August 5, 2020 | The Federal Reserve Is Supporting the Market

Were we directed from Washington when to sow and when to reap, we should soon want bread. – Thomas Jefferson SAN MARTIN, ARGENTINA – Yesterday, we were looking at “transfer” payments. Today, we look closer. What exactly are we talking about? Our developing hypothesis is that the furious money-shoveling in the last quarter was not […]

August 5, 2020 | Technical Hurdle Looms for Delusional Buyers

Even on days like Wednesday, when stocks seem to be merely marking time, the Dow tacked on another 373 points. This is particularly disconcerting with the U.S. sinking into Lockdown 2.0 and signs all around that the pandemic is not even remotely about to abate. Count me skeptical as far as pending news about an […]

August 5, 2020 | Moral Hazard

As goes 416, so goes Van. The latest housing stats from YVR echo those in Toronto, where sales have jumped more than 20% from last July, despite the fact last summer there was (a) no pandemic, (b) no CERB, (c) no mortgage deferrals, (d) eight million people still had jobs, (e) your office was still […]

August 4, 2020 | Cycles Point to Chaos for America

America is undergoing upheaval. It isn’t just the pandemic and its resulting economic fallout. The nightly news is filled with images of protesters battling police in major cities. These started as protests over police brutality, but anger is reaching the boiling point on other issues as well. President Trump and others worry about “a left-wing […]

August 4, 2020 | Gold Soars to New High Above $2000 While Managed Money Sat it Out

  Many hedge funds are stuck in a box hoping for a pullback to buy gold. Some have even bet against the rally. Understanding FuturesIn the futures world there is a short for every long. The first horizontal box has Large Specs, Small Specs, and Commercials. This is It’s Old COT reporting. The second box distinguishes producers […]

August 4, 2020 | Gold: Parabolic Financial Speculation, But Not Inflation!

Gold is in parabolic mode. Everyone loves it. Inflation and safe haven and the end of the dollar are the rationales. 1) This is not inflation. If it were, corn (green line overlaid) and all the other real stuff would be blowing off. It isn’t. 2) This is not the end of the dollar yet; […]

August 4, 2020 | US Dollar Stalks Risk Markets Everywhere

After weakening since the end of March, the US dollar index had the most negative month in a decade in July as US Treasury rates slumped, government spending leapt and plunge protection teams pumped equity futures nightly.   The consensus is now betting on more of the same. As shown on the left, courtesy of […]

August 4, 2020 | Deutsche Bank & Jeffrey Epstein

The mystery of Jeffrey Epstein, which extends beyond the sex with underage girls, has been just exactly where did his money come from? I have stated that I believe what truly lurked behind the surface was an attempt to entrap powerful people for the sole purpose of blackmail. Recently released transcripts show that he did […]

August 4, 2020 | Revisiting Our Silver and Gold Predictions – Get Ready For Higher Prices

If you have been following our research into Gold and Silver over the past years, then you were already prepared for the recent rally that has taken many investors by surprise.  This year, 2020, Gold and Silver are set up to have their best year of price appreciation over the past 40+ years.  It is […]

August 4, 2020 | Really?

The head fake continues. This week – perhaps tomorrow – real estate boards will start reporting July stats. They will be, at least in Toronto (and perhaps Montreal, Van and Victoria) wholly detached from reality. Buyer activity will not reflect millions of people on the dole, a 13.6% local unemployment rate, close to a million […]

August 3, 2020 | Gold Rose for 8 Straight Weeks: What’s Next?

Gold is on a tear. Historically and fundamentally what’s next? Jim Bianco at Bianco Research posted a couple of gold charts last week that he gave me permission to reproduce.Gold Goes Streaking Gold finished its 8th consecutive week higher. Since Nixon took the U.S. off the gold standard in 1971, there have only been four instances when […]

August 3, 2020 | German Fake News – People Demanding Freedom

  The Berlin Protest was indeed far greater than the German press tried to claim. But even more so, they called these people NAZIs and fringe right-wing conspiracy nuts. You will see this was not a right-wing demonstration nor was it brandishing Nazi symbols. The German people are shouting: “Resistance! Resistance! Resistance”, “FREEDOM” and “We […]

