Icarus

Recall what we told you yesterday about ignoring the news this week?

Then why are you reading this? Shoo. And turn off that damn BNN.

For those addicted, morose and masochistic souls, here we go…

Our bank rate has rocketed higher while the key inflation number out of the US sucks. Both more than anticipated. Economists figured American CPI would jump to 8.8%, but came in hot at 9.1%. The biggest number since way back in 1981 – which explains why anyone born in the last forty years is wondering where all this is headed. Bond yields jumped on the news. The US$ gained even more ground and a rate hike of three-quarters of a point for the Fed later this month was cemented. The odds of an historic 1% hike are running at 30%.

In the land of beavers and moose, our CB shocked with a full 1% increase, the first one of that size in decades. This is effectively a 66% increase in the benchmark lending rate, which rises to 2.5%, while chartered bank prime goes to 4.7% and HELOCs smash the 5% mark, taking variable mortgages along for the ride.

Predictably, stocks dropped. Higher rates mean strained consumers, which ultimately curtails growth. How much higher inflation goes of how much lower markets dip is unknown. But increasingly there is talk that both the peak and the trough are within sight.

Oil and energy prices have stopped climbing. The labour market is firing on all cylinders. Consumer spending remains robust. And on Thursday we’ll see how corporate earnings look as US banks report Q2 results. But we have to remember that inflation and rising rates come from an overheated economy, not one on life support.

Lots of negatives, too. The Ukraine/Ruassian war drags on and will continue for months, it seems. Covid’s coming back. Fourth doses are ramping. China teeters on lockdowns. And this time politicians will have a way harder time getting people to avoid risky behaviours and wear masks.

All this means our bankers are not finished, even with the 1% jump today:

With the economy clearly in excess demand, inflation high and broadening, and more businesses and consumers expecting high inflation to persist for longer, the Governing Council decided to front-load the path to higher interest rates by raising the policy rate by 100 basis points today. The Governing Council continues to judge that interest rates will need to rise further, and the pace of increases will be guided by the Bank’s ongoing assessment of the economy and inflation.

In Canada housing is a vulnerability. We went nuts, flew too close to the sun and are being scorched, Icarus-like. The FOMO and market meltup of February and March now seem absurd, just 100 days later. Prices have fallen dramatically in Bunnypatch, with the big cities starting to erode with so much more coming. Today’s 100-pointer by the Bank of Canada makes it clear recent mortgage hikes were no blip, will not be reversed next year and houses cannot remain at present valuations, lest the entire market freeze.

Thus, sellers who were holding out for a return to Pandemic Pricing will come to understand the new reality. Listings will jump in the next two or three months, with five-year mortgages hitting 6% and a rapid de-escalation in asking prices will surely result.

Says mortgage broker/rate guru Rob McLister:

With a stunning 9.1% US CPI print, likely 8%+ ahead for Canada & growing risk of an inflation semi-panic, the BoC had to show who’s in charge. Markets are now pricing in a 70% chance of another 75 hike on Sept 7

Meanwhile, consumer confidence in Canada is crashing. Down to Covid-crazy March of 2020 levels. This is because the largest cohort in our population has never experienced an inflationary environment like this, and truly believed interest rates could never rise, given the gobs of debt they’ve been swallowing. They thought the government controlled the price of money, and believed dodgy politicians when they assured homeowners that “we have your back.”

They don’t. They can’t. Now current conditions make the under-40 set think we’re living through economic End Times. The indebted among us are in their worst nightmare. The cost of borrowings is on the rise, and the asset everyone stretched to acquire is losing value daily. These are the people who have seen real estate rise in value every single year of their lives. Many are incredulous.

By the way, this is the month average house prices in some markets – like Toronto – turn negative, year/year. In other words, those hugely-leveraged, costly-to-own assets everybody craved and fought bitter bidding wars to obtain, will have gained nothing. Less than nothing. An absolute loss, when inflation is counted.

We told you. Rates would rise. Housing would fall. A one-asset strategy meant risk. And debt is not your friend.

About the picture: “I’d like to pass along a dog photo for you and greetings from the Siskiyou Outback trail races that traverse the Pacific Crest Trail along the California/Oregon border,” writes Faron. “Each year the race features a Shakespearean quote (Google the Ashland Shakespeare festival to understand why) that is printed on the race shirt. This year’s:

“Some are born great,
Some achieve greatness,
And some have greatness
thrust upon them.” –Malvolio, Twelfth Night.
The shirt’s colours are blue/gold. The implication is obvious. Anyhow, here’s a picture of some pups who narrowly escaped the closure of the time warp. Sometimes a time warp is exactly what’s needed. These kind of attitude (levity, fortitude) are what’s needed the most.”
.

185 comments ↓

#1 macroman on 07.13.22 at 10:27 am

Goodnight Canada.

#2 Tacit Capital on 07.13.22 at 10:28 am

Time to open those Spam cans and live the frugal life, eh?

#3 Interstellar Old Yeller on 07.13.22 at 10:29 am

Way to go Garth, so fast out of the gate with a blog post after the announcement!

Husband noticed my reaction to the rate hike announcement and I got to explain what a big deal it was.

I will now turn off the news, as you advised.

#4 yvr_lurker on 07.13.22 at 10:32 am

We told you. Rates would rise. Housing would fall. A one-asset strategy meant risk. And debt is not your friend.
——

Good post, and everyone should be on board now that taking a highly leveraged position has huge risks. However, let’s be a little humble here. Nobody would have predicted back in December what inflation would have run this hot (causing rates to need to rise this high and this quick). If I am mistaken please show us the article where some “expert” predicted this series of events, as well as the double digit decrease in a B+D portfolio over a 6 month period. The magnitude of this was not on anyone’s radar it seems.

It finally turns out that your warnings issues over the years has come to fruition. However, for those who were able to buy a home in YVR around 2010 with leverage and taking big risks (against the warnings of that time) were the winners in this high risk/high reward activity. Prices are not going down to those levels. Win some/lose some, but those who are last onto the ladder (buying within a few years ago) will feel the heat.

It is likely that we will be talking about a rather significant recession within 6 months…

#5 TurnerNation on 07.13.22 at 10:33 am

Media is picking up what I posted here two year ago! That, every system designed to protect us has been turned against us.
They even FIRED tens of thousands of health workers.

Some say this man-made crisis will persist until paid, private health care is rolled out. We’ll be screaming for it. If not bleeding.
Build Back Better right??

https://nationalpost.com/news/politics/as-canadas-health-system-burns-trudeau-and-the-provinces-debate-the-firehose

https://www.cbc.ca/news/canada/toronto/ontario-hospital-emergency-room-family-doctors-1.6516769

FACT: The hospitals never were overwhelmed in fact the Field Hosptials built at great expense in Hamilton, Toronto, Vancover were TORN DOWN never used.
Take everything our leaders tell us and flip it 180 degress to make sense.

#6 Overheardyou on 07.13.22 at 10:33 am

Some of us enjoy your commentary regardless if it’s good or bad news Hon. Mr. Turner!

#7 Chris on 07.13.22 at 10:37 am

Good times ahead for those in debt up to their eyeballs! I can’t believe the party seems to be coming to an end. For most of my adult life, (I finished college in 1994) it seems to have been boom time with a only a couple of slowdowns. I almost believed it was different this time! We are well prepared for an economic slowdown.

#8 Andrewski on 07.13.22 at 10:37 am

Canadian bank stocks immediately dropped after the CB interest hike announcement, so maybe it’s a good time to increase your position, as those tasty dividends just continue to pump out.

#9 Robert S. on 07.13.22 at 10:40 am

Here’s a thought Garth. Paying people to stay home for 2 years has predictable inflationary consequences, which we are living. Now we need to add on 2 extra years on top of this year of work to make up for it. So if you can work twice as fast this year, sustainably to double up, then Justinflation will work itself out. US and all other lockdown nations did this too…and to accomplish what? No lockdown nations didn’t stop the virus either. But at least we ‘looked like we did something.’ Inflationary policy. Supply chain issues. Supply, supply, supply. And dosed with cash. By design, accident, or through ignorance.

How is zero covid strategy working out for China? Won’t turn out well for them either.

#10 Pylot Project on 07.13.22 at 10:41 am

Oh come on, the Time Warp is closed? It’s just a jump to the left, and then a step to the right. Or did the pelvic thrust simply drive them insane?

Staying on topic, my wife and I are soooo glad our townhouse is paid off (she’s the smart one). No interest rate increases to worry about. This is like watching a train wreck in slow motion.

Now back to my regular broadcast day of a Jordan Peterson book on the deck.

#11 The Original Jake on 07.13.22 at 10:43 am

The Wonderful O’Leary not looking so wonderful today with his 1/2 pt prediction.

#12 The Original Jake on 07.13.22 at 10:45 am

Have a sale closing in 2 weeks… crossing my fingers.

#13 Captain Uppa on 07.13.22 at 10:45 am

Beautiful day outside. Go enjoy it!

#14 A01 on 07.13.22 at 10:46 am

Wow, lots of people with tons of debt which is rising rapidly. This is going to get pretty ugly.

#15 Søren Angst on 07.13.22 at 10:49 am

ANGST well described today Garth.

Lot’s more to come.

A mess.

#16 DebinVan on 07.13.22 at 10:49 am

Oh how we pined for the days of “transitory inflation”. Bwahaha, if you believed that back then you’re being suckered with jobs and growth numbers now.

#17 Søren Angst on 07.13.22 at 10:51 am

#55 MaggieB yesterday

Mandatory in Italia not optional as in Canada.

Means baked in ++ Revenues for mRNA Vax Vendors to come.

Expect rest of EU will follow suit as Covid surges here. ECDC has recommended for the 60+, frail, etc. a 4th dose today.

My Comment was a heads up for single stock investors not as a vax reference point for your husband *.

https://www.investors.com/news/technology/vaccine-stocks-novavax-moderna-biontech-hit-fresh-highs-here-is-why/

BTW, Covid deaths still very low in France, Italia < 2 per million. I will get my 4th jab because Gov Italia wants me to. 4th jab registration with the FVG Region Health Authority starts tomorrow.

—————–

* In Italia vaxing is (and was) done orderly, not ad hoc, DIY, you're on your own, as in Canada.

#18 Upenuff on 07.13.22 at 10:53 am

What goes up must come down….until it starts to go up again, those under 40 years old and in the housing game have never seen this before and it is causing them concern. Perhaps no more daily trips to Starbucks and a weekly night out on the town because they deserve it…..

tighten up the belt….

#19 Yukon Elvis on 07.13.22 at 10:56 am

#8 Andrewski on 07.13.22 at 10:37 am
Canadian bank stocks immediately dropped after the CB interest hike announcement, so maybe it’s a good time to increase your position, as those tasty dividends just continue to pump out.
++++++++++++++++

I agree. I will be backing up the truck on a few those at the end of July when I do my self imposed mandatory quarterly buy.

#20 Søren Angst on 07.13.22 at 10:57 am

#56 NoName yesterday

Start charging for entrance to Venecija…

————–

Don’t even get me going. But, you did. PREDICTABLE DIRGE follows (I even take a swipe at Garth’s Lunenburg (sorry Garth, it’s just a flesh wound)…

Residents of the Region of Veneto, that Venezia is in, will not have to pay or people that work in Venezia and students. I have to pay as I live in the FVG Region.

Comes into effect Jan 16, 2023.

How it will work, the payment (€3-10 depending on which day):
https://www.qualitytravel.it/accesso-a-venezia-dal-2022-ingressi-a-numero-chiuso-e-a-pagamento-ecco-quanto-costera/99166

Due to OVERTOURISM. They have something like 20K unregistered stays per night on average (7.3M/yr = 1/3 of all tourists Canada gets in 1 year). Maximum daily admissions will be capped at 40K/day, excludes registered admissions (e.g., at a hotel, workers, students, Veneto residents, etc.).

AirBnB et. al. crowd, time to PAY the PIPER. “I furbetti” if caught not having paid will be subject to a €50-300 fine. They want to get rid of “turismo selvaggio” and “black” overnight stays in unregistered structures.

In 2011 the City of Venice tracked tourist visits (non-Italian):

83K per day
30.38 million per year

So much for the “most visited city” in the World of Bangkok at 22M per year or Hong Kong at 29.3M (dubious). Or London, UK at 19.6M visitors (a lot of them flying there because they have NO other choice).

Bangkok or Hong Kong, NEITHER of them is a UNESCO World Heritage City.

Venezia and its Lagoon are lumped together as ONE UNESCO World Heritage City.

Arguably Piazza San Marco, Basilica di San Marco, Palazzo Ducale, Ponte dei Sospiri [other ponti: Rialto, Scalzi, Accademia], Canal Grande, Murano, Burano, Peggy Guggenheim Collection, Arsenale di Venezia, Gallerie dell’Accademia (where Leonardo da Vinci’s Vitruvian man is), etc. would be world heritage city sites on their OWN if located in a different city.

