Author: garth turner

The housing market has frozen. Regardless of the outcome tomorrow, the ice will remain.

Not only is this faux spring season a major letdown for realtors, brokers, lenders and the guys covered in drywall dust, but all of 2025 may go down as one of the worst years in living memory for house sales. The interest rate declines have ceased, at least for a while. The layoffs have started. The death of The Bay is not Trump-related, but emblematic of what’s happening in retail. Remember that two-thirds of our economy depends on consumer spending and confidence. Both are running on empty.

The trash talk from the White House continued last week, leading up to today’s vote. The weaselly wee sec’y of state, Marco Rubio, amplified the ‘annex Canada’ talk on NBC yesterday. These dudes are real. The threat is growing. More tariffs coming on Saturday. Yikes.

So we get a real estate freeze in April, just when prices, bidding wars and FOMO are supposed to explode. Look at Calgary – steamy a year ago, but this month with sales down 19% y/y and active listings up 101%. In a few days stats out of Van and the GTA will tell a similar tale. The phones aren’t ringing anymore. Prices have yet to decline in any serious way, but there’s no telling what July will bring.

The perennial question remains: will people buy when prices plop by 15% or 20%? Or will they retreat waiting for bigger declines or (more likely) because they’re afraid to act? Recall that the weird thing about real estate is the more it costs the more people want it. So when prices drop, so do sales levels. Humans are ridiculous.

Anyway, check out this chart. It plots the sales-to-new-listings ratio (SNLR), which tracks how quickly fresh properties find buyers. The ratio is a good indicator of consumer confidence and market strength. Above 60% we call it a ‘seller’s market’ when bidding wars, multiple offers and over-asking deals are common. Below 40%, in a ‘buyer’s market’ the sellers are happy to take what they can get during a drought of interest, leading to low-ball offers and falling sale prices.

Where are we now? A lowly 29% – far below the ten-year average, and just a third of level seen three years ago. The buyers are gone (which makes you wonder why everyone says there’s a shortage of houses – which are sitting and accumulating, unsold).

This is a buyer’s market of historic degree

Source: @OutlineCa

TD economist Rishi Sondhi points out that during March (the last full month of data available) sales nationally dropped again – by about 5%. It was the worst level since last 2023. “Notable sales declines were recorded in B.C. and Ontario (both down 7% m/m), with a smaller drop in Quebec (-3% m/m). Meanwhile, sales were flat in Alberta,” she points out. New listings went up, so nationally the SNLR for all of Canada hit its lowest point since way back in the Credit Crisis of 2009.

Total properties for sale in the nation (resales, not new stuff) was up 18% y/y at 165,800. That is almost a five-month supply – which compares to eight days in Toronto back in 2021, when values were skyrocketing. (Remember what I just said about in the relationship of sales and prices?)

“March’s decline was not much of a surprise given that tariff-related economic uncertainty remained elevated last month,” she adds. “For the first quarter overall, sales plunged 12%, which will weigh on residential investment and overall economic growth. Canadian listings pushed higher last month. Notably, markets are hugely tilted in the favour of buyers in B.C. and Ontario and are even loosening rapidly in the once drum-tight Alberta market.”

The conclusion: price declines are coming. Nationally the price of a home fell 5% in the first hundred days of this year. There is more to come. Perhaps a lot more.

This decline will be accelerated by events. If the Trump trash talk continues after our election is done, confidence will be eroded. If tariffs continue to accumulate and are extended to additional sectors, more impact. If layoffs mount in the auto sector, if retail founders more and the unemployment rate rises, real estate will feel it. And if the Bank of Canada responds with a couple of rate cuts (now more possible with a stronger dollar) the impact on buyer confidence will be slight.

All of that seems reasonable, logical and realistic. There is nothing a new Lib or Con administration can do immediately to shut 47 up, rewind the economy, reverse tariff damage or restore lost jobs. It can only increase debt/deficit spending to blunt the impact and support affected workers while we engage in longer-term restructuring so this never happens again.

And meanwhile the listings pile up. Like with freehold homes in Toronto – taking this chart to a new high.

Unsold resale homes piling up fast

Source: Scott Ingram, TRREB

So, expect 2025 to suck if you are a commission-only, eat-what-you-kill realtor or mortgage broker. There is much more disruption to come, but with it we’ll get (a) a vastly larger pool of homes to choose from, (b) the most motivated sellers in years, (c) flexible, quasi-desperate lenders and, yes, finally, (d) meaningfully lower sales prices.

It’s coming. And most will miss it.

About the picture:  “Been on the sideline reading and enjoying your blog for years,” writes Reeny in Victoria, “but never commented. As a renter…no pets. This is my sister Kelly’s best friend Beamer enjoying Ottawa snow.”

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

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One more sleep. Finally.

Elections tend to be predictable. At least, the politicians are. The themes never vary. Almost always it’s about ‘change’. People seeking support also divide the country into ‘us vs them’. They invariably ask if you’re better off now than years ago, and hope you forget what things were actually like. And they use fear as a prime motivator. Vote for me or you’ll be foraging for food, lose your job, be unable to afford anything, never own a home or see your retirement savings wiped out as markets collapse. Trump was a master of that. Still is.

Repeatedly we’ve been told the nation is pooched. Canada is ‘not a real country’ says Elon Musk. It’s an ‘artificial nation’ says the Bloc Quebecois leader. ‘You’d be better off as a state,’ says Trump, because ‘it’s not a real country’. Western Canada ‘may decide to separate’ says former Reform leader Preston Manning. And Pierre Poilievre spent the last three years saying, ‘Canada is broken.’

Is it?

“My Tory brother sent me your blog,” writes Ralph Stanton. So he decided to answer that question for himself.  “Here is a little research about how “broken” Canada is compared to neighbour to the south. What’s the difference? Here is a short look at some indicators.”

