Author: garth turner

Source: the New York Times

  By Guest Blogger Doug Rowat

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JP Morgan CEO Jamie Dimon last week warned investors of a looming “crack in the bond market.” Donald Trump, a few weeks earlier, further delayed his tariffs after acknowledging that the bond market was “yippy”, a highly unusual admission for a president who always claims his policies are flawless. And then came Moody’s US government-debt downgrade, which eliminated the US’s last triple-A rating from a major ratings agency.

It all painted an ugly picture for the US bond market and led to a concerning spike in yields.

So, does all of the above mark the final straw for US debt?

Time for some perspective.

First, the yield spike. Yes, higher yields suggest less investor confidence and while it was uncomfortable to see, say, the US 10-year Treasury yield in April jump half a percent in a week, sharp fluctuations in Treasury yields aren’t unusual and the yields themselves, relative to the long-term averages, are hardly alarming. Again, using the US 10-year Treasury yield as an example, its yield currently sits at 4.4%, more than a percent and a half below its long-term average.

Bonds, of course, also provide coupons. Bond prices overall haven’t moved a great deal since the start of the year, but US bonds have still done their job of providing income. The Bloomberg USAgg Index, a broad-based benchmark of US investment-grade bonds, including Treasuries and corporates, is actually up almost 3% y-t-d on a total-return basis. Not bad considering that we’re only in June and the long-term average annual return of the Index is only about 5%. In other words, thus far, bonds are on pace to have a remarkably normal year.

As for the Moody’s downgrade? Moody’s joins S&P Global and Fitch in knocking the US off its triple-A pedestal; however, the previous downgrades had no meaningful impact on either the US bond or US equity markets:

Past credit-rating agency downgrades had little impact on US bonds or equities

Source: Bloomberg, Turner Investments. S&P Global downgraded the US August 5, 2011. Fitch downgraded August 1, 2023.

It’s unlikely that the Moody’s downgrade will either. A simple question to ask: if the US isn’t triple-A rated then who is? Would you place more faith in, say, Norway or Luxembourg, which do have triple-A ratings? The truth is, if the US’s going down, it’s taking every other triple-A-rated country with it.

And, finally, US investment grade bonds are once again fulfilling the role that they’re primarily intended for: risk management. After an extended period of higher positive correlations between bonds and equities (not ideal from a risk-management perspective) correlations have dropped into the more traditional low-to-negative range. In other words, US bonds are, once again, doing their job of controlling downside:

Rolling correlation between Bloomberg USAgg Index and S&P 500; bonds are, once again, providing the expected low-to-negative correlations to equities

Source: Bloomberg, Turner Investments

Certainly, this won’t be the last time this year that we hear dire warnings about the US bond market.

However, before you heed them, remember the enormity of what you’re betting against.

America-is-about-to-collapse investors rarely do well.

Doug Rowat, FCSI® is Portfolio Manager with Turner Investments and Senior Investment Advisor, Private Client Group, Raymond James Ltd.

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Deb is 56. “Still semi-hot,” she tells me. Wants to retire in seven years. Owns a townhouse and a rescue Chihuahua. She’ll have a modest DB pension – maybe two grand a month if her job with the local health agency holds – and is single.

“I guess marriage is a strategy,” Deb says, “but that train’s probably left the station.”

She has a TFSA and a retirement savings account totaling a couple hundred thou, both in mutual funds. Plus a smaller amount in stocks her BIL suggested, at his broker’s shop.

“There’s no way,” she writes me, “that I can retire happily on this pension without burning through my $300,000 before I even hit seventy. I obviously need more, but with the markets swinging stupidly, I’m just not getting there. Need help. What do you suggest?

We talked a bit. Turns out she has equity holdings at a local fund outfit and mostly tech stocks with her bro at Richardson. The advisor stuff is in mutuals. The broker is paid by the trade.

No wonder she’s concerned, in the time of Trump, Elon, trade wars and change. Deb has lots of risks with her all-equity, almost all-US asset holdings. She has no advice and no plan. And she’s being savaged with fees.

The goal?

Double her liquid net worth by the time she wants to walk out of the office (with a swagger) for the last time at age 63 owning a portfolio able to turn out dependable, consistent, tax-efficient, low-overhead income. Six hundred thousand delivering a 6% return, for example, would kick out three grand a month. Add in her pension, then CPP and OAS, and life looks a helluva lot more interesting.

The trouble is, she won’t get there. Not without change.

The equity mutual funds are expensive. The average MER (management expense ratio) for an equity fund is a tad over 2%. That’s a non-deductible hit which blows a hole in performance. Worse, history and stats show us that actively-managed funds have a poor track record when measured against the index. In other words, Deb is paying a bundle for substandard returns.

Far better to own ETFs – exchange-traded funds. The fees here are a fraction of those mutuals bear – on average about 0.2%, but even lower with some of the big guys (like Vanguard). And because they mirror an index – like the S&P 500, or the TSX on Bay Street – there’s no smarty-pants, Porsche-driving portfolio manager trying to prove manhood. You get pure market results. Over time, as we all know, it goes up.