[Harry’s Bar would be as well if I had a say, invented the Bellini]

By comparison, this is a 🍁 World Heritage City – Old Town Lunenburg:

https://whc.unesco.org/en/list/741
[Pordenone where I live dates back to Roman times & was Venetian “Cottage Country” for centuries, for example Roman Castello di Torre 1st century BC: https://www.gentepocket.it/sulle-tracce-dei-romani-a-pordenone/ and Venetian Ca’ Settecento 1542 AD: https://www.casettecento.it/storia/%5D

——————

Venezia tourism numbers are from 11 years ago. It has only gotten worse, THAT I can attest to (+200 visits by me in the past 7 years, I go there for passeggiate, festivals, events, catch a plane at VCE, etc., 1hr 15min by train).

Something had to be done to make Venezia less travelled and stomped into the Lagoon by “I turisti”. I will visit La Serenissima less come next year, out of protest than for the cash.

Still and in the World, she remains:

Venezia Unica.

#21 john on 07.13.22 at 10:59 am

Someone’s out to lunch in Edmonton. Journal today is saying house prices ae rising!!!

#22 alexinvestor on 07.13.22 at 11:05 am

Looks like the banks are going to start raising their loan loss provisions. If we get a 30-40% sustained drop, people might very well be tempted to start walking away from their mortgages and declaring bankruptcy.

#23 Victor Llearna on 07.13.22 at 11:06 am

Those sheep that flocked into buying houses last few years and ran the prices to the sky are about to learn a valuable lesson. Today’s 100-pointer will leave them fleeced.
Maybe they will all occupy parliament hill and demand Trudeau lower interest rates.

#24 Kurt on 07.13.22 at 11:12 am

Re: CBR -ABFT. The rate has been too low for years, and now the bank has to make up for its sloth. At least they are doing something now, instead of waiting for the currency to collapse. Now all we need is for our government to WTFU and reign in program spending while raising taxes in order to service the debt. Putting the GST back to where it should be (7%) would do the trick – and pigs will be allowed into Class A airspace on Friday afternoon. Harper was a total vote-buying Trudeau when he dropped it to 5% – it was initially set at 7% for a very good reason. Sigh.

#25 I’m stupid on 07.13.22 at 11:14 am

Hoping for a shallow recession is a pipe dream. I’m not a pessimist but the writing is on the wall. For the last 20 years we’ve bought houses, took helocs to finance extravagant lifestyle’s. Life was good but now the bills need to get paid. Paying those bills will take a long long time so please tell me how consumer spending will recover to prop up the economy once it turns negative?

I’m stupid so maybe I don’t see it.

#26 Omicron Kenobi on 07.13.22 at 11:14 am

Have you forgotten about me and my relatives, Garth?

My new variant BIL will make you sweat at night, not just while reading the news :)

https://www.thestar.com/news/gta/2022/07/06/ontario-likely-in-new-covid-wave-driven-by-ba5-subvariant-science-table-says.html

#27 Linda on 07.13.22 at 11:31 am

Flashing on the ‘Let’s Do the Time Warp Again’ scene in Rocky Horror:)

I still don’t understand how the official inflation rate in the USA is higher than the one posted by Canada. Their population is 9 Americans per Canadian; the cost of food, shelter, utilities, fuel, transportation etc. is lower than Canada’s yet their inflation rate is higher? How is this possible? Now, maybe when Canada gets around to releasing our official number for June 2022 our inflation number will match or exceed the one posted by the USA, but I’m not betting on it. I’m figuring something in the range of 8%+ will be the official number – can’t be lower, the numbers being published now aren’t believable as it is.

#28 McSteve on 07.13.22 at 11:32 am

For those of us with fixed rate mortgages…who’d have ever thought GICs would become a reasonable alternative to paying off your mortgage?

#29 Terry on 07.13.22 at 11:34 am

“They thought the government controlled the price of money, and believed dodgy politicians when they assured homeowners that “we have your back.”

“They” lie to everybody! “They” being the so called experts, managers, supervisors, corporate and government entities, politicians, bankers, financial experts, the media, the medical quacks, the police etc….As for me?………I always tell the truth EVEN WHEN I LIE!

When you really think about it almost everything in life is a fraud!

#30 Old Man River on 07.13.22 at 11:35 am

@ Turner Nation: I doubt we’ll be “screaming” for private healthcare, especially those of us “lucky” enough to have spent time living in the good ol’ USA. We’ll definitely be “bleeding” for it.

FYI, the money is there. We’re one of the wealthiest nations on the planet. Trouble is our fearless leaders would rather serve their corporate overlords rather than put our healthcare tax dollars to work.

In Ontario, there’s this from last fall:

QUEEN’S PARK — Doug Ford withheld $5.6 billion that should have been used to protect Ontario families from COVID, put more nurses and PSWs into health care and make schools and daycares safer, say NDP Deputy Leader Sara Singh and NDP Finance critic Catherine Fife.

The newly released 2020-21 Public Accounts of Ontario show the Ford Conservatives massively underspent its own budget for critical services, including withholding $3.5 billion budgeted for health care.

https://www.catherinefife.com/ford_held_back_5_6_billion_that_should_have_been_used_to_protect_ontarians_ndp

*

It goes to show you that the recent outcry from provincial premiers asking for more federal HC dollars is a load of BS.

So, as interest rates continue to rise, we’ll be faced with the age old question: public or private healthcare? Just look south of the border to see where private will take us.

PS — As for Canadian RE, I echo Garth: we’re delusional.

#31 DON on 07.13.22 at 11:41 am

#4 yvr_lurker on 07.13.22 at 10:32 am
We told you. Rates would rise. Housing would fall. A one-asset strategy meant risk. And debt is not your friend.
——

Good post, and everyone should be on board now that taking a highly leveraged position has huge risks. However, let’s be a little humble here. Nobody would have predicted back in December what inflation would have run this hot (causing rates to need to rise this high and this quick.

*********

There were lots of voices warning of the consequences of inflation over the last 12 months…but nobody listened or thought it was possible. Recency bias to the extreme, though hard not to get sucked in by it for whatever reason(s).

#32 Laura C on 07.13.22 at 11:46 am

We just listed our home for sale https://home.ca/mississauga-real-estate/7153-appletree-lane but in this market no seller really wins unless they’re moving to another country, or downsizing significantly. Sure we’re going to make some money from selling our current home, but prices are still high so we’ll be putting that profit back into the next house. Maybe it’s best to wait, but not sure if we can wait and rent for 1-2 years to see how the market does. That might be the smart move though…

#33 Sail Away on 07.13.22 at 12:00 pm

Big jump in interest rates. That’s cool and all, but a brief treatise on carpenter ants:

These animals are a fact of life on the PNW and are perfectly adapted to living here. They love mature Doug firs, are mostly nocturnal, and usually nest at ground level or underground in moist dead wood, although occassionally houses as well. Being industrious, they explore everything within reach, including, of course, houses in their territory. This is to be expected, so plan for it.

Here’s the way to manage: boric acid, when eaten by ants, kills them dead. But the workers don’t matter; much like Luke and the Deathstar, you must attack the heart: the Queen.

First, reconnaissance. Shuffle around your house at dusk with a headlamp looking at exposed concrete foundation between ground and siding for ant movement. Be patient. If found, phase 2 kicks off.

Phase 2: The heart of the matter. Feed them. Forget commercial baits. Ants like good fresh food, just like us. Make baits of everything from fruit to honey to peanut butter to fish. You’re only limited by imagination. Lace all baits with boric acid or borax, which is harmless to other animals but deadly to ants. Sort of like debt to humans. Place tiny little feeding stations along the path of travel and replenish with fresh offerings at dusk daily when running your trapline. Our heroes will carry food back to big momma and kill her with kindness. Then that nest is done. Residual drones will continue until they croak. Done and done… and sorta fun.

Never hire commercial exterminators. Most will come in and blast the perimeter with poisons that kill some workers while the queen stays safe and sound. They can’t spend weeks to deal properly. Do it yourself. Take it slow and easy. Become one with the ants. Learn their psychology, their motivations, their hopes and dreams. Strive for deeper comprehension.

#34 What Could Go Worse on 07.13.22 at 12:10 pm

Sisyphus

Royal LePage reduces national home price forecast to +5.0% (from +15%) in fourth quarter of 2022; expects home prices to hold relatively flat through the second half of the year in greater regions of Toronto and Vancouver.

#35 MaggieB on 07.13.22 at 12:12 pm

#17 Soren Angst

We are not DIY and on our own here in this province. We are registered and notified by e-mail when it’s time for our next booster and given locations where to get it.

#36 Diamond Dog on 07.13.22 at 12:12 pm

Yup. We were warned here at the sometimes prescient Greaterfool, we were told. The doomers had their say, unloved and ignored as a message of warning seldom resonates with the gamblers and the young but we were told.

I mean… we didn’t need old bones and rune stones to see what would come when we look at a chart like this:

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

And watch Friedman’s video discussing the timelines of rapid increases to the money supply (18 months to 2 years with broad money, 12 to 18 months with m2), we passed Friedman’s “honey moon stage” of inflation late last year:

https://www.youtube.com/watch?v=B_nGEj8wIP0&t=2576s

A world recession coupled with coming off an everything bubble could compress the timelines, but we’ve never seen m2 from the states like this before. Just looking at m2, the inflation mess we are in goes back to pandemic policy, back to the kleptocrat Trump era.

We should also keep in mind that the CPI has data compiled from rolling averages (I think rents are 2 years and food is 1 year, do I have that right?) not to mention that it’s cooked data, it’s a Frankenstein number that is well below what is happening in the real world. Housing asset values are near 20% yoy, rents are around 20 or higher, insurance and utilities are higher than CPI, as an example. We know these numbers, they aren’t hard to find. But when we look at what shelter costs according to the bureau of labor statistics that compiles CPI:

https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm

The BLS has shelter costs at 5.6% yoy for June. I will remind, shelter makes up 1/3rd of CPI and just over 40% of core inflation, the metric the Fed uses. This metric alone should drill home just how under reported inflation actually is which brings up the point once again, how late is the Fed in reacting to inflation? Way late. They are way late in reaction to a problem they themselves created, at the behest of the powers in Washington.

Why are they so late? Can’t think of any other reason at this point than its a politicized Fed. It’s political. The Fed has no choice but to raise rates and crush demand or inflation, a self sustaining phenom, will continue to romp. They have control of the money supply through credit conditions and not just a mild one, look at the m2 chart. They’ll have to induce a recession as predicted late last year but they do control the timing and that timing is coming during the mid term elections. That is not a coincidence. Why else are they so late to raise rates, it’s a politicized Federal reserve.

Expect a 3/4 rate hike from the Fed this month (from 1.5 to 1.75% to 2.25 -2.5%) Next month, they don’t meet. It’s likely we’ll see another 50 base point hike in September (2.75 – 3%) and the rest is murky, I think they’ll stop at 3.5% by November into Next year.

One last thing on PMI:

https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/june/

It’s not a good look. Oil’s dropped since these numbers have come out and could keep falling. It’s difficult to say what happens this winter though. If Putin keeps playing God with commodities with gas specifically through the fall into winter, we could be looking at a world war.

#37 Adam on 07.13.22 at 12:13 pm

Had a feeling it would be an early blog post this morning when I saw the 100 bps hike.

#38 Søren Angst on 07.13.22 at 12:14 pm

Faron – About the Picture

FYI, Malvolio in Italian means:

Ill Will.

And in 12th Night:

Malvolio has a disagreeable nature. He is the vain, pompous, authoritarian steward of Olivia’s household.

They locked him in a dark room to cure his madness and they tricked him with forged love letters in the end for revenge.

————————-

I’m just sayin’.

Still, I like it that you are being classical. Juxtaposition vs. the environs.

[I’d have gone with Viola instead]

#39 wallflower on 07.13.22 at 12:22 pm

This is the harbinger; rentals!
https://www.realtor.ca/real-estate/24654006/216-681-yonge-st-barrie-painswick-south

These kinds of condo listings are becoming common.
Actual DOM is 98 but even RENTALS are relisting to both slash prices AND DOM to zero.
This listing appears to be “new” as of today.

Specuvestors (and some of the newer builds are majority specuvestors) gonna get slammed …

#40 Victor V on 07.13.22 at 12:35 pm

Laura: Interesting to see that website provide an “estimated mortgage” of $5,959/month at default 2.55% rate with 20% down on your asking price.

I plugged in 4 and 5% into the calculator on the site, and boy do the payments jump.

Affordability is taking a hit…best of luck.

#41 Søren Angst on 07.13.22 at 12:36 pm

#26 Omicron Kenobi

Nice try Omi.

BA.4 and BA.5 power a surge of known infections in Europe, officials say.
While many European countries have seen an uptick in hospitalizations, “what we’re not seeing is an increase in intensive care unit admissions, so the vaccines are still very much working,” an official with the World Health Organization said this week.
https://www.nytimes.com/2022/07/08/world/europe/europe-covid-ba4-ba5.html

Omicron 100% with BA.2 dominant, BA.5 up to 23.15% – ISS
https://www.ansa.it/english/news/science_tecnology/2022/06/17/omicron-100-with-ba.2-dominant-ba.5-up-to-23.15-iss_b38ceba2-49ec-4a34-9e38-e6a8cf3da229.html

+13 in ICU today in ALL of Italia, 388 in total.

