The Fed & thee

What does today’s Fed rate hike mean?

If you have financial assets, it’s all good. The CB is being tough but not stupid. The bump of 75 beeps is serious, but not nuclear. Inflation is peaking, many people feel. Oil’s back below a hundred bucks. People are buying bonds again. Corporate earnings (it’s Q2 season right now) are surprising to the upside. The current view: there’s a solid good chance of no recession. If one occurs, it will be short and shallow.

Lost in all the social media moaning about how awful things are is the fact employment levels are spectacular. Job openings abound. Incomes are rising. Recessions don’t normally happen when more people are working, the economy’s in recovery and companies are making bank. This one (if it does come) will be more like an adjustment than an event, caused because a too-hot economy in need of spanking. But, you know, not a hard one.

The prediction here remains. The current equity market funk is not a prelude to something worse, like those in the steerage section whisper to each other. This is not the Big One. Sitting quivering on the sidelines means you will miss the best days.

So remember the three rules: invest when you have money. Stay invested. Don’t be emotional. And of all the emotions, fear is the most destructive.

What does the Fed move mean to real assets?

Th move today cements another hike by the Bank of Canada right after Labour Day. Maybe a half-point. Perhaps 75. The chartered bank prime will rise to at least 5.2%. Variable-rate mortgages will be about 4.75% with a stress test hurdle of just under 7%. HELOCs move to 5.7% or more.

Will that be the end?

Maybe, but likely not. Mr. Market expects one more increase (at least) after that before our guys take a pause to see how things settle. The odds of rate reductions in 2023 are fading fast. If we avoid a recession (increasingly likely) or if any downturn is short (almost certain) the monetary dudes have no reason to drop the cost of money. Truth be told, they don’t want to. Higher, ‘normalized’ rates are necessary so they have the ability to pour on more stimulus in future years when it’s really needed.

Where does this leave real estate?

First, check out this chart. Behold what the combo of a global pandemic and 2% mortgages did to the cost of houses in Canada. Boy, are some people ever screwed…

Source: Corplay, Turner Investments

So higher rates in the US (today) mean the cost of money goes up here, too. Our CB follows the Fed over 90% of the time. Considering the inverse relationship of mortgage rates and house prices, it’s evident the chart above is about to turn south.

As we’ve spelled out, real estate takes a lot longer than equities to descend, and a vastly greater period of time to recover. Years, not months. Maybe a decade. A significant current risk is the huge number of folks with variable-rate mortgages. Most Canadians with VRMs have stable monthly payments – no jump when rates rise. But with each payment they’re financing more interest and retiring less debt. Upon renewal in 2023 or 2024 they’ll still owe a huge amount on their principal and face payments, on average, 40% higher.

Meanwhile count on investors to be exiting the market now that financing costs have risen and negative cash flows cannot be recovered through capital appreciation. Given that 50% of all Toronto condos have been gobbled over the last few years by people with no intention of living in them, you can smell what’s coming.

Across the entire planet, few peoples have been as weird as Canadians in speculating so heavily on one asset that costs so much and requires such massive leverage. This is a risk level most humans try to avoid. We embraced it.

The CBs are not backing down. Stop fighting.

About the picture: “Thought I’d flex with this actual email that you actually responded to in order to demonstrate my loyalty and dedication to your pathetic blog,” writes Paul. “Here’s a picture of The Lady Miss Blackie Onassis who, though utterly incapable of putting in an offer that’s $100K over asking with no conditions, seems to have captured that look of someone who got a lil house horny and is now remorseful having taken that 40% hit. Taken at Canon Beach on our first US road trip post-pandemic.”

 

136 comments ↓

#1 Tim on 07.27.22 at 2:06 pm

China property sales could plunge by one third

https://www.theguardian.com/business/2022/jul/27/china-property-sales-could-plunge-by-one-third-analysts-say-as-crisis-deepens

#2 Adam on 07.27.22 at 2:12 pm

Stocks good. Real estate bad.

Balance good. – Garth

#3 Søren Angst on 07.27.22 at 2:12 pm

…9 min later behold, the Blog.

Garth you’re getting predictable. Here’s to that.

#4 Dave on 07.27.22 at 2:16 pm

“Across the entire planet, few peoples have been as weird as Canadians in speculating so heavily on one asset that costs so much and requires such massive leverage. This is a risk level most humans try to avoid. We embraced it.”

It’s not the Canadians who are speculating. You can’t buy a home under 3 million in Vancouver.

#5 sailedaway on 07.27.22 at 2:18 pm

And, one very sad thing is that all this money for real estate could have been used to actually, errr, do stuff.

Like businesses, machinery, etc. But when you talk to the numero uno bank (the one that somehow is allowed to use the word ‘royal’) and they tell you they’d rather do mortgages than take risks…

Well, you stay a second-rate country and a
‘could have been”.

#6 crowdedelevatorfartz on 07.27.22 at 2:19 pm

@#1 Tim
“China property sales could plunge by one third”

++++
No biggie.
They’re just following Canada’s plunge…..

#7 Leagle Beagle on 07.27.22 at 2:22 pm

I know its been said before but the chart in today’s post looks an awful lot like this first half of this one:

https://static.seekingalpha.com/uploads/2018/1/23/48558512-15167626365862508_origin.png

Any bets as to where we are now…?

#8 Leftover on 07.27.22 at 2:23 pm

It might be the first full employment recession in history.

Many believe that one of the main causes for a slow down is the shortage of people willing and able to work – growth stops when you can’t get employees because they already have a job or are perfectly content not working.

But it gives the CB cover to raise rates. If they don’t lead to unemployment, higher rates are a very good thing.

Oh, unless you have a lot of debt.

#9 Dogman01 on 07.27.22 at 2:26 pm

For those of you concerned about the new ideological zeal set to drive farming practices.

This short video is both enlightening and entertaining:

https://www.youtube.com/watch?v=LMG4kuEN_kM

Remember:

“There is a level of admiration I actually have for China because their basic dictatorship is allowing them to actually turn their economy around on a dime and say we need to go green, we need to start, you know, investing in solar. There is a flexibility that I know [Prime Minister] Stephen Harper must dream about: having a dictatorship where you can do whatever you wanted, that I find quite interesting.” – JT

#10 db on 07.27.22 at 2:28 pm

I think the overall advice is sound – stay balanced, stay invested. Suppose however, the economic prediction of no or shallow recession, high employment and solid corporate profits turns out to be incorrect, at least in the short term?
Well, it turns out being balanced, living within your means, consistently investing and managing credit responsibly will still leave you ahead.
You could argue Garth has everything wrong. So what’s the alternative? Crypto? Heavy exposure to the latest hot sector (because concentration and timing the market is a no lose strategy, no?), or say cash?
Ryan had a post a while ago where he reflected on his predictions for the year and discussed the calls he got right, and the ones he got wrong.
Though I appreciated the transparency I couldn’t help but notice that there was no suggestion that neither the right calls nor the wrong ones had any dramatic effects on overall returns and probably didn’t move the needle much over the long term. That to me pretty much sums up the beauty of the John Bogle school of investing.

#11 Blobby on 07.27.22 at 2:30 pm

@#4 Dave:

“It’s not the Canadians who are speculating. You can’t buy a home under 3 million in Vancouver.”

Last time I checked, Vancouver was in Canada.

#12 Melinda on 07.27.22 at 2:31 pm

I wish the people in Nova Scotia would start reading your blog… They really do think real estate can never go down here and that EVERYONE from Toronto will move here, so prices will only go up. They’re still bidding wildly over asking without conditions because their realtor (usually a family friend) said it was the smart thing to do. How many people will ruin themselves this month?

#13 Warren-the-lagging_indicator on 07.27.22 at 2:33 pm

Wow what a chart! Now if we could just get the incomes to break out of the upward pennant structure to close the gap, all the housing collapse worries would abate. You know, treat the job market as a speculative paradise.

#14 Prince Polo on 07.27.22 at 2:42 pm

GoJPowellGo!!!

https://m.youtube.com/watch?v=nvlTJrNJ5lA
Tom Petty And The Heartbreakers – I Won’t Back Down

#15 James on 07.27.22 at 2:44 pm

Long time casual reader, never commented (I try to avoid reading comments for obvious reasons). But seeing a Boston Terrier today makes me happy. Anyone who has been around those dogs knows how hilarious and goofy they are. Thank you for your sound financial advice Mr. Turner, I hope you never stop writing.