As for the broker paid for each trade, another bad idea. The cost of trades is no longer prohibitive (ten bucks at an online place or 1% with a broker), but human nature means clients are sometimes encouraged into needless moves in order to generate cash flow. Mostly, brokers may not be advisors. In Deb’s case she suffers concentration risk – too much in American stuff and increased exposure to one volatile sector – technology. And no plan.

She could take all her account statements and head to a fee-for-service advisor, seeking a better portfolio. The goal is to be balanced, diversified and global. That means 40% in more predictable fixed-income stuff and 60% in equities, divided equally between Canada, the US and international markets. She should have some preferred shares, bonds, real estate investment trusts as well as growth and value equities.

Yes, a fee-for-service shop can craft such a plan. That might cost a few thousand, based on the time spent. But then, who implements it? Where do the accounts live? What about rebalancing when things get out of whack? And when retirement comes, how does she create an efficient and steady stream of income?

Deb can DIY, Google up a storm, watch the wags on BNN, subscribe to investment newsletters and hope for the best – or, find a fee-based advisor.

Typically, for a cost of 1% of what she invests (fully tax-deductible on non-reg accounts) she would get an asset allocation strategy, a financial plan, retirement scenario, and an ETF portfolio built without trading charges, which is routinely rebalanced. There is no contract. No pooled or proprietary funds. There’s at least a million bucks in industry insurance. And she personally owns everything in the portfolio.

Best, less stress. When R-Day draws near, Deb will know what that monthly ‘paycheque’ will be from the portfolio – deposited into her bank chequing account. No need to continuously figure out what to move, trade or sell in order to generate income (and the least tax). That’s the advisor’s job – along with providing full transparency on how long her funds will last.

I told her these things. And she asked about risk.

Less than finding a man, I said. They wander.

About the picture: “Hi Garth.  Wild times,” writes Erin. “Answering the call with the only dog I know who has glacial ice water in her veins.  Ruby is chill chill chill.  Her red button that is safely stored behind the glass cover is reserved for mice, squirrels and cats.  Then she turns into a 12 pound ninja.  Love the blog.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

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Learn to BBQ. Take up snorkeling. Get a dog. Or a Harley. Just fuhgeddaboud the economy until at least Labour Day because, well, it’ll likely suck.

The big impact? On jobs and real estate.

Here’s what to expect (according to most economists plus a new report from DBRS, the bond rating dudes). Then we’ll tell you how much to worry.

• Probably a recession, which means negative growth. Consumers will turtle, the savings rate will rise, retailers will have a cow and the economy will contract along with confidence. You can feel it now. That federal election was all about fear and it’s still here. Two-thirds of the economy is based on sentiment and spending. Have you cut back? See?
• So the first impact of tariffs was disinflation. Demand fell, energy prices went down and the cost of living waned. But now core inflation has stiffened and tariffs mean higher prices across North America. Cars, cribs, refrigerators and the stuff needed to build houses is all about to swell. Trump has found his spine again.
• People running businesses can’t make plans when the rules change daily. So investment is tanking at the same time the GDP is contracting. The unemployment rate seems destined to hike over the summer. Expect double-digits in major markets like the GTA.
• No interest rate cuts yet. Not with Tariff Man hiking costs for everyone and making the global economy less efficient. The Fed has stayed high, while our guys cut a few times more. There’s little appetite in Ottawa to move further – unless Carney flames out and a serious downturn results. (Odds of that below.)
• Making it more challenging is the dollar. Ours – because theirs is troubled. The loonie’s back over 73 cents today, on its way to 75. Perhaps beyond. This makes those tariffs on Canadian exports extra painful. As America’s currency is sold off it means commodities (gold), crypto and our money grow in relative value. (The budget bill now before the US Senate will add about $2.5 trillion to the deficit, pushing the debt closer to $40 trillion. Mr. Market is not amused.)
• The spring real estate market was dead on arrival. It will stay that way. Sales down. Listings up. Prices slowly dropping. Buyers on the sidelines. Construction halted. An industry in chaos and disbelief. Just look at the mighty GTA, where supply and demand have never been this out of whack. There are almost 31,000 properties for sale right now, with sales plunging.

See what I mean? The coming months promise to be more worrisome than ants in your picnic and ticks in your shorts. It you lose your job or utterly fail in selling a property you need to dump, it’ll take time to recover. Sorry.

Otherwise, chill. Drink more coolers than usual. Go offline in the garden.

Longer-term, there are positives.

For example, the Trump agenda involves big corporate tax cuts, a slashing of regulation, personal taxation reductions (tips, overtime, car loans) and a reindustrialization of America. Human rights, democracy, equality, the environment and social justice may take a gut punch, but 47 will ignite asset values if the agenda passes. Stay invested.

Also have some faith in our new leader. Carney is a cagey, non-emotional and experienced exec who understands we need a deal, not a fight. The goal is a new trade agreement, at the same time we build more national infrastructure, crash internal barriers and reach out to the rest of the world. He’s no fool. Deliver or die.

