Lighten up

Let’s review, shall we?

Stock markets have been on a tear (the Dow’s near at an all-time record level). B&D portfolios have sloughed off the worst pandemic in modern history, political crisis plus near-record volatility. Yawn. S’all good. Commodity prices are rising with oil seeing the best pop in months. Bond yields have started to plump again.


Vaccines. Three of them now. Distribution chains are being built. The new American president’s first task will be ensure the pandemic, deaths, hospitalizations and economic destruction ends. Yes, it’ll take months. But the direction is clear. We know where we shall be by this time next year. It will be better.

This pathetic blog has reminded you since March that all pandemics are temporary. They hurt. Then they pass. We told you to stay invested. Ignore the noise. Don’t turn temporary paper losses into real ones. Have faith. Trump would be gone. Science would out.

Now it’s assured this will be the case. Global growth will restore. Demand for commodities will rise. Consumer spending and corporate profits will return. And out of this dark time comes dramatic biotechnology – ‘messenger’ vaccines with the potential to improve human life in important new ways. This is why markets are behaving as such. Stocks up. Bonds down. Yields increasing. Inflation will follow as the GDP plumps. Then rates. So, yes, lock in your mortgage now.

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“I have been reading your blog for many years – thankful for the guidance!” says Jeremy by way of the MSU.

Question: Is it better to continue with a HELOC of $450k at 3.05% (Manulife One) and put more income towards paying down the principle, or to lock in $450k at a fixed 5yr rate of 2.59% (Manulife One) with an amortization of, say, 20 years for a reasonable monthly payment of just over $2k?

We have had the HELOC since 2008. Have registered and non-registered investments totalling over $300k and contributing to 2 defined benefit pensions. Household income over $200k. Toronto detached house currently worth 1.5 million.

It seems we should just be more diligent to keep saving as much as over the monthly interest payment of the HELOC, which would decrease the principal. We have benefitted from having cash on hand to use and invest but now wish to focus more attention on reducing mortgage debt.  Paying too much to the bank…

Face it, a 3% loan rate these days is excessive. Even the big banks are shoveling money out the door at 1.8% (although rates have actually started to sneak higher). But, of course, with a HELOC you need make interest-only payments, while a mortgage is amortized, with blended payments, meaning a portion of the debt is repaid with each one. (If the home equity LOC money was used for an investment, 100% of the monthly interest payments can be deducted from your taxable income.)

First, forget Manulife. Rates are too high and a 2.59% mortgage is excessive. Second, if you have trouble repaying any debt on a $200,000 household income, you’re spending too damn much on frills like children. Buck up. Do a budget. Third, converting the HELOC to a mortgage at a much lower rate with a weekly-pay feature (the correct kind) will let you rapidly reduce the borrowing.

But even without the weekly-pay benefit, the mortgage – while costing you $9,000 a year more in cash flow than the interest-only HELOC you now have – would reduce the debt over five years by almost $75,000. That’s how dramatic the impact of these generationally-low rates is. The principal repayment portion of the monthlies is massive.

Finally, of $1.4 million in net worth, close to 80% is in one asset. The house. Yes, you have DB pensions, but that’s not money you control and job loss can happen. The fact you’ve had a HELOC for the past twelve years and haven’t paid it off is not cool. Nor does it sound like it was an investment loan. And I hope the pensions are fat, because three hundred thousand is a dangerously small nestegg. If you have defined-benefit pensions, hopefully the bulk is safely inside TFSAs instead of RRSPs – which can flip you into a higher tax bracket after age 71. That’s apparently when men reach their sexual peak. Or die trying.

$     $     $

Next Monday, kids. That’s when Chrystia will tell you what the pandemic damage has been and where we may be headed. It’s been a long time – well over a year – since we had a regular federal budget, and Dog only knows when the next one will come. The event on November 30th will be another ‘update’, which means she can lie with impunity. And smile.

In July the T2 government said the deficit would be $343.2 billion, an all-time record (the previous high was Harper’s $56 billion hole during the credit crisis). Since then the Libs have announced new spending initiatives (like pharmacare) plus more Covid relief (an extension of CERB-like payments plus new business subsidies). And now we have a second wave of the virus surpassing the first. Ottawa’s spending, relative to the size of the economic, is the most profligate in the world.

So here’s your assignment. What will be the new deficit number? Post your estimate.

The winner will be given a guest column on this blog. Plus, you can moderate the comment section for an entire 24 hours. Then we will pay for your therapy!


Going tribal

On Thursday afternoon, Toronto’s condo king, Brad Lamb, sent out a blanket email to his contact list – real estate agents, brokers, developers, clients and investors. “COVID-19 Must Read – World Doctors Alliance,” was Lamb’s subject line.

One day later, as we pushed our way through thick, cacophonous, anxious crowds in Pearson Airport, Ontario announced the GTA was locking down. So tomorrow the department stores, malls, hair salons, gyms, vets and restaurants will be empty. The closures will be for ‘at least’ 28 days. Christmas shopping – which allows most retailers to survive the winter – is kaput.

