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There is another important point that is not getting much coverage. The higher interest rates are going to have a massive impact on Canada's debt payments. The near zero interest rates have allowed the Liberals even more latitude to spend like drunken sailors. Canada's annual deficit is going to balloon as rates go up.
Very true, but it was my understanding from past budget speeches that Canada restructured the debt to longer terms at record low interest rates.

I read that even after the pandemic spending applied to the debt, the servicing costs were lower than the pre-pandemic cost.

How long the new terms are in effect would be a relevant question.
 

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People are so happy to see house prices dropping a bit... Do they know the maths?

Say we've reached a -20% drop now that rates increased... Oh, "now that rates increased" also means the 5-year fixed mortgage is a 4.1%, but in 2020 you could get a 5-year fixed at 1.4%.

Say you have $100,000 for down payment, comparing a house at $500,000 in 2020, now at $400,000, so the mortgage would be on $400,000 vs $300,000

$400,000 at 1.4% is pretty much the same monthly mortgage cost as $300,000 at 4.1%

But after 5 years, you'll have paid $69,000 in principal in the first case (17.25% of your balance) and $38,000 in principal in the second case (12.67% of your balance)

What maths are you on?? lol

So you'd rather make the same payment and have:

500,000-69000 = 431,000 remaining mortgage
Vs.
400,000-38,000 = 362,000 remaining mortgage

And you'd take the 1st one because you paid less interest to the bank?
 

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What maths are you on?? lol

So you'd rather make the same payment and have:

500,000-69000 = 431,000 remaining mortgage
Vs.
400,000-38,000 = 362,000 remaining mortgage

And you'd take the 1st one because you paid less interest to the bank?
Yes, I replied the counter arguments to myself in post #460

And it's $400,000 - $69,000 = $331,000 and $300,000 - $38,000 = $262,000 because in my example I used $500,000 vs $400,000 houses but with $100,000 own payment, so $400,000 vs $300,000 mortgages.

But how much have those people paid (lost) in rent over the past 2 years? $60,000? More?

Arguably we could still say that the lower house price, higher mortgage rate was the better option, but that's just a fictive example of mine. Take in more variables into account, each very sensitive, and you end up winning even with high house price and low mortgage rate. Obviously with rates dropping so low, prices overshot, but if rates go up to high, you will also end up on the losing side even if price drops.
 

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@MrBlackhill: That is the problem with housing affordability. Those with vested agendas, e.g. house prices are now 10 times earnings type stuff, use data mining to make their point. Ultimately, affordability is a relationship of market prices vs mortgage interest rate. Affordability is always a messy uneasy equilibrium.... rates go up and prices go down, and vice versa. I've had to give up with the explanations to folks who don't want to get the math. Instead, Ottawa has, over the years, kept increasing demand (and thus prices) with poor housing policies.
 

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Electoral reform is always the policy of those seeking power not the ones holding power. Once elected the extent of reform is done through redrawing the electoral boundaries to carve out a greater probability of winning more seats. I am aware that the remapping is done by Elections Canada and therefore not a direct act of the government. However, there does seem to be a trend in carving up strongholds in the remapping. Especially on the fringes of urban rural ridings.

Electoral district (Canada) - Wikipedia
 

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I don't believe there is any material political interference. EC asks affected stakeholders to comment on proposed electoral district boundaries. Our local boundaries are changing and EC has asked everyone in the districts to comment to see if a proposed boundary makes sense, e.g. through a housing subdivision rather than between subdivisions or along river courses, etc. I think EC looks at the boundaries after each census. BC, AB and ON are growth provinces and usually always get a few more seats. There are a few anomalies guaranteed by the constitution, e.g. in the Maritimes and for Quebec, and allowances are made for very sparsely populated regions. So it will never be true representation by population but it is as fair as can be done in my opinion.

Nothing remotely like the gerrymandering that goes on in the USA where I don't know how they can even say they are a functioning democracy. If the USA model is model democracy, then democracy is hooped.
 

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Cliff Asness of AQR says

"I think the Fed probably fears recession more than they fear inflation. They fear both. Historically ... most macro economists think that if we really have to, we know how to kill inflation. It usually will bring on a worse recession and you only do that as a last resort (Volcker is the ultimate example)"

 

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I don't believe there is any material political interference. EC asks affected stakeholders to comment on proposed electoral district boundaries. Our local boundaries are changing and EC has asked everyone in the districts to comment to see if a proposed boundary makes sense, e.g. through a housing subdivision rather than between subdivisions or along river courses, etc. I think EC looks at the boundaries after each census. BC, AB and ON are growth provinces and usually always get a few more seats. There are a few anomalies guaranteed by the constitution, e.g. in the Maritimes and for Quebec, and allowances are made for very sparsely populated regions. So it will never be true representation by population but it is as fair as can be done in my opinion.