#16 Rook on 07.27.22 at 2:45 pm

Interesting graphic on the NYT about rate raises and recessions.

https://www.nytimes.com/live/2022/07/27/business/fed-interest-rates

If the graphic is correct, the rate is now what it was when the taper tantrum happened. It will be interesting to see if history repeats.

The other noticeable pattern, is that, on the time scale they give, the rate has to rise less than the prior peak every time to trigger the next recession.

I kind of feel like that detail might be important.

#17 Drewfor on 07.27.22 at 2:46 pm

“It’s not the Canadians who are speculating.”

It very much is. gtfo with that tripe.

#18 Søren Angst on 07.27.22 at 2:49 pm

Bought more shares yesterday by reinvesting all the dividends received in July.

Dividend investing is easy.

The more shares you own. The more $ dividends you get. The higher the yield per share is, the bigger bang for the buck you get. YTD avg div yield for me is almost 29%.

Don’t have to sell a single share to help fund my retirement.

Why I don’t worry about share price drops, well, unless a fund goes below its NAV. Even then, they seem to recover quickly.

Still, nice to see share appreciation = a healthy Mr. Market.

#19 Paddy on 07.27.22 at 2:52 pm

“ Most Canadians with VRMs have stable monthly payments – no jump when rates rise. But with each payment they’re financing more interest and retiring less debt”…..

Don’t forget to mention the “trigger point” with VRM payments. 80% of Canadians have a fixed payment VRM..but if the interest rate rises to far, their payment will not be covering enough of the interest payment and their payments will go up.

#20 Drew on 07.27.22 at 2:53 pm

““It’s not the Canadians who are speculating. You can’t buy a home under 3 million in Vancouver.”

Last time I checked, Vancouver was in Canada.”

Wow, you are very clever. Too bad you can’t understand how offshore speculation and money laundering work.

#21 Joseph R. on 07.27.22 at 2:57 pm

DON on 07.27.22 at 12:35 pm
#118 T on 07.27.22 at 10:42 am
#104 Jane Doe on 07.27.22 at 4:48 am
You’d think with Putin putting the squeeze on EU, ensuring recession and depression style rationing, that Biden and Trudeau would learn something about energy security? Germany listened to the Goofy Greens without a clue towards the security of the nation now look what’s happened. Canada is drowning in an ocean of debt at the same time as Trudeau spends historically, some aimed at gas and oil projects outside Canada, but now attacks Canadian agriculture. It makes no sense. He makes no sense. The Green Nonsense makes no sense. Is he a thrall of Uncle Klausse or is he so angry at Canada for denying him our love and obedience that he’s prepared to wreck the country for generations of future Canadians. Experts are saying Canada can’t recover from this.

—————

Stop doom scrolling. Everything is going to be fine.

Once a social algorithm has you, it’s hard to escape the constant barrage of negativity and downward spiral. You can tell who’s falling into the rabbit holes by the language they use.

If you can’t unplug by yourself, seek help.

**********

Who let’s a social algorithm do their research for them?

—————————————–

Qanon does.
What do you think “WWG1WGA” meant?

#22 Steven Rowlandson on 07.27.22 at 3:01 pm

“Given that 50% of all Toronto condos have been gobbled over the last few years by people with no intention of living in them, you can smell what’s coming.”

If it is all spec and no real customers or tenants then financial disaster is possible if not likely.

#23 Steven on 07.27.22 at 3:01 pm

They are NOT backing down YET. But had the GOLDEN Opportunity today to raise it 1% from Canada’s desperate hike earlier but they just can’t because:

Remember the independent FED is holding the line until November’s mid terms…

Trust me Powell is no Volcker. Real inflation NORTH of 8% and we are at what? 2.5%. Please.

Stock market served first and people with Assets, The rest of you are on your own.

Jerome had a tough time saying the R word in his presser too.

Yes business in services is UP due to pent up demand by people with assets…Hard goods except for weapons for the upcoming war within 5 years are down.

Are you prepared? Let’s see CPI numbers tomorrow.

Oil up 3% today is the tell as well….you think it would be UP if interest rate hikes really got serious? I don’t think so….

#24 Jay on 07.27.22 at 3:01 pm

I think what he means is yes Vancouver is in Canada but Canadians are not buying the homes there for $3 million plus, how could they possibly afford that, buyers are coming from outside of Canada.

Covid proved that was a lie. – Garth

#25 Mark Brand on 07.27.22 at 3:01 pm

Any thoughts on the “Trigger rate” pinching folks even further?

https://www.theglobeandmail.com/investing/personal-finance/household-finances/article-calculate-mortgage-trigger-rate/#:~:text=The%20trigger%20rate%20is%20the,you%20pay%20every%20two%20weeks.

#26 DJT on 07.27.22 at 3:06 pm

Interest rates will have to rise above inflation(~%10) to tame the beast created by doubling the money supply over the covid panic.

Not a chance. – Garth

#27 Squire on 07.27.22 at 3:11 pm

Thanks for all you do Garth.

Folks, support the farmers
https://www.youtube.com/watch?v=LMG4kuEN_kM

and remember this when an election is called this fall.

#28 Sail Away on 07.27.22 at 3:13 pm

“Across the entire planet, few peoples have been as weird as Canadians in speculating so heavily on one asset that costs so much and requires such massive leverage. This is a risk level most humans try to avoid. We embraced it.”

——–

Agreed. You guys are loonie about real estate.

It’s just a house.

#29 Richard L on 07.27.22 at 3:21 pm

I understand that the total mortgage debt in Canada is now > $2 Trillion and will soon be more than the national GDP.

Not good

#30 Søren Angst on 07.27.22 at 3:23 pm

Garth, I ‘dunno.

I’m with you 100% that we’re not seeing any current indicators of recession in Canada. e.g., recent Retail Trade normal growth, EI $ no change.

BUT.

Cdns are swallowing a whack of HELOC and CLP debt (3X $ value of HELOCs) as I type.

Either:

1. They are financially well off and want to go on spending spree’s to reward themselves for their genius 1 asset strategy,

or

2. They are in a heap of financial trouble needing to pull out cash of an asset dropping in price by the day to fund their lifestyles.

#1 a good thing but in the Faerie Dust realm. #2 more likely and means sometime soon, the proverbial dung will hit the fan. After all, there is a ceiling as to how much money they can pull out of their 1 asset strategy.

Consumer spending will drop. Layoffs will follow soon after.

The rest you know.

—————–

It’s coming Gath. When? Nobody knows. But it’s coming sooner I think than most imagine. Covid, post-Covid:

Expect the Unexpected.

#31 Amok on 07.27.22 at 3:23 pm

Actual conversation with a friend of mine who works in real estate development downtown Vancouver, in regards to a new residential project going up at the corner of Burrard and Davie:

Me: “There are significant number of studios, making up 42 per cent of the unit mix.” Why would they build almost 50% studios?

Them: Door price. If the required sale price is $1800/ft (tho likely $2000), the price of each unit is more manageable. Also for rentals more affordable market units. 450sqft @ $1800 is $800k. Rent would be About $1900 at current market rates. Sale price is dictated by land cost, construction cost, permitting and civic fees, and financing costs. Likely profit is about 8-12% on this. Don’t know when this particular group bought the land, but the hold cost on it would likely be pretty crazy too (~$200k/mo).

Me: $800K Studio apartments!? Who wants that? Who is the market?

Them: Investors. And people who have rich parents gettin into the market. It’s insanity. But the land cost and construction cost dictate it the most. The projected profit with be required return from financiers.

This is just going to continue.

All those units will sell? And then be worth $1M in a few years? Is this reality?

#32 crowdedelevatorfartz on 07.27.22 at 3:29 pm

@#23 Amok
“Them: Investors. And people who have rich parents gettin into the market. It’s insanity. But the land cost and construction cost dictate it the most. The projected profit with be required return from financiers.”
+++
Wishful thinking in about 6 months.
Flashback to the early 80’s when concrete towers in Vancouver were half finished, concrete, pigeon roosts….for years….