Lamb is a worried, frustrated person. In August he invited abuse by posting an open letter (and sending out another blanket email) claiming the virus is overstated, the health care system is unburdened and we should all follow the Swedish model of letting the bug rip through society, since most people never get that sick.

Mr. Lamb’s condominium business is hurting. Not alone. The Bay will be wounded as its flagship store shutters. Owen the hair salon guy’s probably down for the count. Air Canada? Dunno. The angst and uncertainty is palpable as the US inches towards 200,000 new daily cases and Ottawa claims our situation could be, per capital, far worse.

The desperation has many grasping for simplicity and non-equivocation. So Lamb – an intelligent, successful, articulate business leader – leaned on the shoulder of a bogus organization disseminating falsehoods. To wit:

It is also abundantly clear that the ‘pandemic’ is basically over and has been since June 2020. We have very highly likely reached herd immunity and therefore have no need for a vaccine. We have safe and very effective treatments and preventative treatments for covid, we therefore call for an immediate end to all lockdown measures, social distancing, mask wearing, testing of healthy individuals, track and trace, immunity passports, the vaccination program and so on.

Last Sunday I asked people coming to this blog to cease posting similar messages. That Trump won. The pandemic’s nothing. Masks and vaccines are tyranny. I debunked the Great Reset foolishness. But by Friday the comment section was a swamp of anti-vax, libertarian, live-free-or-die manifestos from hardened keyboard warriors.


Dorothy and I sat outside Gate D43 beside Starbucks, watching the masked masses and discussed this at some length. How did we get to closures and bubbles? Why did 73 million Americans vote for a guy playing down a pathogen that killed 250,000 in thirty weeks? What led to the blog filling with those who believe a global cabal’s trying to enslave them? How can an economy survive a pandemic or a lockdown, or both, when half the population rebels? When business leaders and politicians cry foul? Where does truth lie?

Stressed. We’re all stressed. If only there was a clear way out.


History suggests this is exactly the environment in which conspiracies take flight. Confusion, fear and victimization make us prone to simple explanations, then direct solutions. Hitler blamed Germany’s deep malaise on a conspiracy of bankers and industrialists, all Jewish. It was a threat to the Aryan people and he was the defender. Otherwise reasonable people supported him, hoping for a better outcome. He didn’t even have a Twitter account or Fox News. These days huge numbers have concentrated their hopes and dreams in a red ball cap. The battle is against the globalists, Antifa and the ‘China virus,’ threatening a way of life. Masks, greenies, public health cops, BLM protestors, pollsters, pharma, the UN, mainstream media and big tech are all vilified.

In this context tribalism and nationalism find a large measure of public support. It’s there in tariffs, Brexit, the Mexican border wall, Muslim travel ban, caged kids, MAGA and the withdrawal of US troops. But if Covid’s proved anything, it’s that walls are a fiction. We’re in this together.

“I’ve read your blog daily since it started and have observed the evolution of your frustration with the comments section,” writes Lloyd. “I actually rarely read the comments as I am mindful of my mental/emotional health but decided to do a quick scan of the blog and was “dismayed” by the tenor of the so-called conversations within.  The number of deleted and banned comments were remarkable.  And many of the ones you let through were highly questionable in terms of what I would regard as a standard of respectable behaviour.  If I were you I would not tolerate it. I can’t imagine this is not damaging you in some way (I know you’re tough but seriously….).  My suggestion would be to take a two week break and/or nuke the comments section for a period of time.  I think you should also have a much shorter leash for banning people – no “DELETE”, straight to “BAN”.  I really don’t know how you do it, sir.”


At Halifax airport we went through the Covid check. Safe Entry documentation. Photo IDs. Sealed transportation home. Fourteen days of quarantine. Each morning a direct communication from the government ensuring we have not set forth. But we are allowed in the back yard.

Before we left Dorothy mentioned the Toronto trip to the lady next door. “That’s scary,” she said. People in Lunenburg are now afraid of Halifax.

Vaccine cannot come soon enough.



RYAN   By Guest Blogger Ryan Lewenza

During the spring when Covid rates peaked I was concerned for another wave in the fall as economies were reopening leading to increased human interaction and transmission of the virus and the colder fall/winter months would usher in the always challenging flu season. This is certainly paying out with daily new Covid cases surging to over 150k in the US and roughly 5K in Canada.

While I was correct about a second wave, I was off the mark on the impact rising Covid rates would have on reopening measures. I believed that Canada and other global economies would basically try to power through the increase in Covid rates given: 1) the medical field is much better equipped to deal with the virus with a better understanding of Covid-19 and with new treatments (e.g., using steroids for people with severe cases); and 2) the economic toll of lockdowns is just too devastating on local economies.

Well, this view is being greatly challenged as governments around the world are starting to implement different lockdown measures. For example, the Ontario government just announced that it was locking down most businesses in the Toronto and Peel region, New York is closing down schools, the UK is under full lockdown for 30 days and much of Europe is re-instating different lockdown measures.

So the question is, will these lockdowns lead to another major economic downturn similar to what we saw in the second quarter and will this derail our thesis for a return to global growth in 2021 and the end of this terrible global recession?

