Capitulate

Father-in-law is a troubled man. “He hates your guts,” Mike tells me. “I’m a daily blog reader for many years and a huge fan of direct quoting you to him.”

That sounds like a winning strategy for marital and family bliss, Mike. Well done. There’s nothing to bring relatives closer than a brawl.

But here’s why he really wrote me:

Had my exteriors contractor out for a small job on the weekend. Got to chatting and his phone has stopped ringing for the first time in 20 years of business. He had 6 clients indefinitely postpone needed spring re-roofs because HELOC costs are too high.

I have been afraid for a while about the pain this correction will cause, thinking that my friends and family in trades will see their cosmetic, “optional” work start to dry up. But this is literally the roof over people heads. This is going to be bad.

Beautiful. This is exactly what policymakers, central bankers, economists and investors have been straining to hear. Fear. Retrenchment. Turtling. It’s precisely the reaction the Bank of Canada and the Fed have been trying to engender in people. Only by terrifying humans, destroying personal wealth and trashing the housing market do they feel inflation’s legs can be cut off.

Remember that 60% of Canada’s economy and almost 70% of US GDP comes from consumer spending. So when people are buoyant, confident or unleashing pent-up shopping/travel fervour (like after Covid), demand and prices pop. Add in a crappy supply chain and full employment, and it’s an orgy. Oh, yeah. Plus a war and energy crunch. That was 2021. Inflation went from zero to 100 kph in mere months.

In response, we’ve been handed one of the most aggressive tightening cycles in memory. The bank rate is up 1,200% since March. So, stock markets fell about 25%, bonds sold off, mortgages erupted and now Mike’s contractor’s clients are freaking.

This is good. It means we may not be the beginning of the end, but at least the end of the beginning. CBs are not finished hiking rates (our guys go again on Wednesday) and we’re maybe a year away from the real estate market’s bottom, but lately there have been glimmers of clear sky in the distance.

On Monday a new report from Pennock Idea Hub had this conclusion:

Rising inflation has played havoc with 60/40 portfolios as bond prices haven’t provided a counterweight to falling stock prices. A study reveals that underlying inflation trends are decelerating which should be positive to risk appetite expectations. The inflation and market pivot is just around the corner and it may be closer than the market expects.

Pivot? Seriously? Whazzat mean? And why have stock markets been piling on hundreds of points lately? Don’t things suck? What if Vlad nukes us?

Well a pivot doesn’t mean we see interest rates peeled back to pandemic levels. In fact, you may never again in your lifetime experience a 1.5% variable-rate mortgage. Instead, it’s a pivot in tone and language. CBers will stop saying that rates will have to rise more, and start indicating they’ll be data-driven, leaving the door open to a rate pause as inflation numbers moderate. After all, they know what’s happening. Stuff is being broken. Right on cue.

The challenge is not to wreck the economy while demolishing inflationary expectations. So the bankers are happy when homeowners stop renovating. Buyers stop buying. Unemployment goes up. Prices fall. Inflation cools. Interest rates will stay elevated for a few years with mortgages normalized in the 6-7% range. It’s a disaster for the over-extended and those who let FOMO eat their brains. Hundreds of thousands of people will be under water for a long time. But it’s how the inflation war will be won.

Financial markets love this.

In the last few days investors have been snapping up bonds which now look to be ridiculously cheap and throwing off a decent yield. Equities just had a fabulous week, which continued Monday. If it looks like the Fed will ease back on the throttle, and if corporate earnings come in as expected, you might stop feeling like throwing up when you open the next portfolio statement. In fact, staying the course and not going to cash could make you feel heroic.

A few days, a week or two, even a month of gains – this does not mean bears start self-identifying as bulls. But it is a harbinger. Embrace it.

About the picture: “Your blog is one of the few sites that I will visit every day. I thank you for what you do,” writes Rick. “This is Toffi, a red healer, doing what she loves best: running full tilt after a ball!”

95 comments ↓

#1 TurnerNation on 10.24.22 at 4:01 pm

#89 jess on 10.24.22 at 2:24 pm

A reminder that “Freedom isn’t free”? My city was chock full of “Anti Iran Government” rallies this weekend. Not even this country. What’s the cost there?

——–

The Long Game, 100% taxation ? Or will you own at least something, and be happy?
Yep people will come to see, March 2020 everything was turned against us.

https://www.affordableenergy.ca/_trudeau_s_second_carbon_tax_to_cost_1_277_per_canadian_report
This new tax will be expensive. According to the report released by LFX Associates, Economic Analysis of the 2022 Federal Clean Fuels Standard, household energy costs will increase by 2.2 to 6.5% a year per household. In real money terms this will mean an extra tax of $1,277 a year per worker.
According to CAE President Dan McTeague “This new carbon tax is being released at a time of soaring household costs. Grocery prices have skyrocketed. Families are struggling to afford the basic necessities for their home. Now the Trudeau government is going to make it even more expensive.”

#2 VladTor on 10.24.22 at 4:13 pm

What is inflation expressed in?

▪ In the fundamental imbalance of supply and demand ( everyone wants to eat, but nobody wants to work or work with low returns ). In current realities, this can only be solved through a collapse of demand, because increasing productivity and output in the Western world is almost impossible.

▪ In undermining confidence in phyat money, which is expressed in inflation expectations – spend now, because tomorrow will be more expensive. Confidence can only be restored through consistent and irreconcilable measures to absorb inflation. That is why since June the head of the Fed has been demonstrating the severity and willingness to fight inflation « at any price, even through economic pain ».

▪ A decrease in the quality of the workforce leads to inflation of salaries, as a result of the struggle of employers for qualified and / or able-bodied personnel, which spins the inflationary spiral.

And here we come to the main thing. To restore confidence, the Fed intends to act harshly, even with overflows, while solving the problem of a shortage of foreign capital inflows, manipulating the differential of interest rates and financial conditions of the dollar zone and other currency zones.

Acting tough, the United States will inevitably stumble and run into the collapse of overlooked borrowers. The system, in principle, is not adapted to current over-the-score rates and an exceptionally high rate of rate recovery, which does not imply the possibility of adaptation.

To understand the scale of – exactly a year ago, the US Treasury bill of 0.11% yield ( one tenth of a percent – this is about the market’s ability to predict the future on the short planning horizon ), now 4.66% – This is the maximum since July 2007.

Throughout the history of the US debt market, there have been only two episodes of a similar rate of return growth ( over 4.6 percentage points. for the year ) – this is March 1980 and May 1981. That’s it, there were no more analogues.

10-year-old treasuries confidently broke the line of 4%, balancing about 4.2% – maximum since December 2007. The change for the year is over 2.55 percentage points. Over the past 70 years, there have been three episodes of such a rate acceleration – February 1980, April 1981 and May 1984.

As you can see, the percentage shock is unprecedented. You can not compare the beginning of the 80s and 2022. These are two completely different worlds that have nothing to do – nothing at all.

▪ The entire modern infrastructure of mutual funds and investment banks began to originate after the inflationary crisis of the 80s.

Just think about how they grew up: Money Market Funds – assets 5.1 trillion dollars; Mutual Funds – 18 trillion dollars; Closed-End Funds and Exchange-Trapped Funds – assets of about $ 6.5 trillion. To this we can add various garbage dumps such as GSE, AMP and GSE Mortgage Pools with assets of 2.6 trillion, Asset-Backed Securities another 1.5 trillion.

