about you blog dogs?

#79 Ponzius Ponzius on 05.25.22 at 9:34 pm

#5 Brian on 05.25.22 at 3:50 pm
Apparently not. We used to have a sense of humour before we all got woke. – Garth

Watched the new Ricky Gervais comedy special last night on Netflix.

Spilled my coffee down my shirt front again laughing!
———————
I like Ricky.
So I started to watch and turned it off after five minutes.
He and Chappelle are getting tiresome.

#80 Froggy on 05.25.22 at 9:34 pm

Great post Garth only thing missing is where you think realestate is heading and how low l have my own thoughts and not too pretty 1. Inflation at 6+ 2. Rates heading to 6% 3. Deleveraging in other words a credit crunch. =50-70% Ty very much and no one should expect any less do the math

#81 Dr V on 05.25.22 at 9:37 pm

60 Shawn

“I just bought a few things. Almost everything I bought was on sale. I passed on a few things that were priced too high. When everyone does this, prices tend to drop.”
———————————————

Hi Shawn. I’m smellin’ complete BS on many items. I can understand some shipments being disrupted and
some items may not be regularly available, but the price swings you’ve noted dont indicate any real shortages, at
least not yet.

Our favourite coffee comes from central or south America via Invermere. Price per bag typically $12-13.
We check at least 3 retailers on-line and stock up when it hits $9.

#82 Caffeine Monkey on 05.25.22 at 9:48 pm

CNBC today: “Fed minutes released Wednesday indicated that officials are prepared to move ahead with multiple 50 basis points interest rate increases.”

If an increase so far of 0.75% has half the country worrying about how they’ll eat, I can’t imagine the apocalyptic result when the Fed pushes through multiple 0.5% increases.

#83 Doug t on 05.25.22 at 10:02 pm

#23 cuke and tomatoes

So just to clarify- you always say “we” agree or “we” Yada Yada- so do you “identify” as a “we” ? – or do you have a multiple personality complex and therefore say “we” – or perhaps you are a member of a cult that frequents this blog and must answer as a group? Very curious indeed

#84 mike from mtl on 05.25.22 at 10:05 pm

#66 Love_The_Cottage on 05.25.22 at 7:54 pm

Actually TTC ridership at at 57% of pre-pandemic levels. That’s up from 14%. Like I said. Get out of your jammies and go downtown. It’s alive again. – Garth

Public transit in N. America and beyond is in deep trouble. Be nice if somehow was different this time, the lefties have made their stance.

Sorry but no, the cube farms are dead.

Yes since last year the students are mostly back and the outdoor mall people too. But the 20th century 9-5 staple commuter is gone to a webex/teams meetings nearest you.

Hey back in old ’21 we could have followed actual science and realised some compromise but no… doubled down in late last year. WFH has been cemented to stay courtesy of your dear leaders.

This could have been avoided, but somehow political optics are more important it seems?

#85 Doug t on 05.25.22 at 10:23 pm

#72 fartz

Just remember … DON’T LOOK UP

#86 THE DANDADA on 05.25.22 at 10:47 pm

DELETED

#87 Puzzled in Mtl on 05.25.22 at 10:54 pm

Went downtown Montreal today. The place was packed with people (wearing pants!). Had to stand up in the metro at rush hour for the first time in ages.

#88 Ponzius Pilatus on 05.25.22 at 11:06 pm

#69 Shawn on 05.25.22 at 8:11 pm
God?

The United States, arguably the most sophisticated and advanced nation on earth officially believes in god.

And officially they believe in this god to the exclusion of all other gods. You can’t make this stuff up. Whoops I mean wow, you CAN make up anything. The man with the nuclear codes is sure he has this god on his side.

They also seem to believe that “the founders” some 250 years ago should be given great deference regarding decisions today.
————————-
You can’t become American President unless you are a Bible thumper.
Even Trump had to fake it.
Remember him holding the Bible upside down.
The States are more than half-way towards a Theocracy,
Another Republican majority and a Republican President will push it over the finish line.
God (if you exist) help us.

#89 Ponzius Pilatus on 05.25.22 at 11:21 pm

81 Dr V on 05.25.22 at 9:37 pm
60 Shawn

“I just bought a few things. Almost everything I bought was on sale. I passed on a few things that were priced too high. When everyone does this, prices tend to drop.”
———————————————

Hi Shawn. I’m smellin’ complete BS on many items. I can understand some shipments being disrupted and
some items may not be regularly available, but the price swings you’ve noted dont indicate any real shortages, at
least not yet.