Daily New Confirmed Covid-19 Cases (7-day rolling average)

Source: European CDC

In the near-term we are likely to see a hit to the global economy with economic activity slowing over the next few months as a result of the lockdowns. For example, job growth, manufacturing activity and retail sales could slow, which could lead to some short-term volatility in the markets. However, if this were to occur we would view this as a buying opportunity as we don’t believe these lockdowns will derail the economic recovery resulting in a ‘double-dip’ recession. Here’s why.

First, in March and April it was estimated that three billion people were locked away in their homes as the pandemic exploded. No one knew how bad it would get or the impact it would have on our hospitals so governments just shut everything down by implementing extremely strict measures. With this virus and pandemic now being nearly a year old we know a lot more now and for better or worse we’re adjusting to this new reality of living with a pandemic. So I believe economic activity might slow as a result of these lockdowns, but it’s unlikely to be as bad as what we saw in the second quarter where the US economy contracted by an incredible 32% Q/Q annualized. This is echoed by JP Morgan economists who just lowered their GDP growth expectations for Q1/21.

Second, any lockdowns measures that are implemented will be temporarily until government officials see an improvement in the data. So we’re probably looking at a few months rather than a prolonged and uncertain lockdown.

Third, and critically, vaccines are coming and will start to be rolled out in the coming months. So if we can just get through this challenging winter then come the spring we should be in much better shape.

This week we got incredible news that Moderna’s Covid-19 vaccine is 95% effective, better than Pfizer’s initial projection of 90% for their vaccine (they updated their projection to 95% effectiveness this week upon completion of the phase 3 trial).

Specifically, Moderna’s phase 3 trial included 30,000 participants and an independent board examined the first 95 participants who got sick and ninety of them had received the placebo and only 5 were given the vaccine, which is how they derive the 94.5% effectiveness. Of the 95 who got sick, 11 experienced a severe case of the virus, none of which were vaccinated. Therefore the 5 vaccinated people who got sick only experienced mild symptoms. The read through of this is that the vaccine doesn’t just block the virus in most cases but also shields people who get sick from the worst outcome.

Similar to Pfizer’s vaccine, Moderna’s is an RNA vaccine so this now shows that RNA technology works well with these coronaviruses. Like Pfizer, Moderna will likely apply for emergency approval by the FDA within a few weeks and then they will start distributing in late Dec/Jan. First doses will go to people on the front lines (doctors, nurses, teachers etc.) and the elderly and we’re probably looking at Q2 of next year of a broader rollout of the vaccine.

The other big positives for Moderna’s vaccine are: 1) the vaccine can be stored in a freezer at -20 degrees versus Pfizer’s vaccine at -70 degrees; and 2) the vaccine can be stored in a refrigerator for 30 days compared to Pfizer’s at just five days. So this will help a lot in the distribution of the vaccine.

Overall, I see these recent vaccine announcements as a turning point in this historic pandemic and we’re getting much closer to being vaccinated and returning to normal, which I believe could come in the second half of 2021.

Finally, if I’m wrong about the economic impact of these lockdowns and wave two turns out to be far worse than I currently anticipate, we have the prospect of a new US president come January, which I believe will be the catalyst for another US stimulus package in the coming months.

How big of a stimulus package will depend on who wins the Georgia run-off Senate elections and therefore who has majority in the senate come January. If the Democrats pull out a win in the run-off elections then expect an even larger package given they will control all chambers of congress. January could prove to be an important month for US politics and the direction of the US economy in 2021.

I tend to be a ‘glass half full’ kind of guy and while I’m quite concerned about the increase in Covid cases and escalating lockdown measures, I remain steadfast in my belief that the global economy will emerge from this terrible global recession in 2021 and that the global equity markets will continue to climb a wall or worry.

Ryan Lewenza, CFA, CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Vice President, Private Client Group, of Raymond James Ltd.
Moderator's Note

This blog is not a forum for anti-vaccine comments, nor will it host a debate on public health initiatives such as mask-wearing.  All submissions on these topics will be deleted.


After the deluge

This week BMO (which flogs mortgages) says this will be a boffo year for real estate.

Hard to argue that. Just look at inventory. Across the country there’s but a 2.5 month supply of houses for sale. In a bunch of major centres, just four weeks or less. This is historic. Listings have shrunk while demand has swelled. Sales and prices have belied the fact life sucks. So many people have been so willing to get so much in debt when things are so bad. History may show they were courageous, or just nuts. Let’s wait and see.

Meanwhile, what happens next?

We know the big trends so far…

  • Covid killed condos. Renters retreated as urban jobs vanished. Airbnb croaked and investors are bailing. Eviction bans and rent controls spanked landlords. And as elevators became mobile chambers of death, owners bolted.
  • So city rents have fallen, about 15% on average. Condo prices have dropped, and continue to do so. No bottom yet.
  • Nesting, WFH, that new puppy and the need to social distance from your spouse led to a big rush into detached housing. Anything with dirt and a door to the street has been an object of desire.
  • The virus also made sane people have delusional thoughts, like they’d never need to commute again. Hence the exodus to the burbs, the sticks, the hinterland and beyond. For example, sales/price increases in the vacuous wasteland of the 905 now routinely eclipse those of the urban 416. Porches have been beaten into Pacificas.
  • Household debt has plumped as mortgage rates hit bottom. Once again cheap money allowed average home prices to jump. Lost on many has been the fact emergency rates are with us because, ahem, we have an emergency.

