Category: Accounting tips

  By Guest Blogger Doug Rowat

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Last week, we finally got what we were all expecting: a quarterly US GDP report that sucked.

US first quarter GDP declined 0.3%, the weakest growth rate in three years and well below consensus expectations. A flood of imports and less government spending contributed to the decline. The US now only needs one more quarter like this and, just like that, it will have officially sunk into a technical recession.

However, we won’t get that second quarter GDP release until the end of July. In the meantime, are there other, less conventional, indicators that are telling us that the US may already be in recession?

Indeed there are.

The first indicator comes from one of my own associates. When I told him I was writing a blog on unusual recession indicators, he jokingly told me to use the “support-staff-bringing-sandwiches-from-home indicator”, meaning that he’s making his lunch more often to save money ahead of an economic downturn. (I assured him that his job was secure.)

Another completely unscientific recession indicator:

The lousy US economy has caught The New Yorker’s attention

Source: The New Yorker

Given that The New Yorker focuses almost exclusively on arts, politics and culture—not the economy—the unusual appearance of this article might itself be a recession indicator. If The New Yorker’s noticing problems in the US economy then a recession must be near.

But there’s more.

How about the Tooth Fairy Index? This is an index created by dental-benefits provider Delta Dental. Since the late 1990s, Delta has conducted a poll asking Americans to put a value on a single tooth left for the tooth fairy. Concerningly, the tooth fairy’s leaving a lot less mula under the pillow lately and the Index is rolling over. The February Index reading (the latest available) revealed that the average value of a lost tooth during the past year declined by 14% from US$5.84 to US$5.01. According to Delta Dental, “this marks one of the most significant year-over-year declines in Tooth Fairy giving since the poll’s inception.” And that’s the February reading. One can only imagine what the next survey will show.

Let’s also not overlook the men’s underwear indicator. The theory here is that when tougher economic times are coming, men will hang on to their underwear longer, delaying new tighty whitie purchases. While there’s not a regularly updated men’s underwear index per se, I do highlight that Hanesbrands and Philips-Van Heusen, two of the world’s biggest men’s underwear manufacturers, have seen their stock prices plummet this year. Again, highly concerning for the US economy (and, for that matter, concerning for men’s spouses everywhere).

Men’s underwear giants Hanesbrands and Philips-Van Heusen: gotch isn’t having a good year.

Source: Google Finance

Finally, let’s end on a non-traditional indicator that has more serious predictive value for the US economy: cardboard box demand. Is there any US industry that doesn’t require cardboard boxes for at least some of its supply-chain needs? Bank of America Securities conducts regular surveys of corrugated box converters (the guys that take corrugated board and convert it into ready-to-assemble cardboard boxes) and BofA’s latest survey doesn’t paint a pretty picture: 48% of respondents said that demand is worse than three months ago, up from ZERO percent who said the same in November:

Bank of America corrugated box converter survey: demand sentiment past 3 months

Source: Packaging Dive, Turner Investments

I argued last post that negative data may actually be good for equity markets as investors may view lousy numbers positively as they pressure Trump to back off on his global trade war. The negative GDP data from last week seems to support this thesis, at least in the short term, as the S&P 500 is actually higher since the report was released.

However, while possible tariff easing may be helpful for equity markets, it’s probably already too late for the US economy. A recession now seems inevitable. Both the traditional indicators and the oddball indicators are saying so.

Like old underwear, the holes in the American economy are clearly showing.

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

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An historic mid-town rowhouse, 17 feet wide, sweetly reno’d, two-car parking and a one-minute walk to the Toronto subway emerged at $1.9 million. Hoping for a bidding war the agent set an ‘offer date’ of this past Tuesday. It came and went. No sale. Now it’s listed again, for $2.1 million.

A more veteran agent says while the market overall is in choke mode, there are still deals flying around in the more affordable range of $1.7 to $1.9 million. By the way, up the street from the 17-footer half a dozen homes have come up in a posher hood. Five million gets you on a decent street. One place is listed at $17 million.

For most people, this is a fantasy. And yet it’s reality.

A $2 million house with 20% down needs $400,000 cash and another $75,000 in land tax. The mortgage would be $9,500 a month, with property tax of about $20,000 annually. Required income is $350,000. However, it’s interesting to note the average family income in the hunk of Toronto just referenced is $420,000.

So, yeah, we’re a polarizing nation. The average household income in the GTA as a whole is $97,000. That’s enough to afford a mortgage (or rent) of $2,600 a month, and a house worth almost $500,000 with 10% down.

But wait. The average condo in the burbs costs $618,000, and in the city it’s $710,000. A detached home in 905 is $1.3 million and in 416 it rings in at $1.7 million.

Despite Trump, trade wars, the 51st state, a federal election, recession, stalled mortgage rates, rising unemployment (up again today), financial market gyrations, unaffordability, measles and Danielle Smith, house prices across Canada haven’t plunged. They’ve melted a little over the last three years of turmoil, but valuations have not crashed along with sales levels.

A report from RBC’s Robert Hogue this week says homebuyers are, well, giving up.

“The trade war is taking an increasing toll on Canada’s housing markets as potential economic fallout weighs heavily on the minds of prospective homebuyers,” he says. “Southern Ontario and parts of British Columbia—the country’s least affordable areas—are seeing sharper pullbacks in activity and weakening home prices as a result.”

