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April 5, 2020 | Buying lust

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.

Jesus. I look just like him now.

Or, given my physique, more like Dog the Bounty Hunter.

“You actually remind me of Bandit,” Dorothy said. “Get a haircut.”

I wish. But the barbershop closed under Emergency Order the day before I could get there and it looks now like it’ll be May, maybe June, before my locks can be lopped. No doubt the demand will be large – as for everything else we can’t buy, hire, access or consume right now.

It’s spring, too. New car season. Imagine in a few weeks when there are motivated, freshly-rehired sales guys. Zero-down, zero-financing rates. Dealerships desperate to unload 2020 inventory. The deals should be epic and the buying, too, when a new vehicle can be yours for what feels like free – no money down, no interest, awesome price and a set of free floor mats.

Economics is actually pretty simple. Supply and demand. In a society where two-thirds of all activity of the result of consumer spending, what people want, desire and do ends up creating growth, jobs, incomes and wealth.

Lately, thanks to Mrs. Virus, demand has been squished (along with civil liberties and, in many cases, civility) by governments anxious to keep folks alive and the health care system viable. But buying lust hasn’t gone away. It’s merely abated. Growing, too. And it shall return with a frenzy once the immediate crisis has passed. Pent-up demand, relief and optimism will trump worries about personal debt, especially when money is so cheap. This is human nature.

The pandemic? It will fade, of course. Health scares always do. They’re not structural. This isn’t the end of humanity, nor the commencement of an economic depression. Yes, we’re all messed up at the moment. Politicians are spending horrible amounts of money. Some business models (like Airbnb or the cruise industry) are being crushed. Taxes will be higher. Hand-shaking rarer. Dependency on governments greater. Every big event (and this one’s global) brings change. Globalization just took a gut punch, for example. When a bat in China ends up sickening your gram in Kelowna, it’s time to reconsider a few things. We will.

But as far as the economy’s concerned, recovery is assured. And it will likely be here in full force by the autumn.

It’s useful to look back to the last time people swore a rerun of the 1930s was coming and it was ‘different this time.’ It wasn’t, because it never is. The actions of governments and central bankers – fiscal and monetary stimulus – brought sunshine where there had been despair and turned fear into shopping.

Look at cars, for example. Here’s what happened to US light vehicle sales during the 2008-9 credit crisis, and how government programs reversed the decline leading to economic recovery and a torrent of deals.

 

 

Real estate’s the same. In Toronto 2008 house prices cascaded lower by about 15% before recovering and surging. Same with new home sales, as you can see below in America. Demand gathered like water held back by a temporary dam, only to spill over and create a tsunami of buying. Shopping lust is a powerful thing. It sweeps away fear.

 

Well, this is what you have to look forward to. The world will be a little changed, but the fundamentals will remain. Folks still want clothes, cars, new iPhones, houses, vacations… and haircuts. We’ve all been dealt a setback, forced into a period of reflection, loss and – for many – isolation and loneliness. We’ll always remember 2020. Regret it.

But it also lets us appreciate what we had – the freedom, mobility, friendship, choice and plenty that makes this a good life. It’s coming back. Big.

Gotta go now. Dorothy’s sharpening the garden shears. This could be brutal.

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April 5th, 2020

Posted In: The Greater Fool

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