Author: garth turner

The Dow opened another 500 points in crimson Thursday while the price of US Treasuries dipped further into the red.

It might as well have been the blood of American investors who thought their new president would bring booming markets, lower taxes, falling inflation, rising demand and an expanding nation. Oops. Just the opposite.

And now, the ‘nightmare scenario’ just drew a little closer.

That’s the term one prominent Wall Street economist uses for the day that Donald Trump fires the head of the Federal Reserve and installs his own lackey, effectively politicizing monetary policy. It is exactly the play that Canadian Conservative leader Pierre Poilievre has advocated for the Bank of Canada.

After Fed boss Jerome Powell this week said Washington’s tariffs were larger than expected and would lead to an increase in both inflation and unemployment, plus slower GDP growth, Trump wrote this on his social media soapbox:

“The ECB [European Central Bank] is expected to cut interest rates for the 7th time, and yet, ‘Too Late’ Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete ‘mess!’,” Mr. Trump wrote on his Truth Social platform. “Oil prices are down, groceries (even eggs!) are down, and the USA is getting RICH ON TARIFFS. Too Late should have lowered Interest Rates, like the ECB, long ago, but he should certainly lower them now. Powell’s termination cannot come fast enough!”

It was Trump, of course, who nominated Powell in his first term. Biden renominated the guy – who has won respect for his steady hand in controlling inflation and the perilous journey through the pandemic which brought it. Like our central bank boss, Tiff Macklem, Powell has ceased cutting the cost of money because of the massive uncertainty Trump’s trade war has delivered. Pausing is wise, prudent and professional. The president is none of those.

Why does this matter? After all, Trump has moved to control or influence almost every other facet of American society, while upending the economy and trying to reshape the way nations deal with each other. Why’s the Fed different?

The simplest answer is that the US dollar is the world’s reserve currency, and the Fed controls it. Not only the supply of dollars, but their value. Lately that dollar has been falling (since Trump took office) which has pushed other currencies higher (like the loonie) and threatens to make American inflation worse. If the Fed were to chop rates, as the prez urges, the dollar would tumble further. This currency manipulation would cause more trade chaos.

Moreover, the US is the world’s biggest debtor, and all that borrowing is denominated in dollars. Countries around the world hold a mess of this debt (Canada has $350 billion worth) in the form of US Treasuries. Since Trump started the trade war, the price of those bonds has dropped and the yields increased. This has put more upward pressure on interest rates in general, and pissed off the bond-holders who are looking at a capital loss. These notes have for eons been considered the most risk-free assets in the world. No more.

And the Fed, like our guys, sets interest rates. Mortgages, business loans, credit cards, car financing – the whole works. Lower rates make borrowing cheaper, heaping stimulus and liquidity into the economy. That facilitates growth, expansion, higher stock prices and more inflation. No wonder Trump wants it. This could temporarily paper over the misery of his trade policy mistakes.

But Powell says the White House will have to pry monetary policy out of his cold, dead fingers. The Fed is an indy agency. His position is protected by law. He ain’t quitting, leaving, or being dragged out.

Will that stop the president from trying?

Maybe not. After today, probably not. There will be a legal challenge, but these days Trump is ignoring the courts and ruling as an autocrat by executive order. So far he has illegally deported US residents, waged war on universities that allowed free speech and protest, attacked law firms that were hired to oppose him, approved the dismantling of the federal government, ended vaccine research along with water protection programs and life-saving foreign aid, oh yeah, mocked and trolled sovereign Canada while throwing Ukraine under the bus.

Blowing up Powell is just another day in the West Wing.

But know that if US monetary policy comes under the thumb of a political leader, especially an unprincipled grifter with failed economic fantasies, things could be forever altered.

Mr. Bond Market will be the final line of defence against men without value. Watch it.

About the picture: “Thanks for your great blog,” writes Bonnie. “Much appreciated. Here is a pic of Princess Zoe & her pals from Vancouver Island. They’re always hoping for a treat.”

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

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This week a record was broken. Unless you have a condo to sell in DT Toronto, it seems like a meaningless number. But, not.

In the 416 hunk of the GTA there are now more than 7,000 resales on the market. Add three times that many in new, unsold and almost-finished units, and the conclusions are clear. A gut of supply. A dearth of buyers. Prices pressured lowered. And things are getting worse weekly, as about 200 more appear on MLS every seven days.

Why is this happening when mortgage regs are looser, downpayments lower, choice greater, mortgage amortizations longer, sellers more motivated, lenders eager and loan rates historically attractive?

You know. Fear.

Most people are afraid to buy because they’re scared of what’s to come. The economy seems iffy, Trump is crazy, there’s a confusing election happening, tariffs dominate the headlines, everybody’s heard of layoffs and the Conservative leader says we have a swelling crime wave, plus a drug crisis and are on the verge of industrial and social collapse. Yikes!

The real-world consequences of this barrage is a pullback in consumer spending. Since that makes up two-thirds of the national GDP, we’re pooching ourselves.

The latest evidence comes with air travel. Trips to the evil United States have collapsed. Airlines have suspended flights. Ticket sales have cratered. And the inflation number released this morning – surprisingly down to 2.3% – reflects that. It was also dragged down by a drop in the cost of gas plus the demise of the carbon tax.

So Trump tariffs will probably make things more expensive in the months to come but freaked-out Canadians will be spending less (with a real estate crash likely) shrinking the GDP and perhaps bringing recession. Meanwhile unemployment is going up (we lost 32,000 paycheques last month) and key sectors, like cars and steel and lumber, are in trouble.