Further brokers, dealers, financial holdings — is another top of $ 12 trillion. The reduction in interest rates, the liberalization of financial standards and the easing of financial conditions gave rise to all this absurdity. They were almost gone in the early 80s. There was only how insignificant and limited the application to traditional banks.

All this, not counting commercial and investment banks, plus pension and insurance funds. All together, excluding the Fed, have assets in excess of $ 125 trillion.

▪ 武Secondly, it is important to note – the debt burden of the non-financial sector in the early 80s was 140-150% of GDP, now over 330%. What was allowed to be done 40 years ago cannot be repeated now.

▪ Thirdly, 15 years of zero rates and endless QE have corrupted the system so much and led to a systematic neglect of the rules of management risk and violation of measure and balance ( the largest asset market bubble in human history 2021, as it were, symbolizes this ), that the transition to another reality will inevitably cause shock.

▪ Fourth, the system in the 80s had the potential and ability to organic, natural growth. There were no problems with the demography and quality of labor resources, there were no problems with finding points of capital application, labor productivity had room for expansion.

Then there were no problems with innovative development and industry transformation ( the information economy was just emerging ), just like globalization was at the very starting point, the elite was not an example more adequate. Everything was different.

Therefore, the 80s and 2022 are two completely different worlds, and we see that the rate growth rate is comparable to 1981, and the rates themselves are maximum for 15 years. What will happen to the system with current transcendental imbalances? The answer is obvious.

What is intrigue? In 2008 and even in 2020, in response to the crisis, they lowered their rates by zero and beat with a dough from all trunks ( Fed and US Treasury ), but for problems in 2022-2023, a similar response scheme is not applicable.

Inflation will not allow the Fed to disperse as before, and the high debt burden and the lack of demand for debt instruments due to record negative real rates will not allow the US Treasury to do so, as they always did.

Absolutely insoluble contradiction. It is necessary to save the system, but it is impossible – the Fed has no opportunity and there is no demand for treasuries in the private sector.

#3 Millenial Jay on 10.24.22 at 4:13 pm

Just out of curiosity what indicators are pointing to a RE bottom in 1 year time?

#4 stealth on 10.24.22 at 4:13 pm

Thank you for the post and commentary on equities and bonds.

Could you comment on what is happening with Canadian REIT ETFs in this environment they are also down significantly?

Thanks

#5 I’m stupid on 10.24.22 at 4:15 pm

I’ve said this a few weeks ago, you’ll be hard pressed to find a build that sold more than a few houses in the last 5 months. Every carpenter, drywaller, plumber, hvac etc etc etc. will be unemployed next year. Myself included, I have 55-60k worth of work on the books for the reminder of the year, next year crickets.

The only time I’ve been this slow was in 2008-2009 but this seems far worse. My spending has gone to only buying necessities. My portfolio has gone down, my house has gone down, my business has gone down but all my expenses have increased. Plus my wife is taking an extended mat leave. Yay for me lol. I’ll survive but I can’t speak about others.

#6 Father's Daughter on 10.24.22 at 4:16 pm

This is what I’ve been seeing more of on the market as of late – homes being sold mid-renovation. This one was listed today. Sold in March March 2021 for 101000, list for 924000.

https://www.realtor.ca/real-estate/24999723/5390-corry-lane-beamsville?fbclid=IwAR206NgzEKwX347B4Zk3v95cfAIKfqH_YZPd7Wdw9R1QCVuvge6Cb-Tgue4

#7 Re-Cowtown on 10.24.22 at 4:16 pm

Overheard two mill-age guys at the local watering hole bemoaning the rise in interest rates and saying they hoped that rates would come down by the time they renewed their mortgages.

Spolier alert: The carnage is just starting. Rates are moving back to their long term average and maybe even higher before this mess is sopped up.

#8 @J on 10.24.22 at 4:34 pm

“In fact, staying the course and not going to cash could make you feel heroic.”
—————————

Canadian investors withdrew a very large $9B from mutual funds in September. Seems like they are trying to time the market which is almost always a dumb move. They may be selling low (and then buying high later on). Hopefully they will at least get into ETF’s when re-entering the market.

https://ca.finance.yahoo.com/news/investors-pull-eye-popping-9-b-from-mutual-funds-in-september-191928690.html

#9 Ole Doberman on 10.24.22 at 4:39 pm

Garth what do you think of investing in marijuana stocks now that Biden is talking expungement and re-scheduling mj from the banned substance list?

I believe this is the same a legalization of weeeeeeed brah.

#10 Linda on 10.24.22 at 4:45 pm

Haven’t seen much signs of renovations drying up in our neck of the woods. Still plenty of dumpsters dotted about the neighborhood accompanied by the sound of jigsaws, hammers & the like. However, have seen some indications that local builders are trying to flog excess inventory. So expect 2023 will see things slowing down until folks adjust to the new reality. That having been said, have not seen much if any pullback in the local shops. If folks are worried about rising rates, couldn’t tell based on amount of goods being wheeled to the till.

#11 Jason on 10.24.22 at 4:49 pm

Could you comment on what is happening with Canadian REIT ETFs in this environment they are also down significantly?
————————————–

Real estate trusts are highly levered like most real estate owners. Higher interest rates aren’t good.

#12 chalkie on 10.24.22 at 4:58 pm

Canadians are prepared for A Hard Landing, do not spend all your extras cash on Christmas gifts, you will need it for your cushion.

A credit card is the easiest way to access money, but be aware, it can turn nasty if you do not respect it.

A hard landing is a recession that happens after a rate adjustment, when trying to calm inflation. This contrasts with a soft landing, where rates rise but the economy only slows — no recession.

BOC missed their opportunity trying to be mister nice, they waited too late, so we will all pay the price. There is no stopping this recession, it is knocking on our front door, we just need to answer the door and let it in, the sooner it happens the better, let us get this monster behind us, so we can once again adjust back to acceptable society and put our livelihoods back on track. There is just as much pain waiting for what we are told is coming, then the actual recession itself.

Interest rates have nowhere to go but up, the multiple opinions are putting the Oct 26th BOC from Zero to ¾ percentage, do not be surprised even if it tips the scale to the one full percentage point on Wednesday.

The 2% cost of living target that the Feds are fighting for is never ever going to happen, unless they push the BOC rate beyond 6%, putting the brakes on the economy and that is not in the cards due to so much backlash over their own waiting on the sidelines far too long. I think Garth used the best word yesterday to describe what has happened and is still happening (Damage). There are no repair shops insight folks, we may have to buy a new economy, what can’t be fixed has to be replaced.

There is not enough bravery within the entire Federal Government, with all of them put together to stand up and rebuild what could have been a cost-of-living fix in the first place, they have a lot of egg on their faces, let’s hope it dries and sticks for a while.

I found multiple homes today throughout Southern Ontario that dropped a significant amount from their asking price over the weekend, in this market one day may make an asking price difference and reality check.
Save your cash, do not get excited for reduced home discounts just yet. The ball has not reached the steepest part of the hill, it will take a well experienced catcher at the bottom to see the final speed and mark, keep your glove on, wait a few more months until the Christmas bill blues catches up if you need to buy soon, most likely all the way at the end of 2023 and into 2024 sometime before home prices stop falling. Prices may even continue to fall in what is known as the spring boom, there is a lot of debris floating that has gone unnoticed.

Heal the past, live the present; dream the future.

Quote of the day: Good Judgement Comes from Experience. Experience comes from bad judgment.

#13 Timmy on 10.24.22 at 4:58 pm

From the Economist…the housing collapse has made the front page!