So, here we are a few weeks from the dawn of 2021. The virus is ripping us a new one. But, thankfully, we’re a lot closer to herd immunization now that at least two vaccines have been proven effective and safe. (BTW, if you think you’ll avoid being vaccinated, dream on.)

What could the potential end of the pandemic mean for housing?

Assuming most people are jabbed by this time next year, we can make several assumptions. First, the economy will be far, far better. The virus damage will still be evident in many failed businesses, but the vax will have allowed investment to reappear amid increased confidence. Folks will be flying around in Max 737s. Going on cruises. Eating out. Watching games and concerts. And, yes, going to work.

Downtowns will rekindle and repopulate. We’ll remember why people want to live in close proximity to great restaurants, clubs, arenas, theatres, galleries and stores. Offices will reopen in stages. The giant buildings will adapt. Workers will be expected back on a rotational basis, if not full-time. WFH will go back to being a some-time reality, not the norm. Commuting will be a thing again.

Condo prices and rents will be higher in 2022 than they are now. Probably by a lot. The suburbs will retain their price increases, but lose their appeal to the masses. As the GDP expands and the impact of government over-borrowing is felt in the bond market, yields and mortgage rates will increase. The days of 1.5% loans will be gone, gone. Interest levels will not explode, but the price of a home loan could easily double. In the Roaring Twenties prediction comes to pass, we’ll be headed much higher.

The bottom line is that Covid made most housing less affordable. The vaccine to kill Covid will probably do the same. We will emerge from this with real estate even more of an acute symbol of the wealth divide in our society. That’s been bolstered by the reality of 2020 – wherein the bulk of job losses were among those in essential or lower-income jobs, while the white collar WFH bourgeoisie just went online, got a fat mortgage and moved to a ranch bung in Mississauga.

None of this is healthy for society. We become less diversified. More indebted. Less liquid. More immobile. The young are disenfranchised. Wealth is consolidated. And governments have a far better idea of where to go for the new tax revenue they so desperately need in a post-Covid world.

More on this, soon.




As I wing out of The Big Smoke Friday morning it’s expected the bully premier will lock the place down. No joy for Owen. His hair salon downtown, he told me, almost died earlier this year when the province ordered it shut for three months. Without the landlord forgiving rent, it would have been curtains. The road back’s been painful. Another forced closure would be the end.

Around the corner a rocking Italian restaurant was forced to move when the LL sold out to a condo developer. The owner moved a few blocks north and spent a million making the dining room Covid-compliant. Clear plastic walls around tables. New Hepa HVAC. Then the city went red and indoor meals were prohibited. So screwed.

Is the virus winning?

Seems like it some days. In BC Comrade Premier Horgan went tribal this week, asking the prime minister to ban inter-provincial travel. Nothing bad in that province is ever the fault of the people living there, of course. In Ontario and Quebec new case counts are at record levels. Even the Atlantic Bubble’s being breached as the NS chief medical guy decries “a worrisome spike.”

In the States, a disaster. Next week there may be 200,000 new daily infections. Deaths are now 250,000. That’s four times all fatals in the Vietnam war. It’s eighty Nine Elevens. Yesterday they closed down the NYC public school system, the nation’s largest. Deaths are now projected to be 400,000 within a month or two. The stock market burped and stumbled this week as investors see-sawed between vaccine euphoria and revulsion at the economic carnage.

Pivotal to this is a president in the White House more obsessed with clinging to power and undermining the electoral process than he is with public health. Trump, as you know, was still mocking people wearing masks a few weeks ago – eight months into the global pandemic. When deaths were 200,000 he told people not to be afraid of the virus, that recovery was ‘just around the corner’ and the economy should open. Now there are fifty thousand more graves. The economy’s more uncertain, and he refuses to recognize or assist the man who will take over in two months.

This week the iconic Dr. Fauci says, if all goes well, people may start discarding their masks about this time in 2021. For that to happen a majority of the US population will have to be vaccinated. For that to occur, the federal government must be on a war-time footing, utterly focused on serum production, distribution, inoculation and oversight. And while the Trump administration helped to fund the warp speed vax process, the nation’s now mired in a post-election swamp of vile allegations, debilitating conflict and heartbreaking inaction. Because of one guy. Without grace, class, patriotism or a sense of the greater good.

So what does this mean to you?

Hmm. The next two months will likely be ones of market stress, volatility and swings. Investors are waiting to see what craziness Trump is capable of. Will he start an international conflict? Use executive orders to kneecap Biden? Refuse to leave in January? Also, will Congress pass the multi-trillion-dollar stimulus package so clearly needed? How about the Senate run-off elections in January – will control of that body go red or blue? And what impact will that have on a new president to corral the Covid crisis?