Nothing remotely like the gerrymandering that goes on in the USA where I don't know how they can even say they are a functioning democracy. If the USA model is model democracy, then democracy is hooped.
Definitely nowhere near level of gerrymandering taking place as the US but I typically don't hold the US as a shining example of a stellar political system. Increasing the number of seats due to population is definitely the right thing to do. Perhaps I am reading too much into it but I find that when the boundaries are redrawn, ridings that are shuffled geographically tend to carve out ridings that result in constituents that all vote the same way. Again, I haven't researched to confirm such is the case and has been more of an observation over the years with input from some associates in the bureaucracy. The recent federal election is a poor example as we saw regional voting for the most part similar to the 90s. I understand we will likely never see true rep by pop(I think it would create a greater imbalance for the territories and Maritimes) and the majority of the voting power still lies in the larger populated provinces.
 

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I also like the first part of the video where he talks about avoiding bonds.
As an active manager, he does want to avoid bonds. You can go that route but then the question becomes: when do you get back in?

Remember, these CNBC guests are active managers (this guy runs a hedge fund). He's not saying avoid bonds in the long term, he's saying avoid them for now until his opinion changes again. In 6 months he might be saying something different.
 

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I've noticed a significant downward trend in interest rates expectation over at the TMX website. A month ago the market was pricing in a solid 3% BoC rate by December, and up to 3.5% in early 2023. Now they think it's going to be about 2.5% by December, and drop somewhere between 2 and 2.25% by mid 2023. Heck, even the 0.75% hike next week seems unlikely.

I've been following the interest rate expectations on TMX a lot over the last few years. I find it quite reliable. Now the question is, what are they seeing that we don't?
 

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Now the question is, what are they seeing that we don't?
Not we but you 😂

Many see raising rates into a recession as unfeasible. Normally they should raise rates when the economy is running hot. Economy has already cooled off significantly

Bullwhip effect is coming
 

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Heck, even the 0.75% hike next week seems unlikely.
The BOC is saying today that inflation expectations are high, which apparently can be a self-fulfilling prophecy. Here's a discussion about it on BNN today. This guy thinks they will raise 0.75% next week.


Maybe the rate expectations you're looking at are anticipating that the BOC will have to reverse course late in the year?
 

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Maybe the rate expectations you're looking at are anticipating that the BOC will have to reverse course late in the year?
They're expecting 0.75% hike by September, which I assume includes both the July and September rate hikes. So it could be something like +0.50% next week and +0.25% in September. Then we'd have +0.25% again in both October and December to bring the rate to 2.5%.

Anyways, it's all (educated) speculation, I was just surprised at the downward trend when everyone seems to think interest rates need to go to the moon to tame inflation....
 

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I've noticed a significant downward trend in interest rates expectation over at the TMX website. A month ago the market was pricing in a solid 3% BoC rate by December, and up to 3.5% in early 2023. Now they think it's going to be about 2.5% by December, and drop somewhere between 2 and 2.25% by mid 2023. Heck, even the 0.75% hike next week seems unlikely.

I've been following the interest rate expectations on TMX a lot over the last few years. I find it quite reliable. Now the question is, what are they seeing that we don't?
They're looking at the wrong data. Nothing has really changed from the BoC perspective. They are always backwards-looking, so they will likely raise .75% based on May's CPI. They may raise only .50% in September if inflation starts coming down.
 

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I've noticed a significant downward trend in interest rates expectation over at the TMX website. A month ago the market was pricing in a solid 3% BoC rate by December, and up to 3.5% in early 2023. Now they think it's going to be about 2.5% by December, and drop somewhere between 2 and 2.25% by mid 2023. Heck, even the 0.75% hike next week seems unlikely.

I've been following the interest rate expectations on TMX a lot over the last few years. I find it quite reliable. Now the question is, what are they seeing that we don't?
The BoC will only continue to raise their policy rate if they feel the need to do so. Thus the futures market is factoring in an increased probability of either data showing recession or lower inflation pressure by that time. Either of which would be a reason for the BOC to slow the rate of increases, should the data be present, at future decision dates.
 

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I am fine with lower raises if it means inflation rates are normalizing. I am also good with higher raises if the economy remains strong. The rate environment we have experienced was unhealthy and created a lot of bubbles and inequalities in the system. Unfortunately, I think the expectation is that recession is looming if not already here. As the B of C often follows the US fed's lead they will do an about face when the US does should their economy stumble in a big way even if Canada is doing ok. I haven't figured out why Canada's rate can't be marginally higher than the US. I think it would spur foreign investment in this country in something other than RE.
 
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