I sometimes wonder what the future will bring for young people trying
to establish themselves in the GTA. In some cases, their parents are
taking the hit to keep them afloat, borrowing or working longer to
support their children.
The delays getting into the workforce, or in moving up for many of these young people, also
mean their life long earnings are likely to be less.
Where will that take us in the future? Debt is cheaper now, will it
stay that way? The economy is not an easy thing to manage at the
best of times, but when people are living longer and living life
differently (borrowing and not saving for retirement, not leaving much
for the children because it is being spent now) can old theories really
be the grounds for making political decisions that will rebuild Canada
for the future?
I
think there are pieces that are not being put into the equation, and I am
not sure I like where it is leading us. I REALLY hope I am wrong, but
I fear it will only exacerbate the growing rich/poor divide.
"You can't
take it with you," so maybe this is the ME generation going out with a
bang. Like those who deny global warming, they are leaving it to the
next generation to sort out. After all, they have had the best ride in
the history of humankind, so why change now and why should not having enough money saved
change the way they live. So raise a glass and CHEERS.
Source of the idea:
http://business.financialpost.com/personal-finance/debt/canadian-seniors-ramp-up-debt-to-soak-up-glitzier-lifestyle
Thursday, September 24, 2015
Wednesday, August 26, 2015
August Financial Commentary
So much has happened.
The media covered the Bank of Canada rate drop pretty thoroughly and the rather interesting (read perhaps political) failure by the chief of the Bank to use the "R" word, recession. A pretty standard definition of this term is "a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters."
In the Bank's press release it said, "Real GDP is now projected to have contracted modestly in the first half of the year, resulting in higher excess capacity and additional downward pressure on inflation." I italicized the "first half of the year" to point out that this in fact equals 2 quarters.
There has been a great deal of news since then, here are a few items of note:
China's market's have people watching and guessing about what it all REALLY means, but the bottom line for Canada right NOW is they are buying fewer of our resources and it hurts our overall economy.
Harper has declared that if re-elected he will increase the First Time home buyer RSP withdrawal limit from $25,0000 to $35,000. This is great for people who make enough to have contributed this much to their RSPs and who can pay it back on top of the cost of home ownership over the next 15 years. So this helps a small percentage of well to do buyers.
The Bank of Canada still says high personal debt, whether student loans, mortgages, car loans, credit card, or other forms debt is the biggest threat to our long term economic success and yet BMO comes out with an article about "GOOD DEBT." Good debt in this case is student and home loans, Student debt is only good if t leads to better jobs and more income, so until that is proven it is hard say it is "good" because having a large student loan and working minimum wage for years on end is not good debt for many. I think people need to be smart about debt, and do their best to use it wisely, and what that looks like for each person is a bit different, but everyone should have a plan to get OUT of debt.
Real estate values are dropping in some parts of the country which can cause problems for some, but in the short term is fine of you are planning to stay in the home.
Harper government hints at toughening up some aspect of mortgage lending before the election was called, and banks are tightening their lending practices. After the election we will see what becomes of the mortgage market.
While I do not have all the data to hand, my sense is that there will continue to be bumps in the road, but that overall the economy will tick along with no big ups or downs, we have no room for big growth because we did not fall as far as the US, and while our economy is tied to many markets there are no real signs that anything crazy is happening on the upside that should lift us significantly higher. The global situation will force the Bank of Canada to keep rates low for the foreseeable future and this will entice people to increase their debt levels, since the costs will seem so low.
Housing prices in Toronto show no signs of slowing down and as favoured areas sky rocket people will find new pockets to gentrify. A key calculation for anyone thinking of buying is looking at rent, savings, investment return vs. cost of buying, mortgage levels and likely future value of the home. Then of course there are the intangibles like feelings and personal preferences.
I do not like loosing business, but I also do not want people to get in over their heads. Check is out and think about your best options.
http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/can-you-really-afford-that-mortgage-know-your-real-life-ratio/article17333137/
If your path takes you into the market or you want to use the equity in your home to add the extra space please let me help you get the right mortgage at a great rate.