This what Ralph sent. Read it before voting tomorrow.

Life expectancy:

The mother of all statistics; how long can you expect to live. In the US it is 79.3 years, in Canada 82.6. As a Canadian you can expect to live 3 years and 3 months longer. Canada is 19th in LE after Iceland 17th and Martinique 18th, the US is 48th after Panama 46th and Albania 47th.

Happiness:

The US ranks 24th in happiness Canada ranks 18th. Key factors in the US include a decline in social dining and increased deaths of despair.

Suicide:

US is 31st in the world with 14.5 suicides per 100,000, Canada is 67th with 10.3 suicides per 100,000.

Murder:

The US has a homicide rate of 496 per 100,000 or 16,214 people. Canada’s rate is 1.76 per 100,000 or 651 people (both 2022). As a proportion of the population 2.8 times the number of Americans are murdered.

Incarceration rates:

The US has an incarceration rate of 541 per 100,00 for a total of 1,808,100 people incarcerated (5thin the world) while Canada’s is 90 per 100,000 or 35,485 (163rd in the world). Thus 5.5 Americans are in jail for every Canadian in jail. The privatised prison system in the US needs more prisoners and longer sentences to make a profit. This system consumes an extraordinary 6% of US GDP.

Death by police:

per 10 million, 33 Americans die at the hands of police officers, the figure in Canada is 19 per 10 million of population.

Heath care expenditures and costs:

Health expenditures in the United States average out at $12,914 per person, nearly double the $6,500 spent per person in Canada. The US spends 16% of its GDP on health care and Canada spends 10.4%.Yet Canadians live longer. As individuals we pay far less for health care than our US neighbours and thus we have to pay higher taxes.

Education:

Canada scores well above the OECD average in literacy, numeracy and adaptive problem solving while the US rates at or below the OECD average in the three categories. The per year cost of a Doctorate program in the US ranges from $28,000 to $55,000 while in Canada the figures are $6,000 to $16,000. Different educational levels have widely different cost figures but Canadian education is cheaper in general. Canadians have the highest educational attainment of the G7 countries.

Income inequality:

The US is the 13th most unequal country in terms of income distribution while Canada is the 44th most unequal.

Financial Stability:

In 2008 US households lost 11 trillion dollars in wealth. In both the Great Depression and the 2008 financial meltdown major US banks collapsed. This did not happen in Canada.

Debt:

According to the World Bank gross public sector debt as a share of gross domestic product in 2022 stood at 105% in the US and 46.5% in Canada. US federal government debt to GDP is 123% while Canada’s is 107.5%.

Income, wealth:

GNI is Gross National Income per capita. All dollar amounts are in US dollars. The US is 6th in the world at $80,300, Canada is 18th at $53,930. Average income per adult in the US is higher than Canada’s but because income in the US is so skewed to the very rich the median figure (the mid-point from highest to lowest) for income in Canada is higher than the US. In other words, more Canadians are better off as a proportion of the total population. In terms of wealth per adult, in Canada the median figure is $142,587 and in the US $112,587.

Language:

Canada is an officially bilingual country while the US insists on unilingualism. The traditional language rights of Francophones, which secured the unity of Canada, would be extinguished by a merger of the two countries. In part this explains the past and present resistance of Quebec to any merger with the USA.

Reproductive rights:

Canada supports a woman’s right to choose if or when to have children, allows ready, and sometimes free access to birth control as well as therapeutic abortions. 41 US states have abortion bans.

War:

The USA is the most warlike country on earth. Since its founding in 1776 it has been at war for all but 17 years of its existence. It spends about 40% of the world’s military budget to “defend” 6% of the earth’s land and 4% of the world’s population. If Canada were part of the US our youth would be used as cannon fodder in America’s wars.

Democracy:

At the federal level Canadians have a choice of five political parties, who represent Canada’s 40 million people. American have a choice between two political parties which represent 340 million Americans. Former US President Jimmy Carter called the US an “oligarchy with unlimited political bribery” after the 2010 Citizen’s United Supreme Court decision removed all limits on corporate donations to political campaigns.

About the picture: “Long ago reader, when you were business editor of a Toronto Daily Newspaper (in the mid 80’s as I recall) and long ago watcher when you were  on  most evenings of a Toronto television channel providing the daily business updates,” writes Ward.  “Then one evening you mentioned you were leaving… And I lost contact until about a year ago when one of my kids forwarded me your blog and I have read ever since. I valued your opinions then (starting about 40 years ago) as much as I do again today.  This is a picture of Winchester (adopted) and Remington (spoiled), this winter on the rolling hills of south Uxbridge/ apparently the trail capital of Canada.”

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

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AI generated

  By Guest Blogger Doug Rowat

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What makes Trump tick?

Needless to say, answering this question has been every analyst’s nightmare struggle this year.

Michael Kantrowitz, chief investment strategist at Piper Sandler, even went so far as to speculate, somewhat jokingly, that Trump will back down on tariffs whenever his approval rating falls below the Cboe Volatility Index. He may be on to something as Trump’s recent 90-day tariff pause coincided with the two metrics crossing paths:

Trump blinks when market volatility (blue line) moves higher than his approval rating (orange line)?

Source: MarketWatch

But such are the creative lengths that analysts are going to to predict Trump’s behaviour. I’m one of those struggling analysts, and while I would never claim to have solved the mystery of Donald Trump, I suspect that further tariff-policy retreats will coincide with the onset of intensifying negative market and economic data.

We saw as much when the troubling rise in US Treasury yields also became a clear contributor to that 90-day tariff pause. We’ve also now seen FOUR postponements on some or all of his proposed tariffs, postponements that have coincided, more or less, with either higher volatility, or meaningful downgrades of economic and earnings forecasts. Thus, we may be entering into a world where accumulating negative data will continue to curb Trump’s tariff impulses. A world, in other words, where bad data will, paradoxically, become good news for investors.