“Congress is playing with fire,” says my buddy Ed Pennock. “Or so the market started to worry. The recovery may be more elongated. For sure, closing the output gap is going to take longer.” That gap is the difference between what the economy’s capable of doing, and what it actually produces. The difference is measured in unemployed workers, failed businesses and broken families.

If you think this suggests selling the stuff in your RRSP or tax-free account and going to cash, you would be wrong. People with balanced portfolios may see some flow from equity assets into fixed income as market sentiment slops around. You’ll see some dark days ahead as US deaths increase, Canadian cities lock down and Trump blows up. But also expect this: central bankers will be the adults in the room, public health officials will prevail, the quixotic American president will be gone, trillions will gush out of Congress, the vaccine will finally arrive and society will be saved.

By the time you peel off the mask, your portfolio will be healthy. Then may we look back on this chapter and see we almost lost it.



The Reset

It was mid-October when Jake told me he wanted to be an investor. “I drank the Kool-Aid,” he said on the phone. “I’m a Garth believer now and want that balanced portfolio. Now, let’s do this.”

So I got him some new accounts – TFSA, retirement, non-registered. Wrote a plan. Did a presentation. Secured approvals. All cool. Until the US election. And the conspiracy theories. Then Jake flipped out. He wrote:

I have decided that in light of the volatile times in the markets at this time, I want to delay our start. I’m afraid and would like to wait and see how things are looking with the transition of power in the States after the New Year. I’m concerned the money you would invest for me is dropped into the markets all at once rather than a chunk at a time over a period of months. I’m just not comfortable with all the volatility going on right now thanks to uncertainty of the election outcome.

What changed between the time he wanted to invest and the moment he balked? Trump, of course. The baseless theory of a rigged election. When reasonable people (and the markets) were dismissing the allegations as fiction, others couldn’t resist the siren call of conspiracy. The age of disinformation claimed another victim. Today Jake is still sitting on the sidelines, while two new Covid vaccines have proven to be over 94% effective, Joe Biden is moving decisively towards inauguration and the stock market has surged 7% higher.

Will there be more volatility to come? You bet. But we all know where we’ll be in a year or two. Steady Eddy president Biden. Widespread inoculations. GDP growth. People on airplanes. Offices, malls, restaurants open.

The best possible time to invest? That’s when you have the money. Nothing’s changed.

Conspiracy theories have never had as much sway as today, thanks to unregulated, unfiltered social media devoid of social conscience. Democrats are pedophiles. Covid is a hoax. Trump won the election. The vaccines are poison. And we’re at risk of a Great Reset.

Ah yes. The Reset. This is the latest alt-right nonsense skidding around the online world, propelled in recent days by a Justin Trudeau speech, of all things.

So here’s the pitch from those who see the world as a giant struggle between good (them) and evil (socialists, liberals, progressives, climate advocates, BLM, social justice warriors, Tesla owners, mask-wearers, people using funny pronouns and probably women). They’ll tell you that the virus was likely engineered in order for a cabal of elites to foist global economic control over everyone under the guise of public health measures. Freedoms would be curtailed. Movement restricted. Political power centralized. Then laws enacted to break down national boundaries, socialize the economy and ultimately confiscate private wealth. Along the way currencies would be replaced with a digital version and CBs would take over failed private banks, absorbing their assets and wiping out personal savings.


So globalists like George Soros, Prince Charles, Klaus Schwab and Justin Trudeau could take over. Standing between capitalism and chaos was, of course, Donald Trump.

Now, how did Mr. Socks get messed up with world domination?

Plagiarism, it seems. Trudeau gave a speech to the US a couple of months ago in which he plagiarized Joe Biden’s slogan of ‘build back better’ and also the World Economic Forum’s current buzzwords, ‘the great reset.’ It all jived with T2’s personal agenda of climate change activism, female empowerment, social justice and inclusion. Besides, it sounded cool. The vid of that speech has been shared a few bazillion times over the last week, and now a mess of people think there is a Trudeau-Biden-Soros plot to enslave.

The Great Reset, by the way, started with a short thumper of a video about how to make a better society (greener, fairer, more equitable) from the World Economic Forum – which is a think tank of people who wish they mattered. It is – like our Governor-General – powerless, meaningless, utterly symbolic and slightly embarrassing.

As it turns out, today – November 18th – the WEF had an online conference on exactly this topic. “The profound shock of the COVID-19 crisis has challenged public confidence in the ability of leaders and institutions to prepare for unexpected risks,” the forum organizers said. “What new forms of cooperation, bold ideas and reforms are needed for business, policy-makers and civil society to build a more resilient world and restore confidence in leadership beyond COVID-19?”

Does that sound scary? In a world which was unable to deal with a slimy little pathogen in an integrated, effective way, where the wealth divide has never been greater, the climate is under stress and the most powerful elected official openly undermines elections, don’t we need a kick in the global ass? Maybe the big conspiracy here is the concerted efforts of the F150 deplorables to stifle debate by fomenting fear and myth.