After writing this of course we had a busy start to the week with major market shifts and a record low dollar. We will see what happens over the next while, but it looks like more Bank of Canada rate drops ahead.
All the best.
The media covered the Bank of Canada rate drop pretty thoroughly and the rather interesting (read perhaps political) failure by the chief of the Bank to use the "R" word, recession. A pretty standard definition of this term is "a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters."
In the Bank's press release it said, "Real GDP is now projected to have contracted modestly in the first half of the year, resulting in higher excess capacity and additional downward pressure on inflation." I italicized the "first half of the year" to point out that this in fact equals 2 quarters.
There has been a great deal of news since then, here are a few items of note:
China's market's have people watching and guessing about what it all REALLY means, but the bottom line for Canada right NOW is they are buying fewer of our resources and it hurts our overall economy.
Harper has declared that if re-elected he will increase the First Time home buyer RSP withdrawal limit from $25,0000 to $35,000. This is great for people who make enough to have contributed this much to their RSPs and who can pay it back on top of the cost of home ownership over the next 15 years. So this helps a small percentage of well to do buyers.
The Bank of Canada still says high personal debt, whether student loans, mortgages, car loans, credit card, or other forms debt is the biggest threat to our long term economic success and yet BMO comes out with an article about "GOOD DEBT." Good debt in this case is student and home loans, Student debt is only good if t leads to better jobs and more income, so until that is proven it is hard say it is "good" because having a large student loan and working minimum wage for years on end is not good debt for many. I think people need to be smart about debt, and do their best to use it wisely, and what that looks like for each person is a bit different, but everyone should have a plan to get OUT of debt.
Real estate values are dropping in some parts of the country which can cause problems for some, but in the short term is fine of you are planning to stay in the home.
Harper government hints at toughening up some aspect of mortgage lending before the election was called, and banks are tightening their lending practices. After the election we will see what becomes of the mortgage market.
While I do not have all the data to hand, my sense is that there will continue to be bumps in the road, but that overall the economy will tick along with no big ups or downs, we have no room for big growth because we did not fall as far as the US, and while our economy is tied to many markets there are no real signs that anything crazy is happening on the upside that should lift us significantly higher. The global situation will force the Bank of Canada to keep rates low for the foreseeable future and this will entice people to increase their debt levels, since the costs will seem so low.
Housing prices in Toronto show no signs of slowing down and as favoured areas sky rocket people will find new pockets to gentrify. A key calculation for anyone thinking of buying is looking at rent, savings, investment return vs. cost of buying, mortgage levels and likely future value of the home. Then of course there are the intangibles like feelings and personal preferences.
I do not like loosing business, but I also do not want people to get in over their heads. Check is out and think about your best options.
http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/can-you-really-afford-that-mortgage-know-your-real-life-ratio/article17333137/
If your path takes you into the market or you want to use the equity in your home to add the extra space please let me help you get the right mortgage at a great rate.
After writing this of course we had a busy start to the week with major market shifts and a record low dollar. We will see what happens over the next while, but it looks like more Bank of Canada rate drops ahead.
All the best.
Tuesday, July 21, 2015
July Economic Commentary - Mortgage Rates are dropping, again
So much has happened. Sorry for the delay in getting back to the posts.
Last week as the media covered the Bank of Canada rate drop pretty thoroughly and the rather interesting (read perhaps political) failure by the chief of the Bank to use the "R" word, recession. A pretty standard definition of this term is "a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters."
In the Bank's press release it said, "Real GDP is now projected to have contracted modestly in the first half of the year, resulting in higher excess capacity and additional downward pressure on inflation." I italicized the "first half of the year" to point out that this in fact equals 2 quarters.
The rest of the piece has loads of optimism about the future growth, despsite the steep decline in the Chinese economy with the corresponding decline in demand for raw materials. It would seem the lower dollar should stimulate the other parts of the economy to help offset the decline in sales and investment in the resource sector, particularly oil and gas.