We’ve seen the bad-is-good phenomenon before. During the inflation crisis, for example, traditional market drivers were temporarily turned upside down. I argued as much in a March 2023 blog post:

…2023 is shaping up to be a year disruptive to traditional data relationships. Good market data is being perceived negatively (inflation inducing), while bad market data is being perceived positively (the economy’s cooling). Simply put, bad market data signals that central banks are winning the battle against inflation.

As it turned out, overall S&P 500 earnings growth was negative y-o-y in 2023, yet counterintuitively, the S&P 500 advanced an impressive 26% on a total-return basis. Though still far from turning negative, forecasted earnings growth this year is moderating rapidly. The upcoming Q2 earnings growth rate, for example, has been ratcheting lower on an almost weekly basis (see chart below). It’s also very likely that we’ll soon see the onset of negative US economic data as well, particularly in the labour market as corporations will almost certainly favour their profit margins over workers.

Forecast S&P 500 Q2 earnings growth rates steadily declining

Source: Zacks Investment Research. Consensus estimates.

Will consistently weaker earnings and economic data cause Trump to further back off on tariffs and thus send equity markets higher? That’s the theory. And it’s an intriguing one as relatively little economic and corporate-profit weakness has actually appeared in the current data so far, yet Trump has still paused tariffs, as mentioned, four times. It seems probable then that when the data actually does turn negative (an inevitability at this point) Trump will back off even more. Time (and the data) will tell. For now, the world holds its breath.

$     $     $

Finally, emails have flooded our inboxes throughout the year promising to ‘tariff proof’ client portfolios. Here are two that landed just this week:

‘Tariff proofing’ is the Bay Street strategy du jour

Source: Turner Investments

However, such strategies should always be viewed cautiously. Sales pitches like these are opportunistic and designed to capitalize on current market fears. We saw a similar flood of emails during Covid—emails offering sure-fire strategies for capitalizing on the so-called new global-pandemic economy. Needless to say, Zoom, Docusign and Peloton featured prominently. But look how quickly these pandemic darlings lost their lustre:

Zoom Communications

Docusign

Peloton Interactive

Source: Google Finance. Five-year price charts.

This time around it’s the so-called new global-tariff economy. However, this investment theme could fade just as quickly as Covid. Therefore, be skeptical of anyone promising to ‘tariff proof’ your portfolio.

The ‘proofing’ may only last until Trump’s next post on Truth Social.

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

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  By Guest Blogger Sinan Terzioglu

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The average annual tuition cost for an undergraduate program in Canada has been steadily increasing over the years and now stands around $8,000. For students who need to live away from home, housing expenses vary significantly depending on location and type of accommodation, typically ranging from $10,000 to $20,000+ per year. When combined with tuition, the total annual cost for post-secondary education can easily exceed $25,000.

Assuming a 3% annual inflation rate, the total annual cost could reach $42,000 in 18 years, amounting to approximately $168,000 for a four-year program. For parents aiming to cover most of their children’s post-secondary education expenses, it is essential to implement an effective savings strategy as early as possible.

I was recently asked about this:

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My son was born this year, and my parents have generously gifted $50,000 to put towards his education. I understand that a Registered Education Savings Plan (RESP) is the best account for saving for post-secondary education because my son can receive up to a 20% education grant on the first $2,500 contributed each year.

I know that contributing $50,000 now to get the $500 grant for this year and missing out on future grants would very likely result in a higher RESP value after 18 years compared to contributing $2,500 annually or $16,500 in the first year and $2,500 annually thereafter to maximize all the grants. However, I hate missing out on free money.

I came across a strategy that utilizes an In-Trust For (ITF) account in conjunction with a RESP to maximize the grants, and it looks like this approach can yield even greater results versus a lump sum $50,000 contribution to a RESP. What do you think of using an ITF account in conjunction with a RESP?

An ITF account is informal because it does not require a deed of trust for its creation, unlike a formal trust. Setting up an ITF account is cost-free, and its main advantage is that all capital gains would be attributed to your son (essentially no tax), while all investment income (dividends and interest) would be attributed to you the trustee.

To implement the strategy, in the first year you would contribute $16,500 to your RESP (which would secure the first $500 grant for year 1) and $33,500 to a new ITF account set up for your son. After one year, you would need to transfer $2,500 annually from the ITF account to your RESP for the next 13.4 years to receive the $500 education grant each year. This approach will help you reach the maximum $50,000 lifetime RESP contribution limit and obtain the $7,200 in grants provided by the government.

Assuming a long-term average annual return of 7%, contributing $50,000 to your RESP now and receiving a $500 education grant in the first year, while foregoing all future grants, would result in your RESP growing to over $170,000 after 18 years. On the other hand, implementing the ITF strategy in conjunction with a RESP and earning the same long-term average annual return of 7% would result in a RESP valued at over $143,000 and an ITF account valued at over $50,000 after 18 years, yielding 10-15% more than the lump sum contribution of $50,000 to the RESP.

Although the ITF strategy has the potential to yield a larger total investment value, I advise against implementing this strategy for the following reasons:

ITF Accounts are Irrevocable: Once the account is set up and funds are contributed, the assets legally belong to your son and the funds cannot be reclaimed or redirected by you once they are placed in the ITF account.

Loss of Control: Once your son reaches the age of majority, he would gain full control over the ITF account. This means he can use the funds for any purpose, not necessarily for education.

Complex Administration: Managing an ITF account can be more complex than other savings vehicles. It requires careful tracking of contributions, income, and withdrawals to ensure compliance with tax rules and to maximize benefits, which can be cumbersome.