As this pathetic blog has been detailing in the last few days, the stats out of Calgary, Victoria, Vancouver, the Lower Mainland, Toronto and the GTA suck. Down 20% or better over April of 2024, which also sucked. Active inventory is up and demand down, but prices have dropped only a few percentage points, if at all. As the realtor listing that rowhouse demonstrated, both sellers and their agents think FOMO is alive and well, just waiting to be coaxed out of the shadows of doubt.

Hogue suggests, however, the market overall is still pooched.

“Property values are coming under growing pressure amid rising inventories and soft demand. Bargaining power has shifted in the buyer’s favour in Vancouver, Fraser Valley, Toronto and other southern Ontario markets. Prairie markets such as Edmonton, Saskatoon, Regina, and some in Quebec including Quebec City and the Atlantic region like St. John’s seem to be holding up at this point. But, they aren’t immune to trade-induced anxiety.”

His bottom line: “We don’t see a meaningful rebound as long as trade uncertainty lingers.”

But here’s the rub. A ‘rebound’ means an increase in demand, which would suggest rising asking and sale prices. Given the massive gulf between average incomes and average house prices, how can that be a mathematical reality? Given the looming certainty of a Trumpian downturn in Canada, with more layoffs and pressure on wages, how is it possible real estate will have a renaissance?

It isn’t.

Unless there’s a plunge in interest rates. The Bank of Canada would have to drop its policy marker three or four times, taking it back toward the near-pandemic 1% range. With mortgages then around 3%, or a tad less, realtors figure demand could come surging back as the masses gain their appetite for heaps more debt.

The odds of this happening are slim. Yeah, we’ll likely get one or two more cuts in 2025, shaving a half point from the BoC rate. But more would be reckless on the part of the CB. Given the inflation a trade war threatens, we can’t afford to trash the loonie (pushing prices higher) with rates far below those of the US.

Or, the government caves. Housing took a back seat to Trump in the federal election. It won’t stay there. Prices are not falling enough to make homes reasonable. Incomes are not swelling enough to carry crazy levels of debt. Employment is uncertain. Trump is nuts. Folks are frustrated.

Building more homes people can’t buy is no solution. Expect chaos.

About the picture: “I’ve been a big fan of your blog for the last 8 or 9 years, it always helps me to get the big-picture perspective of where things are across Canada, and reaffirms that my decision to move to Calgary, from Mexico City, was the right one,” writes Victor. “I also really appreciate the investment advice. The dog in the picture is Oso, he is a weird breed: Rocky Mountain Liberal. On that, I know that Albertans have a reputation of being “regressive”/disgruntled with Ottawa, and I can appreciate how that sometimes could be true (a fraction of my in-law family is in that camp unfortunately), but that’s not the full picture. There is at least one riding here in Calgary that sees things differently and believes Canada is better as a unity. Long way to say, Alberta is not all folks complaining about Canada. Some of us are grateful to be part of Canada and more than happy to pitch in to keep up the great standard of living we all enjoy in this country. Anyways, hopefully Oso makes it to the cover of one of your posts one day.”

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

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Jen wrote me this week. Her letter signed off with this: “From a single mom who never ever imagined selling herself on the internet just to make it in this world.”

Now 32, she’s been through a ‘toxic’ divorce. The house was sold. They fought in court. “In the end, the judge awarded me everything he could because he knew this was my ex’s doing. Although I was awarded everything, I owed my lawyer so much money I ended up walking away with nothing. I was desperate to survive.”

That’s when she went to OnlyFans. It’s a platform filled with content created by users and a robust preoccupation with, er, boobs. “I am not proud of this,” says Jen, “and would love more than anything to not have to do it.”

But the money’s good. Too good to give up, in fact.

Jen made $30,000 a year at first exposing herself, and “this year I project to make about $80,000- $100,000 from my much hated side hustle.” Meanwhile she has landed a normal job, paying $75,000.

“Since starting this side hustle, I have been paying debt off at a rapid rate, furnished my house and took my daughter to Disneyland,” she says. “Now, my plan is to save for a house. I read your blogs all the time. I watch the trends. I watch the interest rates and as housing prices go up and down. I am now in a relationship where he also makes good money. Not as good as me, but good money.”

She wants to get a place for about $800,000, and has a small amount of money saved. “When do you think I should buy? If at all?” she asks. “What other accounts should I open to offset this tax on my self employed income. I need to create a business and pay GST/ HST and pay myself as an employee. I can live of my actual income now, and I could potentially save all my income from my side hustle that I’m not proud of. Should I do some TFSAs and invest some of this money?”

My reply asked her for more information. How much cash is available for a downpayment? Is she buying solo or with a partner? Will they both be on title? On a mortgage? Is she square with the CRA? Does she have a loan preapproval? What’s she done about saving for her kid? What about the side hustle dependency when people get tired of ogling an aging thirtysomething? No pension there.

Well, dunno. She stopped writing me. So I wish Jen well.

A few thoughts occur now.

When her marriage fell apart it was, more than anything, the matrimonial home that caused the greatest angst. Jen says the sale was court-ordered, suggesting it was joint title and joint financing with one partner refusing to sell. At the end of the day, all equity was lost, likely the result of a big mortgage payout, with penalty, plus those legals.

Real estate can do that. So many people get marred, get pregnant and think they need a house – at any price because (a) properties always go up in value and (b) there’s always a lender around to shower you with debt.