Our favourite coffee comes from central or south America via Invermere. Price per bag typically $12-13.
We check at least 3 retailers on-line and stock up when it hits $9.
—————————
Why drink coffee when you can have CoffeeCrisp
Happy to say that CoffeeCrisp at Dolarama has not succumbed yet to the inflation bug.
Still 87cents.
One of my guilty sins.
So is European beer which is still holding nicely.

#90 bob on 05.25.22 at 11:29 pm

Housing is still FAR too high….lots of room to come down…i think the central bank was actually slow off the mark with inflation…playing catch up now.

#91 margaret on 05.25.22 at 11:40 pm

my daughter, duel citizen US/CDN, after I sent her part of your post today…says” Well I don’t agree on all those odds. I think Putin will have to back out.. They are trying to find a way through Diplomacy where Mr. Putin still gets what he wants but Ukraine will not lose their country. Odds 9-10.

And house prices will go down in some areas but not everywhere….and not fast.

Also there are a lot of people sitting on bags of cash because they sold their houses at top dollar; and no one wants to buy over priced toys..
There will still be cash buyers for homes keeping the prices up.

#92 T-Rev on 05.25.22 at 11:44 pm

I’ll put my money on the 8/10, except I think financial assets are going to take an extended breather here. I don’t see significant gains ahead. The best we can hope for is a B&D to progress at 6-10% over the next year, and there’s still lots of downside risk. I also don’t see houses continuing a big slide. The pain in bunnypatch will worsen as rates rise, then stabilize as rates do. In my prediction fivers likely stay under 6%. Yields are already stabilizing and have been for a month. So bunnypatch gets stung for the next 8 months and becomes a buyers market for an extended period. The core hoods in Toronto, Van, Montreal won’t give up much. All the flat bits between won’t give up much at all, given that they really haven’t appreciated much over the past couple years.

Anyway, the pain will be mostly in suburban south Ontario and the maritimes, where prices escalated the most and WFHers went seeking more space at relatively lower pricing. The rest of the country (like the other 98% of the land mass) will go on with little issue. In fact, if they gut the stress test to help soften the landing for Ontario, I could see the rest of the country actually seeing gains as soon as rates and inflation stabilize.

#93 THE DANDADA on 05.25.22 at 11:48 pm

So long SCAM ARTIST!!

Wu Blockchain
@WuBlockchain
·
54m
South Korean exchange Korbit held an emergency meeting and decided to terminate LUNA deposits, withdrawals and trading support, will end deposits on Tuesday, May 31 at 14:00:00 KST, and end trading on Friday, June 3 at 14:00:00 KST.

#94 T-Rev on 05.25.22 at 11:51 pm

I should add I’d like to see house prices drastically reduced- much like food, gasoline, and other types of energy, abundant necessities at cheap and affordable prices is where everyone should want to see housing. Only problem is we’re too far down the road of financialization of houses for that to occur without enormous pain on Main Street. So we’re in a damned if we do, damned if we don’t situation now nationally.

I just don’t think the crash is going to be a crash at all,, outside the pain in bunnypatch. And higher pricing is likely ahead for the remainder of the country once the macro economy stabilized a bit.

#95 Faron on 05.26.22 at 12:19 am

#72 crowdedelevatorfartz on 05.25.22 at 8:26 pm

Thanks for the heads up. I’ll keep an eye out.

One of my fondest memories is of the 2001 leonids in November. Watched it from a pasture in rural Alberta as earth flew through the dust cloud sending hundreds of meteors through the atmosphere each hour. It was spellbinding.

#96 Faron on 05.26.22 at 12:22 am

#74 DON on 05.25.22 at 8:36 pm

Is the assumption that a slowdown would be short lived with no job loss?

Barring shocks, any recession would be mild. But, it would decrease demand enough to dramatically slow inflation. I think, more or less, this is the plan of CBs.

#97 Russ on 05.26.22 at 12:25 am

Dr V on 05.25.22 at 9:37 pm

60 Shawn

Hi Shawn. I’m smellin’ complete BS on many items. I can understand some shipments being disrupted and …

Our favourite coffee comes from central or south America via Invermere. Price per bag typically $12-13.
We check at least 3 retailers on-line and stock up when it hits $9.
==================================

Hi Doc

I know what you mean. Kicking Horse has always been our back-up supply to Pot o’ Gold. Now that POG is retired we are Kicking Horse as #1.
Retail on the Island is 16 bucks a pound and last year the flyer discounts was typically @ 10 bucks. Now with inflation running at 10% we grab a few pounds when it hits the 11 dollar flyer price. Walk to market, no delivery.