Finally, reason tells us Trump will hit a wall. Check out recent videos of street mobs pushing back ICE cops raiding restaurants and rooming houses. Look at the instability and irrationality of Elon Musk. The insane war against Harvard. Travel bans. Kennedy. Kristi. Cash. The deaths caused by America’s retreat from global health. Gutting of scientific research. Removal of female officers’ pictures at the Pentagon. Renaming a ship because a gay guy’s moniker was on it. Investigating and persecuting the last president – now dying of cancer. Attacking global and historic allies. Like us. Misogyny, homophobia and racism.

How long until Republicans understand this is the death of their party? It’s not America. Not American values. Not liberty, equality or justice. It won’t be pretty getting rid of MAGA, but it’s nonetheless inevitable. Never bet against the USA.

Be an optimist. We got through wars, Nine Eleven, the credit crisis, a global pandemic and Adele.

Now, off to the beach. Whatever happens, do not read this blog.

About the picture: “Difficult news ….my little guy Onyx,” writes Peter. “He’s now 16.5 years old.  In the last year he has been less active and loving his naps.  Unfortunately, he’s been very ill the last week. My daughter is flying in  from Law School, as I write this.  We are saying goodbye….tonight. Onyx has had a brilliant life.  Toronto, Florida, Manhattan and lastly Muskoka. Thank you for everything you’ve given back to this amazing community and country.”

To be in touch or share a picture of your beast, email to ‘garth@garth.ca’.

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  By Guest Blogger Sinan Terzioglu

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In Canada, the income attribution rules are designed to prevent high-income earners from transferring assets to family members solely to reduce taxes on investment income. An effective way to navigate these rules is through a spousal loan – a tax-planning strategy where a higher-income spouse lends money to a lower-income spouse for investment purposes. This helps shift the investment income to the lower-income spouse, potentially reducing the overall family tax burden.

To implement the strategy, the higher-income spouse provides a formal loan under a written agreement. The loan must carry interest at the Canada Revenue Agency (CRA) prescribed rate, which is updated quarterly. For Q3 of 2025 (starting July 1, 2025), the rate will drop to 3% from 4%, making this a good time to consider the strategy.

The prescribed rate applicable at the time of the loan remains fixed for its duration, unaffected by future CRA rate changes. To comply with attribution rules, the lower-income spouse must invest the funds in a non-registered account in their own name only and ensure the annual interest payment is made to the lending spouse by January 30th of the following year.

When considering a spousal loan strategy, it’s essential to run the numbers to determine if the tax advantages outweigh the costs. Recently, I was asked whether this approach would be beneficial for a high-income earner in Ontario, whose marginal tax rate is 53.53%, when he receives a $1 million inheritance instead of investing the funds directly. His wife is in a considerably lower bracket, with a marginal rate of 20.05%.

The spousal loan strategy would set a 3% interest rate on the loan, effective July 1, and allocate the borrowed funds to a diversified, balanced portfolio anticipated to generate a 6% annual return. Here are the details to assess whether this approach is worth considering:

1. Calculate the Pre-Tax Investment Income: The lower-income spouse invests $1 million and earns an annual return of 6%.

Pre-tax Investment Income: $1,000,000 x 6% = $60,000

2. Determine the Annual Interest Payment: Under the terms of the spousal loan, the lower-income spouse must pay 3% interest on the borrowed funds by January 30 of the following year.
 
Annual Interest Payment: $1,000,000 x 3% = $30,000

3. Net Investment Income for the Lower-Income Spouse: After paying interest, the net income earned totals:

Net Investment Income: $60,000 – $30,000 = $30,000
 
This $30,000 is then taxed at the lower-income spouse’s marginal rate of 20.05%
 
Tax on Investment Income: $30,000 x 20.05% = $6,015
 
After-Tax Income for Lower-Income Spouse: $30,000 – $6,015 = $23,985

4. Tax Implications for the High-Income Spouse ($30,000 interest received from loan).

Tax on Interest Received: $30,000 x 53.53% = $16,059
 
After-Tax Income for Higher-Income Spouse: $30,000 – $16,059 = $13,941

5. Total Combined Net Income for the Couple.

Total After-Tax Income: $23,985 (lower-income spouse) + $13,941 (high-income spouse) = $37,926

Now, consider the alternative scenario where the higher-income spouse invests the $1,000,000 directly and yields an investment return of 6%. In that case, the total gross income remains at $60,000 per year, but the entire amount is taxed at 53.53%:

Taxes = $60,000 x 53.53% = $32,118

After-Tax Income: $60,000 – $32,118 = $27,882

By using the spousal loan strategy, the couple can potentially save approximately $10,044 in tax in the first year ($37,926 – $27,882).

Spousal loans can provide enticing tax savings, but they come with several risks that require close attention. Compliance with CRA rules is essential because missing annual interest payments or failing to document the arrangement properly can lead to income attribution back to the higher-income spouse and potential penalties. Investment returns are uncertain, and market volatility may diminish the anticipated benefits. Moreover, future changes in tax legislation may alter the advantages of such loans, while personal financial difficulties might impact the borrowing spouse’s ability to make the interest payments every year.

If the lower-income spouse passes away, the invested funds in their non-registered account would be subject to probate. A spousal trust can be a useful estate planning tool to help mitigate probate risks when implementing a spousal loan strategy. By placing the invested funds into a spousal trust rather than a non-registered account solely in the lower-income spouse’s name, this approach could avoid probate and ensure a smoother transition of assets.