August 3, 2020 | Simple

Over the last decade we’ve endured much. Credit crisis recovery, US debt ceiling panic, oil price collapse, Trump, trade wars, protectionism, Brexit, Bitcoin, Hong Kong, record debt and now the first global pandemic in a century. Stock markets swooned in a serious way four times. Interest rates collapsed. GICs pay 1%. Houses are inflated. Wages […]

August 3, 2020 | Natural Gas Begins Upside Breakout Move

  First, we want to say “It took long enough!” and we’re happy to see this upside move in Natural Gas.  We had been calling this move for many months.  Our predictive modeling systems and cycle systems suggested the extended bottoming formation in Natural Gas was an excellent opportunity for skilled technical traders.  Today’s big […]

August 2, 2020 | Wealth Wave 3 More Charts for Gold Bulls

Happy weekend! It’s been another wild week for gold. What’s the next move for smart investors? I have a few ideas. First, we should look at some charts. Chart No. 1: The New Bull Market Wall Street is finally, FINALLY waking up to the fact that gold is in a new bull market. Still, the […]

August 2, 2020 | Are You Loving Your Servitude? (Part Two)

In Part One of this article I laid out the argument Huxley’s dystopian vision of the future had played out over many decades, but now I observe Orwell’s darker vision in motion since the start of this century. All the “solutions” being imposed by those in power don’t solve anything, because they aren’t designed to […]

August 2, 2020 | The Crash

“We’re doing a story about the potential for a residential real estate crash,” the email from glitzy mag Toronto Life read. “The premise is basically that prices have held steady for the past few months, despite crippling economic conditions, so does that mean the bottom will inevitably fall out?”

A follow-up phone call materialized from the editor (I explained no crash was near). Then another note arrived. Housing is a hot thing these days. Apparently, even bigger than the virus and glory holes. ‘Okay,” I relented. ‘Send me the questions.’

“Has anything surprised you about how the market reacted during the pandemic? Pls explain.”
The current market sucks. Bidding wars. Blind auctions. Bully bids. Multiple offers. Prices rising double-digits. Many are incredulous how this could take place in the midst of a global pandemic with the downtown core a ghost city and a withering 13% unemployment rate in the GTA. Eight million Canadians have been on government pogey for four months, and the GDP has crashed the most on record. Yet when it comes to real estate, we’re partying like it’s 2017 again.

The reasons are profound, and temporary. There was no spring market in 2020, since we were all going to die of Covid, and stayed home in our underwear. Hence a big pent-up demand once it appeared life was going to carry on. What normally happens in April this year took place in June.

Second, lots of demand was unleashed on scant inventory. Available listings shrank faster than a dude in the Humber when the virus arrived. Live showings halted. Owners were totally unwilling to have anyone view their homes. The choices for buyers once public fears started to dissipate were thin. Good properties were immediate objects of desire and competition. Prices popped.

Third, money’s cheap. Ridiculously cheap. The major lenders are quietly giving mortgages for less than 2% on a five-year term. Even decade-long loans are 2.5%. As central banks rushed to rescue the economy from the pandemic, rates were slashed and billions thrown at buying up mortgage securities. Liquidity is sloshing over the gunnels. As mortgage costs decline, of course, people can borrow more money on the same income. So they are. The fact we no longer have any fear of excessive debt is driving real estate higher, unwisely.

But these things are temporary. The demand surge will temper. More properties will hit the MLS. Unemployment will stay elevated. Any economic or public health reversal now could make those who overpaid in June regret things in November.

“You mentioned the likelihood of a potential residential real estate crash is “basically zero.” Can you flesh out how you came to that conclusion?”
Sure. If this were Calgary or Kelowna or Windsor, a protracted period of decline would be no surprise. Lots of places in Canada will have many problems for the next couple of years. But the GTA will fare better, because of a highly diversified local economy, the financial core, migration and the synergy of a six-million-strong market.

No, no crash – which we’d define as a 20% price correction. But this does not mean a rosy market, either. There are several worrisome trends.

“You mentioned there might be a flatlining in the 416. What factors do you think would contribute to that? How long would you expect that to last before prices recover?”
After this little boomlet, it reasonable to expect a far different market to emerge. As mentioned, swollen unemployment is not going to shrink anytime soon. It will be well in 2021 before we get back to the levels of February. Second, a serious number of people deferred mortgage payments, ending in the next few months. An unknown number will still be without work and forced to sell, so more listings. Also many coming up for renewal may be unpleasantly surprised at the reception they get from lenders who were just denied six months of payments.