Heading to Invermere on Thursday (and Radium too). Maybe we will check out the old garage where they started. My friend helped bag the coffee for shipment in the old days. He still has the jacket to prove it :)

As an aside,
The old joke here was they got the wrong name for Fairmont. It should have been “Rearview Mirror”.

Heading south from Radium Hot springs, within a 40 km section you have Invermere, Windermere and then…

Cheers, R

#98 THE DANDADA on 05.26.22 at 12:52 am

Where’s the Integrity in this corporations?

Twitter has agreed to pay a $150 million fine after federal law enforcement officials accused the social media company of improperly collecting and selling users’ personal data to advertisers over six years. https://n.pr/3lLTLQS

How often do we see corporations paying fines for breaking the law, and then nobody gets fired or goes to jail? If the CEO gets fired (ultimately it’s their responsibility) every time there is a fine over $25 million, don’t you think it would stop?

#99 Jake on 05.26.22 at 1:01 am

Trudeau and Freeland Liberals, NDP Singh and the rest of the left leaning socialists create conditions for high inflation, cost of living while it is not bad enough you are still getting low interest rates of 3% to 4% a year but the CDIC $100,000 deposit insurance limit is not increased since 2005. News flash, everything costs way more today than 17 years ago. The CDIC deposit insurance should be $200,000 at the minimum.

#100 Investx on 05.26.22 at 3:49 am

The Fed already starting to waver on its rate tightening:

“I think a pause in September might make sense,” Atlanta Fed President Raphael Bostic said on Monday.

#101 under the radar on 05.26.22 at 5:49 am

Real estate wealth has always been about the long game. Quick flips worked during the pandemic, but the pro’s buy low and sell high or add value. The newly minted big hat no cattle crowd decided to buy high and sell higher. The music stopped for them now.

We sold to a buyer paying 1.76 cap rate. How does this make sense?

#102 Jane24 on 05.26.22 at 6:59 am

Garth many times in the last few years you have called me out for telling people to keep some cash on hand you said it was a wasted oppotunity and to invest everything and use credit cards for cash. See you do need cash some times. The old Italian money under the mattress does come in useful.

31 degrees in Irsina, basilicata, Italy today and I am two in on the 2 euro cocktails with the free chips. I need Luca to order number three! Then onto the palazzo sun terrace. Just got my property tax bill for 2022. 900 euros for half a palace. Not bad. Get out of the snow friends. Italian accountant says I can live here for 5 % income tax per year on Uk and Canadian income as I am over 65. I really need to check this out.

#103 Immigrant man on 05.26.22 at 7:37 am

“A year ago, everyone said they wanted cheaper real estate. But they lied”
It’s highly likely that those who wanted cheaper real estate were potential buyers and the people complaining now are the potential sellers. Of course their interests would be opposite to each other.

#104 Cara on 05.26.22 at 8:02 am

In the last scenario … BOC pauses hike, stock market rallies … why would housing prices continue to decline? Would prices perhaps just pause as well or slightly incline? Isn’t this what happened after 2018 hikes … prices rebounded late 2019 heading into 2020 (precovid)?

Houses do not behave like stocks. The lag is substantial. – Garth

#105 millmech on 05.26.22 at 8:39 am

97 Russ
Republica coffee in Fort Langley check them out.

#106 TurnerNation on 05.26.22 at 8:43 am

The life of a Blog Dog is nasty, short and brutish


Just for fun Hey did everybody get their Monkeypox shot? It doesn’t prevent infection, or transmission, it lessens the symptoms. See I got it down! I am READY. Woo-Hoo ;-)


Are we being sold/set-up for more permanent rolling social and economic lockdowns in the Former First World Countries? This is not designed to be over. Your compliance is required Comrade.

.Monkeypox in Canada: PHAC now confirms 16 cases nationwide (ctvnews.ca)

.With California hit by new coronavirus wave, time to start wearing masks? Limit gatherings? (msn.com)


— Chile — almost back to normal! 2019 very soon? This sounds normal – three shots in order to sit down and drink a coffee A digital ID?

“Starting in June, Chile will block the “mobility pass” of any adult who received the first booster more than six months ago and has not received a second booster shot. Without the pass, Chileans are not allowed to go to restaurants, bars nor attend large events.” (fox13memphis.com)

#107 The real Kip (Ret) on 05.26.22 at 9:11 am

Odds of Fed/BoC bringing down an 8-9% inflation rate with a laughable 1% interest rate? 0%. They’re way behind the curve.