Before implementing a spousal loan strategy, conduct a thorough risk-benefit analysis. Running detailed calculations and considering various scenarios can help determine if the potential tax savings truly outweigh the risks. Although annual tax savings may seem modest, they can compound over time, allowing couples to enhance cash flow, maximize after-tax returns, and build wealth more efficiently.

Sinan Terzioglu, CFA, CIM, is a financial advisor with Turner Investments, Private Client Group, Raymond James Ltd.  He served as vice-president of RBC Capital markets in New York City and VP with Credit Suisse in Toronto.

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About the picture: “Jay from Humane Society has been with us now two and a half years,” writes Michael in Kitchener-Waterloo. “His birthday is this Saturday and he turns 12. He still thinks, on occasion that he is a puppy, and is nothing but a fun love everybody “Dusky.” Part Husky part Doberman.”

To be in touch or end a picture of your beast, email to ‘garth@garth.ca’.

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The average wrinklie in Canada has a retirement income of about $34,000. The average for a couple (and their cat) is $74,200.

This includes everything. The public pension. Old people’s pogey (OAS). Income from RRIFs and any benefits from a past job.

It ain’t much, especially if you live in a city, or have an expensive property to carry. And Dog forbid if you spawned a needy kid or two expecting you to cough up a house downpayment.

The post yesterday about the high-income couple with three million and no pensions who worry about their financial future spawned some interesting comments. Like this from a guy who lives on the wrong side of Nova Scotia:

The snowflakes of yesterdays posting, with no assets other than 3mil of deferred taxable earnings, that burn through enough in one month for IHCTD9 to live for 7.2, don’t need the advice of Garth’s firm to dole out the stash, they need a comptroller to show them how to spend.

In our lifetimes here, we had earned 1/2 of what they have left over, neither of us have worked for decades now, and we still have 2/3 left for the executrix to liquidate and disburse someday. (1/3 RE). Go figure!

Of course, you need less money if you live in a part of the country where real estate is cheap (because few wish to buy there) and you save big by driving a beater car, knowing how to fix your own timing chain and shopping at a local store that sells groceries, bait and ammo.

But most of us don’t. We need income after employment dries up. These days 70% of Canadians have no corporate pension and those among us with govy defined benefit plans is dwindling. The average CPP payment is less than $900 a month. OAS tops at $727 (rising to $800 at age 75). So, less than $20,000 a year. Try living a happy life on that.

For those of us who do not wish to eat bugs or collect shopping carts in a Costco parking lot, how much is enough?

The rule of thumb is that 70% of whatever you made (and lived on) while working should be sufficient. Others scoff, vowing that their living expenses will plunge when they retire, making it possible to live on the public dole and a few saved bucks in a GIC.

In reality, that’s a myth. When you stop working you have more time. Lots more. You can sit home and learn to knit, or actually use the time to pursue a hobby, travel, take courses, run for Parliament, renovate the kitchen, raise goats or write and finance a free money blog for trolls and sociopaths. In short, many folks find themselves spending more in retirement, not less. It’s a nasty surprise.

Some advisors say to retire with grace, dignity and without killing your long-time spouse for an insurance payout, you should have ten times your final employment income saved. So a salary of $150,000 would dictate $1.5 million in liquid assets. Given a 6% annual return from a B&D portfolio, that would yield $90,000. Add in the public cash, and you come close to replacing that working wage. Happiness.

Of course $1.5 million stuck in brain-dead GICs will not do the job. At current rates (which have been around now for years and years) the income generated would be just $52,500. With CPP and OAS, you’re still at only 50% of what you used to bring in. And GIC interest in a non-registered account is 100% taxable, unlike dividends or capital gains from a financial portfolio. Struggling.

But wait. Most households don’t have $1.5 million. They have half that.

The average retirement savings (including any pension amounts) for those at age 60 is $809,000. For the unmarried single, it’s $446,000. The average 65-year-old has about $160,000 in RRSPs and a TFSA combined.

Worse, as mentioned here in the past, Canadians sock more into high-fee mutual funds than they do in low-cost ETFs. Plus the bulk of money stuck in those delicious tax-free accounts is wasted in high-interest (pathetic) savings accounts and guaranteed investment certificates.

Now, what about real estate? People believe if their homes are paid off they can live on air.

Untrue, of course. Houses cost a huge amount. Property tax, maintenance, insurance, utilities, sometimes condo fees – it all adds up. Replacing a roof or a few windows or a furnace can suck off vast amounts of retirement cash. Reverse mortgages are financial death traps. Most importantly, the equity sitting in a home could be put to work generating income to live on. Take the average paid-off SFH in YVR. At $2 million it not only costs a bundle to own, but represents the loss of $10,000 per month in steady income from a balanced financial portfolio.

You can rent a sweet place – anywhere – for half of that. Plus swell your income at the same time and preserve a nestegg of two million to finance the vagaries of really old age. And, of course, the house proceeds would flow tax-free.

Retirement. Thirsty underwear and libido pills. It’s coming. Like it or not.

Are you ready?

