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May 7, 2020 | Whither Us?

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.

Charlie spotted an ad this week on Twitter, seeking a renter. The unit is a 350-foot nest in a giant downtown 416 tower, fully furnished since it used to be an Airbnb. Before the deluge. The key point: over the course of a month the rent ask has dropped seven times, from just below $2,000 down to $1,700. Still negotiable, I bet.

This is called disinflation. Maybe even deflation. Rent goes down. The tenant benefits. The mortgage payment, condo fees and insurance payments stay the same, killing the owner. Meanwhile the unit is likely falling in value, as dozens of similar ones come to market – also owned by a squad of unfortunates. Asset values fall. Debt does not. Liquidity rules.

What a world we’re in. Greyhound said it’s ending all bus routes in Canada. Vendors won’t take cash. This is hurting those at the lower end of the income spectrum. Now 33 million Americans are on pogey. Home Capital just set aside 674% more money to deal with bum loans. Yet stock markets on Bay Street and Wall Street have jumped 33% in the past six weeks. Friday morning we get the Mother of All Employment Reports showing the jobless rate in both countries is, like, 20%. 1930s stuff. We all knew it was coming.

Despite that, oil has leapt back from the grave. Canadian crude has inflated dramatically. But big guys like Suncor are in serious trouble. So is Alberta. The office vacancy rate in Calgary will be 40% by the time we hit bottom. Meanwhile investors have seen their portfolios improve as governments and central banks pour historic rivers of money into the economy and capital markets. Yup – the gap between the afflicted (female hospitality workers are most impacted so far) and the immune (you know who) has widened, because of the virus and our response to it. This is not great for society, but it was an inevitable result. The suffering is far from equal.

The next few months will be critical in shaping the years after that. Will we be going back into offices? Will the malls open? Will Westjet survive? Or Disney? Or the pub down the street? Or Trump?

Polls widely show citizens have had the crap scared out of them by the media, public health officials, politicians and wall-to-wall virus talk on every social media channel. The reaction to Covid, rather than the bug itself, is now our challenge. Are stock markets signaling the pandemic will pass and the economy restored? Or are they on a sugar-high, thanks to CBs and irresponsible government spending? Public opinion has never been so critical to a civilization’s outcome, as this is the first economy 70% driven by household spending.

So today we’re going to probe and prod the Greater Fool Nation. Whither us?

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May 7th, 2020

Posted In: The Greater Fool

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