Now she’s ready to jump in again. This time the relationship is more tenuous – no marriage – and her finances are dependant on a UK-based soft-porn platform with 220 million viewers and run-in with the US government for child exploitation. In other words, income might evaporate. Could Jen be left once again with real estate she can’t really afford, hooked in legally and financially to another person put on title?

If she stays an OnlyFans girl then trying to avoid taxation through incorporation is nuts. The accounting and regulatory burden is too high and the benefits nebulous. Besides, small-business owners taking dividends end up paying the same tax load as employees or sole proprietor producers. So Jen should claim it all, pay her share and use the take-home income to finance an RESP for her kid, invest in RRSPs plus a FHSA for future security and an immediate tax break, plus shovel any extra voyeur cash into a TFSA.

See if the new relationship holds, Jennifer. Don’t get into financing that requires a dubious side hustle. Stay flexible and stop thinking a deed and a mortgage will bring stability to your life. It could be the exact opposite. Like last time.

And ponder this: you’ve reached out to some dodgy, dog-loving dude on the net for personal life and financial help. Not good. Find a person IRL you can talk to about these things.

Mostly, if you’re doing something you hate, for money that you now could do without, stop. It matters not how your partner, your employer, the misfits in this blog’s comments section or society judge you. Only how you judge yourself.

About the picture: “Here’s a picture of Aero,” writes Charlie, celebrating his 13th birthday a few days ago. His brother, Reese, has graced your blog in the past and also had his 13th on the same day. Feel free to use on your blog as you see fit. Thanks for all that you do!”

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

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Sam says she’s had it. “Trump crashed my portfolio. He’s stressing me totally. I’m retiring in three years. I’m out of here.”

So three weeks ago Samantha got rad. She went downtown and bought two kilos of gold.

“Can’t tell you how nervous I was driving home,” she says. “I took some towels to wrap the bars in and hid them under the back seat. But when I got there, I couldn’t stop touching them.”

Seriously. She’s smitten. And reckless.

Gold has advanced in price by close to 30% this year. An ounce is now valued at $3,382 US (it lost about fifty bucks in the last day, or 1.5%). Being priced in American currency, bullion has bounced around even more in loonies as the greenback lost 8% of its value – thanks to the orange guy.

The yellow rocks have advanced as investors questioned the sanity of the American president, the failing wisdom of 19th Century tariffs in a global world, the implications of an international trade war, equity market gyrations and new doubts about the traditional risk-free status of American government bonds.

For centuries, gold has been an asset of last resort, often hoarded within families, passed between generations and considered wearable wealth. Some cultures (think India) consider it to be the only true medium of exchange. Others (think Trump) like to feel rich by making toilets and banister knobs out of it. In recent decades western investors have seen it as a hedge against geopolitical and economic stability. Hence its recent ascent.

But is it a place to put $300,000 worth of retirement savings?

Gold pays no interest. It does not throw off dividends. You can’t sell an ounce over email. Or easily borrow against it. All gains are taxable. And the price is subject not only to currency fluctuations plus supply and demand (it’s a commodity, after all, not a financial asset), but also investor sentiment and human emotion.

Gold costs a premium to buy and a commission to sell. It needs to be securely stored (not under the back seat of your 2004 Nissan), and is subject to loss, theft and damage – unlike your S&P 500 exchange-traded fund.

Of course, the gold sellers make it simple and easy to acquire. And there is incessant pro-rocks chatter among the billions of gold bugs on the planet. They like to quote the golden rule: “He who has the gold makes the rules.”

Buying gold is easy. Selling it, not so much.

Source: Kitco

By the way, what about tax? Lots of folks think because they can carry home a few ounces and keep them in a freezer bag inside the toilet tank the CRA will never know, and not demand a slice when the rocks are turned into cash.

They’re mistaken.

Transactions are recorded by the gold merchants, both buys and sales. Gold coins, wafers and bars come with identifiers, including purity and refiner. The big sellers – Kitco or Scotia, for example – are required to report when bullion changes hands just as they do with the sale of shares in Nvidia or RBC.

All profits are taxable as capital gains – you get to keep 50% and add the rest to your annual taxable income. Not doing so is evasion. Mr. Carney will then hang you upside down by your private parts outside to be licked mercilessly by several Bassett hounds. If you lose money on gold or silver bullion, those losses may be used to offset capital gains.

Now, Sam is gambling that her two lumps of gold will be worth a lot more in three years when her work income ends. There’s no guarantee, of course. Trump will be about to exit, trade wars may be ending, the US$ could be soaring and equity markets celebrating. That would crush bullion.

Moreover, how does Sam turn the rocks into money to buy stuff at Loblaws and Costco?

Right. She has to sell an entire kilo all at once to get any actual cash out of it. If the price sucks on that day, or week or month, she’s SOL. Unlike having a financial portfolio, where a few shares or units can be instantly converted into usable cash, gold investors are trapped inside their rocks.

So there are better alternatives, even if you think Tariff Man is destroying the world as we know it. A gold ETF, for example, is based on bullion prices but is liquid, cashable and convenient. Investors have nothing to store or worry about and can move in and out at will. The ETF holds gold on your behalf with the fees and commissions involved, or sometimes bullion in derivative form. Far more flexible.

Another option is to buy a gold certificate, issued by a company that owns and holds gold, of which you become a partial owner. But there is less liquidity and you still need to work with a gold dealer. Alternatively, buy shares in a gold mining company, like Barrick. This way you might get equity growth as well as dividend income, and you can participate in corporate earnings as well as bullion appreciation. However, owning individual stocks involves risk – sometimes substantial.

