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Email this8:45 am
December 12, 2021
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Well it is about time for savers to get rewarded not penalized and near zero interest rate on the way out?
very interesting articles from CNBC and Bloomberg
12:39 pm
October 27, 2013
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I, for one, am anticipating very anemic growth in equity markets over the next 5 years. It might well become a lost decade like the '70s as the financial system adjusts to positive 'real' interest rates.
Regardless of one's view of equities, I'd also avoid high yield corporate bonds like the plague for another. Minimum BBB investment grade and only in businesses with some sort of an assured revenue stream, such as utility oriented companies.
7:21 pm
December 12, 2021
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IMO cheap money is behind us
What happens when $2 trillion is sucked out of the global economy? It may not be pretty
https://www.cnn.com/2023/05/19/economy/quantitative-tightening-global-impact/index.html
4:39 am
December 12, 2015
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So, how does this article and Dodge’s warning relate to the current inverted rates, and the recent increases in short term rates?
Any more predictions from our experienced members?
https://financialpost.com/news/economy/bank-of-canada-has-18-months-to-rein-in-inflation-david-dodge
7:33 am
June 6, 2023
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I will make a prediction . And that is interest rate will be above inflation for the for see able future . Which will make G.I.C. More attractive then they have been for the past 10 years or so .
10:04 am
November 18, 2017
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Even worse, a massive amount of money has been sucked out of the economy into inflated housing valuations. This is essentially vapor - though the huge shortage of housing and continuing supply of immigrants in developed countries presses to sustain that value until a big crash. We've only had a small softening in home values in North America so far. Canada is now estimated to have more than 40 MILLION inhabitants.
Let me make clear that I'm not anti-immigrant, but anti-overpopulation, and when people move to high-consumption countries, their footprint on the world's resources (including housing) skyrockets.
RetirEd
RetirEd
11:23 am
June 6, 2023
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Is their not a demographic reason for letting all these people in so that benefits like oas and cpp and other can be paid . When so many Canadians are in retirement . with out them we will not be able to support are social programs .
I recall see in France were they had not had such large scale immigration . Riots over reduction in pension benefits . I believe it is said that will not happen here because we have replaced the retiring works with lot of immigration so they will be able to support are large retired population .
I do not know what choice is right . Cutting benefits and see little change in Canadain culture
or letting a bunch of people from different cultures in and becoming a foreigner in your own country and keep the social benefits
Their are no go choices or wrong ones
I am beginning to see . you and I see the world quite differently RetirEd
would be good to now about you .
I am retried to now . but have been financial independent of any employer for over 30 years . just needed return on capital .
were do your point of views come from ?
11:38 am
June 8, 2023
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AltaRed said
I, for one, am anticipating very anemic growth in equity markets over the next 5 years. It might well become a lost decade like the '70s as the financial system adjusts to positive 'real' interest rates.Regardless of one's view of equities, I'd also avoid high yield corporate bonds like the plague for another. Minimum BBB investment grade and only in businesses with some sort of an assured revenue stream, such as utility oriented companies.
I see the U.S. equity markets making new highs next year but giving it all back by the middle of 2026 and decaying for at least a decade. Most of the gains will be the fall of the U.S. dollar not higher corporate profits.
11:47 am
June 8, 2023
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AltaRed said
I, for one, am anticipating very anemic growth in equity markets over the next 5 years. It might well become a lost decade like the '70s as the financial system adjusts to positive 'real' interest rates.Regardless of one's view of equities, I'd also avoid high yield corporate bonds like the plague for another. Minimum BBB investment grade and only in businesses with some sort of an assured revenue stream, such as utility oriented companies.
I would avoid long term corporate bonds in insurance companies like the plague no matter how good they look on paper even Intact. I was a buyer of Rogers Corporation long term corporate bonds when they were recently downgraded to BBB-.
7:57 am
April 6, 2013
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Saver-Mom said
So, how does this article and Dodge’s warning relate to the current inverted rates, and the recent increases in short term rates?
…
They aren't really related.
Former Governor Dodge's warning is that inflation needs to be reined in within 18 months or so to avoid having the current level of inflation being baked into peoples' expectations and plans.
Short term interest rates are elevated because Bank of Canada has pushed up those rates to try to dampen the demand side factors that are pushing up inflation.
Long term rates are not following the short term rates upward and the yield curve has inverted because long term bond investors don't believe that current short term rates will last.
8:50 am
December 12, 2021
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The inflated housing market in Canada has nothing to do with "immigrants" or "shortage of housing" It is not a problem that is unique to Canada. New Zealand, the Czech Republic, Australia and Germany just to name a few are the world's bubbliest.
It is the near zero interest "S#$%$D" for more then a decade….. but the stock and real estate broker want us to believe otherwise, it will end badly.