About the picture: “Thanks for keeping the blog going, your advice is always wise and helpful.” writes LeeAnn. “My part time stint is finding gorgeous dogs and asking the owners if I can share on Canada’s best financial blog, they said yes. This is Baker, a Great Pyrenees, who lives at Superior Farms on Vancouver Island. She’ll have a great life ahead of her as the farm attracts bus loads of young, eager students. Is there any chance Canada can regain her innocence like Baker? She seems to be pointing out the way.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

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He came to Canada from the States as a toddler. Met his throb while working in tech on the US west coast, then returned to Canada to make a life.

They’re both duallies, but when it comes to family finances the Yankee-cowboy side prevails. Of the three million they’ve saved and gained in stock options, 90% is in equities, eighty per cent in US$ and most of it sits in American accounts, including some 401k and Roth IRA stuff.

We talked. Aging out of the industry now, they’re thinking about the rest of their lives. No pensions. Kids to push through uni. Big income of half a mill a year will end before long. So, what then? Will they have enough?

Just another story of navel-gazing 1%ers?

Maybe. But Tom and Cindy face a unique challenge now, based on the decisions they made.

Why are you so heavy into equities, I asked? Because the goal was always maximum growth, not stability, he said. “And we did okay.”

Why so much in American dollars, in America? Mostly to escape, or delay, taxes. Moving it would trigger capital gains and the IRS taxes Canadian index funds while disallowing TFSAs. “Besides, US dollars always looked best,” Tom says. “Until now.”

The couple has done just peachy by everyone’s standards. But in retirement they’ll need income – a lot of it – because they now save little on a monthly net of over fifteen grand, plus they crave a second house (besides Ontario) to escape winter. So the goal is to preserve what they have in liquid assets and chunk in at least another million over the next decade.

Tom and Cindy face multiple risks. There is concentration risk – because 90% in stocks is a recipe for volatility and whipsawing values. Besides, pick a few wrong horses (like Tesla, maybe) and things can go south fast.

Then there’s currency risk. The US$ has been a winner over the past few years, but not so long ago it sank to the point where the C$ was worth more (and American real estate values cratered). Now we’re told the loonie could push 75 cents within the next few months, as the greenback continues its descent against global currencies.

There’s Trump risk. The capricious, quixotic, unpredictable American monarch has no love for US citizens who live outside the country’s borders and no fear of changing the tax code to suit short-term political goals. Besides, his failed 18th-Century tariff strategy which has ignited global trading chaos and squished relations with places like Canada has devalued the American currency, made it more expensive to finance $36 trillion in debt and worried markets. He should worry T&C, too.

There’s tax risk, of course. Money in a 401k or a Roth account is taxable when withdrawn, which is inescapable. So are capital gains taxes on assets sold within a brokerage account. So delaying tax until income is lower might help, but these guys cannot afford to be in a lesser tax bracket and live the life they want. So meanwhile they face the risks above – while leaving RRSP room on the table in Canada. As for TFSAs, well, lots of duallies maintain them without reporting. After all, they reason, surely the IRS has better things to do than hunt down ex-pats in Canada.

So, what do these folks need?

Simple. A plan. A strategy. Determine the ultimate goal – in this case a comfortable retirement that includes a winter home in the sun despite having no pension income except the CPP pittance – and work towards it. Containing risk is a key element. Sandbagging Trump is prudent. Diversifying out of a currency they won’t live every day in wise. Slashing their dependence on the stock market is essential. Harvesting the fruit of generous Canadian tax shelters just makes sense. And they should rent in Arizona or Florida, of course. That would save capital and avoid what might be coming for non-resident owners. After all, Canada whacks Americans with cottages here. Tit for tat.

The moral: you can be a cowboy for part of your life. But not your whole life. Don’t underestimate how much money you’ll need after you stop working. Never bet against America. But never go all-in, either.  And do not think that this may end in 2028.

About the picture: “In response to your call to arms, here’s Stella,” writes John. “She’s a rescue dog we got in California 3 years ago and isn’t stressed about anything, including tariffs.  When it’s snack time, she taps on the lid of her animal cookie jar and if she wants outside, she pulls my finger (my wife won’t pull it under any circumstances).  Ahh, to be that unconcerned about what the future will bring – it’s a gift.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

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After six months, Parliament resumes today. Expect big, fast change says the guy in charge.

The latest Nik Nanos poll shows a wee burst of optimism in the wake of the federal vote. “In the period following the election of the Carney federal government, consumer confidence has been improving,” he reports. “Views on the future strength of the Canadian economy remain net negative but positive views have doubled in the past four weeks. Positive views on personal finances and the value of real estate are also up.”

But up enough to save the housing market?

Not so fast. At least according to the current stats. Folks may feel better than they did in late winter, but lately they’re seeing car plants idled, TD Bank announce big layoffs and Trump dithering again on tariffs. Job stress is up. So is the Canadian household savings rate – because spending is down.

Veteran real estate broker Bob Ede says, more than anything, this is the reason why…

So it’s almost the end of May – traditionally the hot end of the Spring market which sets the tone for the rest of the year. Lately we’ve given you the latest stats form a number of key markets across Canada, and it’s mostly the same story. Sales down. Inventory up. Prices eroding glacially. Only in the seriously-pooched condo market (especially with assignment listings of pre-con buyers) do we see reasonable rivulets of blood.