There does appear to be an improvement in the labour figures and consumer confidence is high. I often wonder if "high'' is, in part, an adjustment to the new reality, in other words have we lowered our expectations and are happy with the new norm, or does high mean we really think we will get back to spending like crazy?
On the mortgage front the rate drop is good news borrowers, particularly those of us with variable rate mortgages. It means if we keep the payments the same, we are paying down our mortgages incrementally faster, but in the long run even a few dollars more each month can make a big difference, especially if rates ever go up. While the banks are keeping some of the decrease, in January and this month they have only passed on 30 bps of the total 50 bps (or 0.50%) the Bank of Canada announced. There are any number of reasons given, but if you cannot beat them then buy the stock, since it probably means they will be making great profits this year, but then when don't they?
The other rumblings about mortgages hinge around regulations, now with the election in October, I am not sure the Conservatives are going to annoy people by tightening borrowing rules, not after they so generously bought votes this week by passing on money to parents of kids under 18, (most parties in power use similar pre-election giveaways) but the threat seems to be aimed squarely at first time buyers. They are talking about raising the minimum down payment.
While I agree first time buyers are the people taking the biggest risks relative to income compared to people selling one property to buy another. In other words they often buy as much as they can afford to get a foot in the door with as little as possible down. Why not? Most of these young people have come of age since 2008 and they do not know the days of 7-16%+ mortgage rates, and since things still look pretty bleak on the economic front around the world, then why worry about the increase? By the time a significant rate increase hits they will be in better financial shape and will own a much higher percentage of their homes. They also have a long life expectancy, and can pay it off over a long time. How else will they ever get into the market? Hope to win the lottery? Here is to hoping that the boom is not dropped lower on first time buyers.
Last week as the media covered the Bank of Canada rate drop pretty thoroughly and the rather interesting (read perhaps political) failure by the chief of the Bank to use the "R" word, recession. A pretty standard definition of this term is "a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters."
In the Bank's press release it said, "Real GDP is now projected to have contracted modestly in the first half of the year, resulting in higher excess capacity and additional downward pressure on inflation." I italicized the "first half of the year" to point out that this in fact equals 2 quarters.
The rest of the piece has loads of optimism about the future growth, despsite the steep decline in the Chinese economy with the corresponding decline in demand for raw materials. It would seem the lower dollar should stimulate the other parts of the economy to help offset the decline in sales and investment in the resource sector, particularly oil and gas.
There does appear to be an improvement in the labour figures and consumer confidence is high. I often wonder if "high'' is, in part, an adjustment to the new reality, in other words have we lowered our expectations and are happy with the new norm, or does high mean we really think we will get back to spending like crazy?
On the mortgage front the rate drop is good news borrowers, particularly those of us with variable rate mortgages. It means if we keep the payments the same, we are paying down our mortgages incrementally faster, but in the long run even a few dollars more each month can make a big difference, especially if rates ever go up. While the banks are keeping some of the decrease, in January and this month they have only passed on 30 bps of the total 50 bps (or 0.50%) the Bank of Canada announced. There are any number of reasons given, but if you cannot beat them then buy the stock, since it probably means they will be making great profits this year, but then when don't they?
The other rumblings about mortgages hinge around regulations, now with the election in October, I am not sure the Conservatives are going to annoy people by tightening borrowing rules, not after they so generously bought votes this week by passing on money to parents of kids under 18, (most parties in power use similar pre-election giveaways) but the threat seems to be aimed squarely at first time buyers. They are talking about raising the minimum down payment.
While I agree first time buyers are the people taking the biggest risks relative to income compared to people selling one property to buy another. In other words they often buy as much as they can afford to get a foot in the door with as little as possible down. Why not? Most of these young people have come of age since 2008 and they do not know the days of 7-16%+ mortgage rates, and since things still look pretty bleak on the economic front around the world, then why worry about the increase? By the time a significant rate increase hits they will be in better financial shape and will own a much higher percentage of their homes. They also have a long life expectancy, and can pay it off over a long time. How else will they ever get into the market? Hope to win the lottery? Here is to hoping that the boom is not dropped lower on first time buyers.
