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ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

August 23, 2018 | The Game Changer

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.

Markets don’t tumble just because they’ve soared. That’s a myth. But they do crumble when the conditions that puffed them up change. These days US equities are flying along at near-record levels. Have been for months and months. Even Bay Street’s on a streak. Over the last two years investors with balanced portfolios are ahead about 25%. So some people worry if we’ve flying too close to the sun. Is disaster inevitable? Will 2008 come back?

Enter Trump.

This week the US president, now implicated in a crime by his former personal lawyer, was the subject of impeachment talk. His defence?  “I’ll tell you what, if I ever got impeached, I think the market would crash,” Trump said in a TV interview. “I think everybody would be very poor. Because without this thinking you would see numbers that you wouldn’t believe, in reverse.”

Is this possible? Sure. Likely? Nope.

The US market has risen because of economic growth, corporate profits, global expansion, job creation, rising wages, improved consumer confidence and technological advance. Trump has augmented that, especially with the deep tax cuts implemented last year. But impeachment would not reverse those policies. It might even ease the global trade war started by one single man. Yes, it would be a shock. Markets would react for a while. Selling would be foolish. Instead, you’d probably want to whip out the cheque book. Make your portfolio greater again.

      

Remember August 23rd. Could be the day when transparency finally arrived and real estate consumers had the scales lifted from their eyes. The Supreme Court has told the Toronto Real Estate Board to get stuffed, that it won’t entertain any more delays in the realtor’s losing battle with the federal Competition Bureau.

So, after six years of wrangling, obfuscation, foot-dragging and moaning, the real estate cartel is legally powerless to prevent the publishing of listings data that consumers were previously blinded to. Sold prices. Listing and re-listing dates. Price changes. Days-on-market. Pending and conditional sales information. Assessments, property taxes and more.

This is the stuff that all investors and buyers have been privy to only in jurisdictions like Nova Scotia (with Viewpoint.ca), and many people argue it’s helped keep prices stable there. It means realtors can no longer cajole buyers into blind auctions, hide the fact prices have been arbitrarily jacked or slashed and it allows consumers to research their own comparables and sales histories.

Wow. Rising interest rates. The mortgage stress test. Tumbling new home sales. Credit restrictions. And now the end an era in which a cabal of hungry house-floggers obscured and manipulated market data. Sunshine, flooding in. Finally. Big melt coming.

      

As you might know, it’s bank earnings season, and the financial guys are making money obscenely. Record profits, dividend hikes, Bay Street bonuses up the wazoo. The banks account for the largest share of the Canadian stock market and are a proxy for the entire economy.

But, yes, there are some corkers. Here’s one of them:

For the past few years CIBC has been leading the banks in mortgage growth, but that has just hit a wall. The maroon penguins admit the pace of mortgage portfolio expansion has dropped to a four-year low. In fact, the little web-footed suckers are doing 80% less lending than just a year ago. The culprit (of course) is the B20 stress test which has so far punted about 100,000 potential buyers out of the marketplace and reduced the available credit for first-timers.

The bankers are okay with this, by the way. The whole point of the new reg was to de-risk mortgage portfolios since so many unqualified (ie – high-risk) buyers were using Bank-of-Mom down payments to get around mortgage insurance. No more.

By the way, net penguin  income for the quarter soared 25%. Those who think a real estate correction will spank the banks are sadly mistaken.

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August 23rd, 2018

Posted In: The Greater Fool

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