Covid patients total of ICU beds = 3.8%.

Covid patients total of Hospital beds = 15.3%.

Covid Deaths per million = 1.67.

4th dose started in Italia yesterday.

———————–

Ciao d’Italia Omi 😘

#42 Tony on 07.13.22 at 12:52 pm

Re: #27 Linda on 07.13.22 at 11:31 am

Their yearly wage gains are much higher than Canadians. That puts upward pressure on inflation. Immigration in Canada pushes wages down for the people already living in Canada.

#43 Søren Angst on 07.13.22 at 12:56 pm

#35 MaggieB

Which Province?

That would be news what you claim as I tracked Cdn MSM all thru 2020 and 2021.

Vaxing in Canada best described as a slow motion train wreck.

“Due to public frustration with variable vaccine booking systems across the country, a small volunteer group known as Vaccine Hunters Canada created a website, Twitter and Facebook page to help “eligible Canadians find vaccines.”

https://en.wikipedia.org/wiki/COVID-19_vaccination_in_Canada#Vaccination_ramp-up_and_increase_in_deliveries

You were not ranked #30 in the World as a healthcare system for nothing. You are a National Healthcare system in name only.

Vaccine mandates, policies and measures…

https://en.wikipedia.org/wiki/COVID-19_vaccination_in_Canada#Vaccine_mandates,_policies_and_measures

#44 Johnny Debt on 07.13.22 at 12:59 pm

1%?

…when 2% boost was actually needed.

#45 Tony on 07.13.22 at 1:01 pm

Re: #21 john on 07.13.22 at 10:59 am

Condo prices are still at 2019 levels. Home prices have fallen about $20,000 from the peak. Detached homes are selling at $480,000 down from $500,000 and condos are selling at $232,000. Demand for condos is still very low. Renters are still very hard to find. Honest property managers are hard to find. Libertas was the only one left that I know of but they’re gone. If you buy from out of province to rent you might be better just leaving them empty.

Detached for $480k? Where do you live? Goose Bay? – Garth

#46 Johnny Debt on 07.13.22 at 1:02 pm

By the way…

“Interest Rate in Canada averaged 5.79 percent from 1990 until 2022, reaching an all time high of 16 percent in February of 1991 and a record low of 0.25 percent in April of 2009.”

2.5%…what a joke.

Let’s get this to 5% ASAP!

#47 Stone on 07.13.22 at 1:07 pm

How much higher inflation goes of how much lower markets dip is unknown. But increasingly there is talk that both the peak and the trough are within sight.

———

Talk is cheap. That’s like saying tomorrow the sun will rise.

On the other hand, a B&D portfolio does the heavy lifting and continues to chug out yummy dividends.

Currently sitting at -12.06% ytd as I write this.

Good B&D! Now, roll over! Sit! Stay! Good boy!

#48 Søren Angst on 07.13.22 at 1:12 pm

PS Garth:

My 2 oil ETF/ETNs back in the green. After all, there is a Worldwide shortage and that is not going to disappear with lower consumption any time soon. And divs 9%, +50% still “pouring” in.

Maple ETF taking a pounding, again. Mucho Red. Still holding up its 24.84% monthly div.

TWTR up +8.9% USD $37.11
Jul 13, 1:04:54 PM UTC-4
Long road for me to haul as I bought at $50, single stock pick fool that I am.

Hopefully the courts tell Elon he has to buck up. Waiting until then…thin straw grasping. I hate Capital Losses.

#49 Brett in Calgary on 07.13.22 at 1:17 pm

#47 Stone
————-
Agreed, B&D looking better and better.

#50 PeterfromCalgary on 07.13.22 at 1:18 pm

The crazy thing is real interest rates are still negative so the can of tuna or cooking oil in your pantry is giving you a better return then your bank account.

#51 Politicians on 07.13.22 at 1:24 pm

#36 Diamond Dog

Way late. They are way late in reaction to a problem they themselves created, at the behest of the powers in Washington.

This. What Diamond here said.

This is the sentiment among the masses.

“How could they(politicians/leaders/CBs) be so stupid and not see this coming?”

“I’m right, and they were wrong!”

“I told you so! I told you this would happen! Those idiot leaders of ours didn’t know any better!”

CAN THIS ALL STOP?

They knew EXACTLY what they were doing.

They knew it, and they did it.

It is all according to plan.

Stop thinking they are idiots, dumb, stupid. They aren’t. What they are is, really good at making you think this.

And make no mistake about it…the slow response to the mess they created is by design also because they want inflation to run away…at least for a while.

#52 Søren Angst on 07.13.22 at 1:25 pm

#47 Stone

S&P 500 YTD = -20.42%
Jul 13, 1:17:20 PM UTC-4

Nicely done, you are thumping the S&P 500 at -12%.

I’m at +4% YTD, yesterday after the market close (yeah oil, hate on TWTR – my Albatross dragging me down).

Thus my divs yummier than yours, then again, I have a $ THREADBARE Portfolio so you know…half of f’all, is still f’all.

#53 Shawn on 07.13.22 at 1:26 pm

Inflation higher in U.S. than Canda?

#27 Linda on 07.13.22 at 11:31 am
Flashing on the ‘Let’s Do the Time Warp Again’ scene in Rocky Horror:)

I still don’t understand how the official inflation rate in the USA is higher than the one posted by Canada. Their population is 9 Americans per Canadian; the cost of food, shelter, utilities, fuel, transportation etc. is lower than Canada’s yet their inflation rate is higher? How is this possible?

**************************************
No one is saying the cost of living is lower in Canda just the the Americans has a bigger increase in the last year than Canada.

The Americans had a much lower cost of living than Canada and now it’s still much lower but the gap has narrowed a bit as their prices apparently rose faster than ours in this past year.

And imagine that happened with no carbon tax in the U.S. Cue exploding heads over that little fact. Also with no Trudeau in the U.S. (Heads exploding all over on that news.) Who they gonna hate now?

#54 Devil Anse on 07.13.22 at 1:32 pm

One way we can all help to suppress the wage-inflation price spiral is to stop tipping so damn much.

Have you noticed that when you pay for take out there is always ‘tipping’ option on the card reader? Even just for getting a coffee or a sandwich. Not for table service, but for take-out. Just press NO TIP. The prices are high enough for everything already- no need to overstimulate the economy with unnecessary tipping.

Paid $86 for my dog to be groomed yesterday, and when I went to pay with my card, you guessed it, a tipping option, on something that cost half as much two years ago. So stop tipping!

#55 Mean Gene on 07.13.22 at 1:37 pm

Hey the Real Estate Kool-aid tastes funny.

#56 When Will They Raise Rates? on 07.13.22 at 1:38 pm

I am officially retiring this username… Now I got my popcorn and I will sit back and watch the carnage.

Happy housing crash everyone!

#57 Margo Blake on 07.13.22 at 1:43 pm

#43 Soren Angst

Yes, all provincial governments are not created equal. But here in B.C. when our age group became eligible, we signed up online and were then notified where to go for our appointment. Places like the Conference Centre, recreation centres, etc. were used where large numbers of nurses, first responders, firemen, many retired and recruited for this purpose were there to give large numbers their shot.
Now, for the boosters they are directing us to various pharmacies.

#58 Chinese Checkers on 07.13.22 at 1:47 pm

Kiss the condo markets good bye across the country.
Everybody will be bunking with family and relatives.
Should be a ton of cheap deals to buy and/or rent within a few months when the winter chill sets in and the snow starts flying.

#59 Philco on 07.13.22 at 1:49 pm

ahhhhhh plop plop fizzzzzzzzzzz.
Good place to be. Zero debt, tons of cash flow very little in the markets.
But they are lined up waiting for our mini storage to be complete.
Nothing is going back to normal on planet goof ball.
World is in a whole lotta poop in my view.

Pooty says he’s just getting started. He’s way smarter than you think and he holds all the cards.
Because we have idiot puppet leaders in the western world and now your much worse off. Green policies for one exacerbate many things. Energy independence is critical to your well being.
They have no plan just empty promises that ensure their control.
So in the end this is all on you. You voted for socks.
I’ve been shouting from the tree tops for a few years that these clueless clowns and all their stupid policies will lead to bad things.
Free pony anyone?
• Millions now regretting quitting their jobs during the Great Resignation
https://financialpost.com/fp-work/millions-regret-quitting-great-resignation
DAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA

#60 jess on 07.13.22 at 1:50 pm

Ghosts in the Villa: How an identity theft scheme funnelled $1.2 million out of Hamilton’s Villa Italia retirement home
Villa Italia executive director Pat Mostacci, former chair of Festitalia, is accused of being the architect of a seven-year-long fraud and embezzlement plot (the star)
=======

green eyed monster …

so the “successful citizens”:…” who should have known better than to invest in what appears, in retrospect, to have been a Ponzi scheme, and not a particularly sophisticated one.”

SINGAPORE: A Singapore businessman used gains from a billion-dollar nickel trading scam to buy luxury cars, property, artwork and jewellery worth tens of millions of dollars, according to charges filed against him by public prosecutors on Monday (Dec 20).

…. raised at least S$1.5 billion from investors to fund bogus nickel trades, in one of the biggest investment frauds in Singapore.
https://www.channelnewsasia.com/singapore/singaporean-spent-millions-cars-jewels-nickel-fraud-loot-charges-say-2391641

https://www.bloomberg.com/news/features/2022-02-10/singapore-elites-shaken-by-1-1b-massive-nickel-trading-scandal

#61 T Rex and the dinosaur clique on 07.13.22 at 1:59 pm

This is looking more and more like a repeat of 1989.

I just met a dude who got wiped out today. No longer able to keep up the payments on his five houses. Equity is way under what he owes and he can’t make the interest payments on the HELOCs this month. He told me “it’s over”. His net worth at current valuations for his properties is negative, by a lot.

I knew so many people who that happened to in the 1989 crash (was working as a broker at that time, refinancing people’s junk housing investments at subprime rates – vulture financing and the debt spiral).

It is happening all over again. People are losing everything.

#62 The whole world is hunting the hunter on 07.13.22 at 2:00 pm

https://www.dailymail.co.uk/news/article-10966153/Hunter-Biden-spent-30k-prostitutes-FIVE-MONTHS-documents-reveal.html

No comments needed, it had tens of millions of views already, so censoring it is useless. Just wanna raise yr blood pressure.

BTW, are u and Gramps Joe the same age??

#63 the Jaguar on 07.13.22 at 2:01 pm

Wasn’t Icarus the dude who flew too close to the sun?
There’s a lot of that going on. As for the price of oil dropping, well….it might drag GDP down with it. Go figure.

#64 Robert S. on 07.13.22 at 2:22 pm

Want to know where inflation came from. As I told you…sitting in your pj’s expecting to die while collecting 10% extra cash while making half the sh*t that makes the world go round is inflationary, and is a direct result of monetary policy lacking any foundation in reality. What we got from this – is inflation. Now we owe the world 2 years worth of production – so get making stuff.

“Canadians’ after-tax income surged in 2020 with help from COVID-19 benefits, new census shows. The median after-tax household income grew 9.8 per cent from 2015 to 2020, doubling the growth rate that Canadian households .”

#65 Don on 07.13.22 at 2:25 pm

EUR/USD 1.0069

After a 1 full point rate hike in Canada

USD/CAD is still 1.29

How funny. Talk about manipulation!

#66 Sail Away on 07.13.22 at 2:32 pm

Looks like basketball player Griner may get 10 years in Russian prison for drugs possession.

There’s a lesson here that goes something like:

‘When in a foreign country, don’t do stuff that’s illegal in that country’

Crazy talk, I know.

#67 Philco on 07.13.22 at 2:35 pm

Oh and have a wonderful day!

#68 Stone on 07.13.22 at 2:37 pm

#54 Devil Anse on 07.13.22 at 1:32 pm
One way we can all help to suppress the wage-inflation price spiral is to stop tipping so damn much.

Have you noticed that when you pay for take out there is always ‘tipping’ option on the card reader? Even just for getting a coffee or a sandwich. Not for table service, but for take-out. Just press NO TIP. The prices are high enough for everything already- no need to overstimulate the economy with unnecessary tipping.

Paid $86 for my dog to be groomed yesterday, and when I went to pay with my card, you guessed it, a tipping option, on something that cost half as much two years ago. So stop tipping!

———

I totally agree on this point. Tipping should be completely abolished. Actually, it should be made illegal. The employer should pay the employee a proper wage, period.

In Japan, if you tip, it’s considered an insult.

On many things, Japanese culture is a bit backwards but on this, they are bang on the mark.

#69 wuhan we got y'all in check on 07.13.22 at 2:49 pm

Recall what we told you yesterday about ignoring the news this week?

Then why are you reading this? Shoo. And turn off that damn BNN.