Over the past decade owning a house has meant easy money. Prices rose reliably for years and then went bizarrely ballistic in the pandemic. Yet today if your wealth is tied up in bricks and mortar it is time to get nervous. House prices are now falling in nine rich economies. The drops in America are small so far, but in the wildest markets they are already dramatic. In condo-crazed Canada homes cost 9% less than they did in February. As inflation and recession stalk the world a deepening correction is likely—even estate agents are gloomy. Although this will not detonate global banks as in 2007-09, it will intensify the downturn, leave a cohort of people with wrecked finances and start a political storm.

#14 Søren Angst on 10.24.22 at 5:01 pm

#7 Re-Cowtown

The carnage is just starting.

——————-

You got that right on. The TikTok 15s video, Immediate Gratification generations in the rear view mirror of Paleo’s like me think it will all be done quick like, to their personal schedule.

That’s ’cause they think they’re special.

Well they’ll find here in the next year just how special they are.

Actually, Garth outlined their “specialness” vis-à-vis the CBs:

Only by terrifying humans, destroying personal wealth and trashing the housing market …

And here it is, Garth again making Schumpeter’s assertions come alive (+70 yrs ago), again:

Hundreds of thousands of people will be under water for a long time.

PS:

I liked the “terrifying humans” part My Liege.

THAT was good.

#15 Brett in Calgary on 10.24.22 at 5:09 pm

Equity and bond markets will of course bottom before housing, and a Santa Claus rally could be in the cards, however I doubt very much we’ve seen the bottom of this yet. There is just too much leverage and too much refinancing yet to happen.

#16 Shawn on 10.24.22 at 5:14 pm

Unsecured line of credit interest rates

Upon checking, my TD unsecured and unused lines of credit. (I have two little ones that I have had for over 30 years) remain at Prime plus 2.5%. No paper statement fees either. Possibly grandfathered?

#17 Søren Angst on 10.24.22 at 5:15 pm

#2 VladTor

Give us links next time with some summary text.

I copy, pasted a lot of your text and came up with where you lifted the exact verbiage from.

If you are going to plagiarize, have some couth.

And get rid of non-French, non-English whatever’s subsequent to your plagiarizing ways:

“▪ 武Secondly, it is …”

武 = Wu

Diatribes are OK if an original work like Turner Nation and he provides source data, does not pass it off as his own. You’re still wonky to me TN but at least you’re honest. Bat sh!t crazy at times, but honest.

You should be to.

And your concluding paragraph was prose for the sake of prose, in words – prosaic, anemic in conclusion. More like:

Damned if they do, damned if they don’t.

#18 Cash is King on 10.24.22 at 5:18 pm

Finally the savers and subsidizers will get paid a decent return!!
LET THE HOMEMOANERS LEARN A LESSON THEY WILL NEVER FORGET
NEVER PAY MORE THAN YOU CAN AFFORD TO LOSE IN CORRECTING AND COLLAPSING MARKETS.
THIS IS WHERE PEOPLE START GOING UNDERWATER ON THEIR MORTGAGES AND LOANS AND LOSE THEIR CARS & TRUCKS AS WELL AS THEIR HOMES AND CONDOS FROM HAVING TOO MUCH DEBT AND RAPIDLY FALLING PRICES

#19 I noticed ... on 10.24.22 at 5:25 pm

the company that put a new roof on my abode last year is actually advertising in the local rag. Always got plenty of business around here from word of mouth. Never seen him advertise before. Good work … decent price.
Was in the local grocery store today and it was dead except for the pharmacy. Walked by the meat counter and in the usually full display were just a few pieces of meat. And a forlorn crab in the tank. Looked lonely.
Lotsa good deals on Craigslist though …

#20 TurnerNation on 10.24.22 at 5:43 pm

With every system turned against us as of March 2020 not even the obedient will be spared.

-Sure they paid for an Obedience Certificate, giving only the “correct” answers, never questioning their Marxist prof.
-Their corporate employer told them place your pronouns into your email signature.
-They limited workplace banter to safe and approved topics such as Sportsball, Corvid cases.
– They took medical treatments over fear of their job. They complied,
-Online they did not post any opinions or “mis- information”, gunning instead for that blue check box of approval from the global tech masters.
– Overbidding for a slanty semi in a ‘coveted’ area (read: away from the Otherkind) all conditions were waived natch. They listened to their realtor.
Wag wag wag.

The middle classes will not recover from this. Everyone has multiple properties in play.
——–
——–
Comrade why not join the Party? Party faithful will be rewarded.

“Increased by almost a third since 2015​
The CBC News analysis shows the size of the public service has been growing steadily since 2015, when the Liberal Party took power. Over eight fiscal years, Ottawa has hired an additional 79,000 employees, expanding the federal workforce by almost 31 percent. And head counts have increased in 79 of the 84 government departments and agencies that have been in continuous operation over that period. (cbc.ca)”

#21 Rent Rant on 10.24.22 at 5:43 pm

Rents going up?

https://arstechnica.com/tech-policy/2022/10/company-that-makes-rent-setting-software-for-landlords-sued-for-collusion/

#22 Bezengy on 10.24.22 at 5:44 pm

I’ve seen posts here asking if cottage prices will correct. I say yes. Times they are a changing. Never mind interest rates which obviously won’t help maintain current prices. When I look at my little hamlet on the lake and it’s residents I see big change coming in the next ten years as the boomers age. Many bought cottages in previous years for what could be considered dirt cheap. What has happened over the years is cottagers have turned their cottages into houses, in which they live full time, like me. This is a game changer. A house that sold thirty years ago will sell today as a house, but a cottage that sold thirty years ago as a cottage will now will sell as a house, and there is a big difference in price. Cottages used to be 2 x 4 shacks, many poorly built and insulated which is why they weren’t worth as much. They have been torn down and rebuilt, or renovated which in many cases leaves the owner with an old shack with lipstick on it, but still expensive. So, who will buy these expensive things as the boomers are forced to sell due to old age or become incapable of maintaining the place? Forget about inheritance as there are taxes to pay and split ownership with your siblings won’t work despite everyone’s good intentions. Can anyone justify a $400k investment and just use it as a cottage? Unlike previous cottagers, anyone who wants to retire at the lake needs to be well heeled. There are also other issues like who will maintain these shacks with their own water systems and sewage? The old owner did it all himself, are the kids just as handy? Does the next generation want to live in the boonies? Trust me, hibernating for 6 months a year with shoveling snow as your only activity isn’t all it’s cracked up to be. Unlike houses that everyone needs cottages may soon be a thing of the past unless they have a significant price drop. Perhaps a corporation may buy and rent it out as a BNB, but it’s a short season, and winter rental clients are almost non-existent.

#23 MD on 10.24.22 at 5:45 pm

Markets haven’t priced in FED balance sheet reduction yet.

#24 Max pain on 10.24.22 at 5:47 pm

Equities just had a fabulous week?

People, please be careful. All interest rate sensitive assets (which are all of them) have not bottomed. I think there is a collective stupidity that the gains of the past 10 years are gonna come back..

#25 Søren Angst on 10.24.22 at 5:49 pm

#12 chalkie

That read like Desiderata – The Retail Trade sales version.

FYI you are 5-1/2 months late in your admonitions.

Retail Trade picks in May, generally plateaus until Dec and then the Igloo/Ark Dwellers have to pay their Summer/Holiday EXCESSES off in Jan/Feb when they consume next to nothing.