Well, Jake’s still in cash. Waiting for chaos. The Great Reset soon to be another giant regret.



Here’s why the next six months (thank dog) will not be like the last.

First, we got vaccines. Pfizer and Moderna. There will be more. Millions and billions of doses will be manufactured over the next two years and jabbed into a majority of the humans alive. This will allow the airplanes to fly, the Maple Leafs to lose before a live crowd, business travel and conventions to resume, restaurants to fill and, sadly, Drake to perform again. Economic growth will resume. Demand for commodities will surge. Canadian equities may even outperform.

Second, no Trump. The ascent of the Biden administration in January will ease global trade tensions, bring predictability to the most important economy and, yeah, this will also be good for Canada.

Third, if you think stocks have been impressive in 2020 (in spades) then you’ll love the next two years. We’re in for robust growth in the GDP, in jobs and corporate profitability as the pandemic fades from view. This will also bring inflation, especially given the insane amount of government and CB spending.

Fourth, remember that pledge by the Bank of Canada not to raise rates until 2023? Fuggedaboutit. The vax and Biden just changed everything. Bond yields have already been rising as investors shift from the warm womb of debt into the buzz of growth assets. Home loan costs this week may be at the lowest point ever, with five-year money set to rise in the coming month or two. Someday your little children will stare at you, all innocent and glassy-eyed and say, “Tell us again, pappy, about when five-year, fixed-term conventional residential mortgages were in the 1.5% range.” You will tear up a little.

Fifth, FOMO is fading. Look at this chart of home sales over the last few months. We went from normal to terrified to horny and back in record time.

In other words, all that pent-up virus demand from the spring was unleashed in an unsustainable gush during the summer and has now clearly played out. The folks who want to buy have bought. The cheapo mortgage money effect has dissipated. All those misguided people who fled the city for towns where moose, cougars and beaver roam are gone.

In the wake of this real estate mania we are left with even-more-unaffordable prices, new historic levels of household debt, falling urban rents and a growing pile of condo listings where eroding valuations may impact the entire market as mortgage costs increase. In short, Covid has screwed up real estate even more.

Finally, federal officials are now saying everybody in Canada will likely be offered a vaccination by the end of 2021. Seems reasonable. The pharmas have been manufacturing doses even while the stuff is being tested. Ottawa pre-ordered zillions of doses. So widespread inoculations could have this slimy little pathogen on the run sooner than most expect.

Now won’t that be a surprise for those who moved out into a caribou pasture and thought they could WFH until retirement? Downtown cores will start filling again. The office towers will repopulate. And in a year or less the boss may be calling, saying your bum is required in a chair at work three days a week. Good luck getting out of the cabin in 2022 for what you paid during the pandemic panic of 2020.

Says CIBC economist Benny Tal (usually a housing bull): “The level of activity seen in the summer months was unsustainable and reflected aggressive utilization of pent-up demand. Now it’s back to reality for housing, and growth from here will be more consistent with overall economic growth. Therefore look for additional softening in activity during the winter.”

Back to reality. Sigh. Did you ever think those words would ring so sweet?


The price of free

The day during which the second Covid vaccine was announced seems a reasonable time to do this. (A Biden presidency + Pfizer + Moderna = 30,000 Dow, by the way. I hope you have stayed invested.)

This blog is a free speech zone. Sort of. All comments are moderated, which means they pass through a filter. That would be me. Routinely I punt people for things like profanity, racism, appalling taste or vile ad hominem attacks. This is a subjective process, which means some souls have been denied publishing solely because they tick me off.

Here’s one now. This guy’s been banned three times using different names, most recently when he tried to hurt me after the death of Bandit, my animal companion.

Your blog, your right to ban, I’m not going to argue. Plus, I know my post was over the line. I write for a living, put time and thought into a lot of those comments under several user names. To see them ghosted without a word was unfair.

Regardless, I’d like to give some feedback. You have an illustrious political financial blog/social media career, and are successful by many measures (not the least of which being highly respected and maybe even loathed in some circles). Despite this, your blog comment blocking, deleting, warning and banning hierarchy is too arbitrary for so popular a blog. It’s undermining the blog’s quality–I can see it in other posters comments as well.

Maybe no one has told you this, maybe they have, but people come for the comments. Your posts are a great and essential catalyst, but the comments section belongs to all of us.

You’ve killed off two or three of my usernames now, but I keep coming back (you can’t ban anyone who knows IT stuff). But I don’t want to disrespect you, so I’m going to try to stay away. But if you asked, I know a majority of steerage would urge you to allow Attrition, GBiddy, Disenfranchised, and I forget my other user names…to return.

I’ve written and published dozens of professional income producing blogs, you have something wonderful here. But in my experience, when moderating comments you only ban people for lies and hate, not their opinions.

Over the last few months aliens visiting this site would have noticed it – the crowding-out and bullying, plus the replacement of opinion by edict. Trump did that. Or, at least, what some people think Trump means, stands for and epitomizes. His supporters, sycophants and admirers have tried to dominate the discussion, to call those in disagreement commies or Antifa and create a huge cleave between right and left. Sure, the lefties got their shots in, too. But the guys arriving here in their F150s with camo undies, ballistic vests and flags flying dominated. Until I started shutting it down.

