Did the Bank of Canada Just Wave the White Flag? - The Loonie Hour
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- čas přidán 27. 10. 2022
- The Bank of Canada hiked a dovish 50bps this week, contrary to market expectations for a larger move. Is the Bank of Canada the first to throw in the towel? What are the implications for the Loonie? Meanwhile, new home sales are tanking in Canada, falling more than 90% in Toronto. Financial stability risks are increasing as we await another jumbo hike from the US Fed next week.
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Really enjoy the back and forth between all three of you. I appreciate how closely Steve follows the stats, and hearing Keith's moderate big picture thinking. Big shout out to Rich. I love how much he enjoys Keith giving him a hard time, and really am grateful for him calling out the realities of what is happening with energy. I am in the housing industry in the GTA, and was told 18 months ago by a guy that supplies building materials to numerous builders that there was going to be a reduction in building coming up, that most builders were frustrated with the rising material costs, and many believed that there were tough times coming because of the BOC decisions and federal government spending (inflation worries). Sales are definitely down in housing, but so are the number of listings. I am still seeing pretty strong demand considering the rates, many properties are still getting multiple offers depending on the location and price range. I was expecting more listings and softer pricing by now, so time will tell how things go. I hope Keith eats the twinkie next week, don't think the lemon loaf counts to be fair.
You guys are amazing and doing a fab job… love keith’s sarcastic jokes and Rich aligning the puzzles with great facts and technicals. ✊
🙏🏻
Great conversation boys. I really like where Keith's heads at. Looking forward to the "China" commentary next week.
Another great episode. Thanks fellas!
Was wondering what you all thought about the Dollar Milkshake Theory?
Great show boys!
I fully agree with Keith's take on the BOC wild rate hikes, what kind of BS is this BOC hike? In past at one point they were steering for a 25 basis points, then wham 100 basis points. For this round, I was almost expecting another 75 or perhaps 100 basis points, but low and behold a 50point hike. I might as well go to Vegas and roll the dice it's so much of a gamble my odds might be better than betting on BOC hikes. I am going to have to eat some humble pie yet again on this BOC hike!
Re nat gas falling:
1) it’s been a mild autumn in Europe
2) major industrial and agricultural producers have been partially or totally shut down to divert nat gas to residential electricity and heating.
That’s luck and a slow motion train wreck for consumer and agricultural goods. Hardly time to pop champagne.
Fair
It takes about 6 months to see the effect every time the Bank of Canada raises interest rates, so essentially, we haven't felt the effects yet from the last rate hike let alone this one.
I come for the fun discussion. I stay for Keith's jokes.
I still can't believe the 'Vandelay Industries' joke a couple episodes ago went right over their heads! lol
Lol
Awesome show!!
BMO came out criticizing the BOC for not raising it 75. They claim the terminal rate will now be higher.
11:25
In 2021, all the central bankers said they won't raise rates, and they didn't during 2021.
That didn't earn them any credibility.
That was back when inflation was "transitory," which anyone with two brain cells to rub together knew was bullshit.
0.5 hike is the white flag?...lol 😆
Realtor desperado.
Drink whenever Steve says "my good buddy".
Great video
Could you provide a link to the Toronto new single homes down 90 percent ? Or just comment where I can look it up
Many thanks
See you in December gentlemen
EAT THAT TWINKIE KEITH!
35:55 Brilliant question and answer. Passing of the puck from tape to tape to retail investors.
Honveeeeeeerrrrrrrrrrr LOL. Great episode
If rates stopped. You would have your bottom in the housing market on the next spring market, where ppl know bottom is here so its time to buy back ib or pay a little more potentially in 3 months. As many are sidelined wait and see approach at moment
Rates are not too high, conversely the problem is people who have borrowed more than they can afford to.Another problem is most people that purchase a home are gifted money to purchase that home, which means they can't afford that home. Neither of these groups mind the fake profits when QE is at its height .
Exactly
how does being gifted the money make a difference? it's based on mortgage amount. I see your point if you're talking about property tax or unrecoverable costs of running the home, repairs, utilities etc. Just curious what you mean.