So a good option is just to get an ETF holding all of the major stocks traded on Bay Street. Gold and related commodities make up a healthy part of the index – and have done well lately as world trade tensions beat on many other sectors.

In short, Sam needs to decide if she wants financial security or something to fondle. Never an easy choice.

About the picture: “I’m a 30 year old regular reader of the blog,” writes Luke. “My old man, Steve, is a religious reader of the blog, I owe my interest in greater fool, and any semblance of financial literacy to him. I’d love to surprise him with a picture of our old family dog, Barlow. Barlow died in December of 2018. Dad and Barlow were two peas; tall, blonde, and full of joy. He loves Barlow almost as much as loves quoting you word for word at the dinner table. Hope you’ll consider it. Thanks for being one of the good ones.”

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

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With high hopes, Mr. Carney blows into Washington. In advance Tariff Man sighed a little, saying “I don’t know why he’s coming. To try and make a deal, I guess. All these countries want a deal. Because they want what we have.”

And the orange guy forgets we already have a deal. He signed it. Still in effect – spelling out free trade among the US, us and Mexico. The one he broke.

Well, trade tensions are hitting the ground now. Big layoffs and terminations announced in the car business. Big retail outfits going paws up. Now a big collapse in portions of the housing market.

A new report by TD economists is being etched on the tombstone of Toronto condos. The bank now says prices will tank a full 10% this year, bringing units into a bear market (down 20%) compared with two years ago. Sales have collapsed to levels unseen since the crisis of 2008, when US real estate was imploding along with major Wall Street banks.

There are many reasons. Immigration levels have been slashed, reducing demand from tenants, dropping rents and making investment properties uneconomic. Mortgage rates are stiff and the CB has stopped chopping them. There’s a supply glut on the resale market and 17,000 new, unsold apartments available. And the Trump trade war has spooked Canadians and sidelined both investors and end-users.

TD found a quarter of people surveyed say they’re, “less likely to make a major purchase given the trade tensions.” Now that tariff-related layoffs have started, the bank thinks unemployment could rise to 7% nationally later this year with wage growth falling. Already the jobless rate in the GTA is approaching 9%.

The trade war, TD concludes, is “scarring on the psyche of households and businesses”.

Detached sales down 20%+, prices fall 7% across GTA

Source: TRREB, MLS

Well today’s stats from the local real estate cartel confirm all of that. As we forecast here over the last few days, this pattern of lousy sales, rising inventories and slowly melting prices seen in Calgary, Victoria and the Lower Mainland has spread eastward.

The GTA numbers suck. No spring market there. Overall sales in April dropped 23%. Active listings have ballooned 54% from this time last year. The 905 is a wasteland for offers where detached sales are down 27% and condo deals have fallen by a third. Average prices in the whole region are 4% lower year/year (and 2024 was tough) with detached homes selling for 7% less.

Having said that, the average property in the GTA still costs $1.1 million. A detached is $1.3 million in the burbs and $1.7 million in the city.

Says realtor grand wizard Elechia Barry-Sproule, in trying to shine this road apple: “Following the recent federal election, many households across the GTA are closely monitoring the evolution of our trade relationship with the United States. If this relationship moves in a positive direction, we could see an uptick in transactions driven by improved consumer confidence and a market that is both more affordable and better supplied.”

But the reality is sales at the current level of 5,000 in April are pathetic. During the same month in 2022, 13,600 homes changed hands. The next April the total exceeded 8,000. Last April sales were over 7,000. So this year is the worst since the first full weeks of the global pandemic, when everyone lost their job and prepared to die.

Active listings swell by 54%, average price off 4%

Whither from here?

It’s unreasonable to assume Carney will come home with a ‘peace in our time’ manifesto from Trump. Even if he did, there’s no guarantee the US president wouldn’t change his mind in a week. The Canadian economy is in for months, or years, or transition and uncertainty. Yes, the jobless rate will rise. Interest rates will go down. House prices will continue their slow melt. Inventory will grow. Investors will bail. And urban condos could sink in value more than even TD expects. Plus, we still have kooky Danielle Smith to worry about.

Meanwhile, stock markets have recouped their hysterical losses of the past few weeks. The Canadian dollar is markedly stronger. Trump will barge ahead with gutting government and slashing corporate taxes, fuelling earnings and equities. Oil prices have swooned, cutting business costs and easing inflation.

Those with balanced, diversified, global and liquid portfolios can sleep peacefully. But the nightmare in the towers has just begun.

About the picture: “Garth, thank you for the many years of this wonderful blog,” writes Michael. “I enjoy it everyday. You have improved my financial literacy, and in turn my families. Here’s the new addition to our family “Nala”; waking from a nap on a long drive.”

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

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How bad does it get?

This week the big real estate cartels report dismal spring sales – as the gloom spreads. GM is slashing a third of its workforce at the company’s biggest Canadian assembly plant. Trump just announced a 100% tariff on movies made outside the US – horrible news for Toronto, Halifax and the Lower Mainland. On NBC yesterday he repeated that Canada should be a state and the USA has no need for our “energy, lumber or cars”. And tomorrow Mr. Carney goes to Washington, knowing full well what the prez and his hitman JD did to Zelenskyy in the same chair.

Well, maybe things get better from here. Perhaps the new PM can get the North American trade pact reborn. We’ll see. But whatever happens, it will be too late for the poor, starving realtors.