This puts the Bank of Canada in a tough spot. Drop rates to save condos and GM workers? Raise rates to counter the debilitating impact of a trade war? Do nothing, hold the line, and pray? And what happens if Prime Minister Poilievre makes good on his promise to punt the Bank of Canada boss. “I will fire the governor of the central bank to get inflation under control,” he said just before becoming Conservative leader. More instability.

So much to worry about. Such tough choices. Lower inflation data today. More tariff changes hourly. A bank rate decision tomorrow.

“Normally, this would be a big green light for the BoC to cut tomorrow, except the small detail that their major core measures are holding close to 3% (so with the overnight rate having been slashed to 2.75%, real rates are already negative) and policymakers are operating in the dense fog of an ever-shifting trade war,” says BMO chief ec0nomist Doug Porter.

Over at CIBC, the boys still expect a couple of rate cuts are coming – but not just yet.

“We expect the negative demand impact from higher unemployment due to tariffs and the deterioration in sentiment since March to be more worrisome for the BoC than temporary upward pressure on prices from tariffs ahead, and we continue to look for the overnight rate to reach a trough of 2.25%.”

And at RBC, economists are leaning into a quarter-point drop tomorrow morning, as insurance, because business sentiment is starting to circle the drain.

“About 32% of firms surveyed now expect a recession in the next 12 months, up from 15% in the previous quarter,” they say. “March employment data reinforced these concerns with the job count falling and unemployment rising. And, housing markets have shown clear signs of slowing—reducing the odds that near-term interest rate hikes will lead to another round of surging house prices.”

TD says ditto.

“The central bank will be weighing the inflation risk from tariffs against the downside risk coming from consumer/business sentiment surveys, a loosening job market, and a very weak real estate market. We are maintaining our call for another cut from the bank, as it should take out more insurance against the mounting downside risks to the economy.”

So, here’s the thing. Rates may go down a bit tomorrow, or pause. But they will not increase this year, regardless of inflation’s ugly return. The threat now is recession, contraction and unemployment with a crash in consumer and business confidence. Less spending, less investing. The damage from Trump has already been done, and Canadian real estate will be the poster child for it. We’re going down. How far is unknown. The bottom unclear.

By the way, virtually every major new condo development in the country’s largest market has been cancelled. Thirty thousand new units annually, to zero.

What could go wrong?

About the picture: “As it’s getting more difficult to find ‘cuteness’ in the world today, I thought this adorable, orphaned, week old capuchin monkey might fill that void,” writes Robin. “He stole my heart a few weeks ago in the jungles of the Peruvian Amazon.  I enjoy your informative blog daily with my morning coffee… especially love the humour and sarcasm.  A great way to start the day here on Vancouver Island.  Know that you are appreciated by many.”

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

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Pierre is toast.

Yes, I know. This pathetic blog’s reader survey is not scientific. It ain’t 19-times-out-of-twenty anything. No public opinion sampling experts were injured in its design. And it only appeared here on this one site for less than 24 hours.

But, sheesh. It tells a tale.

Just under 4,100 people took the poll before webmaster William Stratas pulled the plug at 11:40 am. In Canada, that’s a huge sampling. And the audience is national. Moreover, we know from past surveys that the addicts who come here routinely are wealthier than most Canadians. They largely own real estate. They have a higher net worth. They skew older. There are more men.

In short, it’s a natively conservative crowd. So the results of this week’s mid-election poll (which closely match the one done on March 24-25 when the campaign started) show just how tone deaf the Poilievre team has become. Canadians do not want anger, mocking, name-calling, sloganeering and especially negativity about our country just when the place is under attack. The Conservatives opted for a Trump-style full-Monty assault on incumbency two years ago, and have not let up.

But Canada moved on. Trump is a bigger enemy than the now-defrocked Justin Trudeau. The new guy, Mark Carney, may be relatively unknown and amazingly boring, but he’s seen as the adult in the room best suited to face Tariff Man. Pierre’s the friend you want in a bar fight. Mark’s the litigator you’d choose for a dirty divorce case.

Well, the results are clear. More than half say their impression of Carney has improved during this campaign while a mirror number say they have a less favourable view of Poilievre. The dominant issue is, as you know, Trump. Far less important have been things the Conservatives have been spending whacks of time on, like crime and immigration. Very few even care about the carbon tax (which is now gone).

Seven in ten say that despite the flip-flops, back-tracking and policy wiggling, the threat Trump poses to Canada is just as serious as when the campaign began – and six in ten say Carney is the best guy to deal with it.

A third of you indicate you’ll switch party allegiance in this election (a massive move), and big numbers of people at Poilievre rallies are seen as endorsement by his base, not momentum among other Canadians. At the same time, western secessionist sentiment is being scoffed at, while most people lament the polarization of politics in this nation and yearn for a leader standing the centre. And you seem to have picked one.

As for voting intentions, the situation is nothing less than historic. Six months ago national polls gave Poilievre a twenty-point lead, as he savaged Justin Trudeau daily. Now the Liberals (in our poll) have almost as strong a lead, even as PP tries to destroy Carney. This 40-point swing in such a short period of time is without precedent in Canada.

It appears Mark Carney is about to be handed a majority government. Let’s hope he knows what to do with it.

