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September 13, 2023 | More and More Hard Data

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel ( Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog:

Debt payments consume an impossible amount of household income, and the problem is global.

Across ten large Canadian cities, mortgage payments alone are eating up about 59% of household earnings, based on mortgages amortized over 25 years. This is with 70% of Canadian mortgages still paying fixed payments based on rates less than 3%. With current mortgage rates around 6 percent, interest costs will double and more as terms come due.

Twenty-five percent of the mortgage book at Canadian banks is negatively amortizing today (i.e., loan balances increasing monthly) with amortization periods over 25 years. Regulators have instructed banks to bring these loans back to conventional 25-year amortization, stat.

In Toronto and Vancouver, mortgage payments on the median home consume the vast majority of household income, according to economists at National Bank of Canada. See Home prices in Canada are so stretched that even owners want them to fall.

Meanwhile, even with a whopping bear market rally in the S&P 500 from October to August, it has been 616 days (1.7 years) since the index made a new cycle high; this length of price stagnation has only happened seven times in the past seven decades, and only within ongoing bear markets.

Aggregate hours work has been stagnant for six months and US non-farm payrolls have been revised lower for seven consecutive months–an extended pattern only seen during past recessions.

“We really are starting to see multiplying signs of stress in the consumer sector.” Danielle DiMartino Booth, chief executive officer and chief strategist at QI Research, discusses the US economy, oil prices and her outlook for the labor market. She speaks on Bloomberg Television. Here is a direct video link.

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September 13th, 2023

Posted In: Juggling Dynamite

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