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June 14, 2016 | The Squeeze

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

Hmm. So much to get your shorts in a twist over. Are you ready?

In nine days there’s the Brexit thing, with four polls yesterday showing the ‘Leave’ side is gaining momentum fast. Whether the ‘Remain’ camp will be overwhelmed by the June 23rd vote is unknown, but it’s gettin’ ugly. The pound is falling , equity markets are sketchy and investors have been fleeing to the safety of fixed income, bloating German bond prices and pushing rates negative. The no forces have managed to turn this into a vote about nationalism, ‘Britishness’ and anti-immigration. Ugly. Outcome perilous.

Now add in Trump. And Orlando. The mass killing this week by the radical, ISIS-loving nutjob just polarized the already-bizarre presidential race even more, as it drifts into the emotional areas of gun control and Muslims. And while The Donald statistically cannot win (the popular vote does not elect presidents) the campaign ahead will be one of the most shrill, aggressive and divisive in US history. More volatility.

Then there’s us. StatsCan reported Tuesday morning we continue to pickle and saute  ourselves in debt. We now owe $1.9 trillion, 65.6% of which ($1.26 trillion) is in mortgages. So overall debt remains at 165% of disposable income, the highest number ever recorded, which worries the poop out an increasing number of engaged people.

“The weaker economy has reignited concerns about the elevated level of household debt and divergent trends in house prices, which are rapidly rising in Vancouver and Toronto and falling in Alberta,” says the International Monetary Fund in a new report. On Tuesday the OECD, another global financial body of influence, warned Ottawa it has to cool this housing sucker off – fast. “That means (home buyers have) got skin in the game, and that means if (your house) comes down in price at some point then you also lose part of that,” said OECD boss Angel Gurría.

And what about voices from the trenches?

Here’s one belonging to Mo Povoden, a Re/Max agent working BC’s Whistler and Pemberton regions. Below is taken from an open letter he sent clients yesterday. The message: sell now, and do not buy. There’s a storm coming. Sound a tad familiar?

“Having been an investor in this area for nearly 25 years now… I’ve seen cycles.  I’ve seen cycles and let me state for the record – while their swing and magnitudes have varied cycle to cycle, their timings have not.  With the pending US election on the immediate horizon, talk of interest rates increasing both for Canada and the US, talk of China’s reforms on out-of-country investment as well as staving off a country wide meltdown themselves; we have the perfect storm brewing.  Anyone remember the summer of 2008??  All that fervour and buying and positive market attitude with people buying homes all over the place and loving life and spending and racking up their credit cards and being told everything was rainbows and unicorns and nothing could possibly go wrong??  Almost similar to what’s being said today – in the news – in conversation with people – friends – families – businesses…  Optimism and disbelief almost at equal peggings.  Well folks – we’ve been here before, and we’re about to be somewhere else again!…  The party’s in full swing – so if you want to benefit from a fantastic return on your property purchase from 1 year ago or 10+ years ago – NOW IS THE TIME TO DO IT!!!

“For those eyeballing to BUY….  If you can resist the urge to lock into these outstandingly tempting rates offered by your mortgaging branch, do so – WAIT!!.  The correction on the horizon can see prices correct quickly in the arena of roughly 20-23% over the course of the next 2 years.  Sure – this will also be paralleled with an increase in lending rates, but saving almost a quarter on the purchase of your [next] property compared to the point or two up on lending rates.”

There’s more, of course. Oil has plopped again into the $40-range and most oil sands production is still sidelined after the Albertan wild fires. The top bankers are worrying more every day, it seems, about what Canadians are doing. (On Tuesday the Teranet-National Bank composite index showed a huge 9% national year/year surge in prices.) Two years ago the CEO of Scotia was saying “‘bubble’ is perhaps the most overused word since the global financial crisis,” while now he’s saying, “we’re a little concerned about housing prices in the Greater Vancouver area and Toronto,” and cutting back on lending. Suck. Blow.

Add in China’s bloating debt levels, the Fed’s ongoing rate tease, record assault rifle sales on Monday and whatever the hell Justin Bieber did on stage in Winnipeg Saturday night and, well, maybe it’s time to go to the cottage and unplug.

So, stop reading this blog. Final warning. Govern yourself accordingly.


From the Bank of Canada: GTA & YVR are sellers’ markets. In Montreal & Calgary the buyers are in control.

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June 14th, 2016

Posted In: The Greater Fool

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