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ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

May 31, 2019 | Take Cover

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.

Well, it’s happened again. The one-man presidential wrecking gang has roiled the world. It will be interesting about eight inches from now to see how the red-hat brigade in the steerage section rescues their guy after this Trumpian mess.

In case you missed it, the xenophobic American president, unable to get his own country to seal off the southern border (no wall) says Mexico will be penalized with tariffs until they seal theirs. Five per cent now. Rising to 25% within a few months. Of course this just about abrogates the new NAFTA and, worse, it will cost US companies and consumers around $87 billion in higher input costs and prices. So, the economy will hurt. Profits fall. The stock market was whacked.

The Mexican tariff came in a Tweet. Nobody in Congress voted for it. No research document from the trade department was done, no impact study on the North American auto industry (the biggest loser), no consults – just a Tweet, and it’s done. Incredible.

At the same time China has retaliated against the latest Trump tariffs affecting that country, imposing $60 billion in duties on US imports. Beijing is also mounting a campaign in response to Trump’s vendetta against Chinese tech giant Huawei, saying US companies will be shut out of the world’s biggest market. More economic fallout. More pain for corps and their shares.

In Canada, consequences.

This makes a joke of the new NAFTA that took a couple of years to negotiate. Obviously a trade deal with Mr. Trump means diddly. He is capricious and unreliable. Investors took one look at the latest moronic move and flocked to the safety of bonds. Prices there shot higher and yields crumbled. The curve inverted the most in 12 years (short rates are now substantially higher than long ones) simply because the writing’s on the wall. NAFTA’s probably dead.

So a 10-year bond now yields just 1.5%, the least in a couple of years, as investors bet what the White House is doing could torpedo our economy.

Not that it needs much help, apparently. Despite the boffo jobs numbers in April, the GDP is lying in a ditch, covered in brambles, barely breathing. Poor thing. We’ve just learned that growth in the first quarter of the year was a sickly 0.1% – the same as the final quarter of 2018 in which stock markets fell 20% and the Bank of Canada had a small cow. Now with a quixotic egomaniac in charge of our biggest trading partner, none of this is good. Without robust trade, Canada gets hammered.

By the way, speaking of Mr. Trump’s political prowess, this week in Japan he agreed with his friend, Kim Jung Un, the dictator of North Korea, that Joe Biden – four decades in Congress and eight years the US vice-president – was a low-IQ person. It was the first time anyone could remember an American leader openly dissing a fellow legislator on foreign soil, before a foreign leader. The fact he was agreeing with a dictator made it all the more notable. A day later it was revealed Kim has executed by firing squad his envoy to the US for the Hanoi summit, because of a bad outcome. He’d been co-opted by the US, the dictator said, and he threw three other officials into the lineup for kicks. They took bullets, too.

Of course, it was Trump’s personal attention and fawning which turned Kim from a third rung, regional bruiser into a global player. And it continues. Meanwhile the American leader shreds relations with a key economic and geographic partner. Because most poor migrants are, he’s says, murderers. But Korean ones are okay.

Over to you, deplorables.

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An update on the very sensible and expanding decision being taken by many people to get the hell out of Dodge. Life in the GTA, Vancouver or the Lower Mainland is expensive, congested and populated with too many conflicted, financially stressed souls. They knee you on the subway. They give you the finger from their cars. They grab the best avocados from your hand.

Who needs this? Why not go somewhere affordable, where jobs are waiting? A poster calling himself ‘Running from Ontario’ asked me to share this with you.

Dear Garth: My partner and I are leaving Ontario and moving to the south shore of Nova Scotia in July. We’ve also done something we’d never thought we’d be able to do in Ontario – we’re in contract to buy a house!

Why? Doug Ford’s coming cuts to the healthcare profession have luckily coincided with Nova Scotia Health’s recruitment incentives; they offered a very nice signing bonus along with a full relocation package so we jumped.

What? We have an accepted offer of $135K on a nicely renovated three bedroom bungalow that’s walking distance to the hospital (complete with fully updated services, walk-out basement, fancy new kitchen and of course, a bunch of those shiny new appliances!) in a lovely little ocean-side town an hour or so south of Halifax. With a good combined annual income (along with defined pensions) we’re going with a 10year mortgage amortization with plans to pay it off asap.

The problem? Local real estate market stagnation – historically local prices have see-sawed and flat-lined. As such we are NOT anticipating any sort of price appreciation. In fact we are bracing for a possible 25% – 40% decrease (if the economy seriously tanks). Although it’s a lovely home, we clearly see it as a liability, not an asset. But with an effective vacancy rate of zero locally our carrying costs are still far less than our equally nice rental house in Ontario, and should we decide to eventually move on this property will become a rental unit or vacation home for us.

Is our thinking sound?

If you’re happy, financially solid, gainfully employed and content living in a spec of a place by the sea, an hour away from the city, what do you care what I think? Or anyone else? Life’s about choices, and you’re making a bold one. A few thousand people will read this tonight and wish they were you. Without the courage to say so.

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May 31st, 2019

Posted In: The Greater Fool

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