I am debt free and a lowly renter – I look upon this with much amusement

#70 jess on 07.13.22 at 2:50 pm

if they had only listened

Tepco has argued it was powerless to take precautions against a tsunami of the size that struck in March 2011, and that it had done everything possible to protect the plant. But an internal company document revealed in 2015 that it had been aware of the need to improve the facility’s defences against tsunami more than two years before the disaster, but had failed to take action.

A court in Japan has ordered former executives of Tokyo Electric Power (Tepco) to pay ¥13tn (£80bn) in damages for failing to prevent a triple meltdown at the Fukushima Daiichi nuclear power plant in 2011.

The ruling by Tokyo district court centred on whether senior Tepco management could have predicted a serious nuclear accident striking the facility after a powerful tsunami.

Plaintiffs also cited a government report that showed Tepco had predicted in June 2008 that the Fukushima plant could be hit by tsunami waves of up to 15.7 metres in height after a major offshore earthquake.

https://www.theguardian.com/world/2022/jul/13/fukushima-nuclear-disaster-ex-bosses-of-owner-tepco-ordered-to-pay-yen-13tn-tokyo-court

#71 renter in Surrey on 07.13.22 at 2:54 pm

Yahoo!

This 1% rate hike worked.
Decent townhouses in the Valley are about $450K again.
Just kidding, they are still around $1mil.

#72 Zed on 07.13.22 at 2:56 pm

I’m very happy that the BOC raised by 1% today, some normalcy in interest rates is way overdue.

Now, fire that “competent” BOC Governor. He really showed his lack of vision and understanding of the economy and the speed that it moves. 2 years of lockdown/reduced economy was bound to spring into action. In January when Canada had recovered all lost jobs and more he still believed that nothing special would happen.

For the last 30 years all central bankers wanted us to believe was that they were special, superior but all they really did is lower the interest rates at the smallest of trouble. Interest rates were kept too low after the GFC resulting in overborrowing.

Should we believe that central bankers really know what is causing this inflation? Is it the price of oil, Russia, the Saudis, pent up demand, lockdowns in China, no more disinflation imported from China? How to know? All we know at this point is that the central bankers will attemp to kill the economy to lower the inflation, believing that this is the solution. I don’t trust them!

Raise the BOC rate to a normal 4-5-6% but don’t tell us that you know what you are doing!
Interest rates will have to climb a lot to kill

#73 T Rex and the dinosaur clique on 07.13.22 at 3:13 pm

RE: #65 Don on 07.13.22 at 2:25 pm

EUR/USD 1.0069

After a 1 full point rate hike in Canada

USD/CAD is still 1.29

How funny. Talk about manipulation!

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

CDN would be a lot higher if a certain somebody would take the leash off of our resource industries…..

#74 T Rex and the dinosaur clique on 07.13.22 at 3:20 pm

#64 Robert S. on 07.13.22 at 2:22 pm

Want to know where inflation came from. As I told you…sitting in your pj’s expecting to die while collecting 10% extra cash while making half the sh*t that makes the world go round is inflationary, and is a direct result of monetary policy lacking any foundation in reality. What we got from this – is inflation. Now we owe the world 2 years worth of production – so get making stuff.

“Canadians’ after-tax income surged in 2020 with help from COVID-19 benefits, new census shows. The median after-tax household income grew 9.8 per cent from 2015 to 2020, doubling the growth rate that Canadian households .”

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

Very true.

We have learned (the hard way) that you can’t just money print yourself into prosperity. Something has to actually back the money. If everyone is sitting at home doing nothing, collecting freshly printed government money hand outs, then who is producing the products and services?

No one.

That leads to inflation.

And the “roll out” of the green energy revolution is unfunded. Running on faerie farts and pixie poop.

The world runs on production. Not money printing.

This is the problem with big government, and it has been the downfall of every experiment in communism and socialism.

All governments can do is restrict stuff and print money. They are useless at production.

For that, you need free enterprise and an independent economy. We are getting crushed by socialism.

#75 Russ on 07.13.22 at 3:21 pm

Søren Angst on 07.13.22 at 12:56 pm

#35 MaggieB

Which Province?

That would be news what you claim as I tracked Cdn MSM all thru 2020 and 2021.

Vaxing in Canada best described as a slow motion train wreck.

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

Hey Dolce,

Categorically incorrect on all Canada vaxx programs.

Try this:
https://www2.gov.bc.ca/gov/content/covid-19/vaccine/plan

As Margo mentions in #57, easy to get a vaxx appt in BC and get a shot if you want one.

There has also been much nagging/advertisement on the radio & TV to get vaccinated, for well over a year.

Cheers, R

#76 Richard L on 07.13.22 at 3:21 pm

Macklem finally wakes from his 2 year slumber

#77 Is anybody listening? on 07.13.22 at 3:22 pm

It’s winter in New Zealand and Australia. Covid cases and deaths ramping up. What’s in store for us this winter?

https://covid19.who.int/region/wpro/country/nz

https://covid19.who.int/region/wpro/country/au

#78 McSteve on 07.13.22 at 3:27 pm

P/E ratios for bank stocks have fallen below 9. Just sayin’

#79 That Guy on 07.13.22 at 3:39 pm

Blog dogs, let’s help each other out! Time to take action, poor circumstances demand prudent preparations!

Tips for coping in the new world (please add your own, I’d like to have a hive mind on this):

1) Pay off debt, with interest rates the way they’re going it’s time to get paid interest, not pay it
2) Freshen up the ol’ resume. I took my own advice and am advancing thru the CPA…hope to be awarded it within a couple months.
3) Buy food – with inflation high, all your goods will cost you more soon. Read your grocery flyers, they can really help you hone in on where to save money.

Please, if you have better ideas than the above, spread the word!

#80 Don on 07.13.22 at 3:41 pm

#60 jess Pat Mostacci ,Hamilton, eh?

ITALIAN Villa did you say.

#81 Meh on 07.13.22 at 3:41 pm

#65 Don on 07.13.22 at 2:25 pm

EUR/USD 1.0069

After a 1 full point rate hike in Canada

USD/CAD is still 1.29

How funny. Talk about manipulation!

____________________________________

Canadian dollar has no business at that exchange rate. We are normally 1 or 2 cents higher than the AUD and their exchange rate is currently a withering $1.48. Yen getting slammed, Euro getting destroyed, British Pound the lowest I’ve seen in my investing lifetime and the CAD still at $1.29 with it’s house flipping economy and record debt. Every currency on earth getting steamrolled by the USD except the dollarette and the maybe the Russian Ruble lol . Someone please explain this to me.

#82 That Guy on 07.13.22 at 3:44 pm

One more thing: this looks like it will negatively influence government finances with rising interest costs. As I’m sure you all know, that means the government will pass on the increased interest costs in the form of higher taxes. Batten down the hatches!

#83 Shawn on 07.13.22 at 3:46 pm

Canada 5 year had advance knowledge?

It’s up 0.04% with the surprise 0.25% extra Bank of Canada increase.

What 5 year mortgage rate does a 3.155% 5 year bond correspond to?

Canada 5-Year Bond Yield

Toronto
Create Alert
Add to Watchlist
3.155 +0.040 +1.27%
July 13, 2022

#84 In Dog We Trust on 07.13.22 at 3:46 pm

today’s inflation numbers are already out of date as signs are showing the upward trend quickly reversing… be patient and don’t get caught in the hysteria… unless you want a raise,,, then present in hysterical form and maybe,,, you get it… RE – me still has belief in it as not enuf has changed in regards to the last 15-year’s southern ontario/canadian mindset…

#85 Doug t on 07.13.22 at 3:46 pm

I don’t have to tell you things are bad. Everybody knows things are bad. It’s a depression. Everybody’s out of work or scared of losing their job. The dollar buys a nickel’s worth, banks are going bust, shopkeepers keep a gun under the counter. Punks are running wild in the street and there’s nobody anywhere who seems to know what to do, and there’s no end to it. We know the air is unfit to breathe and our food is unfit to eat, and we sit watching our TVs while some local newscaster tells us that today we had fifteen homicides and sixty-three violent crimes, as if that’s the way it’s supposed to be. We know things are bad – worse than bad. They’re crazy. It’s like everything everywhere is going crazy, so we don’t go out anymore. We sit in the house, and slowly the world we are living in is getting smaller, and all we say is, ‘Please, at least leave us alone in our living rooms. Let me have my toaster and my TV and my steel-belted radials and I won’t say anything. Just leave us alone.’ Well, I’m not gonna leave you alone. I want you to get mad! I don’t want you to protest. I don’t want you to riot – I don’t want you to write to your congressman because I wouldn’t know what to tell you to write. I don’t know what to do about the depression and the inflation and the Russians and the crime in the street. All I know is that first you’ve got to get mad. You’ve got to say, ‘I’m a HUMAN BEING, God damn it! My life has VALUE!’ So I want you to get up now. I want all of you to get up out of your chairs. I want you to get up right now and go to the window. Open it, and stick your head out, and yell, ‘I’M AS MAD AS HELL, AND I’M NOT GOING TO TAKE THIS ANYMORE!’

#86 Puzni on 07.13.22 at 3:47 pm

Re :#68 & #55 – Tips
———–
Tipping is not the cause of wage inflation!
Higher cost of living, lack of recessions hence plenty of jobs around all cause wage inflation.

Although I did see an increase in number of places that have put an tip option just for saying ” hello “. I wonder how long will it be before electricians, plumbers and service repairs technicians will add a tip option to their bills.

#87 Chris L. on 07.13.22 at 3:48 pm

DELETED (Anti-vaccine)

#88 rampant inflation on 07.13.22 at 3:49 pm

#4 yvr_lurker on 07.13.22 at 10:32 am
If I am mistaken please show us the article where some “expert” predicted this series of events, as well as the double digit decrease in a B+D portfolio over a 6 month period. The magnitude of this was not on anyone’s radar it seems.
_______________________________

it was on a lot of people’s radar. just not the ones you listen to.

now that the Yield curve is fully inverted, you’ll tell me next nobody warned you there was a recession coming.
this is the steepest 2-10 inversion since 2000. and it’s not over yet.

a recession = job losses = companies making less money = profits falling = MUCH LOWER STOCK PRICES.

the MEDIAN recession since 1970 has seen a 14% DROP in SP earnings. IF valuations stay the same, the SP is worth 3000. Valuations won’t stay the same. you’re looking at a stock market going back to the covid lows.

2500 SPX +/- within 12-18 months from now.

you’ve been warned. don’t say you haven’t .

#89 NOSTRADAMUS on 07.13.22 at 3:51 pm

WATERBOARDING! (CLICK- BAIT!)
I suspect the new home builders are feeling waterboarded. The builders have been caught with their pants down ( once again). For far too long the builders got greedy and built only large and even larger mansions. Big homes, big profit margins. Now with the higher interest rates biting in, the sales office is eerily silent, no one home, really spooky. Today, Hmmm, the wee little people can no longer afford to buy these too die for monsters. Before too long the radar will ping-ping-ping as builders begin to advertise that they will pay down mortgage rates in order to (help) the buyers qualify. Next on the radar screen, ping-ping-ping builders will be drastically repricing their inventory, down in order to find a new market. This will not go over well with the existing homeowners in the subdivision, (Sorry) . Wandering around the subdivision, you will note the previously smiling sales staff will be M.I.A . Back at the office, the previous boastful sales board, once cluttered with large bold red, Sold, Sold and more Sold stickers will appear blank, replaced by a list of, ping-ping-ping incentives, cars, appliances, travel, you name it, you got it. Most alarmingly, previous solid deals are now evaporating like an ice cube in death valley. “Net worth is for bragging, Cash flow is for eating.” Steady lads, hold the line.

#90 JSS on 07.13.22 at 3:53 pm

Can we go back to talking about teen burgers and root beers. Today’s topic is like so depressing

#91 Penny Henny on 07.13.22 at 3:56 pm

#117 Prince Polo on 07.13.22 at 10:06 am
#23 Prince Polo on 07.12.22 at 2:33 pm
What are the odds of an inflation print with 9.x% handle and CBs doing 100+ bips at one mtg in 2022?
Cue all the smarty-pants armchair economists (like me!)

I can take a page out of Garth’s book and pat myself on the back now??
Please advise, oh wise & omnipotent steerage section!

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

Take a bow.

#92 Stan from Canmore on 07.13.22 at 3:59 pm

#54 Devil Anse on 07.13.22 at 1:32 pm

One way we can all help to suppress the wage-inflation price spiral is to stop tipping so damn much.

Have you noticed that when you pay for take out there is always ‘tipping’ option on the card reader? Even just for getting a coffee or a sandwich. Not for table service, but for take-out. Just press NO TIP. The prices are high enough for everything already- no need to overstimulate the economy with unnecessary tipping.

Paid $86 for my dog to be groomed yesterday, and when I went to pay with my card, you guessed it, a tipping option, on something that cost half as much two years ago. So stop tipping!
—————————————

Went on vacation up in Quebec City a few months back and ordered a pizza for pickup (to clarify, I went to pick up the pizza) and the cashier asked me if I wanted to leave a tip. I told her I will leave a tip if she gives me a discount on the pizza.