Last week we told you about Calgary and Victoria. Sales down, listings up, prices wavering but still lofty. Supply is overwhelming demand everywhere. Add Vancouver to the list.

April sales crashed 24% year/year (and last year sucked). So just over two thousand properties changed hands, a drop of a third from the 10-year trend.

“The slower sales we’re now seeing stand out as unusual, particularly against a backdrop of significantly improved borrowing conditions, which typically helps to boost sales,” say the realtors. “What’s also unusual is starting the year with Canada’s largest trading partner threatening to tilt our economy into recession via trade policy, while at the same time having Canadians head to the polls to elect a new federal government. These issues have been hard to ignore, and the April home sales figures suggest some buyers have continued to patiently wait out the storm.”

Some storm. Getting worse. The film business in BC generates $3.5 billion a year and employs 47,500 people. Imagine what a 100% tariff might do.

Buyers currently have 16,207 listings to choose from in YVR, 30% more than last year and a staggering 48% above the average over the past decade. The sales-to-active listings ratio for detached homes has melted to less than 10%, meaning nine of ten do not get offers. Thus, it’s a buyer’s market. But without many buyers.

Not surprisingly, the industry is trying to put a positive spin on this mess. “Inventory levels have just crested 16,000 for the first time since 2014, prices have stayed fairly stable for the past few months, and borrowing costs are the lowest they’ve been in years. These factors benefit buyers, and with balanced conditions across the market overall, there’s plenty of opportunity for anyone looking to make a purchase.”

Prices?

Barely moving. The average is down less than 2%, to $1.184 million. Detached houses have melted even less, 0.7%, at just over two million. Condos are off 2%, at an average of $763,000.

GTA realtors will have their stats out soon, but nobody is expecting a different result. Lousy sales. Cautious, worried buyers. Swelling inventory (a record number of condos now on the market in DT Toronto, for example). Assignment sales bloodbath, as detailed here last week. A massive pile of newly-built units available. And prices that do not yet reflect the growing desperation of sellers.

The flow of offers is at the lowest point since 1998. Yeah, twenty-seven years ago. New listings are up by a third, and the total number of properties for sale has jumped over 90%. Detached supply in 416 has mushroomed 160%. As we detailed here last week, the sales-to-new-listings ratio for condos, at 29%, is the lowest in 34 years. Sales of newly-built units are running 95% below 2022 levels.

These numbers are stunning. Most people in the business have never before experienced them. And it’s a safe bet the overwhelming majority of the 60,000+ agents in the GTA will have no sales this year, or not enough to survive on.

So while Trump turns the screws tighter, the economy is already bleeding out. We lost thirty thousand more jobs in March, a whack of them in the GTA, where the unemployment rate is already close to 9%.

Yikes. What next?

Hopefully Carney tempers Tariff Man. Meanwhile the Bank of Canada will start cutting interest rates again on June 4th. Those domestic trade barriers are scheduled to be torn down by the beginning of July. There is hope.

In the meantime, no option but for prices to grind lower. New construction is dead. Realtors are driving Uber. The jobless rate is rising – but so is the savings rate as households sit on their assets. As always, this will turn out to be a moment of opportunity. As always, most will be blind.

About the picture: “This is Ralph, gone these 35 years,” writes Alan, in Nova Scotia. “For over half of his long life we lived year-round in the high Arctic islands, where he always grew a good coat. This shot was taken at 2:00 a.m. in May 1978 at Grise Fiord, Canada’s most northern community, where we lived for 3 years. In 1975 I ran away from home at age 23 and joined the Hudson’s Bay Company after a short stint in banking. In 1976 I was transferred from Iqaluit as the manager of the HBC store in Resolute Bay, on Cornwallis Island. I bought Ralph from a breeder in Ottawa that fall. In 1977 I moved into Grise Fiord as the manager of the Grise Fiord Eskimo Co-op, a small-trading-post-type store in a town of 100 people. We had no radio, no television, no telephones and we got a plane twice a month, maybe. I managed the store, bought fur and carvings, ran the post office, and operated a small primitive “hotel” for the rich folk flying to the north pole as tourists in Twin Otters. I met my late wife there – she was the school teacher. Best years of my life . . . Thanks for all you do, especially in these trying times.”

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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The Bank of Canada (BoC) recently paused their interest rate cuts after seven consecutive cuts. Central banks have a difficult road ahead as they must deal with opposing forces from Trump’s tariffs – potentially lower economic growth and higher inflation (i.e., stagflation). The question many are asking is, will the BoC continue to lower interest rates or are we near the end of this easing cycle?

Let’s start with a quick look back at Canadian interest rates. The BoC started hiking rates in early 2022 as inflation started to rise, where they hiked rates from the low of 0.25% to a peak of 5% in the summer of 2023. Then, as inflation started to subside, the BoC started to cut rates last summer, with rates declining from 5% to the current 2.75%. With Canadian interest rates being cut effectively in half, clearly, we’re getting closer to the bottom in interest rates.

We think there’s still one to two more interest rates cuts coming this year, so we’re getting closer to the end but, we’re not there yet. Why do we think this?

First, our economy is struggling and could weaken further in part due to the tariffs. Last month our economy shed 32,000 jobs with our unemployment rate rising to 6.7%, which is near its highest level since 2021. The BoC highlighted this slowdown in our economy in their Monetary Policy Report (MRP).

