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August 12, 2020 | Various

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.

Bill vs Mark

This week the prime minister said he had full confidence in Bill Morneau as finance minister. Really?

This came on the heels of two big developments. Fist, Bill royally screwed up by accepting gifts (travel and accommodations) from the creepy WE brothers, then forgetting to pay until being forced to face a Parliamentary inquiry. Worse, he let WE employ his daughter. Even worse, his billionaire wife is a big WE contributor. Worse still, he personally approved giving millions to the charity in the form of a grant. And worst of all, he didn’t recuse himself when Cabinet approved a $900 million contract for student volunteerism that WE would oversee (and profit from).

Bad, Bill. Very bad.

Second, Mark Carney came back to town after serving as the Governor of the Bank of England – a job he took after heading up Canada’s central bank. In fact, he’s the only dude in the world to have been tapped to run two of the planet’s major CBs. Plus, he has experience as a senior guy at Goldman Sachs, along with bone fides as a climate change warrior and, apparently, has a social conscience. Finally, he looks chiseled, cool and unflappable. Never sweats. Makes the stud finders at Home Depot light up.

Prediction: Carney will win a seat as MP in the upcoming Toronto by-election and, by this time next year, be the finance minister. Canada will be better for it. Then he will go on to be prime minister, by the way. Morneau will go back to his $6 million house in Bennington Heights. (I used to own a shack down the street.)

Gold does it again

The bullion-lickers were out in force a few days ago when I dissed the yellow rocks, saying a gold position was wholly inappropriate for most people. The metal soon topped two thousand dollars an ounce before crashing more than a hundred dollars on Tuesday, then rebounding a bit in the next 24 hours. All this proves my point. PMs are intensely volatile, emotional, unpredictable and flaky. They pay no interest and no regular dividends. This makes bullion completely speculative, in the same category as junior resource stocks or the Covid vaccine company your BIL started in his basement. Normal people do not own gold. For good reason.

Gold bugs buy and never sell. They usually refuse to harvest gains, thinking more are coming. Greed is the enemy of investing, of course. It creates gamblers, most of whom fail. As for the metal’s future, it’s as murky as always. Fluctuations are certain but in the absence of runaway inflation, currency collapse or the pandemic wiping out a billion people, the old pattern will continue. Gold is bling. Not money.

How not to fight a bug

Did the countries locking down to fight the virus, thereby idling millions of people and cratering their economies, get it right? Was Covid backed off more than in places which took a different tack?

Nope, no evidence of that, says Prem Gururajan, the CEO of tech startup RideCo and a regular blog dog. “I have read in your recent posts that the social costs/damage caused by the lockdowns outweighs any benefits,” he says. “I agree with your assessment. I have been analyzing the outcomes in lockdown countries vs. countries that did not implement a lockdown – Japan, Sweden, S. Korea, and Taiwan.”

The conclusion: lockdowns don’t work. Masks and hand-washing (and common sense) do. Governments that turn off the economy end up feeding suicide, poverty, depression and economic despair. It’s a failed strategy. In fact, unemployment will kill more people than the virus. By a long shot.

Prem has penned an interesting article on this topic. Read it here. In it he points out how governments wildly, perhaps irresponsibly, inflated the potential mortality of Covid. That was referenced here days ago in reminding you our health minister said between 30% and 70% of Canadians would get sick. So far it is 0.3%.


Housing’s dark underbelly

He’s at it again. CMHC boss Evan Siddall is a unique public servant. He says what he thinks, regardless of what his overlords want to hear. And he’s passionate. We need more.

Siddall has warned that the dream of homeownership has the potential for turning nightmarish for those who buy when they actually can’t afford it. His views of the economic future are dark, brooding and cautionary. He thinks we’re a nation of debt junkies, that real estate has turned into a casino and lenders are rapacious. What’s not to love?

So now Siddall has written to bankers and brokers imploring them to stop handing out big mortgages to households that are seriously leveraged as a result. High-risk borrowers should be denied, he maintains, because 5% down mortgages are just feeding potential negative equity. And the current mid-pandemic housing boom is doomed. Later this year prices will retreat when the CERB money evaporates, structural unemployment takes hold and the mortgage deferral cliff arrives.

“We would hope you would reconsider highly leveraged household lending. Please put our country’s long-term outlook ahead of short-term profitability,” he tells the lenders, adding, “there is a dark economic underbelly in this business that I want to expose.”

If Minister Mark doesn’t happen, let it be Evan.

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August 12th, 2020

Posted In: The Greater Fool

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