Many people are gifted the deposit to purchase their home. Which means the haven't taken the time and responsibility to save to purchase that home. So they wouldn't have been able to buy that home on their own. Than add on interest rates, property taxes,up keep whatever
Look some people like myself purchased a home you can’t afford, get it you can’t afford 😅but yet here I am still affording it, it’s called hustle baby.
@@markuss8079 Hugh Happy for you bud,
I don't care about your financial situation.
I just believe we should be teaching people to be more responsible in how they invest,even if its with mom and dads money.
A lot of people over leveraged and are feeling the pain and complaining about it. I was telling people two years ago rates were going up and they couldn't understand why, If theyre playing the game with someone elses money they should know how it works.
People act like everything always goes up.
BOC can just as easy step on the gas in December because it's the most expense time of the year causing inflation to rise, as well as cost of energy, then in January we could see other 0.50 to 0.75 if inflation stay up 6.9%, many are saying BOC will start to drop interest in 2023, I don't see this happing cause that would cause inflation to rise
I am in the construction industry and our company does almost exclusively government funded projects. Schools, police stations, water treatment plants and things of that nature. We have not yet seen a slowdown. However government construction is usually lagging by 1 year as all projects go out for tender and close February/march. I expect to see last years projects still go ahead and next year’s projects slow. This will lead to job losses 18 months out.
That sector will be much more resilient
stock markets are soaring last few weeks! Clearly we can raise rates some more :)
Rigged
Why do I not see replies when I click on the replies?
@@dwightcarlson7136 same, must be spam or something. Comment aggregations are probably cached.
Natural Gas is not all fungible, it takes time and energy to transport LNG. Just because storage is full doesn't mean every BTU has been replaced from pipelines.
I’m in the building trades in BC, new build spec starts have stopped! We are finishing current projects, 3-6 months out will really show how painful this will become. Our economy doesn’t work with5-6% rates. Hold on to your hat!
Gotta get in those BC housing jobs, plenty of them and they won't get shelves due to political pressure.
Our economy doesn't work at ZIRP, people just don't like the cost of money, the economy will rebalance.
Interesting..
Rich sounds like he’s from Alberta :)
Rich, let’s not forget that while energy policy has a significant impact on the cost of energy, OPEC has ultimate control when it comes to the price of oil.
I was listening a year ago Rich and I have managed to sell my house in Kelowna Bc at the peak and wait a bit to buy in Alberta, a smaller property cash. So now the question is, what do we do with our cash boys ? Nothing seems trustworthy right now.
Hi Alisa. We see the opposite. Potential for enormous moves are very close.
Rich with the Super Bock lol, cheers 🍻
There is another way to deal with inflation which makes me think that they took this opportunity to bring rates closer to normal to take some of the distortions out. Canada has much lower VAT rate than EU which could be easily exploited to kill inflation. We could increase HST and lower personal and corporate taxes to offset. So demand goes down, productivity and production goes up. Beats the crap out of me nobody is talking about especially with the Left in power, and the Right for that matter, including Trump advisor floating the idea before we had inflation for purely economic and trade advantages.
properties are not valued based on mortgage prices. If the is an attractive long term fixed transferable mortgage on the property, that would affect value.
Has anyone else seen the story on ZeroHedge, where a CZcams Channel has documented their 1st generation car that takes a Tesla and incorporates a generator into it so that they can stretch a tank of gas to 1800 miles? This is different from a hybrid that switches from gas to electric or visa versa, this uses a generator to recharge the electric. Think of the possibilities if this idea could be improved and adopted en mass. I find it very innovative and exciting to imagine stretching a gas/electric combo as a transition into greener tech. At the moment there seems to be a panic that the transition has to happen yesterday, but this kind of innovation could add decades to research and development time for sustainable tech.
Yeah, read that article.
@@Rawdiswar What did you think? I was so impressed, were you? I don't know about tech so I might be wrong.
@@sagefool5786 The inventor was positive about his next iteration of the tech.
BMW has been doing that for 10 years with their i3 model
@@danwb5916 It's the same idea as the Chevy Volt as well, as far as I know.
You guys are great, Rich is so interesting to listen to. Couldnt agree more on energy independence and woke global warming policies being the cause of many of our problems.