Same thing when I went to a Swiss Chalet (or is it a St Hubert ?). This was again a pickup order and she asked for a tip.

Is this a cultural thing in Quebec that they are so aggressive ? I was shocked.

#93 1255 on 07.13.22 at 4:07 pm

#78 McSteve on 07.13.22 at 3:27 pm
P/E ratios for bank stocks have fallen below 9. Just sayin’
——————————————————————-

Based on ttm. What does future growth look like?

#94 Mattl on 07.13.22 at 4:10 pm

#68 Stone on 07.13.22 at 2:37 pm
#54 Devil Anse on 07.13.22 at 1:32 pm
One way we can all help to suppress the wage-inflation price spiral is to stop tipping so damn much.

Have you noticed that when you pay for take out there is always ‘tipping’ option on the card reader? Even just for getting a coffee or a sandwich. Not for table service, but for take-out. Just press NO TIP. The prices are high enough for everything already- no need to overstimulate the economy with unnecessary tipping.

Paid $86 for my dog to be groomed yesterday, and when I went to pay with my card, you guessed it, a tipping option, on something that cost half as much two years ago. So stop tipping!

———

I totally agree on this point. Tipping should be completely abolished. Actually, it should be made illegal. The employer should pay the employee a proper wage, period.

In Japan, if you tip, it’s considered an insult.

On many things, Japanese culture is a bit backwards but on this, they are bang on the mark.
————————————————————–

You being a poor tipper is the least surprising thing on this blog. You driving a Camry, not so much.

#95 Is anybody listening? on 07.13.22 at 4:19 pm

So, while the Bank of Canada’s predictions of lower GDP growth should be taken with a grain of salt, the direction of the prediction is instructive.

It is undeniable that our economy is getting worse, so if the Bank of Canada is predicting lower GDP growth, there is good reason to believe that is what will take place. Where they will likely be wrong is in continuing to predict growth at all.

59% of Canadians already believe Canada is in a recession, and predictions of an official recession continue to grow.

Just as they have been late and wrong on every inflation prediction in recent times, the Bank of Canada is likely far behind when it comes to predicting when a recession will take place.

We also must remember that the Bank of Canada spent many years enabling Justin Trudeau’s agenda.

The Liberals will be desperate to distract and hide from their horrendous economic performance, and are likely to keep pumping more and more money – borrowed of course – into the economy to generate false and unsustainable ‘growth.’

The Bank of Canada will then be faced with the choice of whether to acquiesce to that agenda, or whether to keep raising interest rates.

What they decide will determine whether they start winning back some trust, or whether the BoC continues to be viewed as a politically-compromised extension of the Liberal government.

#96 Ole Doberman on 07.13.22 at 4:40 pm

Do rents rise or fall in an increasing rate environment?

#97 under the radar on 07.13.22 at 4:56 pm

61 – When you leverage yourself to the moon you get scorched by the sun.

Tipping. In my world a person earns a tip. I tip trades who promptly show up, do a professional job, and go the extra mile. 4 garage doors installed at my Farm, full day working in the rain. Tip was $500.00 . Oh, and when I need him , he calls me back.

Rarely go out to eat, but when I do, same thing. 20% no problem, make sure you bring me my food when its ready , keep my water glass full and don’t forget to smile.

#98 Ustabe on 07.13.22 at 4:58 pm

#86 Puzni on 07.13.22 at 3:47 pm

Re :#68 & #55 – Tips
———–
Tipping is not the cause of wage inflation!
Higher cost of living, lack of recessions hence plenty of jobs around all cause wage inflation.

Although I did see an increase in number of places that have put an tip option just for saying ” hello “. I wonder how long will it be before electricians, plumbers and service repairs technicians will add a tip option to their bills.

My mechanic adds “shop supplies” to every bill. It is a percentage of the parts and labour component. A ten minute job with an expensive part can cost $10 in shop supplies as well as a 2 hour job with none to little part cost.

My plumber has a cost line on his invoices called “Truck”. When asked he told me that each of his companies trucks have considerable dollar cost in tool and supplies on board. It also is a % of labour/parts on the bill.

My government also has a line on most of my bills, PST and GST.

At least, for now, you can decline paying a tip, try that with any of the others.

#99 RichardTO on 07.13.22 at 5:01 pm

The war in Ukraine can be ended TODAY, if that was the will of the US Empire.
Biden can snap his fingers and order that puppet Zelensky to sit down and negotiate terms with Russia TODAY, but that is not the desire of the bellicose Anglo empire.
No, they want to try to bleed Russia, using Ukrainians as cannon fodder in a dirty proxy war.
Canada, having no sovereign foreign policy of her own, is complicit in this business.

#100 tkid on 07.13.22 at 5:02 pm

Garth, I have three questions:

1. Will the BoC do a Volker and hike 4% all at once?
2. If the BoC successfully eliminates inflation and the Fed does not, would that be good or bad for Canada?

#101 tkid on 07.13.22 at 5:02 pm

My apologies, today I have lost my ability to count.

#102 Diamond Dog on 07.13.22 at 5:06 pm

#51 Politicians on 07.13.22 at 1:24 pm

Yours was one of the more dullard comments I’ve read in a while. You can quit making stuff up and putting words in my mouth any time you like.

I’ve made the case 10x before today that the Fed’s decision to slow roll raising rates was politically motivated to induce a recession for the mid terms and that they know exactly what they are doing. It’s an archived matter of record.

Of course, slow rolling raising rates that would otherwise fight obvious high inflation for political purposes is putting party before nation to do so. In that sense, it’s soft corruption… stupid in a sense, but for different reasons than one might think. What you say here:

“And make no mistake about it…the slow response to the mess they created is by design also because they want inflation to run away…at least for a while.” – Politicians

I strongly doubt anyone in central banks anywhere in he world want inflation to run away. (Kleptocrat Trump wouldn’t care if it got him re-elected though would he, not a question) One need only ask why we haven’t seen high inflation in 40 years to understand why it is so. High inflation once started after all, is a self sustaining phenomenon. The only way to kill it is to kill demand and central banks really only have one tool to do it which is to tighten credit conditions (raise rates which slows or reverses the creation of new money) which most of the time leads to recessions:

https://allstarcharts.com/wp-content/uploads/2011/07/7-23-11-10-yr-yields-FFR-and-inflation.jpg

Note how every time the Fed has raised rates meaningfully in the chart above in response to a spike in inflation, it’s triggered recession.

There is an argument to be made that 1%’ers don’t have debt like us regular folk do, so higher rates don’t effect them but higher rates do effect other assets they own like businesses, stocks, bonds, real estate revenue and commodities. If higher rates trigger a recession, in general it causes deflation over the long haul so unless 1%’ers are fluid (inflation creams them there too), their margins get squeezed, their buying power is reduced and their worth deflates along with everyone else. In other words:

https://www.youtube.com/watch?v=_uHXS36LKNE

You have much to learn, dude. You can start by quitting putting words in people’s mouths like you did today.

#103 Tony on 07.13.22 at 5:13 pm

Re: #96 Ole Doberman on 07.13.22 at 4:40 pm

Normally rents fall with about a 12 to 18 month lag period of time when home prices fall due to higher interest rates. Rents being very tight in Ontario and British Columbia the lag period of time could be two years or so before rents fall due to falling home prices.

#104 Stop tipping? STOP BUYING! on 07.13.22 at 5:18 pm

@ #79 That Guy

Dude, have you not read 54 Devil Anse?

STOP TIPPING!

NO TIPS! :-)

@ #54 Devil Anse

I’ll do you one better. Stop paying $86 for dog grooming in the first place. What kind of first world spending is this? :-) People are having a hard time putting food on the table…and $86 for dog grooming?

I’ll tell you how far I’m going to take this first world excess out of the economy.

I sometimes pass by this hipster bakery place called BUNNERS to get the triple chocolate muffin. I pop in today and I’m informed that prices have gone up. Muffin is now $5.59 each! AND…the muffin tops got smaller!

That’s the end of that. BUNNERS Muffins are off the shopping list permanently.

Kids want ice cream? No more $40 or $50 stops at the ice cream shop. Over to grocery store, buy a container for $5 and give them wooden spoons – GO TO WORK.

I’m taking dollars out of this fluff everywhere. ENOUGH already.

$6 daily lattes? Yeah…done with those too.

SO MUCH FAT you can trim out of your day. It’s easy.

Do I need the $5.59 muffin? Certainly not. And not the $50 ice cream or $6 lattes.

Does your dog need the $86 grooming?

Actually, if you spent the time with your dog and took care of it yourself, your friendship would improve. And you’d have more time with your dog instead of handing him off. Not judging, just fact. How long would it take you? How about an $86 tip to you for 2 hours with your dog and a visit to a car wash? :-)

#105 Cars on 07.13.22 at 5:24 pm

#94 Mattl on 07.13.22 at 4:10 pm
#68 Stone on 07.13.22 at 2:37 pm
#54 Devil Anse on 07.13.22 at 1:32 pm

On many things, Japanese culture is a bit backwards but on this, they are bang on the mark.
————————————————————–

You being a poor tipper is the least surprising thing on this blog. You driving a Camry, not so much.

————————————————————–

First, what is wrong with a Camry? Solid build, reliability, value, dependability, cloak-ability in traffic – they disappear from your attention and memory, latest V6 pulls to 100km/hr in well under 6s with 305hp and 8spd and looks great doing it.

Go ahead, show me another car that can touch it at this price point in terms of performance, reliability, safety, value (price), features, and of course resale value.

And as for the Japanese, many things are backwards? I actually think that Japanese have many more things right…at least as they present it externally. Of course those things are fading out with the new young generations. Honour. Patience. Respect. Craftsmanship.

My time in Japan…I remember very fondly.

#106 Cici on 07.13.22 at 5:25 pm

The labour market is firing on all cylinders because the Great Resignation has taken many wage slaves out of the labour pool because they were able to cash in on massive RE gains spurred on by lax lending at all-time low rates. Some downsized and are living solely off the non-productive gains, whereas others “invested” more equity into more rental units. Those landlords have now jacked rents to all-time highs, further igniting inflation.
Consequently, a lot of the “robust consumer spending” is on credit cards or via deferred payment options because too much of actual workers’ basic income is going to food, gas and shelter.

If they don’t go hard on rates now, the inflation problem is just going to soar higher. But regardless, it will probably still take a long time to come down because the RE holders are still winning since most locked in at much lower rates and aren’t budging on their prices. Only the newbies who paid too much with variable rates are going to get hurt.

But when that starts happening (and the economy and housing market actually stand a chance of rebalancing), count on policy makers to do whatever it takes to please the bag holders and keep the RE market from deflating, which will once again stoke inflation, political unrest and ultimately usher in a huge and nasty recession.

Like Ma and Pa always said, “no pain, no gain.”

#107 Shawn on 07.13.22 at 5:27 pm

Are HELOCS demand loans? Will banks be calling them in as housing valuations decline?

#108 Philco on 07.13.22 at 5:29 pm

You get the leader you deserve. Too many too busy on their house porn to notice that we have people running a country that no zero about business. Its kinda like take your kid to work week but there’s no Dad. Just a kid at work..
Now those sillies about to get hung out for being ignorant. lol

#109 Canada - Mendeleev table of elements but no nukes on 07.13.22 at 5:34 pm

Canadian dollar has no business at that exchange rate. We are normally 1 or 2 cents higher than the AUD and their exchange rate is currently a withering $1.48. Yen getting slammed, Euro getting destroyed, British Pound the lowest I’ve seen in my investing lifetime and the CAD still at $1.29 with it’s house flipping economy and record debt. Every currency on earth getting steamrolled by the USD except the dollarette and the maybe the Russian Ruble lol . Someone please explain this to me.

O I L and G A S, even it’s in the ground. It’s really that simple

#110 and the budget will balance itself on 07.13.22 at 5:36 pm

why did CPD etf go down today.. i thought rate reset preferred share etfs were to rise when interest rates rise

#111 Stone on 07.13.22 at 5:40 pm

#94 Mattl on 07.13.22 at 4:10 pm
#68 Stone on 07.13.22 at 2:37 pm
#54 Devil Anse on 07.13.22 at 1:32 pm
One way we can all help to suppress the wage-inflation price spiral is to stop tipping so damn much.

Have you noticed that when you pay for take out there is always ‘tipping’ option on the card reader? Even just for getting a coffee or a sandwich. Not for table service, but for take-out. Just press NO TIP. The prices are high enough for everything already- no need to overstimulate the economy with unnecessary tipping.

Paid $86 for my dog to be groomed yesterday, and when I went to pay with my card, you guessed it, a tipping option, on something that cost half as much two years ago. So stop tipping!

———

I totally agree on this point. Tipping should be completely abolished. Actually, it should be made illegal. The employer should pay the employee a proper wage, period.

In Japan, if you tip, it’s considered an insult.

On many things, Japanese culture is a bit backwards but on this, they are bang on the mark.
————————————————————–

You being a poor tipper is the least surprising thing on this blog. You driving a Camry, not so much.

