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January 20, 2021 | Tale of Two

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.

It’s been an economic crisis like no other. For the first time in a century we locked down whole cities. Provinces, even. Travel restrictions. Bars, eateries, hair salons, gyms, arenas, shops, theatres all shut. Never in our lifetimes have the streets been full of people in masks or has transit ridership plunged 90%. Entertainment, tourism and travel have been crushed. You can drive on the Gardiner Expressway without melting down.

So, there are 1.7 million people unemployed. The number working from home is currently just under 5 million. But here’s the weird thing – almost 350,000 new jobs were created in the last 12 months, and they were all high-paying positions. So as the hairdressers, shoe store clerks, baristas and fitness instructors got whacked, society gained more government employees, health care professionals, realtors, IT dudes and managers.

CIBC released a report this week saying, “it’s a tale of two economies.” And this: “The lower the pay grade, the worse the job market performance is,” as three-quarters of a million lower-wage people were idled.

Well, here’s the bottom line: net worth for the WFH crowd has increased if (a) they had investment portfolios, which ended up delivering solid gains in 2020, or (b) they own real estate, which was bloated by FOMO and crazy-cheap mortgage rates. Meanwhile these folks in general retained their salaries while seeing their overheads plummet. Cash flow improved. Savings grew. Covid was good for their bottom line. And now the wealth gap has yawned even more than back in 2019, when you never thought about bats or vaccines.

What’s next?

It gets worse, but only for the folks at the bottom of the income scale. The lockdowns in Ontario and Quebec, especially, has decimated the service sector where most of them work. Unemployment is expected to increase to 9% or beyond before things get better in the summer. (We lost 63,000 jobs last month.) Meanwhile everyone is anticipating an inflationary spring housing market and equity markets have been inching to new record highs on the expectation of economic reopening.

The rich get richer. Assets grow in adversity. The rest fall behind. Hard times hurt.

Can the wealth gap grow indefinitely? Not if Chrystia gets her way.

More on what our politicians have in store in the coming weeks. In the meantime, let’s count your blessings.

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January 20th, 2021

Posted In: The Greater Fool

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