20 years of Retail Trade sales without Seasonal Adjusting so the within year cycles may be observed.

https://twitter.com/bsant54/status/1584660700701790210

I suppose hope last to die but sorry, no one will listen to you unless by divine intervention (big electron for the non-believers). Old habits will not die hard – not even with the Evil CBs terrorising.

PS:

When I read your first couple of sentences, these lyrics came to mind:

“Mamas, don’t let your babies grow up to be cowboys”

Your initial sentences were rhythmic to me.

#26 AM in MN on 10.24.22 at 5:59 pm

This is good news for some.

In the industrial sector, it’s still supply constraints, labour shortages and factory backlogs for the next couple years.

A slowdown in people upgrading their kitchens with granite countertops they don’t need might help the Northern mining towns and other rural industries by making the urban hipsters trudge up north, where many a six-figure salary can be had.

Unless the bottom drops out of the price of oil, nat gas, copper, fertilizer, grains, etc., there will never be a problem earning good money in Canada.

#27 ogdoad on 10.24.22 at 6:10 pm

And then, Ladies and Gents (and all the rest…totally inclusive, just really lazy)….came slap fighting…

Climbing for dollars is next, right?

Anything for a buck, eh humans?

Og

#28 NOSTRADAMUS on 10.24.22 at 6:11 pm

LOOKING FOR AN ANSWER.
So many economists skip over the fact that the economy itself is in a downward economic and industrial spiral of equal gravity. Many prophets pluck and massage bits of favorable information to support their point of view. All the while discounting or totally ignoring any conflicting view. Disclaimer, I myself on occasion, have been known to go down this slippery road. In the final analysis, it becomes a question of an alleged corpse (real estate) attaching itself to another corpse (stock market). How this helps is rarely explained. Devil’s Advocate.

#29 SunShowers on 10.24.22 at 6:14 pm

Garth does better than most, but still, far too many economic policy wonks are more than happy to discuss this upcoming manufactured recession in terms as clean and sterile as possible.

Economies are portrayed as completely abstract entities that exist to be appeased by humans. It honestly reminds me of biblical times when people would ritualistically sacrifice animals on an altar in hopes of currying favor with a mighty being whose true nature, despite what a few clerics who don’t always agree with each other might say, is ultimately unknowable.

The only difference now is that in biblical times, people at least expected SOMETHING in return for their sacrifice instead of todays blind subservience; and instead of animals, today we sacrifice people.

The abstract nature is the part that makes me the cynical. Like I said, while Garth does better than most, economists will beat around the bush and talk about “tightening” and any other number of squeaky clean synonyms they can fart out to disguise the brutal nature of their intentions.

If economists and central bankers were completely honest and said “We are going to cause millions of people to lose their jobs and their life savings because we THINK it will produce a better outcome insofar as we are able to predict using our not-always-correct models of an economic system that is mind-bogglingly complex than any other solution which must exist within a very narrow capitalistic framework that we will not permit ourselves to look beyond for political reasons”, people would rightly be rioting in the streets.

Well if these economists and central bankers are so confident in their analysis, maybe they should put their money where their mouths are and be the first ones to walk up to the proverbial sacrificial altar, and volunteer themselves before they condemn the rest of us.

#30 Søren Angst on 10.24.22 at 6:22 pm

I don’t see inflation tamed, not one bit … well NOT from 2022 Retail Trade sales, not seasonally adjusted:

Month | $ x 1,000 | % chg vs. prior month

January 2022 | 48,567,306 | -20.4%
February 2022 | 48,056,730 | -1.1%
March 2022 | 59,135,942 | 23.1%
April 2022 | 60,685,106 | 2.6%
May 2022 | 67,703,592 | 11.6%
June 2022 | 67,766,338 | 0.1%
July 2022 | 64,367,907 | -5.0%
August 2022 | 64,634,138 | 0.4%

Nothing atypical about these numbers vs. prior years. Jan/Feb they spend nothing after Christmas (credit card bills cometh & CRA). March they go somewhere to escape the Igloo/Ark weather (and CRA). April/May garden/lawn, renov sales. June to August summer time vacation, party, barbecue, enjoying the 2 months of summer that there is in Canada.

——————

BoC probably looking at the same numbers as I am and concluding:

Canada is a long ways off of curbing its spending ways.

Increase rates until the above is quashed.

#31 wallflower on 10.24.22 at 6:32 pm

#3 Millenial Jay on 10.24.22 at 4:13 pm
Just out of curiosity what indicators are pointing to a RE bottom in 1 year time?

COMEDY
COMEDY
I come here for the comedy.

Those who have their collection of “participation” ribbons will be learning, as adults, about responsibility.
This includes things like, do some research.
On your own. Without asking teacher.

#32 Jens on 10.24.22 at 6:36 pm

#2 VladTor on 10.24.22 at 4:13 pm
the fundamental imbalance of supply and demand … can only be solved through a collapse of demand, because increasing productivity and output in the Western world is almost impossible.

I beg to disagree, and I believe I have Garth on my side. The pandemic has brought about a lot of “money for nothing” attitude. We thought we could be as productive as pre-pandemic, while walking our dog with our sweat pants on. And now we’re reluctant to go back to the old ways.
If we roll up our sleeves and provide more value for the increased salaries we claim in response to this inflation, we can make a difference on the supply side and contribute to fixing the imbalance. Recession or not, there’s a lot of work to be done.

#33 Søren Angst on 10.24.22 at 6:42 pm

PS: Retail Trade

In 2021 it was

37%

of GDP ($680.1 billion of $1,832 GDP billion)

Total Consumer Spending was

$1,085.91 Billion

or 59.3% of GDP.

Retail Trade is 62.6% of Total Consumer Spending.

-StatCan data

———————-

Garth, in 2022 no signs of Retail Trade slowing down at all. I expect BoC will act to quash spending further.

People are whining about inflation and how hard done they are by it, but in reality and overall up to Aug 2022 …

They have not changed their spending ways. Sorry Canada, but you haven’t despite what you say.

#34 Old Boot on 10.24.22 at 6:47 pm

Hey Garth, here’s a question that may sound stupid:

How does this dramatic, synchronized rise in the world’s central bank rates affect China, Russia, Iran? Is there another reason for the precipitous increase, other than just crushing inflation?

Okay, that was two stupid questions. Along with my inability to stay away from the third rails of life, I’m also bad at math.

#35 Shirl Clarts on 10.24.22 at 7:01 pm

Looks like I called it perfectly last week. Inflation down. Groceries up. Oops, Galen. If you want to hide profits, you gotta move prices in the right direction. Your price freeze is too little too late.

https://www.cbc.ca/news/business/competition-bureau-grocery-1.6627144

#36 espressobob on 10.24.22 at 7:15 pm

Buying opportunities are based on the fear of the herd.

The more the merrier.

#37 baloney Sandwitch on 10.24.22 at 7:21 pm

Ah, The good old pre-Covid days of $12 haircuts from the nice Chinese barber lady. Now its $17 + $3 tip. I don’t think I will see $12 haircuts ever again.

#38 Millenial Jay on 10.24.22 at 7:22 pm

#31 wallflower on 10.24.22 at 6:32 pm
#3 Millenial Jay on 10.24.22 at 4:13 pm
Just out of curiosity what indicators are pointing to a RE bottom in 1 year time?

COMEDY
COMEDY
I come here for the comedy.

Those who have their collection of “participation” ribbons will be learning, as adults, about responsibility.
This includes things like, do some research.
On your own. Without asking teacher.