This is just getting started.
Enjoy the last Summer of endless spending for about 5 years.

#33 Ustabe on 07.27.22 at 3:32 pm

“No sympathy for the devil; keep that in mind. Buy the ticket, take the ride…and if it occasionally gets a little heavier than what you had in mind, well…maybe chalk it up to forced consciousness expansion: Tune in, freak out, get beaten.”

~ Hunter S. Thompson

#34 Søren Angst on 07.27.22 at 3:39 pm

#18 Sail Away

AMEN!

Same in Italia.

In 7 years here none of my relatives have ever talked about the price of their home. When asked what it might be (me the Cdn expat being Cdn) they don’t have a clue. In fact, I haven’t bothered to find out what my condo is worth for years. Don’t care.

It’s just a home. Not a retirement asset plan.

——————

RE is a Cdn disease in need of lancing.

The lance is the Cdn CB and lance they will.

Commenters whining they aren’t seeing price drops (suspect they are Realtors, I mean who else says that?) or not happening fast enough or still too high.

People.

The 1st rate increase was on March 2nd and it was an anemic 0.25%. So, it’s been all of 4 months + 11 days or so that rates have been going up. *

PATIENCE.

If 4 months has set Cdn RE into a nosedive, imagine what 12 months will do? Or 16 months?

Paleos like me and the IMMORTAL ONE have seen this before and danced its dance.

PATIENCE oh IMMEDIATE GRATIFICATION GenX, Mills and Toe Fondlers.

* Scroll to chart & table.
https://www.bankofcanada.ca/core-functions/monetary-policy/key-interest-rate/

#35 Søren Angst on 07.27.22 at 3:56 pm

#31 Amok

RBC resales:

-23% this year + -15% next year.

Price down -12% by 2nd Qtr 2023 (wishful thinking by the bank looking at ON price drops already having beaten that estimate into the ground awhile ago). BC is not immune to CB rate hikes, not even the Orca’s can save them.

Those buyers are Poster Children for this Blogs moniker:

Greater Fools.

——————-

PATIENCE.

The CB fun has just begun.

Track that complex and get back to us in say 12 months time about how it’s been for them. You know, if they think they made a GENIUS investment and aren’t losing money hand over fist.

#36 wallflower on 07.27.22 at 3:58 pm

The Lady Miss Blackie Onassis
Nah, this is not remorse.
She’s having a lazy squat pee getting caught on camera!

#37 COVID Variant Math on 07.27.22 at 4:03 pm

#26 DJT on 07.27.22 at 3:06 pm
Interest rates will have to rise above inflation(~%10) to tame the beast created by doubling the money supply over the covid panic.

Not a chance. – Garth

++++++++++++++++++++++++++++

Think of it as debt X interest rates is the formula to fight inflation..

If you have no debt, interest rates mean nothing to you.

If you’re carrying a $1million in debt, a small interest rate delta is deadly.

The trick to fighting inflation is to mop up excess dollars. In a world pickled in debt, interest rates don’t have to move far to do that.

ECON 581 – Economic Theory for Millenials and Idiot Bankers.

#38 Scott in Gibsons on 07.27.22 at 4:05 pm

Just for fun….if the WEF is predicting that in 7 years you, I, and Garth will “own nothing” then there is a lot of wealth destruction required in a relatively short time. Politicians around the world are implementing policies that look very similar to WEF goals and destroying the wealth of the 99% in the process. Might just be a coincidence, unless the WEF has been “penetrating ze cabinets”……

Are you related to Pat or Tamara? Or just too long in Gibsons? – Garth

#39 Scooby Snacks on 07.27.22 at 4:07 pm

Mortgage up for renewal….fixed or variable?

#40 Todd Somerville on 07.27.22 at 4:10 pm

Thanks Paul, that is one beautiful Boston Terrier!!

#41 DJT on 07.27.22 at 4:16 pm

Interest rates will have to rise above inflation(~%10) to tame the beast created by doubling the money supply over the covid panic.

Not a chance. – Garth

Interest rates in the 80/90’s hit 15%+, what has changed?

#42 National Post on 07.27.22 at 4:23 pm

OECD has predicted that Canada will have the worst growth prospects of the major industrial societies for the next FOUR DECADES (please excuse the annoyed capital letters but good God — the worst? And for four decades?).

https://nationalpost.com/opinion/jordan-peterson-worst-is-yet-to-come-from-trudeau-liberals

#43 Sail Away on 07.27.22 at 4:27 pm

With the summer heat, I’ve switched the mountain assaults to 5am for happier dogs. Kick off just as it’s getting light, up and back in 1.5 hours, home for a shower, then some fun market manipulation.

It’s an accumulation week. Tech really jumped on the huge bill passage for US chipmakers. Government money, baby. Intel, Nvidia, AMC…

#44 The General on 07.27.22 at 4:35 pm

Its interesting that Blackrock, Statestreet and Vanguard control $ 20 trillion in assets, being the top 3 investors in multiple companies which span oil, pharmaceuticals and agriculture. And each other. You, the investor, are not as smart as you think. You’re part of the problem if you go along with this charade.

How is investing in the economy and jobs a ‘charade’? – Garth

#45 Domino on 07.27.22 at 4:42 pm

Let’s try another topic
Garth..question..
What are your feelings about the new pc party and the leadership contest
Is Canada ready for PP. ?
Will pp beat t2 ??
Now there are questions

#46 Dave on 07.27.22 at 4:42 pm

If EU doesn’t get Russian oil or gas….that will send prices sky rocketing.

Inflation will be talk of the town…people will not have any disposable income for Garth to invest

Drama queens everywhere. You should start a club. – Garth

#47 Penny Henny on 07.27.22 at 4:47 pm

Nasdaq YTD high – 15849
YTD low- 10565

That was a drop of precisely 33.34%

or you could say the low was 66.66% of the high.

Spooky

#48 yorkville renter on 07.27.22 at 4:58 pm

#7 – I’m going to say we’re still in the DENIAL stage… although some agents online are claiming to “buy the dip” and those folks (who are obviously lying anyway) must be in the BULL TRAP part of the curve.

Just stay invested. Way easier. – Garth

#49 Diamond Dog on 07.27.22 at 5:10 pm

Let’s split the markets so there’s no confusion.

Canadian markets are commodity laden. Agriculture in Western Canada overall will do well. Our miners will do well. I think Nickel for example, has already bottomed. It’s a bit early to declare it with copper as another example, but I think we are close. There are supply/demand fundamentals that cannot be ignored in base metals regardless of China’s woes. PM miner’s beware. They may not do as well over the next year. O & G will do well this winter thanks to Putin. Fertilizers are poised for strength. What does this add up to? A stronger market.

Canadian housing is a bit of a wreck, we all know this but it will take a couple years before we see bankruptcies hit financials and the economy as a whole. We have to monitor it without question, but its a medium to long term problem.

As long as commodities stay strong, we may be able to weather it at least for now meaning there may not be a Canadian recession to worry about, not this year, maybe not next. It really depends on Europe, but I don’t think we’ll have one here because of sanctions on Russia.

The U.S. on the other hand, is headed for a serious downturn. I think they’ve got a 4 quarter recession on their hands. If their Fed chickens out and doesn’t break price behavior, it will be ugly there going into 2024.

U.S. fiscal realities are not pretty by any means. We are likely to see a market melt up in the latter half of this decade in U.S. as a consequence of a substantially weakened dollar from a debt crisis. When we talk about diversity, we also need to think internationally. Big question marks surround Europe right now. Will the Soviets remain in power in Russia or will they flounder? Will Democracy rise from the ashes and Europe become a united world superpower, or will Europe remain divided thanks to Putin and Soviet ideology? It’s to be determined.

There is much in the future that remains uncertain, other than climate change will get worse, we should hit peak people in the latter half of this decade and humanities systems do not function well in contraction environments, not our economies or currencies, none of it functions well in contraction. Our systems are so poorly designed for this and so I shudder at the prospects of the 2030’s for the young.

But I wander, Canada could avoid recession depending on how Europe and commodities play out. The U.S. won’t be so lucky. There’s no soft landing for them. We think we rapidly increased the money supply here in Canada, our counterparts outdid themselves and will have to pay the price. Like I say, I see a melt up coming for them in the latter half of this decade with indications of it coming sooner, particularly if the Soviet Russian problem is resolved and how it would effect the dollar assuming the war doesn’t turn nuclear of course. Life is cheap for Soviets so there’s always that.

