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Email this7:29 pm
October 29, 2017
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Just remember that anything can come along and wipe out interest rates. That’s why the best strategy is to average. Put some of your money in now and more a little later. If you wait and miss the peak, it could be a steep fall, with little time and notice to get your position. With rates where they are, there isn’t a bad buy.
7:38 pm
October 27, 2013
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canadian.100 said
6% GICs sound good to me too - hope both you and I do get these.
Do you think mortgage rates will go to 7.5-8%? That is what it will take for FIs to offer 6% GICs.
7:49 pm
December 12, 2021
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Fed Funds Rate History: Its Highs, Lows, and Charts ---->
https://www.thebalance.com/fed-funds-rate-history-highs-lows-3306135
Charts in here ---> https://www.macrotrends.net/2015/fed-funds-rate-historical-chart
The Fed has twice lowered the rate to a range of 0.0% to 0.25%. The first time was during the financial crisis of 2008, and the Fed didn't resume raising rates until December 2015. The second time was in March 2020, as a result of the global health crisis.
In the last 40-50 years with exception of the financial crisis of 2008 and March 2020, as a result of the global health crisis, the Fed rate always been above 2.5% to 3.00% Neutral Rate
IMO the Fed will once again reach that level and higher to bring down inflation then if inflation is in under control will settle between 2.5% and 3.00%.
nice article here ---> https://www.pbs.org/newshour/economy/federal-reserve-poised-to-fight-inflation-with-fastest-rate-hikes-in-decades
UPDATE
Former BoC governor Stephen Poloz sees coming period of stagflation
major slowdown, or even a recession.
” he said In the face of a commodity price shock, the Bank of Canada can either move interest rates higher in a measured way – allowing inflation to come down gradually while the economy slows – or to slam on the brakes by raising interest rates quickly to restrictively high levels."
2:09 am
April 6, 2013
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agit said
…In the last 40-50 years with exception of the financial crisis of 2008 and March 2020, as a result of the global health crisis, the Fed rate always been above 2.5% to 3.00% Neutral Rate
…
Not true.
Fed rate was lowered from 2.4% to 2.14% at the end of July 2019. As well, the neutral rate does not remain fixed and depends on the structure of the economy at the time:
One challenge the Fed faces is that the neutral rate is even more uncertain now than usual. When the Fed’s key rate reached 2.25 percent to 2.5 percent in 2018, it triggered a drop-off in home sales and financial markets fell. The Powell Fed responded by doing a U-turn: It cut rates three times in 2019. That experience suggested that the neutral rate might be lower than the Fed thinks.
agit said
Former BoC governor Stephen Poloz sees coming period of stagflation
major slowdown, or even a recession.
…
No, he does not. Poloz is expecting a period of technical stagflation, with a moderate slowdown, and not roaring stagflation with a recession.
That Globe & Mail article and the C.D. Howe Institute podcast of the interview, starting at 19:19, actually do not support your reporting of what Poloz said.
I recommend people listen to the 30 minute C. D. Howe Institute podcast to hear what the former Bank of Canada governors actually said, what happened in the 1970's, and what some informed people are seeing.
4:30 am
November 8, 2018
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AltaRed said
Do you think mortgage rates will go to 7.5-8%? That is what it will take for FIs to offer 6% GICs.
In the year 2000 I signed for a fixed rate mortgage at 7%. I survived. So did Canada.
To properly deal with inflation Central Bank rate should have been 5% already. The fact it is not, and not expected any time soon, says a lot about competence of those in charge or their priorities.
4:49 am
March 30, 2017
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canadian.100 said
6% GICs sound good to me too - hope both you and I do get these.
You may not wish that. Cuz it means inflation is way uglier than and much longer lasting, earning 6% when inflation is at 9% is the same as earning 2% when inflation at 5%, you still lose 3% purchasing power a year. Compounding diff makes it even worse…
5:09 am
September 7, 2018
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savemoresaveoften said
You may not wish that. Cuz it means inflation is way uglier than and much longer lasting, earning 6% when inflation is at 9% is the same as earning 2% when inflation at 5%, you still lose 3% purchasing power a year. Compounding diff makes it even worse…
That is exactly why I have allocated to Equities as well - because they have weathered inflation much better than GICs and tend to increase their dividends from time to time, so it has worked much better than holding only GICs in high inflation times.