Thursday, March 19, 2015
March Commentary - Economy, Housing and Mortgages
Spring
is nearly here, in Toronto at least, (sorry Halifax) the snow is fast
disappearing and while the weather has graced us with a couple of warm
days we are at least seeing longer days. I love the sunshine. Maple
season is here for those heading out to the sugar bush events and houses
are being listed and sold at a searing pace, with the first 2 weeks of
March seeing 3,838 sales through MLS, an 11.8% increase over this time
last year.
The Bank of Canada has held rates down and while banks did finally drop their prime rates, 15 bps, they did not match the 25 bps the Bank of Canada announced in January. This has still been great for variable rate borrowers.
As ever the pundits are calling for the rates to stay low and to go up. While the US economy is doing well, places like Brazil and India have less momentum than they did, and if we can get around the official numbers it looks like China is slowing down more than the world had hoped.
The spillover effect of the sanctions imposed on Russia for their acts of hubris are hurting Germany, the engine of Europe, so this is going to be a lose-lose on the sanctions game, but since no one wants war with Russia and they still want to take a moral stance I guess there is still a price to be paid.
Canada is now more than ever a petro-dollar economy and so we will probably not see our dollar go back up anytime soon, the hope that other sectors would pick up has not proved as successful at offsetting the declines due to oil, as had been hoped, so the dollar is low, rates are low and in some sectors jobs are being lost. This does not suggest that we will see rate increases any time soon.
An average single detached house price in Toronto is now $1 million, a nice milestone to keep the news hounds happy, but what does this mean. A few things, 1) cheap financing 2) there is a LOT of money in Toronto, 3) people keep coming to Toronto and 4) land is finite. Developers, are now seeing the writing on the wall and are starting to invest in rental housing, they see that the long term prospects of owning a home will be further diminished as the wealth divide increases and more people will rent.
This means 2 things for the some people 1) it is a good time to invest in buying rental properties and 2) house prices are not likely to drop too much even when rates increase.
Our personal (non-mortgage) debt levels keep rising, but we seem to be managing. The government has not jumped on the banks for dropping their lending rates on mortgages this time, and Harper has indicated that they "are not planning to take any immediate action." This is good news for the real estate sector.
On a side note I have yet to see a news story where banks are dropping their credit card interest rates, but then those are not underwritten by government insurance and somehow they keep it out of the news.
Something always happens, at the moment though I do not think it will be much.
I
do not think there should be a mad rush to buy just because of the
current interest rates, while they may rise and fall a bit we are still
in crazy low territory, so take your time and buy what you want when you
can.The Bank of Canada has held rates down and while banks did finally drop their prime rates, 15 bps, they did not match the 25 bps the Bank of Canada announced in January. This has still been great for variable rate borrowers.
As ever the pundits are calling for the rates to stay low and to go up. While the US economy is doing well, places like Brazil and India have less momentum than they did, and if we can get around the official numbers it looks like China is slowing down more than the world had hoped.
The spillover effect of the sanctions imposed on Russia for their acts of hubris are hurting Germany, the engine of Europe, so this is going to be a lose-lose on the sanctions game, but since no one wants war with Russia and they still want to take a moral stance I guess there is still a price to be paid.
Canada is now more than ever a petro-dollar economy and so we will probably not see our dollar go back up anytime soon, the hope that other sectors would pick up has not proved as successful at offsetting the declines due to oil, as had been hoped, so the dollar is low, rates are low and in some sectors jobs are being lost. This does not suggest that we will see rate increases any time soon.
An average single detached house price in Toronto is now $1 million, a nice milestone to keep the news hounds happy, but what does this mean. A few things, 1) cheap financing 2) there is a LOT of money in Toronto, 3) people keep coming to Toronto and 4) land is finite. Developers, are now seeing the writing on the wall and are starting to invest in rental housing, they see that the long term prospects of owning a home will be further diminished as the wealth divide increases and more people will rent.
This means 2 things for the some people 1) it is a good time to invest in buying rental properties and 2) house prices are not likely to drop too much even when rates increase.
