Mortgage rates are at record lows. Five year fixed is as low as 1.5% (HSBC) and my guess is, that with a good down payment and a good credit rating, it would be easy to borrow even as much as $1,000,000 (previously an unheard of amount for ‘worker-bees’) from the Big three for under 2%. In whacked-theory, one can borrow their way to millionaire status. (Well, I guess it is not all-that-whacked a theory since the Grifting Trumps have ‘borrowed’ and defaulted their way to billionaire status.)
The economy is on the ropes in some ways (hospitality, travel, retail) but, in others, it has never been better (delivery services, post, net-based businesses) The US economy ‘grew’ by 38% on an annualized basis in the 3rd quarter (admittedly, it was down 33% in the second quarter so, overall, it is stable at about a 4% annualized growth). But what a wild swing! Housing prices in most of Canada’s markets are past the balloon stage and now into a new un-reality stage.
And that is showing up rurally, too. I.e. Rents in Nelson for a modest 2-bedroom home are $2500 (that is relevant because $2500 a month pays off a purchase price of approximately $750,000 which means some little rented bungalow in Nelson might fetch $750K on the market). And that madness is playing out in all the small desirable towns especially on Vancouver Island. Commercial sites in Victoria are setting new records (altho those sites are generally multiple family residential sites). Put more bluntly, we have a lopsided economy and that makes for very weird analysis and crazy projections.
Our national unemployment rate is still averaging around 6% and even touched 13% for awhile. Covid is raging all over the place. The government is spending like a drunken sailor and, of course, the country’s debt has never been greater. And yet…the Canadian loony is up a bit against the US dollar which is oddly (to me) also considered strong.
The inflation rate is projected to be modest at 1.5% (approx) but real life suggests more like 5% (lately even more). If one adds in the housing index (which they do not always do) and it is higher.
Carnival Cruiselines just launched the biggest cruise ship ever and Boeing has re-debuted their new no-crash 737 max. Duh…….??? Is anyone traveling still?
And on and on and on and on……..I won’t bore you anymore than usual with any more facts….the point is: all the ‘indicators’ are acting counter-intuitively and contrary to previous economic times. The ‘message’ is mixed and, for dummies like me, confusing. I DO NOT GET IT.
Shouldn’t gold have gone through the roof? Shouldn’t real estate be stable at best and, commercial values (retail space) fall? Shouldn’t the Canadian dollar also be falling against say the Euro or even the US dollar? Shouldn’t the price of fuel drop? Why are luxury yachts and boats so expensive (yachts have always been the canary in the economic coal-mine)? Why is the US stock market up? Is it simply the low cost of borrowing? Is it a not-as-yet-recognized new stay-at-home economy driving all this? How come Ali-Express is 3 – 6 months behind in shipping? Have people abandoned previous financial goals and, if they can, they are simply ‘getting out’ to small towns?
Maybe the biggest question I have is why is Netflix so boring lately?