Legal/Tax Issues: Transferring funds from the ITF to a RESP could trigger capital gains and raise questions about the true ownership of the ITF assets, potentially causing tax issues if challenged by the CRA. Also, if the value of the ITF account exceeds $50,000 even for a single day during a year, you may need to file a T3 trust return.

An alternative strategy to ensure you receive all the education grants is to use a new non-registered account designated for your son’s education assets instead of an ITF account and follow the same approach. By primarily investing the assets in the non-registered account for capital growth and incorporating some tax planning, the tax attribution to you can be kept relatively low, especially if you have capital losses to offset capital gains. Most importantly, you will retain control of the assets, which will be beneficial if your son decides not to pursue post-secondary education.

In summary, if you are fortunate enough to contribute $50,000 towards a young child’s post-secondary education, a lump sum contribution to a RESP will likely cover most, if not all, of the costs for a four-year post-secondary program in Canada. Additionally, you won’t have to worry about potential tax issues or losing control over a portion of the assets.

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: “Just west of Cochrane, Alta there is the Yamnuska Wolfdog Sanctuary that currently cares for 50+ wolves,” writes Brent. “Some were hoarding rescues, others were breeding situations that irresponsible owners couldn’t take proper care of. Pictured is Atka. Thanks so much to you Garth and your dynamic team.”

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

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Good news, Honourable Dogs. This is the last post dealing with Monday’s conflagration.

As blog addicts will know, times are strange here. Look at the two writ-period polls we held. They averaged about 4,500 responses over 24 hours. One was conducted when the campaign began, the other a few day ago. Results were consistent. Amazingly so.

What did you say?

Liberal support among readers came in at 52%, miles ahead of the Conservatives (33%). The favourables/unfavourables for Carney and Poilievre were even more interesting. The Lib leader is now viewed as more favourable by 51%, and less by 29%. For the Con leader, a mirror opposite. Opinion of him fell over the campaign for more than half of you. Those who viewed him better came in at less than 30%.

In short, the Liberals were almost 20 crushing points ahead of the other guys in a poll that was not only national in scope but with one of the largest samples of any survey during the campaign. This level of engagement seems reinforced by an unprecedented turnout for advance polls. Over 7 million people turned out even before the Poilievre forces had released an election platform. My guess is many were motivated by patriotism, voting in repudiation of the orange guy. Take your 51st state and…

But wait. What about the comments section?

While the voting here produced one clear set of results, the moaning, wailing, invective, insults, mocking, indignation and protesting from PP supporters has dominated the blog’s sad steerage section. They don’t believe the polls. They don’t believe you could have been thick enough to vote as you did. They’re gnarlier than usual and happy to blame me – an old, white, wealthy, out-of-touch, boomer overlord fossil – for what you did.

So in this final politically-inspired post, let me tell you why, three years ago, I told you the Conservatives had picked the wrong guy. On Monday that may become evident to all.

This is offered by a citizen who was elected twice to Parliament, once as a Mulroney PC and once as a Harper Conservative. The first time was productive and personally fulfilling. I chaired committees, impacted bills, was a leadership candidate and ended up in Cabinet. The second time was an unmitigated disaster. Harper ruled with an iron fist, disallowed MP independence, hated my blogging and digital democracy, tried to ban me form talking to oppo guys, and threw me out after I fought 0% downpayments and 40-year mortgages, arguing it would create a housing bubble. Which it did.

But back to Pierre. He was Harper’s parliamentary secretary and party attack dog. When I fell out of favour with the boss, he took a big bite out of my shapely buns. But I expected that. It’s him. What he does.

What I did not expect from Mr. Poilievre subsequently is why I find him unfit to lead my country.

In the midst of a global pandemic and national health emergency he sided with the truckers who shut down the capital, covered it with F-Trudeau flags, scared the locals, defied police, broke the law and rallied anti-vaccine sentiment precisely when society needed compliance and faith in the face of a crisis. That was opportunistic, unleaderlike, and done fully in the interests of Pierre, not Canada. He springboarded that into a caucus revolt against the leader, and assumed control. He used the truckers, and in so doing sullied us.

In the period following Covid, when the entire western world was dealing with the fallout from broken supply chains and boomerang demand – causing inflation – Poilievre lied about the causes and sought to destroy public faith in institutions. Trudeau was no more responsible for rising prices in Canada than those in the UK or America. It was not caused by borrowing or by debt. Poilievre lied to gain attention and headlines, and misled Canadians.

As the Bank of Canada raised rates (correctly and effectively) to cool things off, Poilievre mocked and trolled the governor, vowing to fire him when elected. Like Trump’s been doing to the guy running the Fed. Having a political leader seek to take over monetary policy is a classic Third World move. It’s meant to gain personal power and secure headlines through misinformation, not to serve society or the nation. Suggesting Canadians embrace Bitcoin was icing on the cake of incompetence.

And now Mr, Poilievre plays footsie with the Wexit, secessionist and goofball elements that seek to place one region’s interest above that of the country’s, just when we face an existential threat. He should have been slapping down Alberta Premier Danielle Smith as she courted Trump at Mar-a-Lago and blabbered to Breitbart.

He should have distanced himself from the failed Preston Manning who threatened the breakup of Canada if people didn’t vote as he wanted. This is the guy responsible for the death of centrist conservativism, years of Liberal spending and the birth of what is now the maple version of MAGA. If there is a Progressive Conservative left these days, it is probably Mark Carney.

Yes, I know Pierre. Well. He is a gifted speaker, a sharp, smart guy with acuity and unrivalled political skills. He is cunning and calculating. That’s why he’s made an entire career out of the House of Commons. He is also deeply ambitious and aggressive, which has led him to shred opponents, destroy reputations, defile instituions and set principles aside when required to get ahead. Three years ago he looked south, like what he saw, and has mined that vein of populism to its core.