Our personal (non-mortgage) debt levels keep rising, but we seem to be managing. The government has not jumped on the banks for dropping their lending rates on mortgages this time, and Harper has indicated that they "are not planning to take any immediate action." This is good news for the real estate sector.
On a side note I have yet to see a news story where banks are dropping their credit card interest rates, but then those are not underwritten by government insurance and somehow they keep it out of the news.
Something always happens, at the moment though I do not think it will be much.
When you or someone you know is ready to buy, refinance or renew give me a call I will always work to get you a great deal and take advantage of the battle of the lenders to make sure you get the RIGHT mortgage at a GREAT Rate. More often than not I can get you something better than most people can find on their own.
All the best.
Friday, March 13, 2015
Debt - Inheritance - Get your affairs in order!
This article from the CBC (http://www.cbc.ca/news/business/high-consumer-debt-reflects-laissez-faire-attitude-to-borrowing-1.2988768) and others discuss the growing debt burden on Canadians. They make allowances for the fact that house prices are insane, and interest rates are also historically low, and that despite the slump in the oil sector a lot of Canadians do not feel that the economy is too bad, but the pundits still feel their is a need to worry.
Then there are other articles about the transfer of wealth, and in the case of the Maclean's article, the battles that can come with that transfer (http://www.macleans.ca/society/life/the-inheritance-wars/).
So, how much of the transfer will offset the debt? And an insufficiently covered part, until I read the Maclean's piece, was how much will the lawyers get.
There are several battles waging for the money that might be transferred. The longevity and health of the people currently holding the wealth: they may be healthy enough to spend it travelling, or need more expensive medical care. The amount that their children might have needed during the much rockier times since the 70s with more schooling, poor job markets and now, high costs of housing. Then of course there is also the philosophical position of those holding the wealth. In 2013 this article came out (http://www.businessinsider.com/tycoons-not-leaving-money-to-their-kids-2013-8?op=1) and while being taken care of by billionaire parents might be more than most would get, it is still not what the rest of us thought might happen. I also know middle class families that hold the same views, that children need to make their own way and should not rely on their parents to get ahead.
I think I lie somewhere in the middle. The world is a tough place and while I think children, young or grown, need to be able to fend for themselves and build a future and not depend on what may be left to them, I think some help is OK. Some might want to build a dynasty, or grow family wealth and set things up so that whatever you are given by your parents you must give each of your children at least that amount. If this were the case then someone must double, or triple their net worth to keep those standards if they have children. Is this done through a Trust? How can you hold people to this? I think the key thing is raising your children with the values you really want them to have, and giving them too much will definitely lead to zero motivation to succeed on their own. So what this help looks like will be different for every family, but what I can say is whatever your plans make sure you get them down on paper and make sure they cover all eventualities.
Do not forget you, or a family member, may get dementia and you should know that, in Ontario anyway, the laws are against the family in the case of a single adult with dementia. Why do I say this? If you think children can be nasty fighting over their inheritance just think about what could happen if a nice man, or woman, saw your single mother, or father, with dementia and a tidy nest egg. Maybe the Will was in place before your parent got dementia, and maybe mom, or dad cannot legally sign a contract to buy a car, but they can get married, and in Ontario at least, if they get married that Will they wrote back when they knew what they wanted, becomes NULL & VOID, and then when they die, well, I guess the lawyers could get most of it, but it certainly will not shake out the way it was planned. (In case you want to read more check out this book, it is well worth the investment if you, or your parents have any net worth that might be targeted. http://www.carswell.com/product-detail/capacity-to-marry-and-the-estate-plan/ and/or listen to the following broadcast http://podcast.cbc.ca/mp3/podcasts/ontariotoday_20150115_54711.mp3 ).
I could go on, but my belief is that we are not going to see debt ratios getting any better while interest rates are so low and housing prices remain so high. I also think despite articles warning that there may be less than one planned when parents die, and it may come later, people are still going to pretend they will rely on their inheritance to get them through their own retirement. This kind of wishful planning is not the best path so whatever your beliefs, or plans, make sure you have the paperwork and budgets in line to meet your own, and your family's goals.