Pass the popcorn.

#108 crowdedelevatorfartz on 05.26.22 at 9:26 am

@#106 Turner Nation
“Just for fun Hey did everybody get their Monkeypox shot?”
+++
There are side effects to the vaccine.
Banana hording.
Fear of tree snakes.
Uncontrollable urges to pick phantom bugs from heads.
Cigar smoking.

#109 DON on 05.26.22 at 9:37 am

#96 Faron on 05.26.22 at 12:22 am
#74 DON on 05.25.22 at 8:36 pm

Is the assumption that a slowdown would be short lived with no job loss?

Barring shocks, any recession would be mild. But, it would decrease demand enough to dramatically slow inflation. I think, more or less, this is the plan of CBs.

*********

The original plan of the Fed was to wait and see as inflation was transitory…

#110 DON on 05.26.22 at 9:42 am

#91 margaret on 05.25.22 at 11:40 pm
my daughter, duel citizen US/CDN, after I sent her part of your post today…says” Well I don’t agree on all those odds. I think Putin will have to back out.. They are trying to find a way through Diplomacy where Mr. Putin still gets what he wants but Ukraine will not lose their country. Odds 9-10.

And house prices will go down in some areas but not everywhere….and not fast.

Also there are a lot of people sitting on bags of cash because they sold their houses at top dollar; and no one wants to buy over priced toys..
There will still be cash buyers for homes keeping the prices up.

*********
Does your daughter work for CREA or CNN.

If we believed the news Putin already lost the war. It was supposed to be over two months ago…according to the western media.

#111 Robert B on 05.26.22 at 9:46 am

–Putin gives in, Ukraine wins and the war ends. Odds of that: zero–

Kissinger has the answer to that……you remember him?
For the board…..A geopolitical consultant who served as United States Secretary of State and National Security Advisor under the presidential administrations of Richard Nixon and Gerald Ford.

Kissinger suggested that Ukraine surrender some of its territories to Russia, as it is land that is composed of mostly Russian-speaking individuals who have not been allowed to vote on whether they’d like to remain under Ukrainian rule……

#112 Robert B on 05.26.22 at 9:57 am

Raising rates will not stop inflation……..this is inflation caused by supply distruptions…

Volker raised rates in the 80s but it was the effect of the strong US dollar that caused DEFLATION that stopped inflation….

The world CBs printed tens of trillions of dollars then shut everything down. Inflation will be around for years…….
Slow and steady with a balanced portfolio….

#113 Quintilian on 05.26.22 at 10:21 am

https://openhousing.ca/2022/05/20/real-estate-fraudster-is-beneficial-owner-of-65-properties-transparency-registry-shows/

Real estate fraudster is the beneficial owner of 65 properties, transparency registry shows

“The Land Owner Transparency Registry shows that an individual by name of Xiao Dong Liu is the beneficial owner of 65 properties.”

So what? If his name was Edward Robinson, would it matter? (Of course it would). – Garth

#114 Yukon Elvis on 05.26.22 at 10:24 am

#102 Jane24 on 05.26.22 at 6:59 am
Garth many times in the last few years you have called me out for telling people to keep some cash on hand you said it was a wasted oppotunity and to invest everything and use credit cards for cash. See you do need cash some times. The old Italian money under the mattress does come in useful.

31 degrees in Irsina, basilicata, Italy today and I am two in on the 2 euro cocktails with the free chips. I need Luca to order number three! Then onto the palazzo sun terrace. Just got my property tax bill for 2022. 900 euros for half a palace. Not bad. Get out of the snow friends. Italian accountant says I can live here for 5 % income tax per year on Uk and Canadian income as I am over 65. I really need to check this out.
+++++++++++++

Please keep us informed. What are the health insurance costs?

#115 Shawn on 05.26.22 at 10:27 am

Consumer recession has started

Today’s retail sales report

“In volume terms, retail sales were down 1.0% in March.”

Jobs are driven by volume of course.

That’s down 1% seasonally adjusted versus the prior month.

Building material and garden equipment and supplies dealers down 7.7% in “current dollars” (which appears to adjust for average across the board inflation)

Convenience stores down 9.2%

This was March

Gasoline up 32% due to massive price increaase (adjusted down only by average inflation).

Something had to give and it is starting to show up in the numbers.

Canadian Tire stock is cheap but they will show weakness in sales this quarter most likely.

#116 Barb on 05.26.22 at 10:31 am

#98 THE DANDADA
“Twitter has agreed to pay a $150 million fine…”

—————————–
Fines are a deductible business expense.
Simple as that.