His base is enthralled. Many would elect a Golden Retriever instead of another Liberal. I get it.

But in this country, character matters.

About the picture: “Hi Garth, thank you for your blog, changed my life!” writes Kim.  “This is Lola, she is a bred dog whom my friend rescued.  She loves her stuffies and is gentle with them, carries them like she would her babies.  She will gaze into your eyes into eternity, and you can really feel the love!”

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

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Here we go again.

Knowing they were about to get the brown end of the electoral stick, previous Con leaders Andrew Scheer and Erin O’Toole tried to scare people by saying Libs had plans to tax home equity.

They lost. No tax happened. None had been proposed.

But that’s not stopped the river of dread from flowing again. Days ago, speaking to a roomful of Toronto wrinklies, leader Pierre Poilievre pulled it out once more. The Carney guys, he said, will have no option but to start Hoovering houses. “It will be crippling.”

“What happens when the finance officials tap them on the shoulder and says, ‘You’re out of money, you need to go find more?’ Well, they’re going to go out and they’re going to tax your home equity. They’re going to go after your house. Bottom line is, Liberals will tax your home equity if you give them the chance in this election. We will never let that happen. Your home belongs to you, and when you sell, you should keep every single penny for yourself and your kids.”

In no political party platform is a home equity tax suggested, hinted or proposed. But that doesn’t seem to matter. Last week the Winnipeg Free Press gave over space so non-Liberal supporter and former mayoralty candidate Kevin Klein could tell folks, flat-out, that it’s coming – if the red devils retain the levers of power.

“With Carney at the helm or not, they will need cash fast. Their only option is to start treating Canadian homeowners not as citizens, but as balance sheet solutions,” he writes.

“This is not about fearmongering. It’s about pattern recognition. This government has spent beyond its means, taxed beyond reason, and blamed others for the consequences. They are not about to change course. They are about to double down.

“When they do, it won’t be Ottawa’s elite who take the hit. It’ll be the homeowner in Winnipeg who finally paid off their mortgage. It’ll be the senior who planned to pass down a family home. It’ll be the small business owner who poured equity into their shop instead of renting.”

And that swamp we call the Internet is home to all kinds of wackos, quislings, grifters and liars who understand there are zero consequences – and perhaps money to be made – by scaring the poop out of people.

Oh, wait. Here comes some now…

As reported here previously, there are existing proposals to seriously increase personal levels of tax in Canada, including residential real estate. In this campaign the NDP has proposed a wealth tax it claims will raise more than $94 billion. It would click in at net worth of $10 million (including property, pensions, investments), collecting 1% of that per year – or a minimum of $100,000, atop income tax (which is at a 54% rate over $220,000 annually). Today the Green Party is slated to unveil its own wealth tax, also including houses.

And Generation Squeeze, which has worked with CMHC on policy concepts, has been lobbying for a pure real estate equity tax for several years. “We’re proposing a modest annual surtax on homes valued more than $1 million… to tackle the housing crisis,” it says. “The surtax could generate $5 billion per year to fund affordable non-profit housing. It would also disrupt a cultural problem that fuels the crisis: many everyday Canadians have benefitted from skyrocketing home values, creating wealth windfalls that are largely sheltered from taxation. Meanwhile those same rising values erode housing affordability for younger generations, whose earnings from work are fully taxed.”

That levy would be calculated annually and paid when the house is sold or changes ownership –  effectively a giant, new land transfer tax.

So far, GenSqueeze has no takers. Nor will Jagmeet or the Greens ever form government in Canada. And both the Libs and Cons understand a retroactive tax on home equity would be both politically toxic and destructive, leading to a crashed housing market plus a big jump in debt as wise people drain their equity.

Of course, we all know the current system sucks. And, yes, the tax-happy kiddos have a point that the principal resident cap gains exemption encourages speculation, higher property values and the financialization of real estate. It’s an anachronism which has locked millions out of ownership while showering long-time owners with unearned wealth.

But, it is what it is. And nobody has the stones to change it. A better option, as proposed here, is a lifetime capital gains tax break for all Canadians, to a certain level (say, $250,000) to be used as they want – sheltering gains from a house, a retirement portfolio or your 1979 Wayne Gretzky hockey card.

Poilievre knows better than to scare old people into voting for him. But he does anyway. When hope and reason fail, use fear.

About the picture: “Hi Garth, I thought i would send you this picture of my dog and my son’s bearded dragon,” writes Jane. “They’re both looking out the window hoping the rain will stop.”

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

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He wouldn’t. Would he?

As stock markets flirt with a bear, bonds are sold off, the US dollar fades and a global trade war gathers… is Donald Trump on the cusp of nuking the Fed?

As we reminded you last week, this is the ‘nightmare scenario’ analysts have been theorizing. But theory no longer. If the American president moves to take over and politicize monetary policy – as Pierre Poilievre has suggested in Canada – Mr. Market could go postal.

So the reaction this morning was no big surprise, after the MAGA boss posted this on his swampy social media site:

Yup, he called Jerome Powell “Mr. Too Late” and “a major loser”, plus accused him of manipulating interest rates to bolster Kamala Harris in the ’24 election. Trump clearly knows his tariffs are pushing the American economy towards recession, and thinks immediate interest rate cuts can paper over the inevitable by flooding the country with liquidity. He is also a vengeful, petty man. Trump may be the most power person on earth at the moment, but he can’t help stooping to exact revenge.

What’s at stake here?

Precedent: the Federal Reserve is independent, non-political and mandated with supporting the economy by stabilizing prices, the currency and the labour market. A primary function is keeping inflation under control, so the dollar is not debased. The Fed boss is appointed for a four-year term (Trump did that as 45) and was reappointed by Biden. He cannot be fired unless the Supreme Court says so (and the Trumpers are seeking it).

