- the source for market opinions


March 4, 2020 | Pow!

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.

G’day, students. Ensure your emergency rolls of TPaper are safely padlocked in your lockers, then proceed to the parking lot to be hosed down by the bleach trucks. They’re waiting. After installing your N95s, safety glasses and nitrile gloves, we can begin. Full agenda today, so enjoy! Nothing to worry about here.

The Biden bulls:
That Trump dude is some smart. As you know, he started to whack away at Joe Biden months ago, using his son Hunter and the Ukrainian caper to destroy the only Dem with the creds to unseat him. Didn’t work. Led to impeachment proceedings, actually. And now Biden has risen from the ashes, phoenix-like, and Mr. Market is smiling.

As the votes were counted after Super Tuesday’s 14-state slugfest, showing Biden trouncing Bernie and his Sandernistas, Dow futures soared by hundreds of points. The primary voters did what the Fed couldn’t, which was to restore investor confidence. Maybe the virus is still here, but the commies have been dealt a big blow. Sanders was the most virulent anti-corporation, pro-tax and socialistic person ever to get that close to a presidential nomination.

Now the Democratic machine has kicked into gear. Today Bloomberg was the final Biden conquest, so you know what November will bring. The MAGA army vs the Centre. America may not have lost its mind, after all.

Bankers cut big, T2 frets:
Right on cue the Bank of Canada offed its key interest rate Wednesday. No surprise there. But the bite was big – half a point, to match the Fed. Another cut expected in April, too. Ours is the latest central bank to reduce the cost of money, shooting stimulus in a global effort to counter the economy-shrinking impact of Covid-19. Expectations are US rates will drop a full 1% this year, and we should follow in time. Savers will be crushed. Investors ultimately rewarded. The real estate news will be sad (more below).

Here’s what they told us:

COVID-19 represents a significant health threat to people in a growing number of countries. In consequence, business activity in some regions has fallen sharply and supply chains have been disrupted. This has pulled down commodity prices and the Canadian dollar has depreciated. Global markets are reacting to the spread of the virus by repricing risk across a broad set of assets, making financial conditions less accommodative. It is likely that as the virus spreads, business and consumer confidence will deteriorate, further depressing activity.

It is becoming clear that the first quarter of 2020 will be weaker than the Bank had expected. The drop in Canada’s terms of trade, if sustained, will weigh on income growth. Meanwhile, business investment does not appear to be recovering as was expected following positive trade policy developments. In addition, rail line blockades, strikes by Ontario teachers, and winter storms in some regions are dampening economic activity in the first quarter.

In light of all these developments, the outlook is clearly weaker now than it was in January. As the situation evolves, Governing Council stands ready to adjust monetary policy further if required to support economic growth and keep inflation on target. While markets continue to function well, the Bank will continue to ensure that the Canadian financial system has sufficient liquidity.

So much for restraint.

The big loser is Mr. Socks. The federal Libs are in a pickle. Oil prices have collapsed into the $40 range, which just fuels the Wexiteers and underscores our energy sector failure. The FN goofs are still at it, and Dog-only-knows what Ottawa conceded to during those four days of talks in Smithers. It came out yesterday they didn’t even discuss the blockades. The virus has yet to land in Canada in any meaningful way, and the Cons are about to pick a snappy leader with political capital – who’s called for an October election. So the CB’s dramatic action is an admission the Canadian economy is pre-recessionary, while we sink into a voracious new deficit (which Millennials don’t care about). Did I miss anything?

What do Biden and McKay tell us about society? Suck it up, snowflakes. The Boomers are still in charge.

By the way, the yield on 5-year Canada debt is now eight-tenths of one per cent. Pow.

When Demand meets Supply:
This week we got a buck-ninety-nine three-year mortgage. This blog forecast that a fiver would be available during rutting season also at 1.99%. And it’s surely coming after the big BoC chop (plus another one in a few weeks) for the reasons spelled out above.

Already cheap rates and a paucity of listings are propelling housing markets back into bubble territory. Sad news, given the fact urban real estate is becoming the preserve of the wealthy. But the combination of cheap loans and a fearlessness on the part of house-lusty borrowers, plus owners afraid to list, is relentless. In the GTA sales are up 45%, listings down 33% and houses are 16% less affordable as a result. The average is now $910,000 and for detacheds it’s $1.485 million.

Even in tax-riddled Vancouver, in the province of Horganistan, sales are up 45%, available properties reduced by 21% and prices up slightly. Despite all of the market-killing initiatives introduced there by the Dippers, cheap money and raging hormones have broken through.

Well, this will get worse unless the virus runs amok and shuts down open houses. After a federal election in which every party came out with dumbass policies to stimulate more demand for real estate (which was already beyond the grasp of average folks) what do we expect?


Okay, kids, that’s it for today. Back outside for a re-rinse.  Tomorrow we’ll focus on root veggies and field surgery. Have a nice night.

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March 4th, 2020

Posted In: The Greater Fool

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