Look at the benchmark GTA/416 region – home to the largest real estate board in North America, plus the greatest concentration of real estate agents on the planet (now diminishing). The last five Springs tell a tale of post-Covid change that few realtors could ever have expected. At the same time, collapsing sales have shocked potential buyers and political leaders because the laws of supply and demand have been negated. At least in the 6ix.

In the first pandemic recovery market (2021) FOMO ruled the land, prices surged, sales soared, bidding wars raged on and houses sold in days, or hours. In the GTA just under 12,000 deals took place (double the previous May) and the average detached fetched $1,716,272.

The following May reality was setting in as inflation and interest rates took off. Sales fell almost 40% to 7,300. Despite that, prices continued to surge – with that same home now commanding $1,914,890.

May of 2023 brought more sales – just over 9,000 – and despite higher mortgage rates prices did not budge. The average single-family home in this market was still selling for an average of $1,913,132.

That started to slip last year when offers fall back to only 7,000 and the sale price of that property dipped to $1,826,370. And now, in 2025 – with Donald Trump in the White House, a weird election result in Canada and serious worries about our nation’s path forward – it’s a realtor nightmare. Sales last month were a scant 5,600 and that average detached price fell to $1,700,710.

In a few days we’ll get the latest. “Uncertainty is being bolstered daily,” says Ede. “Inventory is growing each week. Prices are flat from last month – best case will be up 1% and worst case down 2%.”

Realtor and data nerd Scott Ingram reports listings of freehold properties in 416 are now above 4,000. Condos have topped 8,000. In terms of months-of-inventory, condos have doubled to 7.4 (that’s huge) while freeholds sit just below four.

Here’s a snap of current inventory in a historic context…

Source: Robert Ede

So, what next?

Looks like the Bank of Canada will be treading cautiously now that core inflation is heating up again. Likely no change in rates next week. Besides, US budget concerns have been pushing on yields, so our CB doesn’t want to get offside and whack the loonie (which has been doing okay lately).

So, mortgage rates hold. Supply will continue to overwhelm demand. And now we’re heading into the slower summer market in a year when a million families have to refinance their low-rate Covid mortgages and tens of thousands of pre-con buyers have to close on condos they can’t rent, can’t Airbnb and don’t wish to live in.

During all of this the price of a detached home in our largest city has declined by only 11% in the past four years. Over this time incomes have increased significantly – up 5.8% in 2024 alone. So real estate affordability has improved (relatively) at the same time mortgage rates (five-year) have declined by almost a full 2% (now 4.2%). Today there is vastly more inventory for buyers to choose from. Bidding wars are restricted to unique properties. Sellers are more willing to dicker. Blind auctions, bully bids and offer dates are rare. Lenders are pliant and flush.

Logic – not reason – tells us the missing ingredient to a potential rebound comes down to one thing. Confidence. Will it return? Or is this a false post-election flutter?

So many unknowns. But if a pandemic, raging inflation, historic hike in rates, recession fears and a global trade war, plus the threat of annexation and political upheaval, didn’t bring a real estate collapse, can there be one now?

About the picture: “This is Ola, our 13 week old Flat-coated Retriever from the Annapolis Valley,” writes Brandon. “She’s been a great distraction from the BS as of late. Thanks for your commitment to this blog, it’s been a daily dose of rational thought for many years now. I originally discovered you at work, where some of the “old guys” had a tab bookmarked on the computer. I sold my Vancouver condo last year and bought a house in Ottawa (well within the rule of 90) for a job upgrade. Best decision. You’ve always preached to go where the opportunities are and I’m glad I did. The “Sunshine Tax” is real. Don’t let the comment section get you down. Thanks!”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

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So the King arrives tomorrow. Before lunch on Tuesday he’ll read the Speech from the Throne, opening the new session of Parliament. Crowns, horses, pomp and ceremony will abound. If there’s any doubt remaining we’re not the 51st state-in-waiting, Chuck and Camilla will douse it.

That’s the point, after all. Carney engineered it.

It’s been a long time since a monarch sat in the House of Commons and delivered the government’s agenda. The Queen did it in 1977 for T1. She came again five years later when the Constitution was repatriated from the UK.

Then she visited Canada a decade after that to give me my flag.

Well, actually, she was here for other stuff, too. Like the 125th anniversary of Confederation. But she sat near me and listened to a Canada Day concert on Parliament Hill. It ended with a sassy rendition of the national anthem performed by pop stars of the day, like Randy Bachman and Maestro Fresh Wes.

My role (I was an MP then) had been to raise enough money from corporations to finance the whole thing, including sending a CD (remember those?) to every school in Canada. For my efforts I got the giant flag that flew that day on the Peace Tower, from her hand to mine.

Until the morning – Canada Day, twenty-eight years later – when it was stolen off my building by Indigenous sympathizers, this was my most meaningful possession. When the Queen died, and I set her portrait on my front step, the emotion returned.

But wait.