___________________________________

The one year timeline was mentioned by Garth in the article, I am not here waiting on a bottom. I was curious as to what made Garth think the bottom was only an year out. I do my own research, and just wanted to see if Garth could elaborate on why HE thought it was only an year out.

#39 BNorth on 10.24.22 at 7:30 pm

So like… are Harleys on sale yet?

#40 Quintilian on 10.24.22 at 7:38 pm

#26 AM in MN on 10.24.22 at 5:59 pm

Unless the bottom drops out of the price of oil, nat gas, copper, fertilizer, grains, etc., there will never be a problem earning good money in Canada

Canadians don’t earn “good money” compared to other countries. See what happens when you get your knowledge at the bar

#41 Elcamino kid on 10.24.22 at 8:13 pm

I will continue to pay the $2700 a month to rent a 4 bedroom semi here in Mississauga. It would cost me a lot more to own it. No debt, good chunk of savings, life is good!

#42 the jaguar on 10.24.22 at 8:17 pm

DonG: Is all well in Mazatlan hacienda after Roslyn blowing through? Hope all is well including little Charlie….

#43 crowdedelevatorfartz on 10.24.22 at 8:29 pm

@#40 Quinty’s Questionable Queue quibble

Ahhh yes.
Purchasing Power Parity comparisons…

Where such enviably livable countries like Saudi Arabia (heads , hands and feet amputated for crimes) and Qatar (heads, hands and feet are amputated for crimes) are at the top of the list and lowly Botswana ( prison meals consist of the cockroach soup du jour) hits a perfect 100%.

Excuse me while i laugh so hard I fart.

#44 crowdedelevatorfartz on 10.24.22 at 8:32 pm

@#39 BNorth
“So like… are Harleys on sale yet?”

+++
Only when they’re free.

Whats the definition of a Harley owner?
Fat, loud, slow and broke…..like their bikes.

#45 Doug t on 10.24.22 at 9:43 pm

#1 Turnernation

Yup sadly in the not too distant future you will have less and less control of your own life and how you want to live

#46 baloney Sandwitch on 10.24.22 at 10:00 pm

Looks like the S&P 500 has completed a double bottom. The TSX a triple bottom. It should not be too bad going forward now. The dividend yields are amazing.

#47 Ponzius Pilatus on 10.24.22 at 10:07 pm

#10 Linda on 10.24.22 at 4:45 pm
Haven’t seen much signs of renovations drying up in our neck of the woods. Still plenty of dumpsters dotted about the neighborhood accompanied by the sound of jigsaws, hammers & the like. However, have seen some indications that local builders are trying to flog excess inventory. So expect 2023 will see things slowing down until folks adjust to the new reality. That having been said, have not seen much if any pullback in the local shops. If folks are worried about rising rates, couldn’t tell based on amount of goods being wheeled to the till.
————————
Same here.
Neighbor just did a fancy backyard renovation with jacuzzi, brand new fence.
All the trimmings.
Malls and grocery stores are full.
And traffic is worse than before COVID.
Calm before the storm?

#48 Feds on 10.24.22 at 10:09 pm

It doesn’t matter if there is a pivot or not. Rates are not going below the current levels and will likely go materially higher and stay there for years. This is way more likely that a significant equity market rebound. In every other recession the CB’s lower rates and increase spending. This is the opposite. The debt piggy’s haven’t had to actually pony up yet, but a few months more and things will look more grim. How often have we had a housing crash and stock market rally?

#49 The joy of steerage on 10.24.22 at 10:17 pm

#46 baloney Sandwitch on 10.24.22 at 10:00 pm

Looks like the S&P 500 has completed a double bottom. The TSX a triple bottom. It should not be too bad going forward now. The dividend yields are amazing.

..
The ghost of smoking man approves….

https://dyslexicsmokingman.blogspot.com/2013/03/

#50 Ponzius Pilatus on 10.24.22 at 10:21 pm

Seems like the market is reacting positively to the news coming out of China.
Another 5 years of Xi (She).
Markets are forward looking and don’t like uncertainty.
And once the conflict in Ukraine is settled, one way or another, my guess is it will be full steam ahead again.

#51 Ponzius Pilatus on 10.24.22 at 10:26 pm

45 Doug t on 10.24.22 at 9:43 pm
#1 Turnernation

Yup sadly in the not too distant future you will have less and less control of your own life and how you want to live
———————————
I’m just wondering what kind of life you want to live.

#52 VladTor on 10.24.22 at 10:44 pm

to #17 Søren Angst
—–

You killing me with your exceptional intellect!

Do not be a bore. Don’t bother with typos. If you have an objection, object! Better think about the meaning of the text. If you do not understand, then for you … we are in a deep ass – this is a short concise explanation of the text. Think about it when you go to bed.

#53 Quintilian on 10.24.22 at 10:52 pm

#43 crowdedelevatorfartz on 10.24.22 at 8:29 pm
“Where such enviably livable countries like Saudi Arabia (heads , hands and feet amputated for crimes) and Qatar (heads, hands and feet are amputated for crimes) are at the top of the list and lowly Botswana ( prison meals consist of the cockroach soup du jour) hits a perfect 100%.”

Crowdie, you are quite an enigma.

I thought you were all for law and order.
Can’t blame me for arriving at that conclusion, given your constant lambasting of the limp wristed lefties running the justice system.

Next thing we will learn about you is that you are a member of the Elizabeth Fry Society.

I see a shimmer of hope.

Will you help us raise funds for Ebby?:)
You know he was very active in social justice etc.

#54 Nonplused on 10.24.22 at 10:57 pm

#44 crowdedelevatorfartz on 10.24.22 at 8:32 pm
@#39 BNorth
“So like… are Harleys on sale yet?”

+++
Only when they’re free.

Whats the definition of a Harley owner?
Fat, loud, slow and broke…..like their bikes.

———————————-

I don’t know, the new Pan-America and the new Sportster derived from the same engine make it look like maybe Harley knew how to build bikes all along, but was just staying loyal to their loyal customers.

Mind you, the V-Rod was pretty technically advanced and it totally bombed.

Anyway we’ll see what the reliability and market uptake looks like. And they still don’t have anything targeted at the “new rider” market. If you are a new rider, the Pan America and Sportster are not for you. 150 and 121 HP respectively, I believe. Basically “unlimited” for all intents and purposes. And they have all the fancy electronic add-ons like touch screen adjustable suspension and performance settings just like the competition. Unfortunately the Japanese and to some extent the Europeans still own the sub-liter market, and brand loyalty is an issue for Harley going forward. Well, except that they don’t have to worry about the Europeans anymore. KTM might be able to supply bikes in 2023, but BMW won’t.

#55 Calgary on 10.24.22 at 11:00 pm

https://twitter.com/ABDanielleSmith/status/1584555176308125696

Sovereignty Act ?

#56 Midnight’s on 10.24.22 at 11:05 pm

This is in an investment site, right? Well, there are a few of you in the s field by yourself.
First off a house/home is not an investment. It’s a liability unless the house brings in money/dividends it’s an expense.
Second. I hear people already saying, but, but, lol.
The Forbes 400 listing, doesn’t include one’s house. So, now your argument is with them.
Thirdly the government doesn’t give 2 flies about your house. They’ll take them all back and make them like the state’s section 8 housing. And say they did it for the good of Canada (you know that woke fairness thing)
Fourth, this has more to do with, the bonds market. And the government is aware of what’s going on? But you must break it first then come in as a savior to fix it.
Healthcare anyone? This is about going Green too. Look up the people who are planning to run this system. And how do you implemenI something without having the backup structure in place to run it? I guess all those big a$$, Cat trucks will be solar-driven, and the trains will run on what, wind lol.