Chirping the uranium trade when it's one of the only sectors up on the year (not including explorers) lol
Personally I think Tiff was uncomfortable leading the FED.
Who names their kid Tiff? I guess Jaypeg and Bitmap didn't make the publication deadline for baby names that year.
Diesel is running out by November 21. And the US has reserves but only enough for 6 HOURS. Care to be cocky when you cool dudes explain that?
Canadian dollar is weakened against US dollar, which will eventually exacerbate the inflation. 70% of Canadian trades are with the US so of course rate hike in US will affect the Canadian dollar value. Canadian rate hike should have been higher than US’s to tame inflation, otherwise, it does not work.
There was no mention of how Can is still doing QE , thats gotta be a factor too ? I know someone who is receiving food (weekly) and gas (monthly) vouchers .
"Macro happens at the margins at the rate of change." - Lyn Alden
The icing on the lemon loaf is the best part. You're my enemy forever now Keith!
LOL
100%. That's like saying the cookie crumble of a DQ cake is the worst part.
Dàmage is due to the bubble. Housing has to drop to affordable levels. 5x average income. Developers need to build smaller more affordable duplex and triplex units.
Affordable is 3x, but we're getting there.
Hey Boyz from the desert in southern Nevada how are these people going to afford these extra payments let alone if they can that's a lot of money not going into spending come on get a 30 year fixed rate
Don't worry Keith you're the best part of the show.
Here are a few points on why the market will crash next year due to large inventory and negative market sentiment.
Please prove me wrong….
1. Market sentiment will be at a all time low in March when the year over year data is -20+%.
2. Investors forced to sell there property. Most big market investors charge rent less than there Mortage payment, )cash negative month over month). They rely on house values going up 10-30% a year to make up for the monthly losses. Those days are gone.
3. Record high unemployment. With new construction sales down 96% in the GTA and 1% of the GTA are real estate agents, where are they going to work. We could see double digit unemployment summer 2023.
4. 40% all all home listing in the GTA took there house of the market. They will be relisting in spring 2023 when the realize that it isn’t going to get any better.
Regarding Riche's recap about high investment in Canada in the real estate sector being a non productive investment, doesn't this happen as a consequence of the high rate of immigration which is due to the Liberal government's desire for a high rate of immigration?
Who says there is plenty of NG? Rich and too much fake media ! Keith the love story with the cake ! lol
52 years without looking for more , thats not alot ?
@@luckyPiston if you 82, it's alot, if you're kids are 3 and you like them, no.
IEA states peak oil is 2052, that's exactly when I "should" retire.
We are post abundant energy. Unfortunately we're acting like a middle aged woman who hit the wall, we just can't come to terms and will stay delusional until reality hits us so hard we can't ignore it.
*Wave the white flag, not waive.
Good show, all. I think you're still overlooking how much shelter inflation is set to rise, even Rich who brings it up every time. All the consumer spending that gets redirected into rising mortgage payments? Won't register as a drop, because mortgage interest still counts as consumer spending in the Canadian CPI.
Steve could be Leisure Suit Larry
Larry liked his hookers as recall in that game ?
I'm wondering how significant the real estate price drops within the next year will really be, given that the sales will be so thin. Interest rates will come down sooner or later, and when they do, real estate prices will move right back up. By the time the interest rates go down, the supply of homes will be desperately low.
Its geographical too but the big metros they never seem to come down big on average .
I think kieth should get a double twinkie penalty next time
I agree
Super Bock!!!!!!
You hate the starbucks frosting?? wow disappointed..