READER POLL RESULTS, click to enlarge image:
(a 2nd browser window will open)

About the picture: “Garth! I’m a regular reader now because of my wife Irene who is a long time daily reader,” writes Sam. “We have many conversations about your articles. Your work is much appreciated and valued. Attached is our rescue pup Noodle, she is now ten years old but forever a baby and our first baby.     I can’t imagine the shrieks of excitement if she were to log in to see Noodle at the top of one of your articles. I hope you would consider it, it would be most dearly appreciated and a surprise she would cherish forever. Irene and older Noodle are in the black-&-white picture.”

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

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Yesterday morning this pathetic blog told you to chill, stay invested, remember that crappy markets come along frequently, always pass, and that it’s not different this time.

The Trump tariff terror cannot last, we said. And hours later it didn’t.

Markets roared. The gains were obscene. Many wondered why the US president would make such a profound announcement in the middle of the trading day. After all, the unveiling of tariffs was held until markets had closed on April 2nd. But eight days – and a stock panic later – they were paused in mid-session, providing anyone with advance knowledge the tickle of a lifetime.

Well, at the opening today, more losses. Sizeable ones. The euphoria was gone.

Why? Because he’s still here.

Donald Trump has surrendered his last shreds of credibility. The flip-flops, back-of-the-envelope strategies and conflicting messages from his team have made every other country and leader know that America is no longer a reliable partner. Nobody actually comprehends why this fetish with failed 19th Century economics is taking place.

Companies cannot make long-term investment plans in this environment.

Nobody will trust any trade agreement, formal or otherwise, made with this administration.

The pissing match with China, the second-largest economy, threatens global stability, trading patterns, supply chains and prosperity.

The odds of a US recession fell immediately with Trump’s back-pedalling yesterday. The odds of a global one increased as he bumped up tariffs on China to 125%. Insane.

The US has been weakened dramatically in less than 100 days, alienating allies, attacking friendly neighbours, withdrawing humanitarian aid from the world, deporting innocents who were then sold to the El Salvadorian prison system, gutting medical and scientific research, stroking Putin while berating Zelenskyy, attacking key universities, ending vaccine research, mocking and trolling Canada, hobbling government with 300,000 firings, releasing felons convicted of January 6th crimes and dissing NATO.

“Do you think any of those countries would ever come to help us?” Trump asked this week. He forgot that only once in NATO’s history was that obligation under Article 5 invoked – Nine Eleven. And, yes, we all came.

“A whole pile of invaluable trust just went up in smoke,” says NYT veteran columnist Thomas Friedman, a Pulitzer Prize guy. “In the last few weeks, we have told our closest friends in the world — countries that stood shoulder to shoulder with us after Sept. 11, in Iraq and in Afghanistan — that none of them were any different from China or Russia. They were all going to get tariffed under the same formula — no friends-and-family discounts allowed.

“Do you think these former close U.S. allies are ever going to trust getting into a trench with this administration again?”

Nope. Ain’t happening. Look at the current Canadian federal election campaign – which is now all about how Canada can become less reliant on the US, on trading more domestically, on finding new export markets, crafting a better maple industrial strategy and boosting investment in our own enterprises and future. Ironically, people in China seem to be saying the same thing. President Xi is riding a wave of patriotism, while we go Elbows-up.

“Thanks for your calming words of advice to stay the course yesterday,” writes John. “I’ve heard them echoed by plenty of others since lame ducky President Trump unleashed chaos. Who knows if the goal is to boost US manufacturing and to satisfy his fetish to on trade balances or any of the other theories. In the face of uncertainty it makes sense to stick with an already robust and proven plan. Choking down those emotions even as markets slide and investors begin to eschew US debt. Having grown up in the UK I’m pretty good at it.

“So if the advice to the household balanced and diversified investor is to stay the course, who is doing the all selling and why? Why are highly paid professional institutional investors not set up to ride out the storm too? How much of the selling is from panicked individual investors?”

Machines, John. The same algos that triggered a sell-off this morning moved to spend trillions yesterday afternoon as values exploded. Billions of shares change hands globally in minutes, often taking advantage of small price changes, with human-defying speed. Of course, there are always buyers and sellers triggered by options. Pensions funds with collective trillions have to keep those funds deployed. Traders and money managers are paid for active management, not to sit on interest-bearing fixed-income assets. Volatility is the jet fuel that powers day traders. In short, the risks to retail investors, especially those holding just a handful of individual equities, grows every week, month and year. Stay balanced, diversified, liquid and boring.

This is the new normal. A hobbled, diminished, shamed America is the new normal. So is an ascendant China and a more balkanized world. Expect more of the unimaginable. Trump has already lost. Don’t follow him down.

About the picture: “Here is a recent photo of Mr. Rex waiting for his dinner,” writes Rob. “An iguana he is not.. He’s not very interested in Donald Trump and would probably bite him if that lunatic adult toddler got anywhere near the family here in Hamilton. Good dog! After all these years, still a blog (Greaterfool.ca) worth visiting and reading everyday. Keep going.”

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

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Seems like a storm warning.

The spring real estate market is melting. The tariffs mounting. The stock markets are totally wonky. And unsold housing units are stacking up as politicians vow to build millions more. It’s a weird time, and the heavy weather has yet to hit.

Here’s a small window on the future: in the GTA there are 21,863 new and unpurchased homes for sale, 16,995 of them condos. In the latest sales report just 248 single-family homes sold in a market of six million people – a 50% drop over last year (which sucked).

Currently another 55,000 new condo units are in the final stages of construction – which were purchased from plans two to four years ago. Since then the economy has wilted, immigration levels have been slashed, Trump got elected and rents are falling. “It’s a death spiral,” says mortgage prophet Ron Butler. “By the end of this year 70% to 80% of pre-construction buyers will simply refuse to close.”