Price stability: Powell has warned that the White House tariffs and the retaliatory taxes they prompt are inflationary. Of course, they are. Every living economist agrees. But the US president, stewing in failed 19th Century economic policy, argues that tariffs will “make America rich” even as consumers are forced to pay more for everyday goods. (He got elected promising to reduce those prices. Oh well.)

The Fed succeeded in crashing inflation from over 9% to the 2% range, and is in no hurry to drop rates and let it rip again. Nor is the market. Cheaper money would be nice, but not at this cost.

The dollar: It’s been on a slide since Trump took office and started this tariff nonsense, especially as evidenced in the ludicrous ‘Liberation Day’ event. A lower dollar helps US exports, but renders imports more expensive – at the same time Trump is piling a heap of tariffs on those goods. A vicious circle. As these actions push Aerica into contraction, investors are selling off the greenback.

The bond market: Ditto for US Treasuries. In the seven days following Liberation Day now only did the stock market lose 12% of its value, but the yield on those key American bonds surged by a half point – a move so massive Trump panicked and paused his tariffs for 90 days. Stocks and bond prices normally do not decline together. But this is not normal.

Not only do Treasury notes and bonds underpin America’s $37 trillion in federal debt (a trillion is a thousand billion), but their risk-free status is the bedrock of the global financial system. If they melt down, we’d all better learn to like eating lichen and bugs. At the beating heart of the bond market’s credibility is the Fed – which issues the debt, determines short-term interest rates and whose guidance affects the longer-term market yields. By the way, Canada holds $350 billion in these bonds. China has twice that.

So the Fed’s in no hurry to cut interest rates which would fuel inflation, add stimulus, hasten the dollar’s decline and exacerbate economic upheaval. Not only is this bad for the country and the world, but it risks repeating the affordability crisis which defeated Joe Biden. Clearly, as Trump said about soaring car prices, due to tariffs, “I don’t care.”

And this is why markets are selling off (again) today. He’s nuts.

Nothing good ever happens when politicians seize control of the money supply. Not in the country considered to be the safest on earth. And not here.

About the picture: “Hi Garth, Spike here was wondering, since the US has a $30T economy, and 69% of it is consumer spending, why not just impose a 5% GST and raise a trillion?” writes Jay. “Elon can take care of the rest.  And we all go back to sanity.  Too simple?”

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

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Eight more sleeps ’til the ruler is chosen. Everywhere comes word advance polls are jammed.

What does that mean?

Conventional wisdom is that people are motivated to vote – and do so as soon as possible – when they crave change. So those long lines should be good for the Cons, after three terms of the other dudes. But things are not conventional these days. This sis more an election about America than Canada. If the ballot question is, ‘who best to protect us from them?’ then the Gray Guy may beat the Pugilist.

Meanwhile this has lots of folks thinking like Peter.

“I’m becoming pessimistic on US stocks and other US assets as a result of Donald Trump’s chaotic and idiotic actions. Should Trump be continued to run amok, stability in US markets seems unlikely for an undeterminable amount of time,” he writes me.

The US Treasuries are beginning to look less secure. The Mark Carney story seems plausible and if it is, there could be more selling on the way in  order to attempt reining in Trump. If more selling takes place and US Treasuries are no longer viewed as a safe haven, what is?

What about the US dollars losing its reserve currency status? I can’t help but think the principals of prudent investing would change dramatically. And Trump appears to be ignoring Supreme Court rulings, trying to take control of major universities as well as apparently looking to close up 30 foreign embassies and consulates. He is intent on shutting out the world, blowing up global trade and damaging the global economy. I don’t see how the US economy is going to grow. And where does he stop? Are foreigners who hold US investments going to get whacked tax wise?

I have been in the markets for some 40 years – former financial advisor. I have made all the mistakes one can make. I have learned to hold steady and not sell in times of trouble. It is a guaranteed way to lose money.

I have not sold a thing since Trump began his stupidity this year. I do hold a  significate sum in US assets – both ETF’s and stocks. Yes, the accounts are down a couple of hundred thousand dollars, but I am holding.

My question: At what point are you going to become concerned about US holdings and begin to bring funds home?

Trump, believing he has no guardrails, is on a rampage.

Gutting government. Deporting the innocent along with the troublesome. Attacking universities. Abandoning allies. Promoting commercial fishing in marine sanctuaries and logging in protected forests. Ending vaccine research, trolling and mocking Canada, laying off scientists and personally enriching himself and his family through crypto and real estate ventures, while being suspected of equity market manipulation. And, yes, he’s caused the US$ to decline, American bonds – the gold standard of the planet – to lose both value and confidence, while he digs up the corpse of 19th Century protectionism to decay and destroy the global trade that’s made mankind more prosperous than ever before. All this is in under a hundred days.

We’re all repelled, Peter. Except the maple MAGAs, of course. But their numbers dwindle as it becomes clear 47 is driven by revenge and doctrine, not a passion to serve. This is a presidency destined to end badly. There’s no other outcome. And, yes, it’s a safe bet things will get worse, darker, weirder before they stop.

But they will. And, yes, there are guardrails.

Public opinion is one, now being mobilized. Hundreds of thousands of people demonstrated in eighty separate events over the weekend. Against Musk and DOGE. Against the cutting of health and education services, the negative impact of tariffs, deportations and the attack on academic freedom and personal liberty. The hapless, defeated Democrats are starting to organize and lead. More to come. Look at what’s been happening at Town Halls conducted by Republican politicians. They’re being eviscerated.

The courts are another guardrail. Trump has been trying to ignore legal rulings against White House executive orders that cross the line. But he can’t continue without creating a constitutional crisis, and involving the Supremes. He will lose.

And the biggest Trump thump may be the midterm elections next year. Losing control of Congress is a distinct possibility, and would hobble the president’s effectiveness. He’d also (likely) be impeached.