Then there are other articles about the transfer of wealth, and in the case of the Maclean's article, the battles that can come with that transfer (http://www.macleans.ca/society/life/the-inheritance-wars/).
So, how much of the transfer will offset the debt? And an insufficiently covered part, until I read the Maclean's piece, was how much will the lawyers get.
There are several battles waging for the money that might be transferred. The longevity and health of the people currently holding the wealth: they may be healthy enough to spend it travelling, or need more expensive medical care. The amount that their children might have needed during the much rockier times since the 70s with more schooling, poor job markets and now, high costs of housing. Then of course there is also the philosophical position of those holding the wealth. In 2013 this article came out (http://www.businessinsider.com/tycoons-not-leaving-money-to-their-kids-2013-8?op=1) and while being taken care of by billionaire parents might be more than most would get, it is still not what the rest of us thought might happen. I also know middle class families that hold the same views, that children need to make their own way and should not rely on their parents to get ahead.
I think I lie somewhere in the middle. The world is a tough place and while I think children, young or grown, need to be able to fend for themselves and build a future and not depend on what may be left to them, I think some help is OK. Some might want to build a dynasty, or grow family wealth and set things up so that whatever you are given by your parents you must give each of your children at least that amount. If this were the case then someone must double, or triple their net worth to keep those standards if they have children. Is this done through a Trust? How can you hold people to this? I think the key thing is raising your children with the values you really want them to have, and giving them too much will definitely lead to zero motivation to succeed on their own. So what this help looks like will be different for every family, but what I can say is whatever your plans make sure you get them down on paper and make sure they cover all eventualities.
Do not forget you, or a family member, may get dementia and you should know that, in Ontario anyway, the laws are against the family in the case of a single adult with dementia. Why do I say this? If you think children can be nasty fighting over their inheritance just think about what could happen if a nice man, or woman, saw your single mother, or father, with dementia and a tidy nest egg. Maybe the Will was in place before your parent got dementia, and maybe mom, or dad cannot legally sign a contract to buy a car, but they can get married, and in Ontario at least, if they get married that Will they wrote back when they knew what they wanted, becomes NULL & VOID, and then when they die, well, I guess the lawyers could get most of it, but it certainly will not shake out the way it was planned. (In case you want to read more check out this book, it is well worth the investment if you, or your parents have any net worth that might be targeted. http://www.carswell.com/product-detail/capacity-to-marry-and-the-estate-plan/ and/or listen to the following broadcast http://podcast.cbc.ca/mp3/podcasts/ontariotoday_20150115_54711.mp3 ).
I could go on, but my belief is that we are not going to see debt ratios getting any better while interest rates are so low and housing prices remain so high. I also think despite articles warning that there may be less than one planned when parents die, and it may come later, people are still going to pretend they will rely on their inheritance to get them through their own retirement. This kind of wishful planning is not the best path so whatever your beliefs, or plans, make sure you have the paperwork and budgets in line to meet your own, and your family's goals.
Friday, January 23, 2015
Bank of Canada Announcement not really a surprise
Well, Well the New Year has brought a big surprise for the business news watchers.
Personally, have had a great start to the year and hope the same for you.
The unpredictability of the economy and what the big guys do has never been more evident than with the most recent Bank of Canada (BoC) announcement. The 1/4 point drop in rate means they are worried about the effects of the low price of oil on the Canadian economy. Granted we were reassured that the other parts of the economy e.g. manufacturing etc. are growing, and with the stronger US economy and a lower Canadian dollar it certainly opens opportunity for export growth, but this announcement means they do not expect the one aspect of the economy to pick up enough slack to offset the oil patch slow down any time soon.