#117 Dharma Bum on 05.26.22 at 10:48 am

#103 Immigrant Man

It’s highly likely that those who wanted cheaper real estate were potential buyers and the people complaining now are the potential sellers. Of course their interests would be opposite to each other.
——————————————————————————————————–

Highly likely?

I agree, but would add that it is even more than that.

It is purely factual.

Humans are by nature disgustingly selfish creatures that are driven by self interest. Or at least what they perceive to be their self interest.

We want what’s good for ourselves and those we care about. To hell with everyone else.

So, you’re exactly right. If you’re already a homeowner, you want the prices of houses to rise. You hope and pray that it will be worth more than what you paid for it, and certainly worth more than the debt you owe on it. You also want the cost of that debt to remain low. Low carrying costs plus increasing equity. Win -Win.

On the other hand, if you do not own a home, you want houses to be cheap so you can buy one. You want to see the prices of house tumble so that you can finally get your foot in the door (no pun intended).

Of course, if you are fortunate enough to actually buy a house once the price falls to within the range of your affordability, you then want its value to rise, and your mortgage renewal rate to fall. Because it is NOW in your interest.

Humans are greedy evil swine.

They crave membership in exclusive clubs and want the clubs to reduce the restrictions of membership and open membership to more people.

Until they’re accepted into the exclusive club. Then they lobby for membership reductions and increased restrictions to maintain the “exclusivity”.

We love pulling the ladder up behind us.

Human nature.

Vicious.

#118 Ponzius Pilatus on 05.26.22 at 10:58 am

Walking around the hood this morning, I noticed another house has been taking off the market.
Appears that sellers are not yet ready for the new reality of lower prices.

#119 Sarcastic Sally on 05.26.22 at 11:08 am

As a Liberal who has no prospects of owning a home or having a stable career, one paycheck away from homelessness, this article reeks of xenophobia. The numbered corporations worked hard to get what they bought.

https://www.thestar.com/news/investigations/2022/05/26/vancouver-mansion-owned-by-developer-probed-for-money-laundering.html

If you worked hard, you too can own a mansion! Work harder!

#120 mj on 05.26.22 at 11:24 am

It’s possible that we get a half point increase in June. Then the US announces in July that they are in a recession, then pause in July until things become more clear with the economy.

Odds: one in 10. – Garth

#121 Russia Defeated on all fronts on 05.26.22 at 12:16 pm

DELETED

#122 Quintilian on 05.26.22 at 12:18 pm

“So what? If his name was Edward Robinson, would it matter? (Of course it would). – Garth”

Not at all, it matters not to me if his name is Smith or Jones.

The name of the offender makes no difference to me.
However, your response reveals a great deal.

(a) Folks are completely free to buy multiple properties if they have the means. It’s legal. This is how we get additional rental stock. (b) You used his full name, only of interest for its Asian roots, so it must have been consequential to you. But nice dodge. – Garth

#123 opee on 05.26.22 at 12:20 pm

Re home purchase cancellations. For those interested your agent/RE office, has the ability to notify you every day of cancelled offers, via email. Last 2 days I have had 4 notices.

#124 Quintilian on 05.26.22 at 12:32 pm

b) You used his full name, only of interest for its Asian roots, so it must have been consequential to you. But nice dodge. – Garth

Hey Garth is this name Anglo enough for you:
Carolyn Rogers

Bank of Canada deputy governor’s real estate investment portfolio grew by $548K during pandemic

https://openhousing.ca/2022/05/04/bank-of-canada-deputy-governors-real-estate-investment-portfolio-grew-by-548k-during-pandemic/

So what? She owns two rental properties that appreciated during the pandemic. Is there a point here or are you just full of envy today? – Garth

#125 Joe on 05.26.22 at 12:32 pm

The Bank of Canada maybe forced to pause interest rate hikes, because Canadians are complaining that they can’t afford an extra $50 monthly payment on the mortgage of their second home.

#126 THE DANDADA on 05.26.22 at 12:36 pm

#116 Barb on 05.26.22 at 10:31 am
#98 THE DANDADA
“Twitter has agreed to pay a $150 million fine…”

—————————–
Fines are a deductible business expense.
Simple as that.
————————————–

SHAME!
Trust and integrity out the window but yet were still encouraged to invest in these schemes. And Twitter hasn’t even made profit yet. Just a PONZI of cash and debt swirling around.