#50 an investor on 07.27.22 at 5:16 pm

The Financial Post is reporting that one third of Ontario homeowners are planning to move due to affordability issues. Although not stated, the exodus out of Toronto continues.

Worth noting that for the cost of a 450 sq. foot Toronto condo, you can buy a ranch on 60 acres in Texas.

https://financialpost.com/executive/executive-summary/posthaste-rising-mortgage-rates-driving-ontario-homeowners-to-move-in-search-of-affordability#Echobox=1658923502

https://www.landwatch.com/comanche-county-texas-farms-and-ranches-for-sale/pid/411497324

#51 Mattl on 07.27.22 at 5:22 pm

SP500 was 1400 in 2000, 1400 in 2007 and 1400 in 2013.

800 in 1970, 800 in 1992.

You are suffering from some serious recency bias, there have been incredibly long stretches of poor financial returns. I think it is naïve to think financial assets only require a 20% reset from their absolutely stratospheric gains since 2009. Some of us believe that both RE and financial assets were overly inflated by free money.

And layoffs are just starting, and will snowball. Q3 and Q4 corp earnings are where it gets interesting. This thing has barely begun, I’m fascinated that you think it is almost over.

And yes I am balanced, and fully invested, but strongly believe the economy is fueled by cheap money and debt, and that when that rug is pulled, growth will be hard to come by.

#52 The General on 07.27.22 at 5:24 pm

Central Banks are accumulating a lot of gold lately. Are they considered rock lickers too, oh wise one?

The BoC has no gold. It’s not money, as you know. – Garth

#53 NOSTRADAMUS on 07.27.22 at 5:26 pm

TIME TO PULL THE SHADES UP AND PEEK OUTSIDE.
So many soothsayers all pointing to the incredibly low unemployment rate. Look and believe, retailers are frantically hiring anyone who can fog a mirror to keep up with the wave of consumer spending fed by the Covid checks and PPP loans. As is the case with most economic trends, it takes time for the system to realize the money has disappeared. In my humble opinion this is building up to mass layoffs in the final quarter of 2022. You only have to look at Amazon, Meta (Facebook) Netflix, Tesla, Walmart and numerous other large corporations, the writing is on the wall and crystal clear, they are all without exception announcing layoffs. These company’s, without exception, got to be the leaders in their respective field by reading the tea leaves long before the soothsayers woke up and rubbed the sleep from their eyes. Rising job losses in tandem with rising prices is the last technical indicator along with falling GDP. With GDP well in decline the recession has essentially already started. But the soothsayers continue to tout the high employment rate as proof that all is well in the economy. They consistently ignore all the other important factors including GDP, rising prices, rising debt and loss of consumer spending power. An avalanche of job losses this year going into 2023 is so predictable it hurts, and still the soothsayers remain oblivious. Needless to say, a considerable downturn is about to take place going into 2023 and hopefully people are preparing for the inevitable consequences. Steady Lads, hold the line.

#54 yvr_lurker on 07.27.22 at 5:28 pm

#32
Flashback to the early 80’s when concrete towers in Vancouver were half finished, concrete, pigeon roosts….for years….
————-

Then, starting around 1986 there was a huge BOOM in building condos, duplexes, etc… and anyone who could hold a hammer and a wrench was employed in construction. I owned one of those poorly made duplexes for 16 years. No external leaks, but all sorts of shortcuts taken by those “contractors” (bending pipes to a 90 degree angle rather than putting on a proper joint) showed up as internal leaks over the years, misaligned wiring etc… sold it in 2019 after having replaced so many things….

#55 West New West on 07.27.22 at 5:42 pm

Friend of mine has a Boston Terrier. Every time anyone takes one look at that dog they start laughing. The dog is hilarious, looks like Blackie is the same

#56 Tom from Mississauga on 07.27.22 at 5:57 pm

Cheap expiring natgas future contracts hit Alberta consumer inflation with 54.6% in June, electricity jumped 35.6%. Ontario is next in July with the regulated price jumping a whopping 137.2% to 150.8%. Better harvest some cords for winter.

https://www.oeb.ca/consumer-information-and-protection/natural-gas-rates/historical-natural-gas-rates

#57 The BOC "virus" punted the workers on 07.27.22 at 6:01 pm

The BoC has no gold. It’s not money, as you know. – Garth

That we know, we also know that they are corrupt retards working for Laurentian elites that have betrayed this former country

Who left the blog sewer cover open? – Garth

#58 The General on 07.27.22 at 6:07 pm

# 52- The BoC has no gold. It’s not money, as you know.- Garth
Correct, it’s not money, and Canada liquidated it’s supply at the very bottom of the cycle. No one knows how much China has for sure, but they’re the biggest miner of the stuff. Fort Knox has lots, but they refuse to allow an audit. Some governments seem to have a shiny rock fetish.

#59 Quintilian on 07.27.22 at 6:07 pm

I think I have a solution ….

Because I am so charitable and concerned for the well-being of realtors, speculators and debt junkies, I have come up with a solution, which after the final touches, and the math formulas, I will forward to my MP and CC Shawn ,for a final check before sending it to the finance minister.

In a nutshell it entails placing a surcharge/tax on renters, the revenue would then be redistributed to the mortgage slaves, as a subsidy to offset the cost of the interest, so that the cost of interest would remain at the equivalent of 2%.

Fair and sensible, just as in accordance to how it’s been for the last couple of decades right?

#60 Shawn on 07.27.22 at 6:12 pm

S&P 500 flat periods

#51 Mattl on 07.27.22 at 5:22 pm

SP500 was 1400 in 2000, 1400 in 2007 and 1400 in 2013.

800 in 1970, 800 in 1992.

********************************
Some of that looks right. S&P actually bottomed 666 on March 9, 2009 and Yahoo shows a peak over 1400 in 2000. OUCH!!!

Recency is a concern as you say. Around 2008 to 2012 or later this blog was FULL of people claiming “no body has made money in stocks since 2000”. And “the market is rigged”. Meanwhile the market soared and soared and left them behind. They eventually fell silent or died broke.

My data sources show the S&P 500 at 90 on January 1, 1970, no where near 800. There was a peak in 1973, I don’t have weekly or monthly data but it started 1973 at 118 and ended at 96.

I think maybe you meant 80 in 1970 and 80 again 1982. That looks about right.

Buffett wrote about I believe a 17 year period where the DOW or S&P 500 started and ended at the same level.

If we get persistent high inflation we will indeed get much higher rates and a bad S&P for maybe a decade.

BUT demographics are far different now and few are projecting huge inflation to continue or rates to really soar. Time will tell. Pass the popcorn.

#61 Sonar Gents on 07.27.22 at 6:17 pm

Who left the blog sewer cover open? – Garth

Aren’t we turning the planet into a giant sewer?

It is overflowing everywhere. Beaches, rivers, lakes, oceans, Halifax.

#62 Chaddywack on 07.27.22 at 6:18 pm

@19 Paddy

Yep the trigger point. A friend of mine is less than 0.5 away from this happening. Amazing to think that pretty soon he won’t even be covering the interest costs!

#63 Stone on 07.27.22 at 6:19 pm

The current view: there’s a solid good chance of no recession. If one occurs, it will be short and shallow.

———

Since then BoC follows the Fed 90% of the time, I’ll just focus on the Fed.

Has there ever been a time in recorded history where the Fed has raised interest rates and it has not caused a recession?

I get the impression that the answer is never.

Garth, if you are aware of such an event ever occurring, could you please advise.

#64 Mark on 07.27.22 at 6:25 pm

#4 Dave on 07.27.22 at 2:16 pm
It’s not the Canadians who are speculating. You can’t buy a home under 3 million in Vancouver.

Of course it is Canadians who are speculating. “foreign buyers” being a primary driver of this situation has been debunked by *all* reputable sources that have reported on it. key word: reputable.
Anecdotally I know MANY middle-class Canadian families with MULTIPLE investment properties. I know students and new grads (canadian students, not foreign students) who work part time and have rental properties. My friend’s landlord is a retired nurse and has 5 rental properties. Everybody is riding the train. Nobody sees that the bridge is out ahead.