———

People should be paid a decent wage. They should not have to rely on charity. That’s pathetic.

Like your typical comments.

By the way, I have a Corolla. I recognize your envy but that too is pathetic.

#112 The fifth dose, -30C windchill and bankrupt normies on 07.13.22 at 5:40 pm

It’s winter in New Zealand and Australia. Covid cases and deaths ramping up. What’s in store for us this winter?

https://covid19.who.int/region/wpro/country/nz

https://covid19.who.int/region/wpro/country/au

As senile Joe said of last winter, it’ s going to be a “cold dark winter of death”, that is unless you take the fifth jab, in which case u will be only bankrupt.

Rolling on the floor…, u know the rest.

OMG, the sky is falling, what shall we do, I am going to the nearest vaxx center right now, not waiting for November.

#113 Cici on 07.13.22 at 5:41 pm

#4 yvr_lurker on 07.13.22 at 10:32 am

Larry Summers, Danielle Di Martino Booth and many others said loud and clear as early as last October that this would happen.

#114 Wrk.dover on 07.13.22 at 5:41 pm

#33 Sail Away on 07.13.22 at 12:00 pm
Big jump in interest rates. That’s cool and all, but a brief treatise on carpenter ants:
____________________________________

All that those ants really want to do, is to urinate on the wet wood within your leaky wall cavity so they can eat the fungi which then results.

Hold the Borax, fix the leak!

#115 Philco on 07.13.22 at 5:45 pm

I was just on the blower with Dr Copper. He says we likely up shirt creek without a paddle. It hit 5 balloons then a hair cut to $4.30ish then tanks approx 25% more.
Better get your hard hat on.
If ya did dumb dumb things in the fake boom…oops on ya. If ya kept you B-cheeks tight no problema.
When assets tank and line
Good calls on the rates Garth!
I was telling wify 2 years ago all this flow dough could get crackered if some big fat black swan decides to land…..We got a pile of them.
Oh the bears cruising the back yard while we chill on the deck! lol LG

#116 Reality is stark on 07.13.22 at 5:46 pm

If you read my posts over the years you would know that none of this is even a surprise. It was all cooked in the books.
You can’t borrow your way to prosperity.
I’ll tell you what will happen next, just stay tuned.

#117 Victor V on 07.13.22 at 5:53 pm

“This rate hike from the BoC will hurt mortgage demand more than the others. It’s the first one that pushes up the lowest stress test hurdle as variable will now be stress testing at ~6%

To clarify: Stress test WAS the higher of 5.25% (the Mortgage Qualifying Rate) OR the contract rate +200bps. Variable rates were ~3.2% = 5.25% stress test rate. Fixed were ~5% = 7% stress test rate. But with BoC hike, the new MQR will be closer to 6% which means nowhere to hide.”

https://twitter.com/BenRabidoux/status/1547224863424843777

#118 Goood Boi on 07.13.22 at 5:58 pm

What was the inflation rate when central banksters took the interest rate to 18%?

#119 TheDood on 07.13.22 at 6:09 pm

#105 Shawn on 07.13.22 at 5:27 pm
Are HELOCS demand loans? Will banks be calling them in as housing valuations decline?
___________________________

They are indeed. They can be called in at any time by a bank. Historically, has not been a regular practice by Cdn banks, but who knows, could start happening.

#120 Bob Loblaw on 07.13.22 at 6:18 pm

According to this incomes in Toronto are up 14% since 2015. Meanwhile home prices are up more than 100% over the same timeframe. So home prices in Toronto rose 500% more than incomes. Yet Garth doesn’t think there is any downside to what is clearly an epic real estate bubble in the 416.

Of course there is downside for the over-leveraged. Most people will be fine. – Garth

#121 Bob Loblaw on 07.13.22 at 6:18 pm

Forgot the link:
https://toronto.ctvnews.ca/new-data-reveals-median-income-of-people-in-four-major-ontario-cities-1.5985889

#122 Tom from Mississauga on 07.13.22 at 6:19 pm

https://tradingeconomics.com/canada/imports/germany

We were going to pay either through rates or inflation. The real problem is all these imports from Germany are going away. Hopefully they aren’t supplying too many key industries. Germany used ultra cheap Russian natural gas for manufacturing, electricity and room, water heating. My concern isn’t just Germany de-industrializing but actually de-civilizing.

#123 Sail Away on 07.13.22 at 6:21 pm

#114 Wrk.dover on 07.13.22 at 5:41 pm
#33 Sail Away on 07.13.22 at 12:00 pm

Big jump in interest rates. That’s cool and all, but a brief treatise on carpenter ants:

——–

All that those ants really want to do, is to urinate on the wet wood within your leaky wall cavity so they can eat the fungi which then results.

Hold the Borax, fix the leak!

——–

Well, it’s an ongoing process. Just as Mexican courts look tolerantly upon a prisoner’s escape attempts, I accept the occasional wildlife incursion. They were here first, after all.

Besides, ants don’t urinate. Know your opponent:

https://meadowia.com/wondering-if-ants-poop-urinate/

#124 Pbrasseur on 07.13.22 at 6:28 pm

Funny (or incomprehensible) that governments have been pumping real estate after what happened in 2008, pushing loans and buying tons of MBS, what do they say about repeating error twice?

But here we are, and this time because of inflation there’s no printing our way out of this jam. This is going to get real interesting very soon…

#125 Devil Anse on 07.13.22 at 6:30 pm

#102 Stop tipping? STOP BUYING! on 07.13.22 at

I agree with your assessment. The dog grooming was booked by my wife three months ago…that’s how long it takes to get an appointment now! The dog was covered in burrs from our long walks in the woods (which is the best way to spend time with a dog). And I will not be going to any groomer again, better to do it yourself and bond with your dog while looking for ticks on her!

And if you think the Bunners
muffins and ice cream are bad, have you seen these oriental bubble tea places? Kids go nuts over them. And it costs $10 for an ice tea that looks radioactive.

I am slowly removing all these unnecessary things from my life, but with a wife and children, everything has to be negotiated carefully…as Garth said, “don’t get divorced”. I hate going out for dinner and getting ripped off, but try telling that to the better half.

#92 Stan from Canmore on 07.13.22 at 3:59 pm

Agreed…the tipping culture in Quebec is very aggressive and presumptuous. I was once kicked out of a bar on St-Laurent Blvd after the bartender told me ‘service is not included’. I said ‘ton service c’est de la merde vas t’enculer’.

#126 Quintilian on 07.13.22 at 6:39 pm

The pumpers are out in full force, the hype machine has been fully charged, and the “experts” are prodding through the media circuit.

Yes the “experts” real estate board economists, and realtors, are assuring us in the LM, that all is fine.
Prices might-yes “might” drop a bit-yes a “bit” they say, but they will bounce right back as soon as the rate increases ease up.

Why will the prices hold firm?

The usual yarn, everybody wants to move here, running out of land etc etc.

Tick Tock, Tick Tock

#127 DON on 07.13.22 at 6:42 pm

#84 In Dog We Trust on 07.13.22 at 3:46 pm
today’s inflation numbers are already out of date as signs are showing the upward trend quickly reversing… be patient and don’t get caught in the hysteria… unless you want a raise,,, then present in hysterical form and maybe,,, you get it… RE – me still has belief in it as not enuf has changed in regards to the last 15-year’s southern ontario/canadian mindset…

******
To come: the reopening of China in the near future. The attempted push back of the Russian army by the Ukraine.

#128 Rowdie on 07.13.22 at 6:43 pm

Good post as usual, Garth. It is crickets out herein BC for the seller’s. I check each day on the real estate, a lot of showings, no buyer’s, the house is still on the market. The seller’s don’t get it, time to reduce your million dollar home to maybe 50% or 70%. Probably too much rain soaked brains out here to figure it out. Will keep on checking…

#129 HateTiff on 07.13.22 at 6:58 pm

DELETED (Violence)

#130 AK on 07.13.22 at 7:02 pm

“They thought the government controlled the price of money”
===============================

Yes, plenty of evidence of that on Twitter today.

#131 AK on 07.13.22 at 7:05 pm

“#118 Goood Boi on 07.13.22 at 5:58 pm
What was the inflation rate when central banksters took the interest rate to 18%?”
==========================

Inflation rate In 1981 : 10.32%

#132 wallflower on 07.13.22 at 7:11 pm

about the tipping comments

2019 December, Spain at hotel bar where I tipped!
Got a huge, massive lecture from the bartender about how insulted he was.
Not about the amount.
About that I tipped at all!

#133 Pete on 07.13.22 at 7:15 pm

It takes real eyes to realize to the real lies. The Bank of Canada rate is still to low 1% point increase today is too little too late. A 2.5% Bank of Canada rate is a joke fight inflation is paramount. So why is the Bank of Canada rate not at least 2006 to 2007 levels 4.5% to 5% when inflation was 3% back then. The words don’t count it is the actions that do, raise them much more, interest rates 5% Bank of Canada rate minimum now.

#134 mj on 07.13.22 at 7:21 pm

After today’s increase things are going to get bad for real estate by the end of the year. I heard some conservative MP say that Justin Trudeau might call a fall election because he knows things will get worse. Have you heard this rumor ?

#135 Steven Rowlandson on 07.13.22 at 7:31 pm

We need higher rates so that GICs and savings accounts can be great again.

#136 Balmuto on 07.13.22 at 7:37 pm

“#107 Shawn on 07.13.22 at 5:27 pm
Are HELOCS demand loans? Will banks be calling them in as housing valuations decline?”

They’ll reduce/cap your unused available credit loooong before they call in your HELOC. And they’ll do that on business lines of credit before they touch HELOCs.
And frankly if you’re making your monthly payments on your HELOC I can’t see them ever calling that in. Even if you’re “underwater”. If they cared so much about loan to value they wouldn’t use “generous” valuations to get you approved. It’s a cash cow for them that they won’t touch and they don’t want to lose creditworthy customers. Now if you’re not making your payments that’s a different story, but that would be true in any environment.

#137 Flop… on 07.13.22 at 7:50 pm

Flop Drops.

Vancouver bottom rung still at 1.35

Burnaby is at 1.25, where you can get something like this…

https://www.zealty.ca/mls-R2703560/4654-ROYAL-OAK-AVENUE-Burnaby-BC/

Surrey is a lot lower, mainly because it is Surrey.

There’s a few on for 999k and some of them have the reduced sticker on them so it going below the million mark right about now.

Here’s what someone just bought for 1.06

https://www.zealty.ca/mls-R2702474/9630-REGENT-PLACE-Surrey-BC/

Having my first alcoholic beverage for the year, worked out side in the hot sun all day, not lashing out, it’s only a can of Cariboo, which although I’m not fluent in Canadian yet, I think translates to deer piss…

M48BC

#138 Freedom First on 07.13.22 at 7:51 pm

I am a long time follower of this Blog, which Garth has supplied for free, to help Canadians, as he has generously done in many ways throughout the decades.

Wise are the people who have listened, and practiced his teachings, which are a recipe for life long financial security and freedom.

Freedom First

#139 baloney Sandwitch on 07.13.22 at 8:06 pm

Inflation is just part of the plan. The plan by the gubmint to drive retired people back to work.

#140 Ed on 07.13.22 at 8:24 pm

Funny reading about Quebec businesses pushing the tip jars forward…in Florida (and other places like Mexico) Quebecois are disdained mostly because they are rude & too cheap to ever tip.

#141 Ken on 07.13.22 at 8:34 pm

At 20 yrs of age…
My Family: “Why are you getting married. You’re too young?”
Me: “I love her and we have a great future planned.”

At 25 yrs of age…
My Co-workers: “Why are you so cheap…buy your lunch like the rest of us.”
Me: “That guy with the beard, whose stuff I read all the time, wrote that it wasn’t a bad idea to pay down my debt as soon as possible.”

At 30 yrs of age…
My Bank: “Why don’t you buy a nice car. You don’t have a mortgage.”
Me: “Now that I have kids, that guy with the beard, whose stuff I read all the time, wrote that I should invest more and put money aside for their education.”

At 35 yrs of age…
My Friends: “Why don’t you quit and get a better job making more money?”
Me: “That guy with the beard, whose stuff I read all the time, wrote that a DB pension is pretty valuable. Besides, I may be able to retire when I am a lot younger.”

At 50 yrs of age…
Everyone: “How can you possibly retire at your age?!”
Me: “I am debt free, I own my own home, my kids University is paid for, I have money invested, I have a pension for life, I live a simple life, I like golfing and skiing more than working. By the way, that guy with the beard, whose stuff I read all the time, was right!”

I just turned 56 and on Monday I got my first hole-in-one. Thanks GT!

#142 45north on 07.13.22 at 8:55 pm

Nostradamus I suspect the new home builders are feeling waterboarded. The builders have been caught with their pants down ( once again). For far too long the builders got greedy and built only large and even larger mansions.

here’s Sunday’s post.