That, of course, would be significant news in a normal year. But this ain’t normal. By the summer Canada may likely be in the throes of a recession, according to economists and political leaders alike. The headlines then will be dominated by layoffs.

As we reported, last month Canada lost 33,000 jobs. Actually it was worse than that. The toll for full-time positions was 62,000, many replaced by gig work.

BMO chief economist Doug Porter is not prone to hyperbole. So when he said, “I think that was just really an early taste of what’s to come,” it’s worth dwelling on. In March the rogue American president had not even announced his full suite of tariffs. Stock markets had not plunged in panic. Global recession calls were faint. The guys at the big Stellantis plant in Windsor had no inkling they were about to be sent home.

The April unemployment number – due out in early Mary – will likely tell a new story. And after that economists bet things will worsen as the jobless rate rises toward 8% and the economy contracts – just as 1.2 million families have mortgages come due. About 60% of them expect higher payments. A quarter may be in distress, analysts say.

The Bank of Canada – like the Fed – is expected to cave to economic and political pressures. There could be four or five rate reductions by the end of the year, unless tariff-induced inflation flares so high the CB must pivot. At this point the betting is Tiff Macklem will focus more on trying to rescue the economy than dealing with your grocery bill.

In this environment, don’t let anyone tell you they know what comes next. Nobody does. Trump is chaotic and likely unbalanced, surrounded by people too mesmerized or afraid to corral him. He could back down. He might double down. In any case, the damage he’s done to the US and Canadian economies in just months will take long to heal. The disruption to the global trading environment and world net worth may be decades reversing. You might not even live that long. He probably won’t.

What to do now?

First, as stated here often, nothing is a good option. It’s too late to sell assets and go to cash. Unless you need the funds next Tuesday, there’s no reason to turn a paper loss into a real one. Most people invest for distant goals, like retirement, so stay the course. Stuff will restore in time. It always has. And will.

Second, diversification is your friend. Growth assets should stay in Canada, the US and international by thirds. Eschew stocks and go with index ETFs. Risk is less when spread over dozens or hundreds of companies.

Third, do not lighten up on fixed-income. Bonds have been one of the safer havens this year, and that’s likely to continue. Yields are falling and prices rising because of increased investor demand and the looming certainty of a global downturn. As stated above, CBs look primed to unleash liquidity, pushing bond values higher.

Fourth, the government is about to see greater demand for spending and slashed tax revenues. Regardless of who wins on April 28th, the annual deficit will swell as millions of workers look for income relief when their jobs vanish, as corporations see profits go poof and as consumer spending slows, trashing HST collections. This is a formula for future personal tax hikes.

So, load up on your shelters. Retirement, tax-free, education and first-home accounts, for example, not only offer taxless growth but can also reduce taxable income. If you maxed them all this year, that’s fifty grand for an individual, and much more for a family. Also be wise about income-splitting, including a spousal RRSP, joint non-registered accounts and low-cost, tax-deducible family investment loans.

Lastly, don’t panic over the news or the markets. Nor be hasty or greedy. Most people should do the hardest thing. Chill.  A golden retriever helps. Iguanas, not so much.

About the picture: “On a recent visit to Baja, I came across Santiago, a handsome, sombrero-sporting iguana,” writes Heather, from Sough Surrey. “With all the nonsensical things going on in the world today, we need all the levity we can get. Thanks for your free, information-laden, daily blog, Garth. Your efforts are appreciated.”

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

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Q: If the Trump tariffs are whacking Canada, why did the loonie rise in value last week?

A: It’s all about the greenback, not our dollarette. The US currency has been shedding value since the tariff insanity began. The White House planned on the American currency strengthening, further bolstering its protectionist strategy. But, oops, FX traders saw it differently. Down she went. Up bobbed the loonie.

Q: Don’t understand. If the US is creaming everyone and skimming off trillions in tariffs, why a weaker dollar?

A: Because Mr. Market thinks Trump is a wiener. The tariff thing is wrong. A “self-imposed economic nuclear winter” as one of the president’s oligarch backers put it on the weekend. The outcome will be a recession in the States, economic contraction, more debt, lower tax revenues and worsening credit. So the dollar is being discounted.

Q: A recession in the biggest economy – is that why oil prices have tanked in the last few days? Less demand?

A: You learn fast.

Q: Sunday night stock market futures were far worse than at the opening this morning – down, like, 5% for the S&P. What happened to trim those losses by this morning?

A: Still ugly. But traders and investors are gambling all this grief and all these losses – $9.5 trillion by sunrise today – will force the Fed to take action. Before Obliteration Day the US central bank was expected to make just one or two rate cuts this year. Now people are betting it will slash five times – maybe with a big initial emergency chop – to stauch the market’s flow of blood. But the Fed most recently said it’s also worried about Trumpian inflation. So, yeah, this is a gamble.

Q: Some people say Canada got off lightly. Fact?

A: No, a lie. We are wounded. Steel and aluminum exports tariffed 25%. (Canada’s major metals producers ship up to 90% of their stuff south.) Our cars are being hit by a tax at half that level, but enough to shutter production. Softwood lumber duties have just doubled. Lots of exports not covered by our now-meaningless trade deal with the States are hit with a 10% levy. Unless this stuff disappears, expect recession.

Q: Okay, so what is a recession? What’s so bad about things slowing down and house prices dropping? Maybe Trump did a good deed.