This gets me to the second point, which is the negative impact of the tariffs. In the MPR they noted that tariffs impact our economy in two ways – first directly through the uncertain trade policies and secondly how this trade uncertainty then weighs on consumers, the labour market and business spending.

In the report they provided two scenarios on the tariffs. Scenario 1 assumes the tariffs are negotiated away, where economic activity slows but then picks up later this year. Scenario 2 assumes a protracted tariff war, which results in a significant global and Canadian recession. You can see how critical these tariffs are to the outlook and how binary the outcome is.

Third, inflation has slowed in Canada and is currently around the BoC’s 2% target, so this gives them some flexibility to cut rates further.

Finally, the bond markets are pricing in another cut or two. Interest rate futures put a cut at the June meeting at 50% and 100% by the July meeting. By the end of the year the market is pricing in a 70% chance of two cuts, which would take the overnight rate down to 2.25%.

So, given all this, we see high odds of one and potentially two more cuts by the BoC this year.

Outlook for Canadian overnight rate

Source: Bloomberg, Turner Investments

The implications of this are that we could see Canadian bonds rise from here (bond prices move inversely with interest rates). This could be good for Canadian dividend stocks, which often get a boost from lower interest rates, and could help the beleaguered Canadian housing market. Plus, we could see a further rebound in the Canadian dollar. Why?

Canadian dollar is off its lows

Source: Stockcharts.com, Turner Investments

To the surprise of many (not us!), the Canadian dollar has experienced a notable turnaround, rallying from the lows of 68 cents earlier in the year to around 72 cents currently. Many were calling for the Canadian dollar to continue to drop, with some even calling for our dollar to hit 50 cents versus the US dollar.

We took the other side of the debate and in a blog late last year predicted this turnaround. From the blog, “Sure, our dollar could drop a bit further in the short-term, but I think these dire calls for it to fall into the 50s is overblown, and in fact, I see our dollar surprising people in 2025. Call me a contrarian, but I’m predicting our Canadian dollar to recover next year.”

A key reason for this contrarian view was that the current divergence between the Canadian and US economies (the US economy was doing much better than Canada prior to Trump’s tariff war), would ‘mean revert’, and that our economies and monetary policies would get back in gear or converge over time. This is now happening.

The US economy just contracted in Q1 with a -0.3% GDP decline, marking the first negative quarter of growth since 2022. Not a great start for Trump’s presidency. And this is expected to continue for the remainder of the year. Coming into this year economists were forecasting the US economy to grow 2-2.5% this year, and many economists are now forecasting modest growth for this year and potentially a recession.

As a result of this slower economic growth, expectations for US rate cuts have been rising. The bond market is now pricing in 3-4 rate cuts this year from the Federal Reserve. This partly explains why we’ve seen the US dollar decline in recent months. Below is a chart of the US Dollar Index, which measures the US dollar versus a basket of foreign currencies. It’s down 10% since its peak earlier this year.

Add in the fact that foreign investors are starting to question ‘US exceptionalism’ and are moving money from the US and into other foreign markets. All of this has led to a steep decline in the US dollar and a rise in our Loonie.

All told, we see another interest rate cut or two from the BoC and see our Canadian dollar potentially rising from here as investors realize the US may encounter some difficulties as a result of Trump’s silly trade war.

US dollar index is under pressure

Source: Bloomberg, Turner Investments

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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April is prime rutting season when hormones flow and the nesting is serious.

But 2025 ain’t normal. So many reasons for that, of course, from mortgage rates to Trump and tariffs, to election uncertainty, a looming recession, employment and lenders more seized with risk. There’s no spring housing market this year. Early next week we’ll have more data to support this, but stats from two major markets tell the tale today.

Let’s look there, then bounce to a rockstar realtor’s suggestions on how we do a change-up.

In bucolic Victoria, where real estate costs way more than it should, sales last month fell 5.3%. Condos were down 10%. “Activity in April was most likely impacted by events in play well beyond our immediate real estate market,” says grand wizard Dirk VanderWal. “Political uncertainty associated with the federal election, combined with broader economic concerns stemming from the United States tempered our brisk spring market growth.”

So sales (demand) down. Listings (supply) up by 13%. But what happened to prices? The benchmark is $1,344,800 – an increase of 3.3%. In the world of economics, how does this make sense?

Let’s flip to Calgary which, along with Montreal, is one of the most affordable cities in the country. Here the monthly inventory doubled that of last year – oodles of supply. Sales, however, crashed 22% below year-ago levels. “Economic uncertainty has weighed on home sales in our market,” says cartel economist Ann-Marie Lurie.

So do sharply lower sales and swelling supply mean homes cost less? Not a chance. “Benchmark prices for each property type have remained relatively stable compared to last month. However, compared to last year, detached and semi-detached prices are over two per cent higher than last year’s levels, while apartment and row-style home prices have remained relatively unchanged,” say the realtors.

When other cities report, expect more of the same. Buyers have retreated. A massive surplus of available listings grows daily. There is serious distress in slivers of the market (as detailed here yesterday with condo assignment sales). But overall, prices have stalled out despite months and months and months of tepid demand, growing anxiety and Trumpian economic malaise.

Is this the new normal? Will homeowners sit on their hands forever, refuse to drop their ask, and wait for the next inevitable boom? Will investors take advantage of a softer market to gobble up more properties, also expecting higher rents and rising valuations once the orange threat ends? Have we reached a point where it’s routine and permanent that a house costs ten or twelve times a family’s annual income? That’s what the latest RBC affordability index suggests, and which sales stats confirm.