#65 THE DANDADA on 07.27.22 at 6:28 pm

Cheap RE on its way.

Can’t wait to pick up a couple properties for a steal!

#66 Jessica on 07.27.22 at 6:31 pm

What it means by fall 2022, September to October 2022, reverse mortgage rates of 9% to 9.25%, we even see 10% reverse mortgage rates by end of 2022, November to December 2022. This is why as a single senior, I never owned real estate as I knew I could never afford it but my RRIFs, TFSAs, GICs, term deposits, bank stocks and CPP, OAS covers 50% of my rent, living expenses etc. This leaves me with $3,000 a month financial cushion and no debts so I am in a decent position. I have $40,000 in my reserve account for future car repairs, purchases and other expected future costs.

#67 Al on 07.27.22 at 6:42 pm

That we know, we also know that they are corrupt retards working for Laurentian elites that have betrayed this former country

Who left the blog sewer cover open? – Garth

Garth, it’s gems like these that make the comments section worth reading. Please keep the great posts coming!

#68 Brian on 07.27.22 at 6:43 pm

Garth residential real estate was half of Canadian 1st quarter of GDP.
https://betterdwelling.com/canadian-real-estate-was-responsible-for-nearly-half-of-gdp-growth-last-quarter/

How can the downturn of housing you mention which is occuring now, not affect GDP going forward?
How can the economy hum along going forward?
I’m not being a smart Alec, but I just don’t see the economy holding up once summer is over.

Half of growth, not GDP. Read more carefully. – Garth

#69 Sam on 07.27.22 at 6:43 pm

This amazing bull market has gone nowhere since 2008 if you divide it by the M2 money supply.

The bull market from 1982-2000 was real, this one is fake, only driven by money printing.

You can’t have a new bull market without another round of QE-geddon.

#70 Yorkville Renter on 07.27.22 at 6:58 pm

GT, we were talking RE, not Financials.

in my ‘play money’ account I’ve got some $$$ that was waiting to buy some MFC when the yield hit 6% but we never made it… hit 5.9% but not 6… generally speaking, is it better to buy now at a slightly lower yield or be patient and hit my target yield?

any opinions out there (hope I dont regret asking)

#71 Brian on 07.27.22 at 7:03 pm

#58 Brian

Sorry about the typo in my comment. I meant to type half of GDP growth. So my question still stands. Where is the GDP growth to come from if housing is tanking, O&G investment is tanking and soon to be agriculture returns coming down if the Liberals have their way?

#72 Paul on 07.27.22 at 7:22 pm

YEEEHAAA
and why doesn’t anyone respond “first” anymore.
oops, did I just date myself.

#73 Stop defending the BoC on 07.27.22 at 7:25 pm

Bank of Canada and others got inflation completely wrong and created this mess we are in. They are supposed to be the experts but a child can do a better job of running the economy.

Then you sound perfect for the task. – Garth

#74 Dean on 07.27.22 at 7:40 pm

Jessica, two pointers out there for a senior that has RRIF payments and is 65 and older, claim the pension tax credit which could be as high as $370 and don’t forget to max out your TFSA each year as much as possible which keeps OAS clawbacks and higher incomes at bay. My wife and we make sure to do these 2 things every year and it has saved us at least $21,000 over the last 5 years in potential higher taxes, OAS clawbacks.

#75 DC on 07.27.22 at 7:43 pm

To all the interest rate gurus out there claiming rates need to or will go to 10%; please do some homework and look to see what the bond market is saying. Check the Government 2,5, and 10 yr bond yields…you see 10 anywhere? Right.

#76 inflation is rampant on 07.27.22 at 7:45 pm

# 52- The BoC has no gold. It’s not money, as you know.- Garth
___________________________________

all the big important central banks hold physical gold. if it was not money, they would all unload it over time. but they will not.

Canada does not have a serious central bank. they should never have sold our gold. more incompetence from our leaders.

#77 TheDood on 07.27.22 at 7:48 pm

#31 Amok on 07.27.22 at 3:23 pm
Actual conversation with a friend of mine who works in real estate development downtown Vancouver, in regards to a new residential project going up at the corner of Burrard and Davie:

Me: “There are significant number of studios, making up 42 per cent of the unit mix.” Why would they build almost 50% studios?

Them: Door price. If the required sale price is $1800/ft (tho likely $2000), the price of each unit is more manageable. Also for rentals more affordable market units. 450sqft @ $1800 is $800k. Rent would be About $1900 at current market rates. Sale price is dictated by land cost, construction cost, permitting and civic fees, and financing costs. Likely profit is about 8-12% on this. Don’t know when this particular group bought the land, but the hold cost on it would likely be pretty crazy too (~$200k/mo).

Me: $800K Studio apartments!? Who wants that? Who is the market?

Them: Investors. And people who have rich parents gettin into the market. It’s insanity. But the land cost and construction cost dictate it the most. The projected profit with be required return from financiers.

This is just going to continue.

All those units will sell? And then be worth $1M in a few years? Is this reality?
_________________________

No one with a working brain is going to consider a studio for 800K. Wealthy or not. Those units will remain unsold until the price is half that or less.

There are 1400 sq ft townhomes in Langley on the market for nearly 1.5 mil, same thing, nobody’s buying them. It doesn’t matter development costs, construction costs, blah blah blah. They’ll sit on the market until the price is aligned with local incomes.

Of course anyone associated with that industry will tell you otherwise, I guess we’ll just wait and see.

#78 Flop… on 07.27.22 at 7:57 pm

Flop Drops.

Looks like we’ve got a caller on line one.

Go ahead caller, what’s your question?

#124 Calgary on 07.27.22 at 11:42 am

“Will I be able to buy a single detached house in White Rock, BC, for $800K by 2023?”

No, you will not, the bottom rung of detached in White Rock is at about 1.4 million, it could happen if this correction is a multi-year event, you could probably snare something around the million mark at some stage next summer, at the current pace though.

These guys already did in the neighbouring city of Langley.

The details…

20089 45TH Ave Langley.

Asking 1.19

Just sold for 999k

It ain’t sexy, nor is Langley in general, but just like I showed with the house in Chilliwack that sold for 627k, rents are exploding, real estate is correcting, so for some it makes sense to put in a lower offer and secure some discounted shelter.

Langley will be at 800k long before White Rock.

I’ve already seen stuff go in Abbotsford in the 8’s

The only thing in White Rock the starts with an 8 is the price of a beer…

M48BC

https://www.zealty.ca/mls-R2702877/20089-45-AVENUE-Langley-BC/

#79 inflation is rampant on 07.27.22 at 7:59 pm

#51 Mattl on 07.27.22 at 5:22 pm

SP500 was 1400 in 2000, 1400 in 2007 and 1400 in 2013.

800 in 1970, 800 in 1992.
__________________________________________

only partially correct.

from 2000-2013 the SP could not breach 1550-1560 and traded as low as 666 in early 2009. 2002 also saw a low of 768.

from 1966-1982 the DOW could not cross the 1000-1050 level, and bottomed at 570 in late 1974. it finally crossed higher in late 1982.

the SP was a slight variation
it peaked in late 68 at 110 then collapsed to 68 in early 1970. peaked again in Jan 73 at 121 then collapsing again to 61 by late 1974 (this was very similar to 2000-2009 but a shorter time frame)
followed by a third peak in 1980 at 142, bottoming in mid 1982 at 102, before starting a secular bull market

there was a similar situation from the 1929 peak to essentially 1942. another lost decade +

this is sadly what needs to happen now. another lost decade or more, with markets going nowhere and adjusting to the new reality.

#80 Shawn on 07.27.22 at 8:01 pm

#69 Sam on 07.27.22 at 6:43 pm

This amazing bull market has gone nowhere since 2008 if you divide it by the M2 money supply.

************************
In other words fake if you torture the numbers sufficiently to confess that it is fake.

Certainly don’t use official inflation to measure the real return. Instead just make up a number or use M2 growth or the price of houses to measure inflation.

I believe the percent growth in the monetary base which is different than M2 was even higher so use that if M2 is not enough.