#57 Nonplused on 10.24.22 at 11:09 pm

I was in Costco today and it marks yet another trip where every single thing was up in price from last time. Even the baked goods. Except for the iPhone 13. I needed a new phone and that one could be had for $500, which is 50% off. I understand they are no longer selling as they once did.

I understand as well as anyone how a phone is almost as essential as a social insurance number to get along in today’s world. But I still can’t quite understand how everyone can afford one, and one for their wife, and one for each kid, and you still need computers for school and work, and you need a plan with data, and cable internet, and everything has to be replaced every 4-5 years because even if you change the battery software updates stop. This is huge overhead compared to the old land lines and payphones. But we have TikTok now, so there is that.

#58 crowdedelevatorfartz on 10.25.22 at 12:28 am

@#53 Quinty’s questions quantified…
“Crowdie, you are quite an enigma.”

+++

Churchillian prose.

“A riddle, wrapped in a mystery, inside an enigma”

Or

My flatulent frippery has you stymied……?

#59 crowdedelevatorfartz on 10.25.22 at 12:32 am

Winter has arrived early this year.

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahUKEwjR-P2Xxvr6AhU4MTQIHfefDEEQvOMEKAB6BAgJEAE&url=https%3A%2F%2Fleaderpost.com%2Fnews%2Flocal-news%2Fsnowstorm-hits-saskatchewan-shutting-down-portions-of-trans-canada-highway&usg=AOvVaw2s17cdWomTRa4-IL982_HV

Meteorologically and………. economically….. speaking….

#60 Linda on 10.25.22 at 3:28 am

#47 ‘Ponzi’ – maybe it is the last great hurrah before the bottom drops out. Or maybe it is just folks getting all the holiday shopping done early. As for the traffic, I agree it seems to be worse than it was pre-Covid. Whether that is due to having forgotten how bad it was – it was eerie but also kind of cool to be traveling to the DT core & have one’s pick of parking spots during Covid – or whether it really is worse post Covid is difficult to prove.

#61 KNOW IT ALL on 10.25.22 at 6:27 am

They want you to believe inflation is an uncontrollable act of nature, while the weather is a controllable act of mankind.

The JOKES on you.

#62 maxx on 10.25.22 at 6:44 am

@ #10

¨That having been said, have not seen much if any pullback in the local shops. If folks are worried about rising rates, couldn’t tell based on amount of goods being wheeled to the till.¨

Agreed, and I suspect that a huge part of this is due to the fact that armies of working-age people are not actually working – ¨at home¨. They are out shopping, jamming restaurants and coffee shops or having fun walking their dogs and enjoying ¨quality time¨ in the parks.

With all due respect to those who actually do work, far too many people in this country were already blessed with a dominant lazy gene (it´s practically cultural) and COVID turned it into an economic cancer.

Attitudes across many industries stink – workers (mostly Mills) resent having to actually work for pay and act as though they are doing you a favour by taking your money.

The best thing that could have happened is rising rates and they need to continue to rise.

When the lazy and entitled run out of money (and they most definitely will – even the bank of mom is reaching its limit) or better yet, experience an economy where jobs are scarce and precious (coming soon), attitudes will change. They need to.

What the worlds needs as well as rising rates is for the congenitally lazy to get their butts booted back into the office.

Sidewalks peppered with working-age people walking dogs, yucking it up in restaurants or loaded up with shopping bags between 10-4pm rather than doing their damned jobs is insane.

Of course, this, in very large part, flows from the top.

#63 maxx on 10.25.22 at 6:55 am

@ #19

¨Lotsa good deals on Craigslist though …¨

Wait ´till next year….the treasure hunt will yield like you can´t imagine.

#64 crowdedelevatorfartz on 10.25.22 at 7:31 am

@#55 Calgary
“Sovereignty Act ?”

++++
Pffft.
Another “appointed” premier with delusions of their own self importance.
Painful to watch.
The smart leaders are scurrying for the darkness of “retirement”
Lets see how well she does at the polls in an actual election 6 or 12 months from now when voters realize the economy is down the “terlet” and the flushing is getting stronger…..

#65 Jess on 10.25.22 at 8:05 am

Pretty soon the food bank will need a food bank.

#66 Zeedie on 10.25.22 at 8:17 am

chalkie, our family has been preparing for decades about what you rare saying. We built up our RRSPs, TFSAs, paid off primary residence , have no debts at all. Our main slowdown was lower interest rates for many years. We just retired now at 57. We now can finally increase our income plan for the next 10 years with 5%+ GICs and know that $100,000 a year interest is building, coming in every year.

#67 604sam on 10.25.22 at 8:34 am

Ok, I laughed at “bears self-identifying as bulls”

#68 Tiffy - the fool in the shower. on 10.25.22 at 8:42 am

Econ 101 giggled when Prof described “the Fool in the Shower”.

Central Banks go too far/too fast w/o waiting to measure impact. When the fool realizes the water is too hot he turns on cold water.

Tiff Macklem of
@bankofcanada
is the Fool in the Shower.

#69 Hope and Change on 10.25.22 at 9:06 am

https://oilprice.com/Energy/Energy-General/IEA-The-Current-Energy-Crisis-Is-Unprecedented.html

And Trudeau quips “ there’s no business case for LNG”.

I think Trudeau must know something we don’t. A guy in his position must. There must be a powerful mind hiding behind the throne. There must be a Gene Roddenbury level genius advising our Liberals who’s sitting on a secret stash of dilythium crystals that will power windmills into base power warp core energy giants. Mr Trudeau must know that currently UN invented tech is just around the corner.

Why else would be tell the German chancellor that we’ll be selling hydrogen manufactured with windmill power. Now, we all know that a million wind mills won’t replace the gas and coal base power hydrogen facilities.

Trudeau must know that only Star Trek level technology will produce hydrogen from off shore windmills. Perhaps a solar powered vacuum cleaner sucking power direct from the sun? Read it again and again. Interplanetary travel here we come.

https://oilprice.com/Energy/Energy-General/IEA-The-Current-Energy-Crisis-Is-Unprecedented.html

#70 Dharma Bum on 10.25.22 at 10:00 am

#22 Bazinga

So, who will buy these expensive things as the boomers are forced to sell due to old age or become incapable of maintaining the place?
——————————————————————————————————–

People with extra money on their hands, who don’t care about interest rates, or appreciation, or depreciation, or paying a handyman to do their maintenance. That’s who.

Cottages are luxuries. Second homes. A home on top of a city home. For pleasure. For the hedonistic experience.

These people are usually unaffected by the economic factors that slay the masses. These people have money and make money notwithstanding the general malaise of the economy. In fact, they welcome these hard times as they tend to shake out the weak and reveal the cash strapped and desperate.

Then the vultching begins.

The rich get richer.

The cash strapped and indebted get poorer.

In the long run, cottages will continue to sell. Prices may drop, but people love the appeal of the pastoral good life.

Lakes, loons, campfires, swimming, boating, waterskiing, barbecuing, the woods, the beach, the dock, beers, the starry nights, fishing, bunkies, sunsets, marshmallows, and weenie roasts.

Please ignore the reality of mosquitoes, black flies, power outages, bad internet, hicks, lack of services, and the stay-the-hell-away-from-the-cottage guy.

#71 Dharma Bum on 10.25.22 at 10:10 am

#50 Ponzi

Another 5 years of Xi (She).
———————————————————————————————————

So, that’s his pronoun, eh?