So what can we do?

As detailed here earlier this week, governments – like the shiny, new Carney one – keep harping on a supply shortage and vow to throw up more units. But supply is not the issue. It’s price. We have financialized residential real estate, turning it into an asset like stocks, bonds, ETFs and futures contracts. Investors own half the condos in Toronto, for example. Most Boomers hold the bulk of their net worth in a single property. The kiddos have learned the only can’t-fail path to financial security in this country lies through property ownership. The tax system made it so. Culture cemented it. The laws of supply and demand has been slaughtered. And now we have a generational war as the result.

“Every election, we hear the same promises: more housing, more affordability. But for the next generation, homeownership is slipping further into fantasy,” says Toronto brokerage owner John Pasalis (who still hates me). “I’ve been in the real estate business for over twenty years, and in that time, I’ve seen young homebuyers lose hope—and parents wonder why their children can’t afford what once seemed attainable.

“Contrary to what many suggest, home prices in Canada didn’t explode because cities stopped building. In fact, many metropolitan areas have seen a steady pipeline of new housing. What’s changed is the role that housing plays in our financial system. We’ve moved from one economic reality to another—a full paradigm shift. In the old housing paradigm, home prices were anchored by incomes. Households saved for a down payment, qualified for a mortgage based on what they earned, and bought homes to live in. That world was governed by an internal logic: prices couldn’t rise far beyond what people could reasonably afford. But in the new paradigm, that anchor has been severed. Housing is no longer just about shelter—it’s a financial instrument. Prices are no longer constrained by income but driven by capital flows.”

Here are his solutions:

1. Raise minimum downpayments for investors from 20% to 35%. It will then be more difficult to qualify for a mortgage, reducing demand. “By reducing the amount of debt an investor can take on, this policy also reduces the rate of return investors can expect on their rental property investment.”
2. Heap on additional land transfer taxes for people buying any property other than a primary residence. “Charging an additional land transfer tax increases the amount of money investors need on closing, making it harder for them to buy and less profitable even if they do purchase the home.” But, he says, exempt cottages.
3. Drop taxes on newly-built homes (as the reds and blues suggested in the election) but only for first-time buyers, and not investors. “Public funds should not be subsidizing investor purchases. Instead, policy should focus on making it easier for first-time buyers to enter the market, and harder for investors to compete with them.”
4. Disallow the ability of investors to deduct mortgage interest costs from taxable income. “The policy will not end investors buying homes, but it makes owning a single-family home less lucrative. An investor who buys a home in cash would not be impacted by this policy, but buying a home in cash is a far less lucrative way to invest in single-family homes.”
5. Treat all profits from selling residential real estate as personal income in the hands of investors. “Today, capital gains from real estate are taxed at a lower rate than income. The solution is to remove this preferential tax treatment and tax any capital gains from single-family homes used as investment properties at the same rate as income.”

Is Pasalis correct? Or will scrubbing investors out of the market crash the number of units available for rent, and spike costs for tenants? Are investors really to blame for today’s insane prices, or by clinging to the PR tax exemption, is the tax code itself responsible for the financialization of homes? And how will any of the above actually drop the price of a resale house in Kits, Etobicoke or Point Pleasant? In most hoods, investors are rare. Owners are covetous.

What would you do, as prime minister?

About the picture: “Chico & Zoe, who made their Web debut individually on your blog, met up again near their home on Vancouver Island,” writes Lawrence. “They spent time discussing the election and were confident that Mark Carney would be able to come to a satisfactory deal with Mr. Trump (they are quite respectful even if not deserved)  and this would lead to more and better treats making their way into our country and hopefully into their mouths!”

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

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Long ago (pre-pandemic, the Before Times), Vancouver media was shocked at news evil people (realtors) were selling houses that had not yet been sold. In other words, the masses read about assignment sales. And they were floored.

Anyone who’s purchased a property with a valid contract can sell or ‘assign’ that contract to somebody else, prior to the original sale closing. In a crazy up-market, the flip means the first buyer can make bank by simply selling the paper to the next purchaser, and pocket the gain. There were big headlines in YVR when some sellers learned their agreements had been resold days later for considerably more money than they were in line to receive. Had their agent steered them into a bad deal? Selling too cheap? Outrage!

Well, the emergence of assignment sales in a boom market helped lead directly to heavy shelling from the province and the CRA. Profits are now taxed as income, not capital gains. There’s GST levied on the transactions. The feds have a one-year anti-flipping tax. And BC has a new, onerous two-year flip-crushing equity snatcher in place.

But wait. The market’s not going up any more. There are no profits. Only losses.

Now the assignment web sites and brokerages specializing in these sales are swollen with misery as we enter a dark time for thousands of investors who bought condos when rental demand was high and interest rates low. Today the math doesn’t work – especially with condo fees, insurance premiums and property taxes on the rise. Folks who thought buying a condo (or three) with a minimal downpayment, letting the tenant pay the mortgage was a no-brainer are in deep trouble.

Scads of units purchased pre-con are coming up for closing in 2025, and significant numbers of buyers are unwilling or unable to complete their deals. They didn’t plan on mortgage rates doubling since they signed an offer three or four years ago. They never believed rents could do anything but rise, let alone steadily decrease. They did not foresee the punitive taxes coming, or a collapse in demand on the resale market. They believed what the industry says daily – it’s always good time to buy, and you can never lose with real property.