If GIC rates do get to 6%, I will most likely buy some, same as many others in this blog will do as well if they have some cash at that time.
6:08 am
September 11, 2013
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Gaining 6% when inflation is 9% means you've lost (before taxes) 2.75% of your purchasing power, gaining 2% when inflation is 5% means you've lost 2.86% of your purchasing power. Might be important to know for some who focus on incremental GIC rate increases and inflation rates.
If inflation is 9% I figure (e.g.) Bell Canada's revenue is up 9%, as are its expenses including taxes, and thus its bottom line too. All things being equal. So 9% more available for dividend distributions (plus value of Bell's shares might be up 9% too). I agree that equity investors could lose less purchasing power than GIC investors, and those who judiciously select specific corporations that weather or even benefit from inflation more than corporations might even benefit more.
6:56 am
December 12, 2021
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Norman1 said
agit said
Former BoC governor Stephen Poloz sees coming period of stagflation
major slowdown, or even a recession.
…No, he does not. Poloz is expecting a period of technical stagflation, with a moderate slowdown, and not roaring stagflation with a recession.
That Globe & Mail article and the C.D. Howe Institute podcast of the interview, starting at 19:19, actually do not support your reporting of what Poloz said.
I recommend people listen to the 30 minute C. D. Howe Institute podcast to hear what the former Bank of Canada governors actually said, what happened in the 1970's, and what some informed people are seeing.
WOW i copied and paste the global and mail title they changed it this morning to
Former Bank of Canada governor Stephen Poloz sees coming period of stagflation
from
Former BoC governor Stephen Poloz sees coming period of stagflation
major slowdown, or even a recession.
MARK RENDELL
PUBLISHED YESTERDAY
UPDATED 3 HOURS AGO
7:07 am
December 12, 2021
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Norman1 said
…
No, he does not. Poloz is expecting a period of technical stagflation, with a moderate slowdown, and not roaring stagflation with a recession..
Again just quoting the global and mail
"
Former Bank of Canada governor Stephen Poloz said that Canada is heading into a period of slowing growth and high inflation known as “stagflation” – although he said that this won’t necessarily last long nor result in an outright recession."
7:36 am
January 13, 2022
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savemoresaveoften said
You may not wish that. Cuz it means inflation is way uglier than and much longer lasting, earning 6% when inflation is at 9% is the same as earning 2% when inflation at 5%, you still lose 3% purchasing power a year. Compounding diff makes it even worse…
This is simplistic. You're assuming that the goal of raising interest rates will never be achieved...that it will remain at 9 percent throughout the entire life of the 6 percent GIC. I think it's more realistic to assume that central banks will achieve their goal, eventually, of bringing inflation to its target level. At which point, central rates are brought back down to restimulate growth, and at which point six percent GICs locked in from 5 to ten years are looking pretty good. Thus, we're back to the window of opportunity, which may be short (or not so short, as I suggested in my initial post. As for a rolling ladder, that might be a good strategy in predictable times. I don't think these are usual or predictable times. Only time will tell.
8:07 am
October 29, 2017
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Alexandre said
In the year 2000 I signed for a fixed rate mortgage at 7%. I survived. So did Canada.
To properly deal with inflation Central Bank rate should have been 5% already. The fact it is not, and not expected any time soon, says a lot about competence of those in charge or their priorities.
My sentiments too! They are coddling what the people want and desire when they should be following monetary protocol for the overall health. The masses are dictating monetary policy now and it’s unhealthy long term.
9:10 am
December 12, 2021
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Vatox said
My sentiments too! They are coddling what the people want and desire when they should be following monetary protocol for the overall health. The masses are dictating monetary policy now and it’s unhealthy long term.
Alexandre said
In the year 2000 I signed for a fixed rate mortgage at 7%. I survived. So did Canada.