Full natural gas reserves represents less than 48 hours of average use for each EU nation. Natural gas price has dropped because filling the reserves to capacity drove increased demand. Now that the reserves are full and there is no more storage available to fill the extra demand has evaporated. The price has not dropped because EU thirst is sated -- it has dropped because they already purchased as much as they physically can. The "beauty of capitalism" and "price discovery" can solve these problems quickly on a ledger, but in the physical world expensive infrastructure is a precondition for using this product and it cannot be built with short notice. The facilities for EU coastal nations to regasify LNG at port terminals and feed the gas into the existing system is years away, and the complexity of pushing the energy into the landlocked EU countries is a long term project. The "contingency plan" is to purchase natural gas through the old pipelines crisscrossing a war zone under the heaviest artillery bombardment since the second world war. The Tonga volcanic explosion in January was the largest recorded since 1883. The water vapor and ash ejected into the atmosphere will reflect enough solar radiation to reduce average global temperatures by around 1 degree, non-uniformly. This will further reduce crop yields, especially high altitude crops (buy coffee), and makes a harsh winter and depleted reserves more likely. It's not just internet doomers, but I believe the UK government itself has estimated that 10,000 UK citizens will freeze to death this winter. Unwise political messaging if the crisis proves to be as mild as you boys anticipate, though Keith seems to have stared into the abyss, possibly recalling his profits from the previous 12,000 year cataclysm cycle "opportunity."
Storage levels and storage capacity vary greatly in the EU (chart). The tanks in Poland and Portugal are already close to 100% full. However, even the full tanks in Poland and Portugal are not enough to get through the whole winter. They hold enough gas for 79 days of consumption and 24 days respectively. That means without new supplies during the winter they would run out of gas by January 18 and November 24 respectively if all gas supplies were cut off from the current levels of gas stored.
With the other countries much depends on their relations with Russia and the size of their tanks. Hungary’s storage tanks hold 133 days’ worth of gas, which means it would run out on March 13 if its tanks were full when Russia turned off supplies, but earlier this year it signed a new gas supply contract with Russia and has locked in supplies for this winter.
Germany remains the most exposed, as it is almost entirely dependent on Russian gas imports. Despite having by far the largest storage tanks in Europe, its demand for gas is equally large and its tanks only hold 108 days of consumption - full tanks would run dry on February 16 and they are currently only 60% full, which would be emptied on December 8 if Russia turned off the gas tomorrow.
The EU as a whole is in the same position with an average storage capacity of 98 days of consumption, so full tanks run dry on February 6, but as the tanks for the whole of the EU are also 60% full, if the gas were turned off tomorrow Europe would run out of gas on November 28 (assuming an October 1 start to winter).
And the country in the worst position is Ukraine, which also has huge storage tanks accounting for about 20% of Europe's entire capacity, but those tanks are currently only 21% full. In the normal course of things Ukraine’s hold enough gas for 135 days of consumption, which takes it through to the middle of March, but the current amount of gas will run out on October 29 if deliveries are turned off tomorrow and at best the end of November if the autumn is mild. Ukraine is very likely to have an energy crisis this winter, as it has not imported gas from Russia for over three years and its European friends will be short of gas for themselves this winter.
@@luckyPiston Interesting. I'd seen totally different (much smaller) maximum capacity for storage tanks. Going to do some digging.
Housing is fkd until % rates come down.
All to appease Jagmeet
BoC pivoted?
Buddy is delusional!..lol!
You also have to look at the people carrying 1 million dollar mortgages or do you want them to lose the house?
Why did they take out such large mortgages if they can’t afford the payments? If they could only handle more than 1% variable rates and we’re praying that interest rates would stay super low, then this is a good gambling/high risk lesson for them. Even if they could handle 2% that’s not the norm and just shows the weakness in Canada’s banks and mortgage brokers to give out these loans. Best they learn from their mistakes so they don’t repeat them next time
They are a small group....most of them cashed out homes that they paid 200 to 400k they made a million then they went to buy a new home that somone else's paid 200 to 400k for and sold for a million +....so what you get is 2 sets of buyers switching homes both taking 20% as down-payment on the new mortgage banking the rest or investing it they will not lose anything at the worst they will have to take that other 80% and pay off the mortgage....they over paid that's their problem and the rest that got in over their heads and went above their means of affordability well you ar just plane stupid and I hope you do lose your home....you deserve to lets not forget 1 in 5 of all Canadian homes was purchased with mortgage fraud why should they get away with a crime plus a reward of millions in equity.....
Why didn't my broker inform me that real estate was a risk free, government-guaranteed savings plan with a ludicrous return on investment?