Well, here we are. Blood is coursing through the gutters of Condoville. It may not be time to vultch just yet, but we’re on a journey that usually ends with outsized gains for the brave.

Below are a few selections from the AssignmentPlus site, brought to my attention by veteran realtor Dan Bartley. “Wow,” he says, “the original price listed is what the buyer signed up for. Most can not close.”

For example, a two-bedroom, two-bathroom unit in downtown Toronto originally sold for just under $1.1 million, or a stunning $1,600 a foot. It’s now available for $940,000, with occupancy set for October.

This 579-foot, one-bedroom unit in Oakville comes with a parking spot and locker. It was purchased for just under $750,000 by a guy now trying to bail out before closing – two weeks from now – for $550,000.

Down the QEW in Hamilton, you get more space but the same troubles. This 946-foot condo has two beds, two baths plus parking and is on the market for $599,000 or $68,000 less than the buyer just paid on closing day, April 1st.

And on the Toronto waterfront, this two-bed, two-bath, no-parking apartment of 678 square foot comes up for occupancy in June. The original buyer paid $832,000 and is trying to unload for $659,000.

Of course, all these folks will also face realtor commission charges, legal fees and related costs. Their losses will be considered personal by the CRA, not deductible against earned taxable income. Also not a capital loss that can be carried forward and used to reduce future gains. Investors will have lost some or all of their downpayments – money which earned nothing during the years since it was placed on deposit. And if they fail to find a buyer on the assignment market, there’s even greater hardship and cost ahead.

Will this be enough to bring down the entire housing house of cards? Or just swaths of it?

To be continued.

About the picture: “Hi Garth, love reading your articles,” writes Deborah.  “They’re so down to earth and to the point. This photo of my dog Tiburon represents what I think of the current state of the world today!”

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

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Two polls happened here during the campaign, weeks apart. The results were close. The election outcome last night mirrored both.

Despite the caterwauling in the comments section by the maple MAGAs, the anti-vaxxers, WEF conspiracy whackadoodles, the gender cops and the traitorous Wexiteers, Conservatives did not form government. With so much hair on their support base, that’s a good thing. This is not the old govern-from-the-centre-right PC party that I pine for. Stephen Harper, remember, kicked me out for being too reasonable. The new guy seems worse.

So, you were correct. It was Carney’s turn to take the torch and carry it into battle. Country over ideology. Hold your nose and vote for Dad. Father knows Best.

Mr. Poilievre lost his seat. After twenty years as a career politician, that’s a blow. But if you want to retain your support in Ottawa, best not to diss civil servants, pledge to shrink government, defund the public broadcaster or gut foreign aid. The anti-establishment stuff that resonates in Airdrie seems regressive elsewhere. That’s the problem with abandoning the middle – it’s where the bulk of the voting population lives.

In the end, it was about Trump. Canada has now rejected him in every way possible. Both Conservatives and Liberals opposed him. The narrowing of our political spectrum to a two-party race showed voters were seized with finding a strong anti-orange-guy voice for Canada and rejected the other agendas. Jagmeet and the Dippers were wiped out, despite their claim of dentalcare, pharmacare and child care success. The Bloc was seriously whacked along with their Je-me-souviens focus. The Greens were squished as climate change took a back seat.

Mark Carney’s road ahead is rocky. He’s got to work out something with the Americans while at the same time knocking down domestic trade barriers and forging new deals with other nations. He must stand in Parliament for the first time and face the hounds of opposition. If he fails to get a majority there’s deal-making with the Bloc to keep the government alive. And he surely knows the Libs were given a one-time deathbed resurrection because of the American president. He’d better not blow it. The voting mob will not accept failure, or it will demand revenge.

Poilievre may try to hang on, find a caucus member to suicide for him and run in a byelection. But when the House of Commons resumes, he’ll be in the visitors’ gallery for the first time since he was in his twenties and a Reform Party devotee.

This blog said Poilievre was the wrong guy. We told you why. We said it would be evident on Monday. It was.

The blog also warned for months about the second-coming of Trump. It will be destructive, economically punishing and chaotic, we said. And it is. Today marks his 100th sunrise in office. Every single one has come with disruption, shock, fear and pain for large numbers of people. He attacked, mocked and trolled our country. Even as we headed to voting stations he said Canada is not a viable country and we should surrender.

No politician sounded more like Trump, with sloganeering, demeaning nicknames for opponents, hard-right policies and a tireless message of negativity about the nation, than Mr. Poilievre. He did not call out Danielle Smith for supplicating at Mar-a-Lago nor Preston Manning for promoting the breakup of Canada unless people voted as he said. He supported the criminal anti-vaxxers in the Peterbilts. He said crime is raging in Canada, that our steets and children are unsafe and if Mark Carmey were elected people would soon be foraging for food.

So, the leader’s defeat in his own riding, the squishing of the socialists, the repudiation of Quebec sovereignty, the backseating of climate change, the emergence of a two-party system, the quick rejection of woke Trudeauism and the historic reversal of political fortunes in just 120 days mean something.

If we can find the centre again, we all win. Here’s hoping.

About the picture: “Hi Garth: Love your blog and love your dog/cat/lizard pics,” writes Mike. “Australian cattle dog Mojo in his muddy element enjoying the spring in Nelson BC.”

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

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