And big troubles with condos. Airbnb has collapsed. Pre-virus, the GTA had over 21,000 short-term rental properties. Hundreds of those have been hitting the market lately, with thousands more to come. Add to this the 15,000 units coming available as new construction is completed over the next two years. Supply will overwhelm demand. This is why condo prices and rents will decline, pulling the entire market back.

Finally, the virus. It freaked out millions. No surprise that detached sales in 416 have actually declined while those in the boring, soulless expanse of 905 have jumped. People want backyards. Front doors to the street. No elevators or garbage rooms, corridors or parking garages. Besides, Covid showed that a lot of companies can function perfectly well with employees working remotely. So no need to spend three hours a day on the QEW and Gardiner Expressway. The burbs are suddenly sexy. The clogged Kingdom of 416 is tarnished.

“How do you think it would impact the market if there was a much-dreaded second wave of coronavirus?”
Like an asteroid. Combine that with joblessness, more shutdowns, the condo plop, mortgage deferral cliff, CMHC rule tightening (no more HELOCs to finance rental props) and more risk-averse lenders and the market would be a smoky hole in the ground for at least a year. Until the vaccine.

But why would this happen? We’re all wearing masks now. Leaping off the sidewalks from each other. Lining up like ducks at the grocery store. Washing hands all day and bathing in sanitizer. This is not March. The authorities are not going to lock down society or turn off the economy again. If infections rise and hotspots develop, so be it. The virus risk ain’t going to zero. It never will. And it will be a long, long time before the herd is dosed and social distancing ends.

The best time is to buy a house is when you need it and can truly

August 2, 2020 | How Long Can the Fed Cancel Gravity?

I’ve referred to pandemic stimulus as ‘dead money’, and the latest statistics would seem to bear me out.  Far from pumping up the consumer economy,  quite a few of the trillions of digital dollars ginned up by the central bank are being used to retire credit card debt. Delinquencies and new borrowing have fallen very […]

August 2, 2020 | European Resurgence

One of COVID-19’s many less-than-obvious consequences is the way it makes us look inward. Facing mortality has always done that, of course. West Texas Judge Roy Bean reportedly said, “Nothing focuses the mind like a good hanging.” For the vulnerable and those of us of a certain age (ahem), this virus goes beyond the normal […]

August 2, 2020 | Can Trump Postpone the Election? Maybe He Can!

  Trump tweeted about postponing the election due to the mail-in voting without proving who you are. There is a lot of fake news running around claiming that the 20th Amendment to the Constitution says the term must end by January 20th. However, this does not specify which January. The 20th Amendment says: The terms […]

August 2, 2020 | Why So Many Cities Are Paralyzed

Sympathy for America’s big-city mayors and their allies is evaporating – generally for good reason. Portland and Seattle, for instance, seemed willing to give rioters a free hand before halfheartedly stepping in. And of course there’s the amazing quote from Chris Cuomo, the brother of New York’s Governor : “Please, show me where it says […]

August 1, 2020 | Are You Loving Your Servitude?

“A really efficient totalitarian state would be one in which the all-powerful executive of political bosses and their army of managers control a population of slaves who do not have to be coerced, because they love their servitude.” ― Aldous Huxley, Brave New World “Every record has been destroyed or falsified, every book rewritten, every […]

August 1, 2020 | What are the rules for Net Zero?

Strategic assessment of climate change says new Canadian mines, power plants, pipelines and railways will be covered, but lacks details on how changes to them – and the global energy system – will be measured or enforced.   Overview of changes In an article here in June, we wondered how our federal government plans to get […]

August 1, 2020 | Average Age of Cars & Trucks on the Road Sets Record, Will Jump During Pandemic as New-Vehicle Sales Plunge to 1970s Level

The average age of passenger cars and trucks on the road in the US – light “vehicles in operation” or VIO – rose to another record of 11.9 years in 2020, according to IHS Markit. But this doesn’t yet include the effects of the Pandemic on the auto industry. We’ll get to that in a […]