A: When an economy shrinks for at least two consecutive quarters (six months) we’re technically in a recession. The hallmarks of this are struggling businesses that shed workers. Layoffs are the most visible sign, and as unemployment rises consumer sentiment sours, families pull back and spending falls. That makes the hole deeper. As for real estate, yes, a price decline is absolutely to be expected – along with lower mortgage rates. But history shows us when prices fall, sales do as well. Go figure.

Q: You’ve shoved homilies like ‘never sell in a storm’ down our throat. Are you a financial marketing shill? Or some kind of sadist? The storm’s getting worse.

A: So sell. Sheesh. Turn a paper loss into a real one and see how that feels. All we’re saying is that never, ever (and never) did financial markets stay down for long after a crisis or a sell-off. The worst episodes in memory (Black Monday of 1988, the Financial Crisis of 2008, the Pandemic in 2020) were all followed by a wave of buying and eventually record market highs. If you don’t need the money now, do nothing. That includes coming here to be an emotional wuss.

Q: Is Trump trying to influence our election?

A: He got tired of trolling Canada. Besides, he’s afraid of Melanie Joly. Who isn’t?

Q: So are you saying this is a good time to back up the F-150 and buy a mess of cheap stocks and stuff?

A: No. For most people, absolutely not. The Vix has spiked wildly, market sentiment is swirling the drain, corporate valuations are being gutted and as yet Trump shows no sign of the capitulation which will have to come. He just posted this drivel: “Don’t be weak! Don’t be Stupid! Don’t be a PANICAN (A new party based on Weak and Stupid people!)”. When the most powerful person in the world is saying such things, stay under your rock. Lots of stocks may be cheap, but unless you have the stomach for wild swings and more slides, wait. He’s nuts.

Q: Why is this blog loading so slowly lately? Did you run out of money to pay for a stable connection because your B&D portfolio is shredded, you geriatric old dog-licker?

A: The site has been repelling up to 70,000 attempted log-ins per day. It’s a “new and worrisome threat and attack” my webmaster says, as he welds another piece of scrap metal (looks like a scorched Cybertruck hood) onto the gates. Bots roaming the digital world looking for vulnerabilities have seriously tested site defences and slowed response times. But we’re winning. We just ransomed the IPs of the morons in the comments section on the dark web. All good. Check your email.

About the picture: “This is Daisy,” writes Kim. “She is two, she loves to play stick and tug-a-war.  Sweetest little bug but, Daisy has a cat brother names Peter.   If we want her to come quickly, and she won’t respond to her name, all we do is call Peter.  She’ll comes tearing towards you looking for that dang attention-stealing-thief cat!!  She’ll chase Peter away but Peter tolerates it, with a few whaps and then he is gone.”

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

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   By Guest Blogger Ryan Lewenza

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Kellyanne Conway was a senior Whitehouse aide for President Trump in his first term and famously stated there are “alternative facts” during a TV interview when defending a clear falsehood over Trump’s inauguration attendance.

This view of alternative facts would set the tone for Trump’s presidency, where facts, truth and honesty would be replaced with exaggerations, mistruths and outright lies. The Washington Post kept track of Trump’s mistruths and by the end of his term he had racked up over 30,000 false or misleading statements.

And these mistruths continue in Trump’s second term, particularly around his justification for the tariffs. While I agree with his concerns around unfair trade practices with some nations, I totally disagree with his prescriptions to deal with them and how poorly he’s been treating Canada, a close ally. Let’s review some of Trump’s recent statements to illustrate the point.

Does America really ‘subsidize’ Canada?

Trump says constantly that the US supports or “subsidizes” Canada by $200 billion a year. This number he’s referring to is the yearly trade balance between the US and Canada, and the $200 billion is a made up, fictional number. From the Office of the United States Trade Representative website, last year the US had a trade deficit with Canada of $63 billion. So, it’s around $60 billion, not $200 billion. There are no alternative facts!

Also, the only reason the US has a trade deficit with us is because they need and buy our oil. We ship them over 4 million barrels/day as they can’t internally produce the 20 million barrels they consume. Excluding our oil, goods trade is essentially flat between our two nations. Finally, when you include services, which is largely Canadian tourism and snowbirds spending, we’re very close to a balanced trade position with the US.

Trump also rails against Canada on our unfair tariffs, and often refers to our supply management system as a key example. To be clear, we do not charge tariffs as we have a free trade agreement with the US. There are, however, a few select cases where we do charge the US a tariff and dairy is a key one.

Our supply management system puts quotas on dairy production and help set prices. We try to support our dairy industry with this supply management system and setting a quota on what the US can sell into our market. Given our much smaller size, we try to protect our dairy farmers from the US, which have much larger farms and are prone to overproducing. The fear is the US could dump their dairy products into our markets, drive prices lower and put our Canadian dairy farmers out of business.

With the renegotiated NAFTA agreement, the US can now export up to 3.6% of their dairy products into our markets tariff free. And exporting they are – US dairy exports to Canada are up 67% over the last few years.

Now, when US dairy imports rise about this threshold, then, yes, large tariffs kick in. But this is not the full story. First, this is really the only industry we have this system for. Second, the US government also supports their farming sector in multiple ways. Funny enough, the US has a very similar system for the US sugar industry. The US government helps to set sugar prices in the US and limits foreign sugar imports by imposing steep tariffs, above set limits. Sound familiar?

So, we have a US president who is both unpredictable and is not entirely honest when he’s providing his rationales for the tariffs. I think this is what government officials are struggling with the most. They can’t figure out what he wants and how to address his concerns.