Who knew?

#72 Shawn on 10.25.22 at 10:40 am

LNG Business Case BS

#69 Hope and Change on 10.25.22 at 9:06 am
https://oilprice.com/Energy/Energy-General/IEA-The-Current-Energy-Crisis-Is-Unprecedented.html

And Trudeau quips “ there’s no business case for LNG”.

****************************************
This is a total malpresentation of what Trudeau said which according to the Financial Post was :

Prime Minister Justin Trudeau said there has “never been a strong business case” for liquified natural gas exports from Canada’s East Coast to Europe, dealing a blow to those in the energy industry who thought Russia’s invasion of Ukraine presented an opportunity to revive dormant gas projects.

“We are looking right now and companies are looking at whether or not the new context makes it a worthwhile business case to make those investments,” Trudeau said, adding the federal government would be willing to ease regulatory hurdles to assist its allies.

“But there needs to be a business case. It needs to make sense for Germany to be receiving LNG directly from the East Coast. Those are discussions that are ongoing right now between our ministers, between various companies to see if indeed it makes sense,” Trudeau said.

Trudeau said Canada’s best chance of helping its allies may be to continue supplying natural gas to global markets via existing pipelines to the United States, and then eventually through LNG exports on Canada’s West Coast, where the country’s only export terminal is under construction.

https://financialpost.com/commodities/energy/oil-gas/trudeau-douses-excitement-over-east-coast-gas-exports-calling-business-case-weak

****************************
So those that claim he said there is “no business case for LNG” are either telling lies or more likely just misinformed and lazy Trudeau haters.

There are lots of reasons to bash Trudeau based on full quotes of what he actually said.

Nova Scotia and New Brunswick both want to have LNG export plants and both have BANNED LNG fracking and have little to no access to the gas that they would like to liquify. How’s that for a business case?

#73 the Jaguar on 10.25.22 at 10:42 am

Snippet for WFH advocates who insist their job functions can be done ‘remotely’. Hint: You are correct. ——
“VANCOUVER • Q4, the Toronto-based provider of an investor-relations platform, is laying off dozens of its employees, moving their roles to Latin America, where labour is cheaper. Said CEO and founder Darrell Heaps:
“Optimizing our human capital in utilizing various geographies around the world is an essential component to driving profitability,” he said, “not just for our company but for essentially every software company out there.”

Heaps said Q4’s approach is “pretty standard” for scaling companies. In the current economic environment, he added, other companies are “absolutely” moving roles to other countries. Heaps cited wage inflation and operating expense costs as contributing factors.” —

#74 Quintilian on 10.25.22 at 11:01 am

https://www.msn.com/en-ca/money/topstories/cibc-ceo-calls-for-overhaul-of-immigration-policy-highlighting-threat-posed-by-labour-shortages/ar-AA13m4wF?cvid=93e321efbb674e3894b2ad4fca257d17

When Bank CEO’s talk as left leaning social engineers, it is time to worry.

“Scotiabank’s Young said that in the current environment, housing affordability was a problem, not just for newcomers but for Canadians across the country. However, newcomers face even higher costs, given recent trends in prices, whether it is to purchase a new home or obtain rented accommodations, she said.”

It’s amusing when the arsonists speak about fire safety.

#75 Don Guillermo on 10.25.22 at 11:13 am

#64 crowdedelevatorfartz on 10.25.22 at 7:31 am
@#55 Calgary
“Sovereignty Act ?”

++++
Pffft.
Another “appointed” premier with delusions of their own self importance.
Painful to watch.
The smart leaders are scurrying for the darkness of “retirement”
Lets see how well she does at the polls in an actual election 6 or 12 months from now when voters realize the economy is down the “terlet” and the flushing is getting stronger…..
######
You’re better when speaking on topics you’re familiar with. Like smoke and woke.

#76 Don Guillermo on 10.25.22 at 11:17 am

#42 the jaguar on 10.24.22 at 8:17 pm
DonG: Is all well in Mazatlan hacienda after Roslyn blowing through? Hope all is well including little Charlie….

#########

It was another miss for Mazatlán. Roslyn turned inland south around Santa Cruz (similar to when Orlene came through). I’m in YYC for a couple of months to take care of some medical issues. We returned last Saturday and hope to be back late 2022 or early 2023. I’ve been checking our home cam and haven’t see much wind or rain so all good. I do see Charlie taken out for a run and he looks great. While we’re gone Charlie and Juan Carlos are in charge of the avocados to share around the hood. Can’t wait to get back.

#77 Ponzius Pilatus on 10.25.22 at 11:20 am

65 Jess on 10.25.22 at 8:05 am
Pretty soon the food bank will need a food bank.
————————-
It’s sad how the food banks have become a way of life for many people.
Don’t remember any food banks before Expo 86.

#78 Ponzius Pilatus on 10.25.22 at 11:26 am

68 Tiffy – the fool in the shower. on 10.25.22 at 8:42 am
Econ 101 giggled when Prof described “the Fool in the Shower”.

Central Banks go too far/too fast w/o waiting to measure impact. When the fool realizes the water is too hot he turns on cold water.

Tiff Macklem of
@bankofcanada
is the Fool in the Shower.
———————-
Good one.
Yeah, Econ 101.
We called it Graphs and Lafs.
And btw,
It’s The Greater Fool in the Shower.

#79 Ponzius Pilatus on 10.25.22 at 11:33 am

#72 Shawn
Excellent post.
But haters will hate.

#80 Diamond Dog on 10.25.22 at 11:33 am

I would temper market expectations somewhat here.

If we look at the DOW chart for example, it’s 1 step forward and 2 steps back:

https://www.cnbc.com/quotes/.DJI

Same with the NASDAQ but more pronounced:

https://www.cnbc.com/quotes/.IXIC

We see it with the S/P 500:

https://www.cnbc.com/quotes/.SPX

Is this a “breakout rally”, or just another relief rally is the question and the answer lies in rate hikes. 3 weeks ago, the Fed hiked .75%. On Nov 2nd, the Fed will hike another .75%. In December, the Fed will hike again, potentially .5% or .25%.

We are looking at around a Fed 2% hike falling into Q4 that the market can say is priced in but quarterly earnings is a “lagging indicator”. We are not going to see what these rate hikes have had on corp earnings until April of next year but logic says it will bite.

We talk all the time about how the markets are forward looking, but the reality is that earnings most moves the needle. I’m not so convinced that great times are coming from the market when I look at the demand destruction that lies ahead from the Fed.

As for maple, Mark Carney has warned of a recession coming for Canada, along with the IMF. Commodities aside, rate hikes are biting into disposable incomes. The mortgage rate in the U.S. as an example, hit 7.2% for 30 year mortgages. The North American housing market overall, has hit the skids just like Canada. I will also remind, the world is in recession.

Point is, it’s likely wise to temper expectations as we look forward into next year.

#81 Calgary on 10.25.22 at 11:39 am

https://twitter.com/ABDanielleSmith/status/1582047978810134529

Provincial Rights?

#82 Dough on 10.25.22 at 12:18 pm

I never here anyone mentioning about recapture of depreciation when it comes time to sell a rental property. You have to claim depreciation of this every year but when you sell it you have to add it all back as income so you go in a higher tax bracket. This is now a bigger deal in a declining real estate values now in Canada. This could mean tens of thousands of dollars tax hit when you sell your rental property. This is never mentioned from the flippers, speculators, sellers of rental real estate. It is one more nail in the coffin for this.