#81 crowdedelevatorfartz on 07.27.22 at 8:02 pm

@#62 Caddywhack
“Yep the trigger point. A friend of mine is less than 0.5 away from this happening.”
+++
Yeah.
The next 12 months will be an eye opener for several generations who have only experienced “go-go” economy.
The interest rate brakes slamming everything to a stop.
Crickets……..
Jobs evaporating.
Underwater mortgage holders realizing they cant swim against the tide…..

But a good time to invest.
If you have money.
;)-

#82 baloney Sandwitch on 07.27.22 at 8:04 pm

US stock market leapt up like a rocket today. Weird, I thought it will go down. I guess relief that it was not a 1%’er hike – just .75

#83 TurnerNation on 07.27.22 at 8:04 pm

Last chance for travel. The endless chaos in the Former First World Countries, continues.
The 2020 shutdowns were the test.

.Lufthansa to cancel almost all German flights on Wednesday due to staff walkout (france24.com)

—–
But why. This was signed off on, a done deal. Your daily Corvid dose is a cover.
We are going back to the stone ages for 1.5c

https://www.c40.org/what-we-do/raising-climate-ambition/1-5c-climate-action-plans/

The C40 Climate Action Planning Framework and C40’s Deadline 2020 programme were created to support cities in developing climate action plans that have the level of ambition and action needed to play their part in meeting the objectives of the Paris Agreement. To stay within the 1.5°C target of the Paris Agreement, climate action planning needs must drive rapid, systemic change in cities around the world.

In all cases, transformational change is a necessity – cities must diverge considerably from their current business-as-usual emissions trajectories.

#84 Wrk.dover on 07.27.22 at 8:13 pm

#134 Dragonfly58 on 07.27.22 at 1:40 pm
Productive ? I am retired. The only one concerned with my productivity is me. Enormously concerned.
I would love to be more productive. Lack of $ is a huge time waster and a fact of life for many retired people. Several projects more or less on hold waiting for more $ to accumulate.
Once most of us retire it mainly becomes about how much $ you can squeeze out of your life after all your basic living costs are paid for.
My dream is to be as productive as my mind and body allow.
My productivity is only limited by my disposible $.
_____________________________

The only thing you can do for free is, get organized.

But very few do it!

It pays well though.

#85 crowdedelevatorfartz on 07.27.22 at 8:19 pm

@#78 Floppie
“The only thing in White Rock the starts with an 8 is the price of a beer…”
+++
Patience my auzzie amigo.
We have a long way down to go.
Besides.
Who wants to live south of the Fraser.
Ponzie lives there.

#86 KNOW IT ALL on 07.27.22 at 8:33 pm

OH REALLYYYYYYY!!!

Former Conservative PM Stephen Harper endorses Pierre Poilievre for party leader

#87 Ronaldo on 07.27.22 at 8:48 pm

Who would have thought that a house I sold in Pt. Coquitlam for $41000 in 1975 would be worth $1.6 million today. Income then was $12000/year. How does this compare to the above chart. The value of the house went up 40 times in that period. An equivalent salary today would be about $60,000. What would be the percentage in this case?

#88 Roofer on 07.27.22 at 8:50 pm

Does the economy, markets, politics make no sense to you? That’s because there is no price discovery or open markets. Canada is on the verge of becoming a communist country. Open your eyes all.

#89 The General on 07.27.22 at 8:53 pm

Now, you can’t go buy a Big Mac with Gold. I get that, but then the west (golden billion) just banned themselves from purchasing Russian gold. To deny the Russkies revenue. Unfortunately for them, everybody else can and will still buy it. Weird.

#90 Palky on 07.27.22 at 9:20 pm

No speculation here in Edmonton. Avg house = 3-4x avg income. Maybe something to do with our 2 seasons. Winter/ construction?

#91 DJT on 07.27.22 at 9:27 pm

Liberals traded all Canada’s gold for Carbon Credits?

#92 Doug t on 07.27.22 at 9:41 pm

What happened to the mindset of this country? When and how did we become so blind to how great we could be? How did we allow ourselves to be so soft, so fragile, so lazy? And where are we headed ? I don’t like it – I don’t like what the future holds for this country

#93 I don't know on 07.27.22 at 9:46 pm

“The prediction here remains. The current equity market funk is not a prelude to something worse, like those in the steerage section whisper to each other. This is not the Big One. Sitting quivering on the sidelines means you will miss the best days.”

-Sitting on the sidelines is always a dumb idea. It’s basically reserved for people who consume too much social media, where trolls, paid foreign actors, and the psychologically damaged run wild.

To these people, every downturn is 2008 or 1929. Any rise in interest rates is 1973 all over again, and inflation always (without fail) leads to the Weimar Republic.

The world of social media is very stark. Moderate voices are ignored or shut out. As a result, the consumer of social media is constantly exposed to extreme views, and usually starts to believe them.

It’s dangerous, and the financially successful learn to ignore it.

Speaking of personal finance, it’s ironic that the same people who usually shun being managed by a professional, are the ones who need it most.

The market bottom likely was in June. All time highs are a ways off, and volatility lurks, but 2008 this is not. Never was close.

IDK

#94 Bee See on 07.27.22 at 9:51 pm

#11 Blobby on 07.27.22 at 2:30 pm
@#4 Dave:

“It’s not the Canadians who are speculating. You can’t buy a home under 3 million in Vancouver.”

Last time I checked, Vancouver was in Canada.

____________________________________________

True, but like the rest of BC, it was not by choice.

Besides, the Albertans keep complaining that if we separated, they would need a passport to get to their summer homes and construction jobs. For what its worth, I keep suggesting they go to Saskatchewan instead ….

#95 Doug t on 07.27.22 at 9:52 pm

#83 TurnerNation

Keep bringin it brother

#96 RichardTO on 07.27.22 at 10:00 pm

>If you have financial assets, it’s all good.

Unless you own the former number one stock on the TSX by market capitalization (briefly), Shopify.

Holy hell, this thing got REKT. And you like to harp on Bitcoin. This has unravelled more than many vaporware crypto scams.

#97 M on 07.27.22 at 10:29 pm

@83 Turner Nation
@ 95 Doug t

Turner Nation is the best. Keep it up.

Some of my faves were from last week, forgive me if I the accuracy is off but something along the lines of “We will have the best climate! I cannot wait. And the best health”.

Howling of laughter. What a clown world we live in. I love when people see right through nonsense and get to the heart of it all: Power and money. That’s how the world runs.

#98 Ponzius Pilatus on 07.27.22 at 10:50 pm

#87 Ronaldo on 07.27.22 at 8:48 pm
Who would have thought that a house I sold in Pt. Coquitlam for $41000 in 1975 would be worth $1.6 million today. Income then was $12000/year. How does this compare to the above chart. The value of the house went up 40 times in that period. An equivalent salary today would be about $60,000. What would be the percentage in this case?
————————
Ronaldo,
You better stick with scoring soccer goals.
You RE math is waaay off.

#99 Reality is stark on 07.27.22 at 11:07 pm

“Not enough supply”.
What a joke that was.
How about too much speculation?
An average house in Chatham worth more than in Calgary which has over twice the household income.
It became a farce.
50% of the peak price in bunnypatch folks.
You can take that to the bank.
Now you can pay the bank….for years.

#100 Ronaldo on 07.27.22 at 11:33 pm

#98 Ponzius Pilatus on 07.27.22 at 10:50 pm
#87 Ronaldo on 07.27.22 at 8:48 pm
Who would have thought that a house I sold in Pt. Coquitlam for $41000 in 1975 would be worth $1.6 million today. Income then was $12000/year. How does this compare to the above chart. The value of the house went up 40 times in that period. An equivalent salary today would be about $60,000. What would be the percentage in this case?
————————
Ronaldo,
You better stick with scoring soccer goals.
You RE math is waaay off.
===================================
I simply stated facts. I did not do the math. I wanted you to do that. Go back and re-read my post Ponzy.

#101 Russ on 07.27.22 at 11:36 pm

@#83 TurnerNation

It is interesting that at the Paris agreement Canada’s GHGE (green house gas) was at 1.8% of worldwide emmisions.
Last year we were at 1.6% of GHG world wide emmisions. A performance unrivalled by any country.

How much farther can we go without Canadian people dying off from lack of access to energy or food?