@@Clone42 the mortgage brokers and the real estate agents are generally in it to make the sale and collect commission. Unless you have a close friend I’m the business or your very knowledgeable yourself, a lot of Canadians took out variable rate mortgages and are just starting to feel the damages. Best to switch to fixed asap, even though it’s tough it’s probably still safer than watching rates rise more next year to about 5% rate and 6.5% mortgages stay flat from March to end of 2023 and then probably rise more after that if inflation isn’t below 5% in 12 months from now. If you feel inflation won’t calm down then it’s best to go fixed going foreard
@@jmela1370 My comment was in jest. When the government shields investors from the consequences of unproductive investment then these unhealthy sectors are under no pressure to produce real returns and the economy becomes distorted, artificially inflated, and then all those "safe investments" get flushed when the risk returns and the bubble pops. A healthy economy has to shed malinvestment errors. Real life has winners and losers, unfortunately, some risks end in tears. Not everything is accurately valued, especially with two decades of historically-cheap credit. Just throw the money around like it's worthless, because it practically is. Home prices decoupled from their historical average ratio with wages a long time ago and a large percentage of young people were denied "skin in the game" and now comes political instability and radicalism. The chickens come home to roost.
Steve, Rich, you're insulting all Gen Xers calling Keith, a fellow Gen Xer, a boomer.
Ah, if Canada could sell snow and if Europe could sell virtue signalling...
Europe would make no money for Trudeau has cornered the market.
all mortgages are 100% fraudulent when you loan money from a bank its actually a mirror act of the loanee not of the bank's?
or of yourself' a 1099 form can cancel it
@@tipeneuriti5489 you cancelled your mortgage with a 1099 in canada?
@@chriskinnee4466 I'm lucky I paid cash but also uplifted my ownership certificate from the bank there's a few patriots who can guide you through his name is Mark Kishon Christopher ,post office general UK and Gould CZcams?
Gaz
They should have gone up by 1%, and then another 0.5% next month. It would impact the markets and the economy faster, which would bring things under control faster, and thus we can get back on track again sooner.
Canada just has to follow the US. Canada can't be speculating and possibly raising rates higher than the USA. If the USA only raises 0.05 next week then the cahootz are on full send
Loonie falls hard if the US raises 0.75 and has a string statement. But there is 1 reason the US might do 0.5 next week and leave a 0.75 increase till December
@@jmela1370 the countries with the highest rates have the weakest currencies, not the strongest.
when BoC went up 1% did the currency go up? nope.....the opposite also isn't guaranteed to happen.
Look over hear, look over there, look at this but don’t you dare look at the actual issues. We are a commodity based economy that is under producing. Go back to a gold standard based on an actual FREE market pricing. BoC should be mothballed.
Billionaire Michael Bloomberg calls BlackRock “The fourth branch of government” because it's the only private agency that closely works with the Central Banks. In other words, BlackRock and Vanguard will soon hold a monopoly of all industries in the world.Nov 7, 2021
Billionaire Michael Bloomberg said that. He knows far more than you ever will.
Man what’s with the boomer attitude… it’s like they live to be 1000yr… take forever to get to the point… 1.5/10 for being concise.
Most folks with no time to listen prefer their own dialogue , inner AND outer all day long !
Young man, your opening adv is an insult to boomers. Smarten up.
Boomers be like so insecure..Lol😆
lol i'm not a boomer but I kind of thought the same thing. That being said. Rich doesn't know how to buy Bitcoin so...
You guys are great, but the old guy fucks with your flow and he's honestly hard to listen to. I hate having to skip forward when he comes on.
I disagree... I think he's the best part of the show
The "old guy" has the most insightful realistic takes
I totally disagree with you. He is why I listen to the podcast.
Yup, old guy is the best part of the show
@@timber543 don't you have an apprentice to molest somewhere?
The only difference between now and the early 80s, is credit. Credit lines, heloc and credit cards, that is why people are not listing yet. It’s hard to find rentals in BC and crazy amount. So, why would you sell when you can use your credit. Just what the bank does not want. People thinking the market will crash are wrong. They may go back to pre pandemic …
That, and housing prices have risen by a multitude of ten
34:12 ... look at that chart on the right that he didn't talk about , that is a shit ton a cash hanging in the balance that could be destroyed , that's not a laughing matter !
Honveer is doing what general public should be doing! BOC has no credibility whatsoever