In short, Peter, this will end. Trump will end. And while it will take years, or decades, for the US to regain what’s been so quickly and radically lost, it still has the dominant economy, issues the world’s reserve currency, is the most lucrative consumer market and has the most guns and bombs.

Going forward, Trump will probably proceed with slashing corporate taxes, deregulating industry, voiding environmental rules, sucking in offshore investments, dissing the rest of the world and deboning Washington. If you were a billionaire oligarch, you’d be thrilled. He’s one of you. Defrocked or not, this president will leave office enriched as none has been ever before – the grifter king.

In short, do not bet against America. It is what it is. At the moment, repulsive enough to throw our election. But certainly not to have you bail.

About the picture: “I have been with your blog from the very beginning, but I’m glad I didn’t listen and bought a house in 2008! :),” writes Irene. “Nonetheless, your blog has been my go-to source for insightful news and valuable info, more than anywhere else. Thanks for all the hard work you do! I would really appreciate the pic of my cat Tootie, who sadly passed away just a few days ago at the age of 18 years 8 months. She was small and baby-faced, but incredibly fierce and independent. And so loved!”

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

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   By Guest Blogger Ryan Lewenza

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President Trump recently reversed (again) his tariff policies by putting a 90-day pause on his ‘reciprocal’ tariffs. He cited weakness in the bond market as a key reason for this reversal/pause. In response to a reporter on his decision to pause the tariffs he said people “were getting a little bit yippy, a little bit afraid,” and that the pause would calm investors and the bond market.

My boy can get a little ‘yippy’ when he’s on the mound pitching in an important baseball game. What happened in the bond markets was closer to a meltdown. And if he didn’t reverse course, we could have potentially seen a full-blown crisis in the bond markets, which could have had devastating consequences for the markets, the economy, and in our every day lives.

Today let’s review what occurred in the bond market and examine the critical role US Treasuries play in the global markets and economy. So, today’s blog will be a primer on the bond markets, and trust me, what happens in the larger bond markets is more important than the equity markets.

US Treasuries are government bonds that are issued by the US Treasury department to fund government operations. They are backed by the full faith and credit of the US government and are the bedrock of the global financial system.

There are three main types – T-Bills (short term with maturities less than one year), Treasury notes (bonds with maturities of 2 to 10 years) and Treasury bonds (long-term bonds with maturities up to 30 years).

US Treasuries are initially issued in the primary market, and are sold to various investors, pension funds and central banks through an auction process. Every year that the US government runs deficits, which is the difference between revenues (i.e., taxes) and expenses, the US Treasury must issue new bonds to cover the shortfall.

With all the accumulated deficits over the last 250 years since the foundation of the US, total US government debt outstanding sits at a record US$37 trillion. This is broken into debt held by the public which sits at US$29 trillion, and debt held by US intergovernmental agencies ($8 trillion) like the US social security fund.

The Federal Reserve is the US central bank and is responsible for setting short-term interest rates, known as the Fed Funds Rate. Interest rates on longer term maturities like the key 10-year Treasury yield is determined by the market. Investors consider a number of factors including the level of short-term rates, future expectations for inflation and economic growth, and they collectively help set the level of interest rates for long-term bonds.

Below is a chart of the US yield curve, which is the level of interest rate for each US government bond, ranging from the shortest (1 month) to the longest (30 years). So, for example, the current yield on short-term T-bills is 4.4% and 4.8% for a 30-year Treasury bond.

US yield curve

Source: US Department of the Treasury

Now, US government bond yields then dictate the interest rates on all the different bonds, loans and investments that exist including mortgage rates, CDs (US GICs), and corporate bonds. For example, in the US most mortgages are based on a 30-year term, and 30-year mortgage rates are based on the level of interest rates of the 30-year Treasury bond.

As seen in the chart below, there is currently US$77 trillion of debt outstanding in the US, which is broken into state, federal, household and businesses. As US treasury yields change over time, this will impact the level of interest rates on all these different bonds and loans. This is why the yields of these different US treasuries are so important and why stability is key.

Total US nonfinancial debt stands at US$77 trillion

Source: Federal Reserve; Financial Accounts of the US

So, now that we know the size and importance of US treasuries, let’s review what happened in the bond market following Trump’s tariff announcement.

Shortly after Trump announced the tariffs, investors started to get concerned or ‘yippy’ about the impact of these tariffs on the economy and, more broadly, the safety in holding US dollars and Treasuries. Investors were losing faith in the US as a stable trading partner, as the world’s largest superpower, and even the US dollar as the world’s reserve currency.

From the date of Trump’s tariffs announcement (‘Liberation Day’) on April 2nd to April 9th, the day he announced the pause of the tariffs, the S&P 500 declined by over 12% and US Treasury yields surged by over 50 bps in just a few days. Below is a chart showing the US 10-year and 30-year Treasury yields, and you can see the surge in yields over this period. A 50 bps jump in yields in just a few days is extremely rare and captures how spooked investors were over the impact of his tariffs.

While the stock market drop was quite concerning, President Trump seemed unfazed by this and stuck to his guns. He kept stating to “stay cool” and “markets are going to boom, the stock market is going to boom.” But what did spook Trump was the steep drop in US government bond prices and the surge in interest rates.

According to the WSJ and other news outlets, the Treasury Secretary, Scott Bessent flew to Mar-a-Lago on a weekend to warn Trump about the chaos in the US bond markets, and that the bond market was “flashing red”. He advised Trump that he had to change course or risk a major meltdown in the bond markets, which is the lifeblood of the US economy and global financial markets.

US government bond yields surged by over 50 bps

Source: Stockcharts.com, Turner Investments

There were also rumours that China was offloading some of its US Treasury holdings in retaliation to his outrageous tariffs. China currently holds US$770 billion of US Treasuries, which is down from the $1.2 trillion they used to hold, but they still represent the second largest holder of US Treasuries after Japan.