From what I can gather, President Trump sees a few key goals of the tariffs.

First, he wants to bring back jobs to the US manufacturing sector and rebuild the US industrial sector. Manufacturing jobs have steadily declined since the 1980s and 90s as seen in the chart below. He wants to force US and foreign companies to build more plants in the US.

Second, he’s trying to force other nations to lower their tariffs, and level the playing field. For example, Europe charges a 10% tariff on US auto imports (22% for pickup trucks) versus the US charging 2.5% for European imported cars, and China charges high rates on US beef and pork. These are the ‘reciprocal’ tariffs and frankly I get his point. I can’t fault him here.

US manufacturing jobs decline since 1980s and 90s

Source: US Bureau of Labor Statistics

Third, Trump and his trade officials believe this will generate billions in new tax revenues, helping to balance the budget and pay for his corporate tax cuts. Peter Navarro, Trump’s key trade advisor, is predicting the US will generate $650 billion/year in new tariff revenues, or $6 trillion over the next decade. This number is fairy dust as it assumes there will be no impact to imports and economic activity, which could be negatively impacted by these tariffs.

Here’s the problem with this simplistic, 1800s mercantilist economic approach.

What happens if these tariffs, which are upending the global trade system that has been in place for decades, ends up leading to a global recession and/or inflation surging. Will this huge experiment be worth it if the US economy and stock market collapse?

The tariffs impact the economy in two important ways.

The bad news about tariffs: higher prices, lower growth

First, they will result in higher prices. They are a tax, borne by the end consumer. Almost immediately US consumers are going to start seeing higher prices, whether it’s cars, bananas, or semiconductors. It’s not a question of if inflation will rise as a result, rather how much and how sustained. The higher inflation could then force the Federal Reserve to hike interest rates to help combat the inflationary pressures. Higher interest rates weigh on the economy and the stock market, as clearly evidenced in the big drop this week.

Second, tariffs could hurt the economy through lower economic growth. Higher prices will cause consumers to spend less. Corporations will take a big hit to their bottom line through the lower sales and higher costs and will be forced to cut staff. Case in point, Stellantis just announced they are temporarily laying off 900 workers across its North American facilities.

Nations will retaliate with their own tariffs on imported US goods, which will hurt US exports. As well, pissed off citizens will protest with their pocketbook by boycotting US products. This is already happening en masse. Canadians have reduced their trips to the US (flights are down 70% yoy to the US), snowbirds are dumping their US properties, and the Canadian government is considering cancelling a $19 billion contract of new fighter jets. This will happen around the world, which hurt US companies and businesses.

So, trying to solve one problem – the decline of US manufacturing – can lead to a number of negative reactions, thus, potentially setting the stage for a US/global recession. What good is adding a few more manufacturing jobs if people can’t afford the higher priced goods, are poorer due to their 401k’s plummeting, and the overall unemployment rate surges? Given the complexity and interconnectedness of our global economy, you can’t just try to solve one problem, without creating a host of new and likely worse outcomes. This is the crux of their economic experiment.

On the positive side, and there still are some positives, we now know what Trump’s plans are so there’s far less uncertainty today. The US/global economy is still doing well which provides some cushion against these negative shocks. The tariffs will take a little time to start showing up in price trends. We’ll likely see some big deals getting announced in the coming days/weeks, which could lead to Trump reducing or eliminating some of these tariffs. And, Trump and the US congress will now move to start implementing his pro-growth policies including the big tax cuts and deregulations, which could provide a much needed boost to the economy.

That’s Trump’s thinking and potential outcomes from his audacious tariff strategy. We’re at a pivotal point in US history and in Trump’s second term. I wish we weren’t here, but we are. Better days do lie ahead, but the next few months are going to be rocky.

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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The market gazed upon Tariff Man Thursday morning, and had a cow. Today it became a herd. Losses abound (unless you own bonds, which you should – we told ya). Global recession is now  more likely. The odds for a US downturn just rose from 40% to 60%. China has hit back to America. Us, too. The war is on. Nobody wins.

Meanwhile behold the latest maple job stats. More ugly. Over 32,600 net losses last month. A whopping 62,000 full-time positions were erased. The worst in three years. The unemployment rate goes up. “Details were even a bit weaker,” says BMO chief econ Doug Porter, “for the most part, signalling that the widespread decline in business (and consumer) sentiment in the past two months played out in real decisions last month.”

Yup. It’s an epic funk. Looks like equity market losses will continue for a while. Some individual stocks will be hammered into dust. The big headlines in coming months will be about layoffs. The Bank of Canada will have little recourse but to drop rates a few times, while rekindled inflation in the States may have the Fed holding or raising theirs. The gap between the countries will grow. The loonie fall. Trips to the US? Fuhgeddaboudit.

Confidence is melting away, because the people leading the world don’t seem to deserve any. Last month’s real estate stats support that as sales fall, listings rise and prices wobble.

But wait. How do we explain what a veteran agent in tony mid-town Toronto just told me?

A detached (it hasn’t been on the market in 60 years, not heritage), was listed in Riverdale. A 50 x 180 foot lot.  Needs a renovation, possibly a total gut, very unique layout. Listed at $3,988 million.

I have a client looking in that pocket and mentioned it to her.  She didn’t offer on that one, however it sold today with 7 Offers for $4,650,000.

I have actually been noticing much more movement on that price range as opposed to the just under $2 million range.  Makes you wonder. Are they seizing the moment? Do wealthy investors feel things are about to change and demand will increase as will prices?