#127 Faron on 05.26.22 at 12:48 pm

#120 mj on 05.26.22 at 11:24 am

It’s possible that we get a half point increase in June. Then the US announces in July that they are in a recession, then pause in July until things become more clear with the economy.

Odds: one in 10. – Garth

IMO (a minimally informed O at that) the odds are even slimmer. An important part of central bank operations is messaging and consistent messaging. This builds in a sluggishness in their responses (such as their hesitancy in switching from labelling inflation as transient to persistent). Going from indicating 0.5% raises to cessation of raises would be a major messaging mistake that they would be hard pressed to make. Only thing that would cause it to happen is a surge in demand for short-dated bonds.

#128 Faron on 05.26.22 at 12:51 pm

Curious where the people (Nonplused, Sail Away) who were whining about temporary yacht seizures are now that Russia is appropriating Ukrainian agricultural products, railcars and fertilizers with zero intent or papertrail for the return or payment for such property.

It’s almost like you guys hold a double standard which is weird, because that never happens from trump loving conservatives. It’s almost also as if you hold some man-crush on Putin and Orban and the like. Strange.

#129 Faron on 05.26.22 at 12:56 pm

Took off the 2x levered long NASDAQ here and switching to broad market ETF. Lots of option-based squeezing happening on little liquidity and bitcoin isn’t signalling risk-on (yet). Inflation numbers coming out tomorrow are an added risk.

This all in the hedging portfolio. the robo just does its robo thing.

I suck at this. Don’t do what I do.

#130 Faron on 05.26.22 at 1:01 pm

#126 THE DANDADA on 05.26.22 at 12:36 pm

Twitter hasn’t even made profit yet.

It has, in fact, been profitable for some time. Maybe you should slow down and learn to read the basics of a balance sheet?

#131 Brutal on 05.26.22 at 1:10 pm

@#55 Soviet Capitalist

“That is good for the banks and so there are heavy subsidies for homeowners and landlords”

Um, you do realize that dividends come from banks right? So what’s good for banks is also good for portfolios. As proven this week by the big 5 reporting quarterly profits that exceeded expectations and as a result hiking their dividends.

Why would I want a mortgage when I can have those with mortgages pay my rent by having it come in the form of dividends from banks? Your mortgage interest just comes back to me as I invest in bank stocks. So thanks for supporting my lifestyle! Appreciate it.

Also, if you don’t believe what Garth says, why are you here then?

#132 jess on 05.26.22 at 1:12 pm

“A decade ago, Timothy Lane, deputy governor of the Bank of Canada, posed an intriguing question: Are commodity traders too big to fail? It was just after the 2008-09 global financial crisis, when policy makers were scanning the global economy looking for the next potential nightmare.Lane was among a small group of officials who worried it was hiding in plain sight — that the likes of Glencore Plc, Cargill Inc., Vitol Group and Trafigura Group, the secretive giants that underpinned global trade in natural resources, represented a systemic financial risk.“Could the failure of one of the large trading houses cause serious disruption in the commodities markets?,” he asked in a speech in September 2012, arguing their size raised “the possibility” they were “becoming systemically important.

https://www.washingtonpost.com/business/energy/too-big-to-fail-risk-looms-over-commodities/2022/03/16/d6bc2ef0-a4f6-11ec-8628-3da4fa8f8714_story.html

https://www.bis.org/review/r120926b.pdf

What about those commoditiy traders ?Busy March at Russian ports
https://www.spectator.co.uk/article/the-commodity-kings-have-traders-finally-discovered-a-moral-compass

Information on the charterers of tankers from financial data provider Refinitiv
“Historical data also from Refinitiv suggests that this was Vitol’s busiest March chartering vessels in Russian ports in at least eight years, and its fourth busiest month since January 2015 (as far as the data goes back). So much for solidarity with the Ukrainian people.
Commodity traders—a small group of companies with little public profile that dominate the world’s supply of natural resources including oil—were doing their bit. According to data seen by Global Witness, several commodity traders were busy transporting more oil than normal.

https://www.globalwitness.org/en/campaigns/stop-russian-oil/busy-march-at-russian-ports-for-some-of-the-worlds-biggest-oil-traders/
Too-Big-to-Fail Risk Looms Over CommoditiesAnalysis by Javier Blas | Bloomberg
March 17, 2022 at 7:48 p.m. EDT

Javier Blas, Chief Energy Correspondent at Bloomberg News and co-author of The World for Sale, a deep-dive into the colourful history of the trading houses, wrote last month in The Spectator that certain commodity traders had “probably done more to help Putin remain in power than anyone else in the international business community since the West imposed sanctions on Russia in 2014 over the annexation of Crimea”.
lookback :

Vitol was embroiled in a scandal surrounding the UN oil-for-food program and admitted to paying $13 million in bribes to Iraqi officials under Saddam Hussein to win oil supply contracts. More recently, Vitol agreed to pay $164 million in settlement with US and Brazilian authorities, having admitted that it paid bribes in Brazil and other Latin American countries to boost its oil business.In 2021, one of Glencore’s former traders pled guilty to money laundering and violation of the US Foreign Corrupt Practices Act. While working for Glencore he had bribed Nigerian government officials to secure lucrative oil contracts.