Ah, per capita values rule say the greener foundations.

Okay, where is the credit of Canadian GHG capture that our vast forests benefit us?

Umm, none. Say the organizations who wish to control your movement.

We just agreed on this flawed model a bunch of years ago that the proposed process to get there was a good idea.
We honestly didn’t expect it to get any traction. But at this time it is good to thank Justin Trudeau and the other non-thinkers of the cabinet.
Thanks he got rid of that brain, Morneau

If you wish to take it further then correlate government revenue to GHG emission and it is to see you can reduce global warming by lowering government revenues.

Cheers, R

#102 crowdedelevatorfartz on 07.27.22 at 11:37 pm

@#91 DJT
“Liberals traded all Canada’s gold for Carbon Credits?”

+++
Yep.

#103 Balmuto on 07.27.22 at 11:42 pm

One thing to keep in mind about the GDP numbers is that they are adjusted for inflation. So an economy that’s growing at a rate of 7% looks like it’s contracting by 1% when inflation is at 8%. When you have a spike in the inflation number it may distort the growth picture in the short term.

Conversely, when the economy starts cooling, if the inflation number is cooling faster, the inflation-adjusted GDP number may present a more rosy picture of growth than is actually the case.

So I agree with Garth that you need to take the GDP numbers (which might technically qualify as recessionary) with a grain of salt, especially when other economic indicators are telling a different story.

#104 Doctor Know on 07.28.22 at 12:05 am

DELETED

#105 Deadcatzarefallin on 07.28.22 at 12:17 am

Alot of irrational exuberance from the usual stock pumpers after today’ deadcat bounce. I would instead listen to this guy Wilson who has alot more street cred …..
https://www.cnbc.com/2022/07/27/market-jump-after-fed-hike-is-trap-morgan-stanley-warns-investors-.html

#106 David Greene on 07.28.22 at 12:59 am

Uh, sure, why not. But unlike crypticurrenvcies, Shopify is actually based on something real, that generates wealth

=============================
#96 RichardTO on 07.27.22 at 10:00 pm

>If you have financial assets, it’s all good.

Unless you own the former number one stock on the TSX by market capitalization (briefly), Shopify.

Holy hell, this thing got REKT. And you like to harp on Bitcoin. This has unravelled more than many vaporware crypto scams.

#107 Silent Watchtower on 07.28.22 at 1:09 am

“The average homeowner in the Greater Toronto Area is paying all of their monthly income on the mortgage, the report said.” “the annual housing affordability index published this week by Re/Max Canada”

Source: https://archive.ph/KilDV#selection-1995.0-2002.0
https://www.thesudburystar.com/news/local-news/compared-to-the-rest-of-ontario-sudburys-home-prices-a-bargain

#108 Nonplused on 07.28.22 at 2:23 am

I don’t know that all this playing with interest rates the Fed does really does anything to the real economy except mess with prices. There is a school of thought that suggests it is production that creates demand. It is by producing something of value to others that you gain the purchasing power to buy the things that others produce. The money is just a way of keeping score and all the Fed does is control the amount of money on the Monopoly board.

#109 Allan on 07.28.22 at 2:25 am

So, according to the chart, house prices are doomed to collapse 75% from their peek value in February? If the home value/ income ratio will return to “normal”, pre 2005 era.

#110 Rosana Oregon on 07.28.22 at 2:41 am

The homes prices are really high, hope the market stabilize for the good. Regards.

#111 Shawn on 07.28.22 at 8:08 am

“Think I’ll Go Out to Alberta…the weather’s good there this time of year”

#90 Palky on 07.27.22 at 9:20 pm

No speculation here in Edmonton. Avg house = 3-4x avg income. Maybe something to do with our 2 seasons. Winter/ construction?

***********************
Incomes higher, home prices far lower and the weather’s actually good.

Rainy days are rare, there’s not much snow really, you can dress for the cold (plus face it in your working years you are indoors or in vehicle almost always). Unbearable heat is rare in most of the province. Summers are comfortable.

WHAT are young people waiting for? And retired people, cash out and get out. Send your adult kids and then follow.

Go west young man, go west. (But not too far west, the mountains are a signal to stop.)

#112 TurnerNation on 07.28.22 at 8:31 am

FLOP you are like this construction comedian.

https://www.youtube.com/c/CarmenCiricillo

—–
Questions Kanadians must ponder on Travel ‘rights’ .

Now that we know control over travel is permanent: ArriveCan app, QR code, Mask. The question is that will you be past of the ‘chosen class’ allowed travel next next? The year after that? We are being dissuaded from traveling. Voluntary…for now.

.CDC adds 6 destinations to ‘high’ risk category for travel | CNN Travel (cnn.com)

.UK: Government ‘does not know’ whether coronavirus traffic light system worked – MPs
The testing and quarantine requirements for people arriving in the UK were changed 10 times between February 2021 and January 2022. (www.independent.co.uk)


— This is ‘voluntary’ for now:

https://petersweden.substack.com/p/card-co2-tracking
The credit card that tracks your CO2 emissions.
Remember when this was called a conspiracy theory?
Because in Sweden there is now a credit card that tracks the CO2 emissions from all your purchases, and if you exceed your CO2 limit, the card will block you from any further purchases

#113 Pure Polyester on 07.28.22 at 8:33 am

Home prices down, crypto up. This is what I preach, sensible everyday economics for everyone.

#114 Bitcoin Bro on 07.28.22 at 8:55 am

Well, it’s “official” now. The USA economy shrank for a second consecutive quarter. The textbook definition of a recession.

I think this narrative about this being an itty bitty recession is wishful thinking. The last stagflationary episode in the 70’s took most of a decade for the powers that be to navigate. I don’t see how this situation will be easier. Westerners are far, far more indebted than they were back then and geopolitically, the situation is far more complicated.

In better news… Canadian university enrollment is through the roof heading into the new school year. Foreign enrollment and in-person learning/residency too. This is very encouraging!

#115 David Gerald Paquette on 07.28.22 at 8:58 am

2 of 2 drove down from Edson with her 3 daughters to take me out for a birthday dinner. It is at least a 5 hour drive each way but I also got to see my granddaughters. They are special to me and true. I took them to the lake and the eldest was set to catch a minnow with a pail. She succeeded which is nothing easy about it. A family trait – quiet but determined. 1 of 2 says I have a loud voice when I want to use it.

1 of 2 never changed her name after marriage – a deep honor to me. My family did not have money but they held pride and kept their word. The kids like wifey better than me – she gets to see the grandchildren more.

As smart as I think am, wifey was my equal and smarter in a lot of ways. I would walk away with cuts. David, pay attention! It is bad our marriage did not work out and I blame myself. Good to see she is doing well with her new squeeze – I never wanted harm to her. The few friends I have taunt me about her – he is far wealthier and handsome. Ahh, such is life and I will get on with it. I have no intention to remarry – I have enough women in my life trying to build me back better. Where did that saying go?

I know Garth. He banned me once over Yosemite Sam. Lesson learned but I am not going away.

Things have turned for the better for me on the investment front. Don’t know if I can hold but I will try.

I have been buying Cardinal Energy (cj). Lo and behold I see Murray Edwards is a major shareholder. I have never done badly by him – same as Jim Pattison although he is private. Garth runs in the company.

#116 Apocalypse NOW on 07.28.22 at 9:17 am

August 6 is coming fast.

Nukes are just around the corner.

Pelosi in Taiwan will trigger China.

And now Kim, China’s BFF is preparing for attacks.

https://www.thestar.com/news/world/asia/2022/07/28/kim-threatens-to-use-nukes-amid-tensions-with-us-s-korea.html

“…as he unleashed fiery rhetoric against rivals he says are pushing the Korean Peninsula to the brink of war.”

North Korea is falling apart economically in the wake of the virus. Kim is using the same kind of name-calling, rabble-rousing distraction politics as Trump, calling his South Korea enemies “confrontation maniacs” and “gangsters”

Sound familiar?

Do not be a greater fool, thinking that summer is here and you can relax.

Probability of nuclear engagement is well over 80% for August.