Next came the Covid’s-just-the-flu meme, purposefully diminishing the deaths associated with the virus. That continues, even as cases pass 11 million in the US and we face lockdowns from Grand Prairie to Peel. Now the anti-vaxxers are here, saying they’d never take a shot, that vaccinating kids is child abuse and, because only old people get Covid and die, it’s no big deal.

As you probably know, disinformation is the currency of our age. It gets people elected, influences public policy and allows outbreaks to become pandemics. In America over 70% of Republicans, who made up most of the seventy million people who voted red, believe the US election was rigged, despite a paucity of evidence. They swallow the presidential tweets, Fox News and Steve Bannon, plus the thousands of sites that truck in conservative conspiracy, QAnon and evangelism.

Should this blog be a part of that? Does the need for free speech, unedited and authentic, override the filter of reasonableness? Is it okay for a site like this – associated with me, my reputation, background and professional colleagues – to hand over blog real estate to people scoffing on the graves of virus victims, questioning democracy or fomenting resistance to public health?

Moreover, why would I do that?

This is not a commercial site. It has no advertisers, no income stream, no financial agenda, no products to sell. Nobody pays me for clicks or eyeballs. The purpose is to inform, educate and enlighten those who stumble upon it. It’s a volunteer effort as I, Doug, Ryan and sometimes Sinan churn out original content seven days a week and hope every single post is of value to somebody. It’s free. And it will remain so until the day GreaterFool folds.

Do not hasten that.


Oh no.

Toronto, the burly premier said Friday, is staring down the barrel of another lockdown.

Remember that last one? House sales fell 62%. Showings evaporated. Listings crashed. The market just fell apart. Not only Toronto, but every major market in Canada. When Covid came, confidence left town.

Sit down. This time it could be worse. And it appears to be looming.

The virus is one frisky little pathogen. Combine that with pandemic fatigue and human nature, and the Second Wave may be far more consequential than the first. New cases are breaking records in most  provinces and cities, while this week US infections may hit 200,000 a day. The mainstream news is all-virus-all-the-time again. Emotions are high. Business closures are again imminent. And real estate’s in the crosshairs.


Because we went completely nuts following the first wave. Cheap mortgages, pent-up demand and a feeling we dodged a bullet, combined with WFH, nesting and a suburban rush led to galloping sales and exploding prices. As this pathetic blog spelled out, it was completely insane that we’d have a housing boom in the midst of a recession, record joblessness, economic disruption, historic deficits, political chaos and a global pandemic. But we did. Bad choices were made. Now some will regret that.

Lockdowns seem inevitable. Politicians are freaking. The real estate market will grind to a halt. This is taking place immediately after (a) record prices have been achieved, (b) family debt has been pushed to a new high, (c) huge numbers of condos have flooded the market after renters left and Airbnb choked, (d) more people will lose their incomes and businesses, (e) when we’re all emotionally exhausted and, of course, (f) when it’s almost winter. The weather sucks.

Here’s a harbinger. The eternal property-pumping Real Estate Investment Network (REIN) just published a report warning its army of specuvestor groupies to stand down and stand by. “All major real estate markets in British Columbia, Alberta, and Ontario have fallen further into the real estate slump phase driven mainly by the economic impacts of the COVID-19 pandemic,” it says. Toronto, Vancouver and Ottawa are at the “beginning” of the slump while Calgary and Edmonton are in the thick of it.

“At first glance, it might look like the data is pointing towards a market boom because in many key cities, real estate values have been, and continue to, increase. But this is all smoke and no fire. This is a common misconception since characteristics of the boom and slump phases of the real estate cycle sometimes overlap and can be confusing to many if not most people.”

Meanwhile, after hitting a new record high for all types of properties (at $1,026,925) the Toronto market is starting to unwind. Fast. Deal numbers are falling. Open houses are already essentially banned. Showings will be next. If you want to buy  you’d better be prepared for the huge risks of doing so over Zoom or FaceTime.

After months of virus stress, a shortage of listings, FOMO, multiple offers, emotional buyers and that kneejerk flight from urbanity, the market’s fraying. “Real estate fatigue,” as one broker puts it. “It’s more difficult to put deals together because of the collective anxiety.”

Indeed. The first lockdown came with an immediate gush of government money and emergency actions by the Bank of Canada. Now we have an historic $340-billion federal deficit and interest rates that can hardly fall lower, with 1.5% mortgages. Infections are worse. Hospitalizations increasing. The news out of America hard to believe. And if all the coffee chops, hairdressers, gyms, retail outlets, dentists, offices, daycares and schools close again you can expect unemployment in a city like Toronto or Vancouver to soar.