Violation Tracker Agency Summary Page
Agency Name:
Commodity Futures Trading Commission
Penalty Total since 2000:
$13,452,683,397
Number of Records:
685
https://violationtracker.goodjobsfirst.org/prog.php?agency_sum=CFTC

#133 Quintilian on 05.26.22 at 1:27 pm

#127 Faron on 05.26.22 at 12:48 pm

“Only thing that would cause it to happen is a surge in demand for short-dated bonds.”

There is nothing to stop the CB’s, through market operations, to increase demand for short-dated bonds.

#134 jess on 05.26.22 at 1:28 pm

The divide and rule strategy came first, and then stigmatisation and criminalisation of the communities in order to try and avoid being held accountable,” said Williams, executive director of the nonprofit Environmental Rights Action.

The legal case was formulated with help from the public through so-called “crowd pleading” – a hybrid of citizen science and crowdfunding. In the end 886 individuals, including a five-year-old boy, joined as co-plaintiffs. But this was not a traditional class action involving a group of victims having to prove they had been harmed; rather a motley crew of ordinary, worried citizens demanding action to prevent harm.

“We went to court on behalf of the greater good – it’s a new type of campaigning,” said Minnesma. The plaintiffs filled the courts, and the hearings were also livestreamed. “It was about the judges having to look into people’s eyes as they decided, knowing that the world was watching.”

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

Finally, in January 2021, The Hague court of appeal ruled that Shell could not hide behind its local operators, but rather that the company has oversight and control over its subsidiary and therefore a duty to prevent oil spills.

It was the first time Shell had been held accountable in a Dutch court, which has still to rule on compensation for the affected communities. Shell recently reported its highest ever quarterly profits, $9.13bn for the first three months of 2022.
https://www.theguardian.com/environment/2022/may/25/how-two-goldman-prize-winners-won-landmark-rulings-in-dutch-courts

#135 Ponzius Pilatus on 05.26.22 at 1:44 pm

128 Faron on 05.26.22 at 12:51 pm
Curious where the people (Nonplused, Sail Away) who were whining about temporary yacht seizures are now that Russia is appropriating Ukrainian agricultural products, railcars and fertilizers with zero intent or papertrail for the return or payment for such property.
————————————-
As per Der Spiegel:

Reichster Mann der Ukraine will Russland wegen Verlusten verklagen

16.35 Uhr: Der reichste Mann der Ukraine will Russland wegen hoher finanzieller Verluste nach der Bombardierung von Stahlwerken in Mariupol verklagen. »Wir werden Russland auf jeden Fall verklagen und eine angemessene Entschädigung für alle Verluste und entgangenen Geschäfte fordern«, kündigt Rinat Achmetow, Besitzer des größten ukrainischen Stahlherstellers Metinvest, in einem Interview mit dem ukrainischen Medienportal mrpl.city  an: »An diesen Fragen wird bereits intensiv juristisch gearbeitet.«
17 bis 20 Milliarden Dollar seien durch den Angriff Russlands verloren gegangen

#136 P Poilievre on 05.26.22 at 2:39 pm

Oh what a tough night yesterday at the French debate!

Never have been booed that much…

How come astute voters have been admitted to attend?

#137 Diamond Dog on 05.26.22 at 3:14 pm

Monetary policy stays aggressive, the benchmark rises, markets wobble and late in 2022 cost-of-living numbers improve. Further rate hikes are put on hold. Stock markets roar higher. Housing values continue to drop with mortgages above 5%. Odds of this: eight in ten. – Garth

I like this, putting odds on it. I agree with earlier odds you’ve given and these odds of what you are saying except for stock markets roaring higher. What if affordability does not improve or does but only modestly?
For things to really improve, we need either inflation or rates to come down or both. What are those odds? We know where rates are headed near term.