Sunday’s post Now I see the average Cambridge home has given up $250,000, or about a quarter of its value, in the past 100 days. Not far away K-W prices have been hacked by $300,000. Everywhere, listings are up (8 homes for sale in Mt Elgin represents about 20% of the population), sales have slowed, DOM has exploded and the great reset of Canadian real estate continues.

I figure the builder sold 32 homes. Profit was good but he’s stuck with 8. He can chop $250,000 from each of the 8 and break even. The 32 who paid full price are feeling waterboarded. Not him.

#143 Politicians on 07.13.22 at 8:58 pm

#102 Diamond Dog

Forgive if I misunderstood.

Simply, any implication that this is in any way not planned, forecast and premeditated at this point is highly irritating.

Everything they did, they did knowing exactly well what the outcome was going to be.

#144 TurnerNation on 07.13.22 at 9:03 pm

The War on Small Business, kicked off that fateful March 2020 continues. I mean are we back to normal yet??
Help Wanted signs, everywhere.
In Kanada they pretend to pay us we pretend to work.

— Is this what they mean by You will Own Nothing and be Happy?

“Prime Minister Justin Trudeau is eyeing a wealth tax to pay for his government’s spending spree.
Heavily redacted documents obtained by the Canadian Taxpayers Federation show Trudeau asked for analysis of a $60-billion wealth tax.
https://www.taxpayer.com/newsroom/trudeau-looking-at-a-wealth-tax-to-pay-for-soaring-spending

— This is PERMANENT in the Former First World Countries. CORVID IS LIFE now. Nothing else. CORVID.
But they care about our health guys, they really do.

.It’s unanimous: Canada’s health care is crumbling, frustrated premiers agree (nationalpost.com)

.Jacinda Ardern will bring BACK hated Covid restrictions as New Zealand battles its biggest-ever outbreak – with 11,000 cases a day (dailymail.co.uk)

https://twitter.com/TrueNorthCentre/status/1546981274547519489
““I’m not going to let Canada tell me what I do and don’t put in my body.”
Philadelphia Phillies catcher J.T. Realmuto is forfeiting over $250,000 for not complying with Canada’s vaccine mandate and travelling to Canada to play the Toronto Blue Jays.”

#145 Ustabe on 07.13.22 at 9:19 pm

#132 wallflower on 07.13.22 at 7:11 pm

about the tipping comments

2019 December, Spain at hotel bar where I tipped!
Got a huge, massive lecture from the bartender about how insulted he was.
Not about the amount.
About that I tipped at all!

That is because in a great many counties working in hospitality isn’t looked at as something you do while waiting for school to be over, it is looked upon (and remunerated as such) as a profession worthy of respect.

#146 the Jaguar on 07.13.22 at 9:34 pm

#129 HateTiff on 07.13.22 at 6:58 pm
DELETED (Violence) +++++

This is really awful. And I suppose reflects some of the really mean and ugly thoughts that Garth has to scroll through daily to keep the aisles clean in this little grocery store of ideas, comments, and other madness.

Tiff was appointed May 1st, 2020. He pretty much inherited the current sh_t storm our country and the world is going through, and the BOC’s been more or less in line with the approach taken by other western countries. A unified approach would be normal and expected.

What a perfect storm, after all. Incredible asset bubble run up aided by ultra low interest rates, an absolutely unforseen and devastating world pandemic, and now a completely unnecessary war that’s just like pouring gasoline on a fire.

Tiff’s the one who has stepped up. He must be under tremendous pressure with so many people’s lives and fortunes depending on his stewardship. Put your pitchforks back in the shed and let’s give him a chance.

He’s got a nice smile. And never forget those ancient warrior Canadian Banks are also there to lead in a crisis. Like Gene Kranz, NASA’s great Director of Flight Operations during the Apollo 13 crisis they are unified in their common cause:

‘FAILURE IS NOT AN OPTION’. Amen.

#147 Tony on 07.13.22 at 9:34 pm

Re: #118 Goood Boi on 07.13.22 at 5:58 pm

If I remember the Fed funds rate was 19 percent when inflation was 12 percent in America.

#148 Ken on 07.13.22 at 9:35 pm

#32 Laura C:

Weeding and some blacktop might go a little ways to about 85% of your asking.

#149 Doug t on 07.13.22 at 9:49 pm

Fartz ? You out there dude ?

#150 yvr_lurker on 07.13.22 at 9:54 pm

#113 Cici
—-

I looked your suggestions up and you had a really good point. Larry Summers (former head of Harvard) had it spot on, but Gov’t did not seem inclined to listen

https://fortune.com/2022/06/09/larry-summers-cpi-flaws-1980-inflation-severe-recession/

Too bad this fellow is not in Canada. Need to make sure I follow him, as he seems to have a good read on the situation.

#151 Faron on 07.13.22 at 10:03 pm

#38 Søren Angst on 07.13.22 at 12:14 pm

I didn’t pick the quote. Take it up with the SOB race committee or lurch into the time warp.

#152 Ohm on 07.13.22 at 10:07 pm

It is about fricken time! Should have been done years ago.

#153 willworkforpickles on 07.13.22 at 10:08 pm

BANNED

#154 Recession Gods on 07.13.22 at 10:08 pm

#4 yvr_lurker on 07.13.22 at 10:32 am
We told you. Rates would rise. Housing would fall. A one-asset strategy meant risk. And debt is not your friend.
——

Good post, and everyone should be on board now that taking a highly leveraged position has…

It is likely that we will be talking about a rather significant recession within 6 months…

————————————

Jokes on you!! We already here, dude…you don’t know we’re here until we pull a Captain Obvious and slap you in the face with it. First real sign we’ve arrived…cat food goes on sale. Mark our words!!!

Now, back to lounging in the pool!

#155 Faron on 07.13.22 at 10:08 pm

56 mi into the Pacific Crest Trail. 2.5 days. Enjoyed a BBQ bacon burger, couple Coors Light and some pop tarts at this mountain lake “resort”. Back at er tomorrow. There’s way, way more to live than this website’s comments sxn.

#156 Garth's Mentor on 07.13.22 at 11:07 pm

We have been predicting a 50% price reduction in Canadian housing since late 2021.

It is happening.

Garth is calling soft landing – no housing crash.

Time to revise Garth. The facts have changed and 50% drop in price might now be conservative.

The whole bottom is falling out and everyone is going to be impacted by this.

I said ‘crash’ last month. Look up the definition. – Garth

#157 SoggyShorts on 07.13.22 at 11:18 pm

#68 Stone on 07.13.22 at 2:37 pm
#54 Devil Anse on 07.13.22 at 1:32 pm
One way we can all help to suppress the wage-inflation price spiral is to stop tipping so damn much.
————————————-
My last tip was at the airport TGIF, and the machine options were 18,20, and 22%.
15% is not even an option anymore.

The waitress came to our table three times: took our order, and brought our drinks&food (pay at the front). Did she deserve $10 for that? I don’t know, but I’m glad I don’t have to pay it again.

We’re now in SEA with no more tipping, and it’s awesome. You know exactly what everything costs everywhere(taxes are all included in prices)

It felt strange at first, but we’ve spoken with the locals as well as expats and no one wants western tipping culture to come here.

#158 willworkforpickles on 07.13.22 at 11:18 pm

BANNED (Abusive)

#159 Cici on 07.13.22 at 11:52 pm

#92 Stan from Canmore on 07.13.22 at 3:59 pm
#54 Devil Anse on 07.13.22 at 1:32 pm

Is this a cultural thing in Quebec that they are so aggressive ? I was shocked.

_____________________________________________

Not a cultural thing, a very recent (since the pandemic) thing. I started and many started tipping when we were in the throes of the pandemic, before the vaccines had arrived. Everyone was short on staff, and those who were willing to risk it by working service jobs were in short supply and putting in lots of hard work and long hours.

Now that restrictions have lifted, they are still asking for their tips. Keep in mind they are also facing all-time high inflation, with higher rents, education costs, and the like. They may seem aggressive, but I’d say they are actually just “enterprising.” Sometimes I do tip, sometimes I don’t. It depends on a lot of things, including the service I receive, my personal budget and whether the actual restaurant part is open or at full capacity. But even when I don’t, if I say “no” politely, even when they ask quite assertively, they remain cordial and don’t give me any hassle. After all, they too are just trying to make a buck and beat inflation in any way they can.

But back to the original point: is tipping drive-thru workers or restaurant staff really at the heart of all this inflation? At this point (shortage of unskilled labour), I might dare to say it is not. If I’d lost my job during the pandemic but the local burger joint was paying all-time high “minimum” wages, offering excellent benefits and I could make tax-free tips to supplement my hourly wage, I’d probably be more inclined to work than do nothing while receiving social assistance. The more people are willing and available to work, the less businesses have to brunt higher costs (that always get passed on to clients) just to attract staff. Everything’s cyclical.

#160 Longterm on 07.14.22 at 2:11 am

#43 Søren Angst on 07.13.22 at 12:56 pm

You really need to stop going on about things you no nothing about or claim to know about from reading media from Europe.

In BC vaccination was and is a breeze. Registered online, notified by email or text, booked location and time slot, showed up and done in 10 minutes, repeated for second, repeated for third, waiting for fourth in Sept.

My neighbour who is elder and not in good health has gotten four doses so far by the public heath nurse who attended his house.

You know nothing.

#161 Saint Herb on 07.14.22 at 3:14 am

#96 Ole Doberman on 07.13.22 at 4:40 pm

Do rents rise or fall in an increasing rate environment?

I would like to know this too.

Looking for a new rental right now and they have skyrocketed to more than double what I am currently paying.

I think as more and more people get priced out of buying due to higher mortgage rates they turn to renting. This increases the demand for rentals so the monthly rental goes up.

I also see home that where for sale being terminated and then immediately listed for rent at a very high price.

#162 Crowdedelevatorfartz on 07.14.22 at 7:41 am

@#149 Doug t

Yep.
On vacay.
No computer and my fat thumbs arent so great at texting.
A 1% increase. Long overdue.
As one of the bank economists commented in the FP article.
“Canad is behind the inflationary rise. They should have been doing incremental 0.5% increases starting last summer like New Zealand or Oz.
I’m sure politics had nothing to do with it…..
Now?
Pole vaulting rate increases 1% at a time makes it look like their scrambling to catch up.

#163 Dharma Bum on 07.14.22 at 7:56 am

#61 T Rex and the dinosaur clique

It is happening all over again. People are losing everything.
———————————————————————————————————

What’s old is new again.

I’m just watching the wheels go round (and round).

https://www.youtube.com/watch?v=_RAozpCeEK4

#164 the Jaguar on 07.14.22 at 8:06 am

Snippets…..

“Economist Armine Yalnizyan, who is the Atkinson fellow on the future of workers, argued that young people aged 15 to 34 currently have “the biggest leg up of any generation since the 1950s” in finding the types of jobs they want. Though CERB played a role in helping some young people toward those goals, she said the bigger factor to pay attention to is population aging.” ( So stop whining). +++

“AIMCO picks Singapore over Hong Kong for Asia beachhead. Alberta’s Us$129-billion investment manager is looking at Singapore rather than Hong Kong for its first office in Asia as it plots an international expansion of its private equity group. Singapore is gaining capital and finance jobs thanks in part to tensions over China’s regulatory crackdown and its handling of Hong Kong.” ( Location, location, location. Shades of things to come…) . +++

” “Huge 100 bps increase … means bank prime is now 4.70 (per cent) and most HELOC rates are 5.20 (per cent),” Butler tweeted moments after the announcement. “The purchase of a rental property accessing a HELOC on an existing property for down payment is simply becoming unmanageable.”

Butler added that he expects home prices to decline steadily as a result, but that the Bank’s hawkish language means there could be more to come. “Now our attention switches to the September prime rate announcement. Yep … this can and likely will gets worse in six weeks.”

(Ron Butler , resident Blog Dog who will soon need his own press agent…). +++

#165 Dharma Bum on 07.14.22 at 8:10 am

#76 Richard L

Macklem finally wakes from his 2 year slumber.
———————————————————————————————————

Tiff.

What a cartoon character.

The guy is Wally Cox reincarnate.

Mr. Peepers.

https://www.youtube.com/watch?v=1528AeDYHnU

#166 Houses in Canada on 07.14.22 at 8:19 am

So…this higher interest than 2009, right?

Are houses dropping to 2009 levels? Ha ha ha…

NOT EVEN CLOSE!

#167 Balmuto on 07.14.22 at 9:47 am

“Huge 100 bps increase … means bank prime is now 4.70 (per cent) and most HELOC rates are 5.20 (per cent),” Butler tweeted moments after the announcement. “The purchase of a rental property accessing a HELOC on an existing property for down payment is simply becoming unmanageable.” – Ron Butler

Yeah, and I would add – borrowing from your HELOC to invest in stocks looks like a bad idea at 5.2% and climbing as well. Yeah the interest is tax deductible but your dividends won’t cover or will barely cover the interest costs and you still need to pay tax on the dividends. Albeit at a better rate but now you’re really playing at the margins.

#168 Sail Away on 07.14.22 at 9:47 am

Hey, recession or not, my peeps in Alaska have no worries with all time high Sockeye salmon returns and harvest. Climate change?