#83 Shawn on 10.25.22 at 12:43 pm

Alberta and Saskatchewan Premiers say:

Hey Feds stay the heck out of provincial jurisdiction. Except do send more money for health care and other provincial responsibilities.

Sorry but:

“When you eat the King’s bread and drink the King’s wine, you must sing the King’s song”

#84 Shawn on 10.25.22 at 12:45 pm

#82 Dough on 10.25.22 at 12:18 pm
I never here anyone mentioning about recapture of depreciation when it comes time to sell a rental property. You have to claim depreciation of this every year but when you sell it you have to add it all back as income so you go in a higher tax bracket.

********************
Good points but you don’t gotta claim it. It’s a choice.

And often there is not enough income to be able to claim it. Already at zero income tax.

#85 David Greene on 10.25.22 at 12:59 pm

That tends to work well for some software or other tech-related businesses. It doesn’t always work quite so well for other types of industries.

Language differences, cultural differences, time zone differences and differing educational backgrounds and training, to name a few obstacles.

====================================
#73 the Jaguar on 10.25.22 at 10:42 am

Snippet for WFH advocates who insist their job functions can be done ‘remotely’. Hint: You are correct. ——
“VANCOUVER • Q4, the Toronto-based provider of an investor-relations platform, is laying off dozens of its employees, moving their roles to Latin America, where labour is cheaper. Said CEO and founder Darrell Heaps:
“Optimizing our human capital in utilizing various geographies around the world is an essential component to driving profitability,” he said, “not just for our company but for essentially every software company out there.”

Heaps said Q4’s approach is “pretty standard” for scaling companies. In the current economic environment, he added, other companies are “absolutely” moving roles to other countries. Heaps cited wage inflation and operating expense costs as contributing factors.” —

#86 Don Guillermo on 10.25.22 at 1:03 pm

#83 Shawn on 10.25.22 at 12:43 pm
Alberta and Saskatchewan Premiers say:

Hey Feds stay the heck out of provincial jurisdiction. Except RETURN A SMALL PORTION OF THE MONEY WE PROVIDED THAT’S INTENDED for health care and other provincial responsibilities. YOU CAN KEEP THE REST TO BAIL OUT OTHER PROVINCES.

Sorry but:

“When you eat the King’s bread and drink the King’s wine, you must sing the King’s song”

******
Small edit.

No Canadian can afford the wine and bread that our King swills. Especially when prancing around his $6000/night London suite. Hopefully he didn’t order any $16 orange juice for breakfast.

#87 Ponzius Pilatus on 10.25.22 at 1:34 pm

84 Shawn on 10.25.22 at 12:45 pm
#82 Dough on 10.25.22 at 12:18 pm
I never here anyone mentioning about recapture of depreciation when it comes time to sell a rental property. You have to claim depreciation of this every year but when you sell it you have to add it all back as income so you go in a higher tax bracket.

********************
Good points but you don’t gotta claim it. It’s a choice.

And often there is not enough income to be able to claim it. Already at zero income tax.
————————————-
Good points.
I’m no tax expert.
But what happens when the renters trash the place?
And there is little or no room for more deductions from rental income?

#88 Nonplused on 10.25.22 at 1:39 pm

#83 Shawn on 10.25.22 at 12:43 pm
Alberta and Saskatchewan Premiers say:

Hey Feds stay the heck out of provincial jurisdiction. Except do send more money for health care and other provincial responsibilities.

Sorry but:

“When you eat the King’s bread and drink the King’s wine, you must sing the King’s song”

———————————

I don’t know where people get their ideas. Some sort of Jungian subconscious nightmares or wishful thinking I suppose. Alberta is one of the few financially independent provinces in the country and could fund the heck out of our own health care, had we not been disproportionately funding Ottawa all these long years. All one needs to do is look at the transfer payments to figure it out.

That said, I am not necessarily against transfer payments, we are one big happy family after all. But don’t bite the hand that feeds you. Alberta’s contention is that Ottawa is falling behind on healthcare funding for all provinces. Thus, Alberta is paying for health care for all provinces, and none of them are getting what they were promised. Where Ottawa is spending the money remains a mystery. It’s not the military, that’s for sure.

So ya, I think Alberta has a right to question Ottawa’s spending priorities. There is no “king” in Ottawa. If there is someone who thinks he is, it’s time to depose him.

The whole phrase “When you eat the King’s bread and drink the King’s wine, you must sing the King’s song” is humorous, as no king ever had anything he hadn’t stolen. He’s bribing you to do his bidding with your own money.

#89 the jaguar on 10.25.22 at 1:54 pm

@85 David Greene

Agree, however I do think it’s easier to move jobs out of the country when there is no visible presence evident.

#90 mike from mtl on 10.25.22 at 2:05 pm

#88 Nonplused on 10.25.22 at 1:39 pm
..Where Ottawa is spending the money remains a mystery. It’s not the military, that’s for sure…
/////////////////////////////////////////////////////////////

100% agree there. I recall a figure that nationally Canada collects & spends about the same as Germany (twice population) on healthcare. Don’t think we’re getting our dollars spent wisely.

That and we’ve been stuck with the same sumg, spend-o-crats in power who hold such contempt towards anyone not ideologically aligned.

#91 Palpha on 10.25.22 at 2:06 pm

This is the future! https://nationalpost.com/news/canada/federal-government-backs-nuclear-project

#92 Ed on 10.25.22 at 2:19 pm

Shawn on 10.25.22 at 12:43 pm

“When you eat the King’s bread and drink the King’s wine, you must sing the King’s song”
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Without Alberta there is no bread for Junior…or Confederation.

AB is going nowhere. Danielle is a rebel without a chance. – Garth

#93 Dr V on 10.25.22 at 2:39 pm

82 Dough

“You have to claim depreciation of this every year but when you sell it you have to add it all back as income so you go in a higher tax bracket.”

84 Shawn

“Good points but you don’t gotta claim it. It’s a choice.”

87 Ponz

“But what happens when the renters trash the place?”
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Great topic. accountants love to max the deductions
now, and defer, defer, defer tax until later. I just had this discussion with my accountant and have a ballpark figure for taxes owed if I sell in the next few years.

I dont have the answer about the renters trashing it though. That could be a civil matter. And good luck with that.

#94 Don Guillermo on 10.25.22 at 2:57 pm

90 mike from mtl on 10.25.22 at 2:05 pm
#88 Nonplused on 10.25.22 at 1:39 pm
..Where Ottawa is spending the money remains a mystery. It’s not the military, that’s for sure…
/////////////////////////////////////////////////////////////

100% agree there. I recall a figure that nationally Canada collects & spends about the same as Germany (twice population) on healthcare. Don’t think we’re getting our dollars spent wisely.

That and we’ve been stuck with the same sumg, spend-o-crats in power who hold such contempt towards anyone not ideologically aligned.

#########
You’re absolutely right Mike. The problem isn’t funding, it’s totally mismanagement. I’ve seen it first hand these past months.

#95 Ronaldo on 10.25.22 at 3:48 pm

#77 Ponzius Pilatus on 10.25.22 at 11:20 am
65 Jess on 10.25.22 at 8:05 am
Pretty soon the food bank will need a food bank.
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It’s sad how the food banks have become a way of life for many people.
Don’t remember any food banks before Expo 86.
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You may remember this. This was during the hippy days.

https://m.facebook.com/GumbootGirls/photos/i-belonged-to-the-fed-up-food-co-op-network-from-the-start-in-the-early-seventie/2007150109347781/