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Canada’s Housing Market: Being Blind to the Reality

If future prosperity is a direct consequence of present decisions/actions, then it is certifiable how quickly we latch onto false narratives or narrative of hope without basis in reality. What is the motivating factor that allows investors to dispel critical thinking in favor of acceptance of an endless pageant of data manipulations and ruses that will claim to magically produce a reliable and consistent future of organic growth? Most people sense that something smells rotten but are too busy or too distracted to care. When did we just start accepting the propaganda?

Definition: Propaganda is a form of communication aimed towards influencing the attitude of a population toward a cause or position.  

The essence of the U.S. and Canadian economic narrative is “make it look good”.  It is the account of events that has been played now for several years. Forget quality or long-term consequences; just make it look good today, this week, this month, this quarter. Let the regulators eyes be averted and let the investor’s eyes be apathetic or silenced.

Make the company look profitable, make the low-quality product look good enough to close the sale. Make the unemployment rate low enough to justify re-election, make the body count of bad guys look good, make the “pink slime” look like meat, and on and on.  Just make the numbers look good now, the future will take care of itself. This is, of course, a beautiful falsehood.

When an economy like Canada or the US relies on an interminable cavalcade of false narratives, manipulations and deceptions it has only one possible future result.  That is economic downturn, recession and/or inflation with pure abject, undeniable, devastating, consequences for the average investor.

But not to be outdone are the institutions and individuals which have taken the bait and have this undying current conviction that irrational extremes in false narratives, such as the  billions of dollars of corporate buybacks pushing stocks higher, the transfer of the U.S. mortgage market to the public, the fictitious unemployment number (which no longer recognizes those who are able to work but have run out of social assistance or stopped looking) and other fictitious numbers are going to ultimately lead to a new economy of strength and domination. Particularly alluring is the sense that Governments will help while they stimulate the economic situation into a cesspool of debt that will be paid for on the backs of those who wish to be saved.

You may be wondering exactly where Canada does really stand in all of this?  One of the reasons much of the critical analysis involves the US marketplace, besides the fact that it is the world’s largest economy, is due in part that they publish a tremendous amount of data.  From housing to debt and jobs to GDP and everything in between the US does publish a great deal of data.  Canada does not make it so easy.  Sometimes we get a better than expected opinion of the Canadian economy, due in part by that face that we simply receive less in terms of total micro and macro data.

Still, if you care to know more about the country you live in the information is always out there.  Eventually it surfaces and the deceptions simply end up eroding trust in our institutions and the bedrock belief that honesty, integrity, accountability, hard work and productive investments are the keys to advancement.

Canadian Real Estate; Boom or Bubble

Let’s highlight one specific area in the Canadian economy for a moment.  hat is Canadian housing and real estate market.  Are we booming?  Will it continue?  Or are we near a climax that could falter?  Let me try to shed some light on this.

For a number of years now, Canada’s housing market has been the strongest performing developed market, which has also made it the world’s most overvalued according to the Economist, the OECD, and Deutsche Bank. Low interest rate environment and foreign investment appear to be the two major factors aiding performance. 

Yours to the penny,

Darren V. Long

Guildhall Wealth Management Inc.

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