Of course very wealthy people – those who can pay 4.6 million, or $700,000 over asking, for a house you can’t yet live in – are not like everybody else. They worry about long-term asset class values and net worth preservation, not how to finance next week’s groceries or the coming mortgage payment.

So in a world being pushed into a fundamental restructuring, where Canadian dollars are destined to lose value, equities are emotional and quixotic and one rogue president’s executive orders can slash the viability of whole industries, the rich often migrate to safety. For some of them, it’s real estate – in desired urban hoods where prices never crash for properties that cannot be duplicated.

Or maybe they’re just crazy.

Anyway, the rest of the housing market is feeling the same angst that’s keeping UAW workers up at night. If the orange guy does in fact cause a recession to grip North America (the odds are high he will), the most significant property correction since Covid may be upon us.

The stats from March are harbingers.

“Given the current trade uncertainty and the upcoming federal election, many households are likely taking a wait-and-see approach to home buying,” says the GTA real estate cartel. “If trade issues are solved or public policy choices help mitigate the impact of tariffs, home sales will likely increase. Home buyers need to feel their employment situation is solid before committing to monthly mortgage payments over the long term.”

Well, that’s not coming any time soon. Sales last month fell 23% while new listings jumped 28%. The MLS Frankenumber has taken a significant drop of almost 4% year/year with the average selling price of just over $1 million down 2.5%. That means we’re nearing a 20% bear market from the peak of 2022.

In Vancouver, same sentiment.

“If we can set aside the political and economic uncertainty tied to the new U.S. administration for a moment,” say the realtors, “buyers in Metro Vancouver haven’t seen market conditions this favourable in years. Prices have eased from recent highs, mortgage rates are among the lowest we’ve seen in years, and there are more active listings on the MLS® than we’ve seen in almost a decade. Sellers appear ready to engage — but so far, buyers have not shown up in the numbers we typically see at this time of year.”

Nope. Sales have fallen, new listings jumped (29%) and total inventory available is up almost 40%. Last month only one in ten detached homes for sale found a buyer. Average property prices are down about a point to $1.1 million.

In Calgary, “Ongoing economic uncertainty, driven by tariff threats, has weighed on consumer confidence and impacted housing activity in March,” says the industry. “Sales slowed across all property types, with the steepest declines seen in higher-density segments.”

“It is not a surprise to see a pullback in sales given the uncertainty,” says chief economist Ann-Marie Lurie, who also reminds reluctant buyers that prices are flatlining, mortgage rates falling and choice expanding. But, alas, no FOMO.

Well, all real estate is local. Victoria and Montreal are doing okay. Halifax not so much. But it’s safe to say this tempest has just started. Stay moored.

About the picture: “Frederick knows the best tactic for survival,” says Keith, “is to rest easy and ignore all the noise. Life is good!”

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

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Markets tanked Thursday as the world wondered what Donald Trump’s been smoking. The decline on opening was 3.5% for the mighty S&P. The Dow lost sixteen hundred points. Bay Street shed 700 at the start of trade.

For context, the greatest one-day decline took place on a day in October of 1987. As the S&P was clobbered for 20% I sat in my Big City newspaper office and wondered how a hairy, young business editor and columnist should react. Not well, as it turned out.

The greatest one-day advance for that index, by the way, was in 1933. That 16% romp came as the US government moved to breach the Depression – which had been exacerbated (and some argue, caused) by US tariffs and a trade war.

The orange guy’s Rose Garden made-for-TV, live-audience event with a big bizarre chart showing how much he wanted to hurt each country was historic. Nobody thought an American president could be exactly that dumb. But now we have a new low bar that a male Dachshund with a gland problem could clear.

Canada could have fared worse. But still, we have an auto tariff, steel and aluminum taxes plus levies on oil, potash and all non-CUSMA items. It took 12 hours for the first car plant to say it was closing for a while. The president abrogated the trade deal he signed in his first term, and shredded the principles of the auto pact of sixty years ago. He took time yesterday in his rambling remarks to trash-talk Canada once again and moan about NAFTA as “the worst deal in history” that he said had caused 90,000 US factories to close.

A lie of course. He makes this stuff up.

Anyway, what about your portfolio? What now?

Micheal sent me this questions today: should I be buying more? And borrow to do it?

“Married, 38 Years old, household income is about 300k per year with two little kids,” he says. “We have a house worth approximately 700k fully paid off. We also have a financial portfolio currently worth about 950k that is 80% stocks 20% bonds split 40-40-20 Canada, US, International. We paid off our mortgage pretty aggressively early on, which may have been a mistake. Now the question is, would it make sense for someone in my situation to take on a HELOC loan of say, 200k to buoy the financial portfolio? What do you think?”

Leveraged investing can make a lot of sense. Portfolios get larger. Net worth can grow more rapidly. Loan interest is fully deductible for non-registered account borrowings. Your taxes are low on capital gains. You can write capital losses off, and carry them forward. All good.

But there’s risk, of course.

Global markets are selling off following the Rose Garden Gutting on fears we’re headed for a world-wide recession. America’s president is taking an unprecedented gamble that his country can suck off wealth from others in order to balance its out-of-control deficit and cut taxes for Elon. He’s also wagering the people who voted him in four months ago will happily pay thousands more for cars, endure layoffs and see the cost of living go up while the economy contracts, because he’s a genius. And a king. Even Congress and those troublesome elected people are irrelevant now. The enture global trade war has come from the Sharpie of one capricious man.