PREPARE

#117 Dharma Bum on 07.28.22 at 9:37 am

Unless the equity market starts showing some upside pretty soon (before December), and unless the dividends on blue chips and their ETFs start increasing to widen the spread between what they are now and the risk free rate that will be available by September (I’m talking about short term GICs paying out 5+% and the like), there will be some capital outflow into these lower risk interest bearing instruments.
Yes, I know – the rates are less than inflation – but so are the overall returns these days from B&D portfolios.
If the interest rates keep rising, a B&D portfolio would not do too badly to consider some risk free (relatively) instruments (guaranteed payments with zero capital depreciation) that are no worse than most ETFs and stocks that are flatlining or declining while paying out dividends way less than 5%.
The “secure” income producing side of the B&D portfolio will be easier to achieve by Q4. Tangerine has 1 year GICs at 4.5% right now. Not so bad in a registered account.
Dividends need to rise.
SHOW ME THE MONEY!!!!!

Interest is fully taxable at one’s marginal rate. Do not ignore that reality, as dividends and capital gains are far more tax-efficient in non-reg accounts, as are many trust distributions. Balanced portfolios have growth potential as well. GICs have none. – Garth

#118 Dharma Bum on 07.28.22 at 9:43 am

#111 Shawn

Go west young man, go west. (But not too far west, the mountains are a signal to stop.)
———————————————————————————————————-

I’m going back out west again to visit in August.

My son did the smart thing and moved out there years ago.

His name is also Shawn.

Hey, you’re not him, are you?

Sonny Boy!

#119 Penny Henny on 07.28.22 at 9:57 am

#70 Yorkville Renter on 07.27.22 at 6:58 pm
GT, we were talking RE, not Financials.

in my ‘play money’ account I’ve got some $$$ that was waiting to buy some MFC when the yield hit 6% but we never made it… hit 5.9% but not 6… generally speaking, is it better to buy now at a slightly lower yield or be patient and hit my target yield?

any opinions out there (hope I dont regret asking)

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

Wow the yield was 0.1% off your target and you couldn’t pull the trigger.
Let’s see what difference that could of made.
$50,000 @ 6%= $3000/yr
$50,000 @ 5.9%= $2950/yr

Well, I see. My apologies. You were right I was wrong.

#120 Philco on 07.28.22 at 10:02 am

#92 Doug t on 07.27.22 at 9:41 pm

Yup…and then some.
When the government panders and promises everything.
Here’s where ya get. Big government is a failure always.

#121 Tony on 07.28.22 at 10:04 am

Re: #111 Shawn on 07.28.22 at 8:08 am

Many apartments last year were selling for less that the average price of a new car in Edmonton. The resale housing market is extremely cheap compared to new housing but its always been that way in Edmonton. No one in two thirds of Canada could ever figure out the reason for that one? An unknown mystery but the gap between new and resale never closes. The gap between resale townhouses and new homes must be about 400 percent but in British Columbia and Ontario its about 100 percent. Four times less than in Edmonton.

#122 Shawn on 07.28.22 at 10:31 am

GICs?

Interest is fully taxable at one’s marginal rate. Do not ignore that reality, as dividends and capital gains are far more tax-efficient in non-reg accounts, as are many trust distributions. Balanced portfolios have growth potential as well. GICs have none. – Garth

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

Was Garth severely beaten up by A GIC at some point in the distant past? Left bloodied and bruised but unbowed he vowed to fight against the evils of GICs forever?

I’ve never owned one but neither am I triggered by the mere mention of them.

My decades of experience have shown me repeatedly that in trying to avoid risk of loss (usually with GICs) people stumble into the far greater risk, which is running out of money. Unlike you and your spouse, most folks lack life-long guaranteed DB pensions. They absolutely need growth. – Garth

#123 Shawn on 07.28.22 at 10:33 am

#121 Tony on 07.28.22 at 10:04 am

Re: #111 Shawn on 07.28.22 at 8:08 am

Many apartments last year were selling for less that the average price of a new car in Edmonton. The resale housing market is extremely cheap compared to new housing but its always been that way in Edmonton.

**********************
That’s interesting and useful info as I have two sons soon to be in the market.

It seems Edmontonians think buying a used house is like buying used underwear? Ya gotta get a HUGE discount to make up for the bad smell?

We’ll fumigate and repaint.

#124 Dr V on 07.28.22 at 11:15 am

101 Russ

“Ah, per capita values rule say the greener foundations.”
—————————————————

Good morning Russ. You make a valid point.

Canada is a large, cold, sparsely populated country rich
in resources. We are a convenient scapegoat. I think the German people are soon to figure this out.

And you have to love the Norwegians. Pulled investment out of the oil sands, but happy to help with our offshore extraction.

#125 KLNR on 07.28.22 at 11:34 am

eesh the doom is palpable in here this morning.

take a breath, get outside and enjoy the sunshine folks.

#126 Faron on 07.28.22 at 11:49 am

#101 Russ on 07.27.22 at 11:36 pm

Reductio ad absurdum applied to your logic (actually, it isn’t yours but whatevs):

“I only murdered 16 out of 1000 people murdered in Dorkistan, so why should I have to go to jail”?

Or: “My ship is sinking, taking on 1000l per minute, but I’m only pumping 16l per minute aboard the ship to water my weed plants in my berth, so it’s okay.”

You’re smarter than this dude. Or at least I think you are. I’ve been wrong before.

#127 Paul on 07.28.22 at 11:49 am

In my hometown Oakville there is a lot of listings being taken off market. Sooo many. People are listing them only to find out they can’t sell them for the prices you could get just only 3 months ago and they’re deciding to wait. Demand is slowing down a lot https://home.ca/oakville-real-estate/neighbourhoods and homes are taking a lot longer to sell. How quickly things change. I think there’s a reckoning to come with real estate.

#128 AndrewT on 07.28.22 at 12:54 pm

#8 Leftover on 07.27.22 at 2:23 pm
It might be the first full employment recession in history.

Many believe that one of the main causes for a slow down is the shortage of people willing and able to work – growth stops when you can’t get employees because they already have a job or are perfectly content not working.
—–

It’s common for people to think unemployment is all about welfare bums sitting on their couches, but the employment landscape is more diverse than that.

https://www.washingtonpost.com/business/2022/02/25/great-resignation-older-workers/

#129 Conspiracy theorist on 07.28.22 at 2:26 pm

DELETED (ArriveCan conspiracy nut)

#130 crowdedelevatorfartz on 07.28.22 at 2:31 pm

@#127 Paul.
“People are listing them only to find out they can’t sell them for the prices you could get just only 3 months ago and they’re deciding to wait. Demand is slowing down a lot”
+++
Yep.
Saw that in the early 80’s as well.
They will regret not selling now….. in about 6 months…. when the price is lower, much lower.

#131 unbalanced on 07.28.22 at 3:07 pm

Hey Shawn…You talk of your parents restaurant back East. Where is it? I’m in Cape Breton now.

#132 Shawn on 07.28.22 at 3:23 pm

To unbalanced

Clansman motel and restaurant North Sydney. Worth a drive. Home style cooking. And take a walk around the grounds ask about the walking trail in the little woods made mostly by hand by a 90 year old. See the pool area. Older place but well maintained.

#133 Shawn on 07.28.22 at 3:35 pm

Clansman trail is behind the cottages. The grounds are dog friendly.

#134 Rsrgch on 07.28.22 at 3:51 pm

“Job openings abound”..

There just aren’t enough people willing to do poorly paid jobs that are marginal at best. – https://www.cbc.ca/news/canada/ottawa/ottawa-workers-covid-retirements-1.6529325

#135 Simon Chalkland on 07.28.22 at 4:21 pm

@ #12 Melinda
So true I am in Nova Scotia as well seems nobody got the memo “It’s over” the house lust boom that is everyone selling still thinks it reasonable that houses doubled and a half in 18 months for a reason they thought it would last forever that the whole province would be gentrified in just a few months. The panic “what did i do?” selling is yet to begin.

#136 DON on 07.28.22 at 4:31 pm

#132 Shawn on 07.28.22 at 3:23 pm
To unbalanced

Clansman motel and restaurant North Sydney. Worth a drive. Home style cooking. And take a walk around the grounds ask about the walking trail in the little woods made mostly by hand by a 90 year old. See the pool area. Older place but well maintained.

********

I will pass this on to my friend who just moved and retired there. She likes home cooked meals.

Cheers!