The fear is that China could continue to offload these bonds in retaliation to the tariffs, which could flood the market, pushing US Treasury prices lower and yields higher. I believe this risk is overstated since a meltdown in US Treasury prices would be devastating to the global economy and markets, which could end up causing a deep recession in China. Given the almost symbiotic relationship between these two superpowers, I highly doubt China would take this extreme approach by dumping their US Treasuries.

As I’ve outlined today, the US and entire global system is underpinned by US Treasuries. If it goes, then everything goes. Given this, Trump blinked when he started to see his tariffs negatively weigh on the critical US bond market. Hopefully this is a wakeup call to the negative effects of his tariffs, and that he’ll change course, as he recently did with the 90-day pause.

Trump and officials are saying numerous countries are lining up to make trade deals to address Trump’s concerns and have him reverse course on the tariffs. China is next up, and I really hope they come to the table and start the negotiation process. Clearly, the global economy and financial markets can’t withstand this tariff uncertainty, as evidenced by the recent sell-off in the bond market.

Holders of US Treasuries

Source: Statista

Ryan Lewenza, CFA, CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Investment Advisor, Private Client Group, of Raymond James Ltd.

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About the picture: “Thanks Garth for all you do,” writes Paul. “My wife and I have been loyal readers for the last 8 years.  This is a picture of Daisy. She is our 4 year old Havenese.  Daisy is fed up with all the talk of Tariffs and wonders what it will do to the cost of kibble and treats. I love the blog and try not to read the comments to often.”

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

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Even in Calgary house sales have dropped 19% and listings increased 100%. Toronto and Vancouver are a hot mess. Prices across Canada have softened. But they have not dropped, plunged, sunk or mellowed. A few sellers have surrendered. Most are hanging tough. Scores have withdrawn their properties. In one GTA market the DOM for $2 million+ homes – which used to sell in weeks – is approaching two years.

As you heard in the debate last night, nobody has a valid plan to fix this. The reason’s simple. Real estate is not really a federal matter. Citizens just made it that way and politicians were too scared to tell them otherwise. Towns and cities control permits and zoning. Provinces regulate housing. The feds can only dance around the edges tweaking tax policy and pretending to do something.

In any case, we don’t have too few homes for sale. It’s all about price. Here, look at this chart from the GTA which summarizes the total available number of resale homes and rentals at any given moment. Supply is currently off the chart. Buyers and tenants are swimming in choice.

Facing facts: the supply of homes is exploding

What can we expect?

Worsening conditions in the short-term. Tariff uncertainty is rampant. Central bankers have no clear idea what to do. Trump is rogue. A recession is imminent, lasting most of this year. Unemployment is rising in Canada and layoffs will accelerate. It’s no disaster, no depression, nothing as dramatic as the pandemic or structurally seismic as the Credit Crisis. But it’s a big deal if all you want in life is a house.

So, it’s a safe bet to say the cost of real estate will fade a little this year, mortgage rates, too, but so will buyer confidence and the number of jobs. Sales will stay anemic and realtors apoplectic. This is no economy to be an eat-what-you-kill commission guy. The industry could face a serious exodus by the time offers start flying again.

Who is best to deal with this, federally?

Well, nobody – as stated. The government in Ottawa will not, and cannot, make bungalows in Etobicoke or Vancouver Specials cheaper. Basing your vote on housing is to waste that ballot. The feds did not increase home prices. They cannot reduce them.

The plan to build zillions more places is a falsity. Just look at the chart above. There’s a huge surplus already, and prices are not retreating. Adding more won’t change anything, since building and development costs dictate prices will hold steady. Tariffs may even mean things become more dear.

The Carney plan to provide billions for acres of pre-fabricated, mass-built, get-‘er-done homes is innovative, but wholly unproven. Do young couples want that kind of housing? Will it have enduring value? Will it be better suited to rentals than ownership? And, as yet, it’s all just a plan. Shovels in dirt could be years off.

A strategy to lessen real estate demand by making renting a better option would be helpful. So would a plan to definancialize single-family homes. That could involve banning all unhosted sort-term rentals, changing the Interest Act to facilitate the growth of locked-in 10 and 20-year mortgage terms, phasing out the existing PR cap gains tax exemption and giving all citizens instead a lifetime break – to be used sheltering profits from selling a residential property, or wiping out the tax bill on a financial portfolio or retirement savings. Your choice.

Diddling with zoning, punishing cities for trying to plan growth or showering incentives on first-time buyers are things that clearly do not work. The Trudeau gang spent billions going down that road, and we accomplished zilch. You don’t get a different outcome by doing the same thing  repeatedly.

Will the election make a difference in the near term?

Here’s the forecast from veteran broker Robert Ede, a relentless chronicler of market statistics:

“I think the election provides a minority Conservative government,” he says (despite this blog’s two recent polls). “And a modest rally in real estate [powered by] first-time buyers, last-time sellers and buy-sell customers. No investors will be participating (apart from dumping non-performing rentals).”

After that, he adds, will come two quarter-point rate drops from the Bank of Canada, followed by “a fine time for real estate – especially worried realtors – in the summer and fall.”

Realistic? Or is Ede hopped up on hopium?

Nobody knows. But the guys on the political stage need to stop zooming us. We might rebel.

About the picture: “Our 3 year old poodle-cross Harley has been having some adventures!” writes Barb. “Thanks to our talented nephew Yuri for the photos! We have been daily readers for years, have attended one of your seminars in Nanaimo many years ago, and have purchased some of your books ( mandatory suck up)! Our neighbor Robin in beautiful Chemainus BC has submitted photos of her dog Lola which appeared on the blog and suggested we send this images of Harley.”

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

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