To properly deal with inflation Central Bank rate should have been 5% already. The fact it is not, and not expected any time soon, says a lot about competence of those in charge or their priorities.
agree 100%
Central bankers in Canada, the United States and elsewhere they left interest rates too low for too long
The only way out of this mess is for BOC, ECB and the Federal Reserve is to keep raising the Interest Rate and stop QE
A "housing crash, Stock Market correction, raising the overnight rate Interest, ending quantitative easing and reducing household debt" All Could, Would, Will, have dire consequences. the truth is nothing will happen except for those people who put themself in debt they can't afford. we live in an artificial world.
9:34 am
January 13, 2022
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I like to think of it as the "normalization of debt" or "debt slavery". Beginning in the 70s, so many companies realized that there were incredible profits just waiting to be made from lending money and not just selling widgets. At the time, debt was still considered extraordinary...you assumed debt for a mortgage, and maybe took out a loan for a new car, etc. Since then, so many companies in so many sectors have jumped on the bandwagon, and banks and governments have been complicit in convincing the public that debt is good and normal. They've both fed well at that trough. The next couple of years, the piper will be paid, I think.
10:13 am
February 7, 2019
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Alexandre said
In the year 2000 I signed for a fixed rate mortgage at 7%. I survived. So did Canada.
In 1982, we assumed an 18% mortgage with 4 years remaining. We considered ourselves lucky as prevailing rates were 22% at the time.
Five years later, we sold the 1100 sqft house in TO's Bloor West Village area for 2x what we had paid for to cover purchase, realty and moving costs into 2500sqft in Oakville.
We survived too ...
| CGO |
3:20 pm
April 6, 2013
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cgouimet said
In 1982, we assumed an 18% mortgage with 4 years remaining. We considered ourselves lucky as prevailing rates were 22% at the time.
…
Parents survived that. They also ran a small business and more than survived.
During that time, there were huge ads in the Globe & Mail about the performance of a fund managed by Alex Christ. I think it was the Mackenzie Industrial Growth Fund. The fund had an 18-year compounded annual return of 18%. Lots of investors also more than survived.
Lots of ignorance about Canada's history and economics.
I also see an obsession with rate increases to deal with inflation. Poloz points out, at around 13:45 of the podcast, that the commodity and food price increases from the Russia-Ukraine situation also reduces funds available for people to chase other things with. That has the potential to take the place of one or two interest rate hikes.
It's not really material whether a household has to spend $200 more each month on food or on interest for their HELOC. The end result is $200 less each month to spend on their vacation, home renovations, and other things.
3:27 pm
October 21, 2013
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and even more cherry picking of info to support one's views, often anecdotal and/or without reliable references.
3:36 pm
April 6, 2013
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Loonie said
and even more cherry picking of info to support one's views, often anecdotal and/or without reliable references.
They are a big step up from the garbage here misrepresenting what Poloz said, what happened in the 1970's, and that interest rate hikes are the way to address the current inflation.
3:56 pm
January 13, 2022
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Norman1 said
They are a big step up from the garbage here misrepresenting what Poloz said, what happened in the 1970's, and that interest rate hikes are the way to address the current inflation.
Want some help getting off that high horse of yours?
11:26 pm
April 6, 2013
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lifeonanisland said
Want some help getting off that high horse of yours?
You're the one that actually needs help if you can't see how misguided it is to use interest rates to tame inflation caused by the boycott of Russian oil, Russian gas, Russian wheat, and other Russian exports.
There's also nothing wrong with debt itself. It is a bridge between those who have a bit more money than their immediate needs and those who are a bit short. Debt has been a vital part of the financial system.
Debt has been around for a long time. Canadian credit unions were not formed because groups of people couldn't find a place to deposit their savings.
You obviously are not aware of around 2000 when the US federal government balanced its budget and could subsequently stop issuing long term bonds. That was going to be a problem because those risk free long term bonds are used to create the investment pools for products like life insurance and annuities. Pension funds also used the bonds for the risk free portion of their portfolios.
Please write your comments in the forum.