Sustenance, baby.

https://www.intrafish.com/fisheries/alaskas-bristol-bay-smashes-all-time-sockeye-salmon-harvest-record/2-1-1256507

#169 inflation is rampant on 07.14.22 at 10:05 am

good thing the Can$ is collapsing or the drop in the TSX would be far far worse.

nice to be a banana republic.

hey, who could have known? but don’t worry, it will get worse before it gets better.

#170 millmech on 07.14.22 at 10:23 am

#166
What happens to the price when the payment does not even cover the interest portion of your loan, we will be at that point next spring.
One never knows it, could easily hit 50% price reductions and then slowly start back up after sitting in the gully for a few years. Housing is our version of the Gamestop craze, just slower and with bigger prices at play.
Look at what is happening in China, the canary in the coal mine.
https://www.bloomberg.com/news/articles/2022-07-14/more-chinese-homebuyers-refuse-to-pay-loans-amid-contagion-fears#:~:text=A%20rapidly%20increasing%20number%20of%20disgruntled%20Chinese%20homebuyers,crisis%20will%20spread%20to%20the%20wider%20financial%20system.

#171 Linda on 07.14.22 at 10:38 am

#81 ‘Meh’ – maybe because commodity prices are high? Canada does have a lot of commodities – oil, natural gas, timber, minerals etc. I say take the win regarding how our dollar is holding up. That having been said, it is still about a 30% premium to purchase US dollars with Canadian ones.

Thanks to those that provided theories about why our inflation is lower than the USA. Still think we should be at the same levels or even higher given that vicious 30% premium – Canada does import a lot from the USA after all. I doubt that USA suppliers are accepting Canadian $ at par when presenting their invoices for payment.

#172 T Rex and the dinosaur clique on 07.14.22 at 10:39 am

RE: #166 Houses in Canada on 07.14.22 at 8:19 am

So…this higher interest than 2009, right?

Are houses dropping to 2009 levels? Ha ha ha…

NOT EVEN CLOSE!

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

I was a mortgage broker back in the 1989 crash, so I remember it.

People were having trouble refinancing mortgages of 100k to 200k. They did not have the money.

At that time, 100k was a lot. Now it isn’t even a down payment.

I think the big problem now will be how much people actually owe on their houses.

The average “borrow” for a new bought deal (resale house) in Ontario in 2021 to early 2022 was over a million dollars.

A mortgage of, say 1.4 million on a 1.8 million dollar house was quite common, and people could carry it at 1.4% interest.

However, if you turn that into 6% interest, then it becomes untenable.

The interest alone is $84,000 per year, and that doesn’t even include the principal payments.

A 6% mortgage of 1.4 million is actually more than double the interest paid on a 200K mortgage at 15% interest.

And then you have the problem of long term money. The 1.4 million mortgage takes way longer to pay off than does the 200K mortgage. It is basically debt for life.

So the next few years should be interesting.

If rates stabilize around the 6% rate for a five year loan, for a person with perfect credit, then we are going to see a significant downward push on house prices, pretty much everywhere.

Unless all those foreign buyers finally show up to keep prices at elevated levels…….

#173 Philco on 07.14.22 at 10:44 am

Is Craptow secure and safe? A big fat NO.
Hope for depositors dwindles as crypto lender Celsius files for bankruptcy. (A Ponzi?)
https://www.msn.com/en-us/news/us/hope-for-depositors-dwindles-as-crypto-lender-celsius-files-for-bankruptcy/ar-AAZylKW

#174 Yukon Elvis on 07.14.22 at 10:45 am

Hong Kong (CNN Business)
China’s real estate crisis is escalating, raising concerns about growing risks in the banking system.

Desperate homebuyers across dozens of cities are refusing to pay mortgages on unfinished homes, according to state media reports and economists at international banks.

https://www.cnn.com/2022/07/14/economy/china-property-crisis-homebuyers-bad-debt-intl-hnk/index.html

#175 Shawn A on 07.14.22 at 11:14 am

How to tame Inflation?

It’s apparently been caused by demand exceeding supply

So, need to cut demand

So, need to lower people’s access to cash.

So, need job losses or reduced access to credit / debt.

Higher interest rates should reduce the ability of people to borrow.

Let’s watch for signs of lower borrowing in the next set of bank quarterly reports. Also watch for reports of the trend in credit card debt.

#176 protea on 07.14.22 at 11:32 am

Garth have always enjoyed your daily blog, and appreciate your sincerity that comes through loud and clear.

I need some advice, sold out of the Real estate market a few years ago and did OK . Got an amazing rental situation in a complete house and garage 20 min from DT YVR . Would like to get back into the market either a smallish house or Townhouse as we are both seniors debt free etc.
Personally I feel that the time to start looking for a home to call our own is once the CB has increased the interest rates to aound 3.25/3.5 % your thoughts please !!!

#177 Russ on 07.14.22 at 11:33 am

Hey Faron,

Is that your Westfalia featured in the pic for this blog (that you sent in)?

Cheers, R

#178 Wrk.dover on 07.14.22 at 12:45 pm

The world could be a more fun place, if the markets only opened one day every week. The activity would be less of a demolition derby than the wild fluctuations that occur daily now.

I get a kick out of the futures shortly after the daily close. As in where were you ten minutes ago with that reaction?

Imagine if they had to then wait six days!

#179 IHCTD9 on 07.14.22 at 12:48 pm

Here’s hoping the BOC keeps its T-levels this high for years. I want the old sticks back. 300K average detached house prices and near 70K median HHI’s made this area the bomb, 600+K average house prices and boatloads of GTA escapees has made it shit.

Bring the fire – first to the sticks, and then to Ottawa. Canada needs a good solid front kick, after that prosperity and good living will return (GTA and GVRD excepted of course).

#180 T Rex and the dinosaur clique on 07.14.22 at 12:55 pm

RE: #177 Russ on 07.14.22 at 11:33 am

Hey Faron,

Is that your Westfalia featured in the pic for this blog (that you sent in)?

Cheers, R

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

Looking at the side hook up connections, is that a 1985 Westy?

#181 Tony Macaroni on 07.14.22 at 1:18 pm

China is fed UP!!

Coming to a theatre near you.

https://www.zerohedge.com/markets/china-verge-violent-debt-jubilee-thousands-disgruntled-homebuyers-refuse-pay-their-mortgage

#182 Diamond Dog on 07.14.22 at 1:27 pm

#143 Politicians on 07.13.22 at 8:58 pm

You are forgiven.

#183 Russ on 07.14.22 at 1:57 pm

T Rex and the dinosaur clique on 07.14.22 at 12:55 pm

…r Westfalia featured in the pic for this blog (that you sent in)?


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

Looking at the side hook up connections, is that a 1985 Westy?

—————————————-

I too thought the 3 inna row hook-up was a typical 1985 marque, and it could be common, but I just found 2 pics for 1980 & mid-80s with same.

The Westy 1984 unit we have has the electrical cable (middle door) down low. Headlights & front grill and colour are the best “fieldmarks” for “Westying”

https://en.wikipedia.org/wiki/File:1980_Vanagon_Westfalia.jpg

https://en.wikipedia.org/wiki/File:Volkswagen_Vanagon_Westfalia_–_03-30-2012.JPG

True to topic, these things do not depreciate very much (inflation hedge) and are a good way to avoid this blog for a while…

Cheers, R

#184 Diamond dog on 07.14.22 at 3:24 pm

# 143 Politicians

For what it’s worth, you chose the right hill to die on but just didn’t use the right tact. It’s the second time I’ve said it in the last week but bears repeating, one shouldn’t try to prove others wrong but try to prove themselves right to wit, argue both sides.

In relation to the Fed and it’s archived, I’ve argued in defense of the Fed at the beginning of the year going through all the plausible reasons I could think of such as world CB co-ordination, currency valuations, war, post pandemic economics and wealth effects, governor confirmation and appointments, yes human error to name a few but ultimately the timing of their actions inducing a recession in time for the mid terms unfortunately was the reason that stood out the most.

The thesis is a bit complex as one has to research who appointed the 7 voting governors (currently 3v3, 3 Trump appointees with Powell having the deciding vote) and know that the Senate is Republican controlled when it comes to money (Sinema & Manchin side with the Reps on anything to do with money). So, Republicans still have the means to control the Fed politically.

In Canada, PMs appoint our BoC governor from a short list picked within the BoC itself, so it’s very much so in house and not under a media spotlight. Because PM’s have chosen this tradition, our BoC is not a politicized institution or has ever appeared to be one optically in the modern era. It’s become a set it and forget it scenario and it works.

In the states it’s another story, one of highly publicized senate hearings and confirmations for Fed governor appointees and contract renewals getting very political. Brainard & Cook were nominated with 52 votes as an example with Raskin, a former Fed governor not making the vote. This is quite politically charged and far from bi-partisan in nature.

Can’t say with 100% certainty, but Biden’s plan looked like Raskin becoming vice chair in charge of monetary policy, moving Brainard up into Chairman or vice versa. Republicans stopped that from happening and stalled appointments. We were seeing a Federal reserve internally stalled through term renewals (Powell) and nominations (Brainard) from operating normally enough to even address inflation in some respects in theory this year from December through April, there was an argument for disarray.

Politics, right? But I wander, did and do Republicans still have the means to create a Fed induced a recession in time for the mid terms? They do, with 3 Trump nominees, Powell having the tie breaking vote.

When you go through all the slow roll excuses they came up with from transitory to fighting climate change, it didn’t flesh out and they lost credibility because of it. Their slow roll explanations came across as dishonest or inept to wit, it forced us to make a choice boiled down from two. Either the Federal reserve doesn’t know what they are doing, or they know exactly what they are doing and can’t be truthful with their choices because it’s “politically motivated”.

It’s difficult to imagine a Fed in charge of the largest economy and world superpower not knowing what they are doing but they do have overlords. It is a democracy, in case of the U.S. a Republic and they do answer to Washington.

In a perfect world, democratically elected leaders make appointments and the appointments in this case to the Fed call their own shots from there. At least, that’s how it’s supposed to function and we try that here in Canada. Otherwise, soft corruption creeps in and political parties start putting their interests before the nation. In the case of the Federal Reserve which has full control over the money supply, the Fed has the power to create the mother of all wealth effects through a rapid increase in the money supply (or induce recessions by decreasing the money supply. In the great depression, the broad money supply was shrunk by 33%, the reason why the U.S. economy couldn’t recover, they went too far the other way). This is why CB’s in North America have tried to target 2% since the 80’s.

What did we see during the pandemic? A rapid increase in the money supply and an everything bubble topping out in late 2021.

What readers may not realize is the delay or lag between increases in the money supply and increases in inflation. These delays are laid out in common speak by one Milton Friedman here which is why I keep bringing up this video:

https://www.youtube.com/watch?v=B_nGEj8wIP0&t=2579s

The question or argument is simple. Was the Fed forced to print or rapidly increase the money supply to the extremes that it did during the pandemic? The answer lays in this chart in m2 and consequent high inflation:

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

The answer of course, is no. They overshot by a trip to the moon. In my view, the Fed’s response was crazy town but they answer to overlords in Washington, where crazy comes from. (if you look at the chart and correlate it with the money supply during the Nixon era, Ford’s era and one term of Reagan, you’ll see political corruption from those presidencies as well)

When we ask “who benefits”, it was supposed to be a Trump re-election but he was so immoral, criminally corrupt and terrible as a president he couldn’t get re-elected even with the mother of all wealth effects the Fed gave him!

Fast forward, we see Biden getting stimulus 3 cash giveaways passed (so Republicans could hang him with it) and a 25% increase in food stamps. Otherwise, new spending has been largely muted. Republicans have effectively stonewalled everything Biden has tried to do and now they are painting Biden to be an ineffectual president, blaming Biden for inflation which Trump is mostly responsible for. It’s not based in reality but Republicans will likely take over all 3 houses regardless because the Dems aren’t economically smart enough to argue their case. They really don’t know where inflation comes from. For that matter, most Americans are too financially illiterate to catch on.

And, of course, Dem messaging has been far from on point. They’ve got a winning argument but don’t know it because they don’t understand macro economics enough to realize the major correlation and time lags between the money supply and inflation, or high inflation mostly born from Trump era policy. Not their fault in particular really, most Americans don’t know what I’m telling you. They are too financially illiterate, distracted and mentally lazy perhaps, I don’t know. It’s not just the masses, it’s from the top of those who are supposed to know:

https://www.youtube.com/watch?v=_X7fcO7t-0Y

If you watched Friedman’s video, you would know why the Dems have a winning argument. Friedman speaks it plain.

Anyway, I’m out of time and this comment is once again too long but I wanted to share this with you because of your choice for a moniker, you have a passion for this I can tell and this site is truly about financial literacy.

#185 helpinvancouver on 07.15.22 at 4:32 pm

After 10 years of warning everyone it seems the positive feedback loop on housing may be finally broken.
More covid lock-downs, more free cash, drop interest rates and keep the housing market going.