So, Mike, are you okay with buying into this storm?

I am. But then, (a) I do not have three dependents, (b) my portfolio is not already overweight in equities, like yours, and (c) I don’t leverage up with borrowed funds.

Confident and experienced people understand this market will rebound, as it always has in the past. They see a selloff for what it is. A temporary event. Also a time to deploy cash you’ve been sitting on waiting for a few bargains.

Rational people also comprehend that an irrational leader pursuing debunked policies will have to modify, surrender, retreat, capitulate, backtrack or sheepishly admit fallibility. That last thing will never happen with Trump, of course. But Republicans already nervous about the midterm elections in 2026 may play a key role in pointing out tariffs and trade wars never worked in the past, and surely will fail again. That is exactly what Mr. Market is saying today.

Don’t trade. Go play with your kids instead, Michael. Rebalance and derisk that portfolio once equity prices recover. You are gloriously debt-free, so endeavour to stay that way.

The leader of the free world is, as Mark Carney repeated yesterday, unreliable.

About the picture: “Zoe, an 8 year old Bichon Shih tzu  from Vancouver Island wondered if she could grace your wonderful blog,” writes Bonnie. “She just returned from the spa and thinks she looks pretty cute. Thanks for your informative blog.”

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

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Lost, but unforgotten in these Trumpian times, is the fact kiddos can’t buy houses.

This week Pierre Poilievre stepped in it by saying 36-year-old women are getting antsy about real estate affordability because “their biological clocks are running out.” Oops. There’s a lot of stuff you can say about the femmes. But not that.

While scads of people have children without also having a mortgage, in PP’s world that’s apparently not possible. So time is of the essence and he’d like the so-called housing crisis to be a bigger issue than fighting the orange guy (a battle Carney’s winning).

So let’s yak about how the two major parties would deal with clocky women and their mates. (The NDP wants the government to start handing our low-rate mortgages. But Jagmeet is irrelevant. His party may end up with fewer seats than your car.)

The Libs propose a new agency – Build Canada Homes – to throw up half a million units a year, “and get the federal government back into the business of home building, by acting as a developer to build affordable housing at scale, including on public lands.” That would be greased with $25 billion and focus on pre-fab housing, “using Canadian technologies and resources like mass timber and softwood lumber, to build faster, smarter, more affordably, and more sustainably.”

Another $10 billion would be available in cheap financing for home builders, and the Carney crew makes the usual vow (like the Cons) to cut red tape, force development charges lower and trash zoning. There’d also be a tax incentive to build new rental units, elimination of the GST for newbie buyers and the conversion of offices into homes.

Maybe that would help. Maybe not. Like all politicians and governments, these guys still cling to the build-build-build solution to a problem that’s all about affordability.

And the Conservatives?

More building fetish, and a promise to punish cities and towns that don’t goose housing starts. But there’s also a new wrinkle – the Canada First Reinvestment Tax Cut. Any person, any business or any corp selling an asset and realizing a profit would pay no tax on that gain if the money were invested in Canada. The deal would stand until the end of next year, but could be made permanent.

It could be “rocket fuel for our economy,” says Poilievre. “It will incentivize investors—from small business owners, to farmers, to homebuilders—to reinvest and build things here in Canada.”

Capital gains tax would not be eliminated, however it could be effectively deferred – maybe forever. But this inventive to reinvest could also have an unintended consequence – like making it even more attractive for people (and corporations) to snatch up investment properties and drive prices. “It risks worsening affordability and further entrenching the financialization of housing,” says broker and property guru John Pasalis (who still hates me).

“While this policy could encourage more rental construction,” he says. “it carries significant downsides when applied to other areas of the housing market – particularly owner-occupied homes and investment properties. By allowing investors to defer capital gains taxes, the policy makes real estate an even more attractive investment vehicle.

“For baby boomers sitting on substantial home equity or corporations with deep pockets, Poilievre’s plan provides an opportunity to roll over their profits into more properties without facing an immediate tax hit. This could lead to more speculative investment in the housing market, driving up prices and making it even harder for young Canadians to enter the market. As a result, homeownership would move further out of reach for younger generations, who are already struggling to save for down payments amid skyrocketing home prices.

“It’s also clear that this policy is aimed at attracting the boomer vote, but it does so at the expense of younger Canadians who are being priced out of homeownership… If Poilievre’s plan moves forward without addressing these unintended consequences, it could deepen generational divides and accelerate the transformation of Canada’s housing market into a vehicle for wealth accumulation – rather than a system that provides secure and affordable homes for Canadians.”

In short, they don’t get it. Years and years after it became evident the Canadian real estate market has choked on speculation and over-investment, due mainly to the cap gains tax exemption for principal residences, making property flips even more profitable ain’t the answer. Nor is spending more billions to encourage the construction of millions of new units when the ones we have available languish unsold.

The tax system needs a reset. What homeowners get, renters should also enjoy. If the PR exemption cannot be eliminated it should be capped, and tenants given an equal chance to avoid having capital gains on other kinds of assets. Make owning less attractive. Make renting more beneficial. Then values will adjust.

And let’s do it soon. Because, you know, the clock…

About the picture: “Here is a photo of a dog in the middle of a hot humid summer here in Japan,” writes Kian. “Hope this pampered pooch will make it into your blog. Thank you for you blog. It has been very educational and should be mandatory reading for all Canadians. I appreciate your views on politics, economy, wfh, fire and of course Trump.  Thank you for all you do.”

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

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