I’m not a monarchist. Or a Royal junkie. It’s easy to view that group as a dysfunctional family (like the rest of us) in a position of unearned power, wealth and influence. Hereditary leadership belongs in another century. But sometimes someone special, like Elizabeth, comes along. And for almost all of my life she helped define why a different kind of life starts at the 49th parallel.

Charles seems like a decent guy. His causes have gone from rescuing architecture to shepherding the environment. Quebeckers dislike the Royals. Albertans hate greenies. Ontarians are more worried about traffic flow on the 401. So this quickie visit is about perfect. Send a message to Trump. Get on the plane.

Brief or not, it’s a worthy visit, at a meaningful time. Canada is still part of the Commonwealth. We’re not a republic. Our prime minister is a representative, not a head of state. The country is a Parliamentary democracy. Cabinet ministers must be elected by the people, not appointed by one guy. We chose evolution over revolution. We’re not America – and have a King to prove it. So suck on that, Donald.

Well, the Throne Speech will set out the Carney priorities. As we all know, the Libs were handed an unprecedented fourth term because the former central banker and career finance guy was viewed as the best defence against incredulous US threats. Now he must deliver.

This session of Parliament will last less than a month. Poilievre won’t be there until he wins a seat in the safest of Con ridings in Alberta. So the headless Oppo will have to decide on supporting legislation to reduce the lowest tax bracket and also approve updated main estimates laying out the government’s fiscal position and borrowing needs. Parliament will be presented with a plan to finally end trade barriers between provinces, then split until the autumn.

That’s when the real meat happens. A budget. Confidence votes. Debate on (hopefully) a new trade deal with the evil Americans. A boost in defence spending and debate on the Golden Dome. Implementation of the new Lib housing strategy. Tax policy, including the carbon pricing and capital gains inclusion rate that Chrystia and Justin screwed up. New trading relations with the rest of the world. And actions to cut the legs out from under the noisy little pack of whiny Wexiters.

So the King thing is just symbolic. Carney will have to prove his mettle, standing solo on the floor of the House of Commons as Charles retreats to his palaces. We shall see.

But symbols matter. Indelibly.

About the picture: “We have followed along with your blog for years and are clients of Turner Investments,” writes Cathy. “I think the dog photos over the years have clearly worked their magic on us and a week ago we welcomed our first dog – a one year old potcake rescue named Cyrus. One of the best things we’ve ever done he’s just a delight. Here he is trying on his new raincoat. Feel free to use on the blog:).”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

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Source: Forbes

  By Guest Blogger Doug Rowat

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When Warren Buffett announced that he would be stepping down as CEO of Berkshire Hathaway at the end of the year, it gave the media an opportunity to highlight Berkshire Hathaway’s otherworldly performance. The overall market-value gain of Berkshire Hathaway shares from 1964 to 2024 was a staggering 5,502,284%—a number so massive that it seems made up.

The boys on the Animal Spirits podcast a few weeks ago put the Berkshire Hathaway gains into perspective in another way: Berkshire Hathaway, they pointed out, could lose 99% of its value tomorrow and it would still be outperforming the S&P 500 since inception.

What the Animal Spirits podcast didn’t highlight though was what the legendary value investor would probably do if the stock did drop that much: enthusiastically buy more:

So, yes, Buffett was (is) an investor of extraordinary talent. But he’s much more than that, of course.

He’s probably the most quoted investor of all time and every financial advisor, strategist and market pundit has a favourite Buffett quote to draw on for perspective and insight in any market environment.

I’ve highlighted Buffett’s wisdom myself many times, either on our weekly client calls or right here on this blog. My favourites were always his reflections on extreme market risk. Buffett wasn’t a salesman; he was blunt and realistic, reminding investors that some risks simply can’t be protected against:

There is, however, one clear, present and enduring danger to Berkshire against which Charlie [Munger] and I are powerless. That threat to Berkshire is also the major threat our citizenry faces: a “successful” (as defined by the aggressor) cyber, biological, nuclear or chemical attack on the United States. That is a risk Berkshire shares with all of American business.

In fact, Buffett frequently raised the subject of nuclear war, at one point in 2002 stating that

We’re going to have something in the way of a major nuclear event in this country. It will happen. Whether it will happen in 10 years or 10 minutes, or 50 years … it’s virtually a certainty.

These perspectives seem particularly relevant today following the Kashmir border fighting between India and Pakistan or the ongoing rise of AI. And while Buffett’s emphasis on these dire risks may seem depressing, viewed another way, his warnings are really a reminder to make the most of the time that we’ve got.

On a personal note, Buffett played a significant role in salvaging my own finances. Early in my investment career, after getting my brains beat in with my tech-stock investments during the early 2000s, I finally turned to (limped to?) Buffett’s annual shareholder letters and began reading them in earnest.

In mid-2002, after the dust had settled on the tech wreck, I switched direction and bought some ‘wide moat’ Buffett favourites. It matters not what stocks I bought specifically, but it should surprise no one that Berkshire Hathaway itself has easily eclipsed the returns of both the Nasdaq and the S&P 500 since mid-2002.

And Buffett sacrificed much to achieve these results. His success was due to a single-minded focus on his craft. He’s probably spent as much time examining balance sheets as Paul McCartney’s spent time strumming chords on an Epiphone Casino.