How long will sticky high inflation be around for considering the levels of stimulus… I’m thinking most of 2023 (El Erian is also thinking that), potentially even into 2024 meaning we may not see the cost of living meaningfully improve until then. After all, CB’s were buying bonds with rates near zero as late as March 2022. It’s a probable 18 month to 2 year lag to reverse the inflationary effects of monetary stimulus and CB’s are late to the game.

One would think that if the Fed was stopped in its tracks to raise rates toward or past neutral from systemic risk or shock to the credit side, that the stock markets would respond in kind and do well because the Fed would actually have to reverse their course and lower rates. The reasoning is clear, certainty of no more rate hikes and a reversal of policy back to stimulus. Unfortunately, markets would also have to digest and price in exactly why CB’s can’t further raise rates to tame inflation (systemic credit risk or shock). If inflation was still high and earnings disappoint, down stock markets go perhaps by a lot as reality further sets in.

We are coming off an everything bubble (I will remind, commodities are the last to fall). It’s human nature to complain when things turn adversarial but really, like you say Garth, no one was complaining riding profits up to the peak. I think these are early innings of a downward cycle. I think it would also be unwise to believe another bull run is just around the corner with inflation running so high and rates forecast to rise at least 1% over the next couple months and likely 2% by September with valuations so high across the board. I’m thinking the Fed will take rates past neutral and induce a recession this fall. I think we’ll be in a recession by Q4 if not sooner. We could also be looking at back to back recessions whenever they start.

Lets say systemic credit risk does appear, this is the only reason the Fed gave in their May minutes to deviate from raising rates. I think the system will handle it through September but if or once they go past neutral, the economy will fall apart first on growth and then we will see systemic risk or breakage on the credit side. Let’s be clear on what that means, it doesn’t mean a corporation here or there closes their doors, it means entire sectors are falling apart on the credit side. Maybe its small to mid size banks in the U.S. or a disruption in housing or lending (this is middle innings) but that risk once an economy slides into recession, if it’s led by bankruptcies, it means hard times.

Perhaps something also breaks internationally on the credit side. Begins with EM’s and permeates. This risk is also growing considering Chinese property values unwinding and Europe sliding into a recession due to war, the potential for international systemic risk is growing. But unless something like this develops or systemic credit risk spikes domestically, can the Fed deviate from raising rates? I think not.

If something broke on the credit side at any time late this year or next while inflation is in high single digits and the Fed unable to do anything about it… the markets would have to price it in.

Like you say, we should take stock of our past good fortunes and bunker in for challenging times because they are now here. If I’m unfortunately right, high inflation will be around for a while. This all by itself, with the level of debt and the limited ability of the Fed to do much about it, (they’ll hit the wall at 3.5%) throw in some lost jobs in the mix and some defaults, this is just cause to worry us all. Unfortunately, its all too easy to imagine happening at this point.

Anyway, I’m out of time, still have a business myself to run, enjoy your day everyone.

#138 Shawn on 05.26.22 at 3:24 pm

Qunitillian makes a disgusting weak jealous comment

#124 Quintilian on 05.26.22 at 12:32 pm

Bank of Canada deputy governor’s real estate investment portfolio grew by $548K during pandemic

*************************************
Wow, jealous much?

The depths that people sink to to try to find a conflict of interest or whatever are sad. As if a successful executive is not allowed to own an investment property.

You prefer people with no investment experience running the bank of Canada?

#139 Faron on 05.26.22 at 3:44 pm

#135 Ponzius Pilatus on 05.26.22 at 1:44 pm

Seems as likely to succeed as me suing you for a lederhosen infraction. Russia’s approach to Ukraine is 100% lawless.

#140 crowdedelevatorfartz on 05.26.22 at 3:47 pm

@#135 Ponzies pales
“Russia is appropriating Ukrainian agricultural products, railcars and fertilizers with zero intent or papertrail for the return or payment for such property.”

+++
The Russians are looking more and more like Nazi ‘s .
Invading, plundering, etc.

#141 Sail Away on 05.26.22 at 3:50 pm

#128 Faron on 05.26.22 at 12:51 pm

Curious where the people (Nonplused, Sail Away) who were whining about temporary yacht seizures are now that Russia is appropriating Ukrainian agricultural products, railcars and fertilizers with zero intent or papertrail for the return or payment for such property.

It’s almost like you guys hold a double standard which is weird, because that never happens from trump loving conservatives. It’s almost also as if you hold some man-crush on Putin and Orban and the like. Strange.

———-

It is non-binary, as the world often is. Yes, I disagree with the yacht seizures, and also yes, I disagree with Russia’s seizures.

Expand thy mind, oh thou tunnel-visioned.