8:58 am
October 27, 2013
Online
I am of a similar view to that of Norman1. If the prevailing view becomes one of believing current, or even slightly reduced, inflation levels will be the norm for the foreseeable future, e.g. 5? years, demand to buy before prices increase further will continue to be a tailwind for even more demand and higher prices holding inflation up. That can become a dangerous, vicious circle requiring a deep, and painful, recession with high unemployment to resolve.
I thus see short term rates remaining elevated, with the yield curve inverted, for some time to come. Short term rates, at a minimum, must remain higher than inflation, incurring 'real' cost to the economy. Consumer demand must be tamed.
Market sentiment wants to believe inflation will be brought under control in the not too distant future, which is why long term rates are where they are.
10:09 am
April 6, 2013
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A complication that is developing: The high short term rates being used by the Bank of Canada to tame inflation are causing inflation in parts of the Consumer Price Index.
Statistics Canada noted the following for April:
Mortgage interest cost rises as homeowners' replacement cost slows
… Canadians continued to pay more in mortgage interest cost in April (+28.5%) compared with April 2022, as more mortgages were initiated or renewed at higher interest rates. The higher interest rate environment may also be contributing to rising rents in April 2023 (+6.1%) by stimulating higher rental demand.
…
1:12 pm
October 27, 2013
Online
I do not think that is, or should have been, a surprise to BoC nor should it be to anyone else, although maybe the extent of it has been.
With every tight housing supply, and use of shorter term debt, the effect may be larger and faster to show up than in the past with similar sharp interest rate increases. I don't have relevant data from past periods but I do recall mortgage interest rates going up sharply in the '70s and '80s when I was carrying a mortgage.
9:17 am
November 18, 2017
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fat_dog:
Is their not a demographic reason for letting all these people in so that benefits like oas and cpp and other can be paid . When so many Canadians are in retirement . with out them we will not be able to support are social programs .
Yes, this is precisely the problem. Politicians who use tax cuts to gain power and the people who benefit from those cuts (primarily those in high income brackets) don't want to ever have to pay back all those borrowed dollars on the government books. So they kick the debt down the road and hope someone else will pay for it. That someone has to be an increase in population - either by reproduction or by immigration.
Of course, in the absence of higher taxes or lower spending, that just leaves a bigger debt-creating population. It's a short-sighted and selfish approach leaving a legacy of continued debt (and often inflation). Since lower spending usually affects more people negatively than raising taxes, political parties usually line up with corporations and the rich wanting lower taxes and spending, and the non-rich and wage-working wanting higher taxes and spending.
That's why the political right criticizes the left as "tax-and-spend" fools. But that's what governments do - tax and spend. Who gets the spoils and who pays the bills is the central argument in politics. The balance works both ways - many prosperous European countries (look around Scandinavia) provide a very good standard of living with high taxes and government spending. The US, dramatically, does not.
Increasing population delays resolving this balance, with massive debt the result.
RetirEd
RetirEd
11:52 am
September 11, 2013
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RetirEd, you opine that politicians use tax cuts to gain power and that these cuts benefit "primarily those in high income brackets". As the top 10% of earners pay more than half, 53%, of all federal and provincial income taxes paid (per Stats Canada), and it's been pretty much constant for some years now, it doesn't look like the wealthy are doing a very good job of taking advantage of those tax cuts you refer to, does it? Or are you indicating that the top 10% should be paying a different % than 53% of all income taxes paid?
10:44 am
November 18, 2017
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Bill: First, I don't think looking only at the top 10% of income earners tells much of the story. The wealth-versus-income-tax-policy balance pivots somewhere between $100K and $200K.
Higher-income Canadians have a much greater share of the total personal income in Canada, and that's why they pay more of the total income tax collected. We haven't had much by way of income tax cuts in the last seven years so that hasn't changed; it's the US that shows this effect most. Here in Canada the political right HAS continued to push for lower income taxes on higher incomes, but the country hasn't bought in yet. Their share of support still wiggles around 35%, and they have only won when the NDP and Bloc - both advocates of a steeper income-tax curve - split the non-con vote.
Corporate income taxes have been consistently falling for a long time, mind you.
Are the wealthy are doing a very good job of taking advantage of those tax cuts? That's a different question, and I think they are - though that's not as clear-cut. The creation of new tax shelters and exemptions has been their main benefit, not basic income-tax rates.
RetirEd
RetirEd
1:06 pm
September 11, 2013
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Not really the place for prolonged back and forth on here, RetirEd, guess we'll just disagree on this one.
3:00 pm
November 18, 2017
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The point to remember is that allowing population growth to destroy our planet and societies because everyone wants someone yet unborn to pay their debts is a death spiral.
And it provides a strong political motive to NOT control population.
RetirEd
RetirEd
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