Unfortunately, Buffett’s focus on investing was so all-consuming that his family paid a price. His family has often stated that he was never fully present as either a husband or father. His first wife, Susan, in the documentary Becoming Warren Buffett, highlighted that when she was in bed with a stomach flu, Buffett brought her a colander in case she threw up. When she explained how a colander wouldn’t work, Buffett then brought her a cookie sheet to place under the colander.

Clearly, Buffett’s mind was elsewhere. And while his family might not have benefitted from his preoccupation with capital markets, the rest of us certainly did. Buffett became fabulously wealthy because of his talent and hard work, but so did millions of others. And even if we didn’t become wealthy, we still became better investors.

We owe him our thanks.

So, with much gratitude Mr. Buffett, this one’s for you.

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Doug Rowat, FCSI® is Portfolio Manager with Turner Investments and Senior Investment Advisor, Private Client Group, Raymond James Ltd.

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This week a lost soul in the comments section said this pathetic blog had lost its way.

Stop with the politics, he cried. Stay with the investment stuff.

The reply was simple. They’re married. If you don’t understand what’s happening in public life the financial consequences may whack you. In today’s ridiculously-polarized political world, it’s truer than ever. Park your bias. Pay attention.

Example: you can forget about mortgage rates going down. Fivers for sure. Maybe even variables. That could be bitter news for people trying to flog their houses in a dead Spring market. And say a quick little prayer for the condoholics among us. Pooched.

Bond yields around the world are headed up today. The benchmark Canada five-year is zipping to the 3% mark as this is being written. That’s a 12% higher yield than two weeks ago on the security that influences five-year mortgage costs. Meanwhile the Bank of Canada will be reviewing its rate in less than two weeks, and an expected cut is off the table. Core inflation is hot. Now we have this Trumpian bond dump to deal with.

Yup, politics again. Messing up your daughter’s condo listing and that bond ETF in your tax-free savings account.

Mr. Market is indicating this might all get worse before, well, whatever comes next.

Days ago, as we told you, the US was downgraded by Moody’s. It was the final rating agency to strip away a triple-A credit rating America had enjoyed since 1917. A big deal. The move reminded people of what a mess US finances are in – about to be made worse by the current White House. Already there is $36 trillion in debt with trillions more about to be added.

Time out: a million seconds is a vacation (about twelve days). A billion seconds is a career (thirty years). A trillion seconds is 31,688 years (thirty thousand years before Christ).

The realization America’s financial trajectory may be headed down the loo faster than expected weighed on investors. Stocks sold off sharply Wednesday (and wobbled today) after the latest auction of 20-year US bonds went badly. The government had to pay 5.047% interest (a huge sum) to attract enough buyers to raise $16 billion over the next two decades.

Immediately this pushed yields up (and bond prices down) across a range of bond maturities, then across the globe (including the Canada bond referenced above). When the biggest economy on earth, that issues the global reserve currency with the dominant financial markets shows such vulnerability, everybody loses faith in the future. That’s what the bond market is. A place where people place bets on what lies ahead.

Now that future contains a greater possibility of US financial troubles, higher risk premia and tariff-fuelled inflation devaluing the currency. Thanks, MAGA.

What is Trump’s role here?

It’s yuge. Bond yields are rising because investors see trillions more thrown on the debt pile as 47 pursues a reckless agenda of massive tax cuts while pushing tariffs that have sparked an international trade war and threaten a global recession while increasing domestic prices and inflation.

Trump’s ‘big, beautiful bill’ containing those cuts passed the House last night by the narrowest of margins. It may yet hit a wall in the Senate, but the president says failure to approve it will be “the ultimate betrayal” and result in retribution. He’s that kinda guy. My way, or political death.

The 1,000-page legislation would extend $4.5 trillion in tax reductions to corporations (Elon, Jeff and Mark love him), add new cuts for tips, overtime, car loan interest and retirement incomes, increase spending by $350 billion (a bunch for the ‘Golden Dome’) and parially offset lower revenues with a drop in health and welfare payments.

The non-partisan Congressional Budget Office says almost nine million people would lose health care coverage and another three million a month have less in low-income benefits (food stamps). The changes would increase federal deficits by $3.8 trillion over a decade, even as the government spends $1 trillion less on social support. The CBO claims lowest-income households would be robbed and the highest-earning ones rewarded.

Is this what Americans voted for?

Well, for investors it’s all a big red flag. When the US government has to pay more to attract capital to the safest assets on earth (Treasury bonds) then rates everywhere, on everything, are going up. Higher borrowing rates mean less economic activity, lower growth and reduced profits. So markets react. Making it worse are dumb tariffs that hike prices at places like Walmart, Target and Amazon.

You’d think ‘conservative’ politicians would be appalled at this fiscal timebomb and lack of discipline. But you’d be wrong. They love the guy – or at least, fear him.

Overnight Republicans renamed a proposed new children’s savings program as ‘Trump accounts’.

Guess what may end up being in them?

About the picture: “I’ve been reading your blog for many years and thank you for all the advice,” writes Del. “The photos are of our dog Toby who we got 8 years ago from the pound and they said he was two so now he’s ten years old. He now owns our house and would refuse to sell.  Ha!”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

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