Now, this is grim. It’s also realistic. Political leaders don’t want a big body count on their watch. And lockdowns may be the only way to squish this bug until the vax arrives in Q2 of 2021. Hopefully there will be another outcome. But…

Says Re/Max agent Meray Mansour: “The levels of anxiety are high. People are drinking a lot more. We don’t have the normal things that we do every day, like going to the gym or being with friends and family. There’s a lot more isolation. All that stuff affects us psychologically. And most people are not even aware of that. It’s kind of like this underlying factor… Sometimes when people are anxious, they make bad decisions.”

Sadly so. Soon to be realized.


Slice & dice

DOUG  By Guest Blogger Doug Rowat

Thank god the US presidential election’s over.

Not because we now have a declared winner, but rather because I no longer have to suffer the endless TV network advertising loop. Tom Selleck hypnotically reassuring me about reverse mortgages, learning that mattresses can be like McDLTs—hot on one side, cold on the other, or watching grey-haired dudes pumped full of Ageless Male slinging kettle weights like balsa wood was becoming too painful to watch. But at least CNN and Fox News had one thing in common: a target demographic.

However, the other recurring ad that caught my attention during election night (or, as it turned out, election week) was one for Schwab Stock Slices. I have to confess, until I started watching the election coverage, I’d never heard of these products.

But a “slice” is simply a fractional share of some of the largest and best-known US companies: Netflix, Apple, McDonald’s, Amazon, Facebook, Alphabet (Google), Nike and so on. With Schwab you can buy as little as one fractional share or up to as many as 10 fractional shares. The service that Schwab provides, of course, is ease of ownership. On an absolute price-basis, many of these stocks are expensive. Amazon and Alphabet, for instance, currently trade at more than $3,000 and $1,700 per share, respectively. Fractional shares have become popular and are not unique to Charles Schwab. Many other firms, including Fidelity, Robinhood and Interactive Brokers, offer similar products.

Now making investing more accessible is not in and of itself a bad thing. But like Tom Selleck’s ad plugging reverse mortgages, you’re not getting the full story. “Slices” present concerns.

First, fractional shares aren’t portable. In the case of Schwab, you can’t trade them on any other company’s platform. Owning a fractional share of Amazon isn’t like owning a full share of Amazon. If you owned a full share you could move it over to another financial institution without difficulty. However, if you want to do the same with a fractional share, you’ll have to sell it first, which introduces potential tax consequences.

Second, fractional shares encourage more frequent trading, which is particularly problematic for inexperienced investors. And if you’re trading five-buck fractional shares because you can’t afford the full price of a single share, I would argue that you’re very likely an inexperienced investor. I’ve mentioned many times on this blog that frequent trading is a doomed approach to investing.

And finally, owning even the 10-company “slice”, while better than nothing, still doesn’t even come close to providing proper portfolio diversification.

When it comes to portfolio risk, there are two main types: systematic and unsystematic.

Systematic risk refers to the broad, overall events that, to varying degrees, take down all individual stocks. Systematic risk is often referred to as “market risk”. The 2008-09 financial crisis, 9/11, 1987’s Black Monday, 2011’s Japanese earthquake and tsunami or, more recently, Covid-19 are all examples of systematic risk: forces or events that will drive any stock lower regardless of its particular individual business model. There’s nothing a portfolio manager can do to diversify away systematic risk.

Unsystematic risk meanwhile, refers to company-specific risk. Unsystematic risk refers to the internal events that can crater a company’s fortunes. The fraud at Enron, the mismanagement at Nortel or the inability to adapt to changing technologies at BlackBerry are all examples of unsystematic risk. Fortunately, unsystematic risk can be diversified away. The difficulty, however, is that it takes an enormous number of individual stocks to do this. Roughly speaking, about 60 individual positions (see graphic below).

Proper diversification: it takes a lot

Source: Burton Malkiel, A Random Walk Down Wall Street

The further problem, of course, is the impossibility of having an informed, thoroughly researched, and ultimately accurate, outlook for 60 different stocks.

I worked many years on an institutional research desk and a hardworking research analyst might cover 10 or 15 different companies. And this analyst would be focused: working long hours studying the industry and company-specific fundamentals affecting their concentrated coverage list. But, in the end, and I can tell you this from witnessing it first hand, the accuracy of the analysts’ recommendations was inconsistent and often amounted to nothing more than a coin toss.

I presume my readers have regular jobs or at least busy lives, so imagine the impossibility of trying to successfully analyze not 10 stocks, but 60, and doing it with a fraction of the available time. However, building a portfolio with anything less than 60 stocks means taking on unsystematic risk. Schwab stock slices might appear to provide sufficient diversification, but they fall well short.

A concentrated portfolio can be devastated if even just a few of the positions collapse. And even if you hold what you perceive to be blue chips, which is how Schwab currently positions its “slices”, this will offer little protection if you hold too few positions. Remember: General Electric, Lehman Brothers, Bear Stearns, Nortel, Boeing, Nokia (the list goes on) either are, or were once, blue chips.

So it might be kind of neat to buy five or 10 blue-chip companies in a single transaction. But five or 10 fractional shares aren’t enough to properly control risk.

There are many ways to properly diversify a portfolio. A Schwab “slice” ain’t one of them.

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