The focus was on opening the lending gates to business to help them grow, and while the BoC hedged around it, the media sources jumped on the fact that people might take this opportunity to borrow and dig themselves deeper into debt. So the banks have held off on dropping personal lending rates and even those of us with variable rate debt had hoped it would mean our payments would be making a bigger dent in the principal. The banks though have taken the "general concern" and turned it into a window to boost profits as their margins improve while they save us from ourselves. Maybe a good time to up the bank stock holdings? Anyway, the rate drop does mean that while we had it pretty easy after the 2008 collapse we are going to have to pay some price for our focus on oil.
Look at the federal government, in an election year they are postponing the next budget and starting an aggressive pre-election media and phone campaign and trying to figure what they can put on the table to give to voters because the money they thought they had has evaporated. This means that even they are worried about the effects on all Canadians. So this is no small announcement.
I also listened to the Obama state of the union and while I must admit I like the guy as a orator, I also think I like the way he reached across party lines and tried to find a way to help all Americans benefit from the current growth in the US. I did not see a lot of happy Republican faces, but where before Obama was learning the job and the games and then had to be re-elected, maybe he meant it that he would use the 2 years he has left to do more of what people elected him to do the first time? If that happens it may have a spin off effect in Canada.
Why you might ask? Well if he can get people paid sick days, fair wages and maternity leave, maybe some parts of the US will have improved economies and this would further boost consumption of both US and Canadian goods, and if wages go up we may be more competitive in our labour costs. We do need to work on our productivity though.
The experts say they were caught off guard by the rate drop, and the Bank of Canada said they dropped hints and that the experts understood the effect the big drop in oil prices would have so they should not have been surprised. The BoC said this move was for insurance purposes and reminded us that the effects of a drop are never immediate ( 6 - 8 quarters to influence inflation) and that it could take a year to get back on track. They have room to go up, or down, if they still need to and with their models predicated on $60 it is going to be interesting. The recent death of the Saudi King may also lead to changes, overall it is a dramatic start to the year.
Will this help return "output to its full potential" or help "close the labour market gap?" Hard to say. I am going to agree with Michael Hlinka on this and I think there is far too much under employment and people who are in the wings with better educations and skills than the economy is putting to use. I do not think the Canadian economy is crashing and burning, but I also am not yet convinced that this one cut will give us the growth we need if governments and business do not start investing in infrastructure, growth and people. And I am not sure I see enough of that across the country to say that me might not see another rate drop.
The benefit to the consumer is delayed by banks who will not match the rate drop, and it may take time to work its way into mortgage rates, but I guess the one thing we can be sure of is that mortgage rates will not be going up soon. So if your personal economics and job prospects are good it is still a great time to buy, and a great time for those happy with where they are to pay the debts down even faster and free up that cash flow for a much freer life down the road.
The dollar remains low and this too will affect how Canadians spend their money. Higher food prices ahead.
Personally, have had a great start to the year and hope the same for you.
The unpredictability of the economy and what the big guys do has never been more evident than with the most recent Bank of Canada (BoC) announcement. The 1/4 point drop in rate means they are worried about the effects of the low price of oil on the Canadian economy. Granted we were reassured that the other parts of the economy e.g. manufacturing etc. are growing, and with the stronger US economy and a lower Canadian dollar it certainly opens opportunity for export growth, but this announcement means they do not expect the one aspect of the economy to pick up enough slack to offset the oil patch slow down any time soon.
The focus was on opening the lending gates to business to help them grow, and while the BoC hedged around it, the media sources jumped on the fact that people might take this opportunity to borrow and dig themselves deeper into debt. So the banks have held off on dropping personal lending rates and even those of us with variable rate debt had hoped it would mean our payments would be making a bigger dent in the principal. The banks though have taken the "general concern" and turned it into a window to boost profits as their margins improve while they save us from ourselves. Maybe a good time to up the bank stock holdings? Anyway, the rate drop does mean that while we had it pretty easy after the 2008 collapse we are going to have to pay some price for our focus on oil.
Look at the federal government, in an election year they are postponing the next budget and starting an aggressive pre-election media and phone campaign and trying to figure what they can put on the table to give to voters because the money they thought they had has evaporated. This means that even they are worried about the effects on all Canadians. So this is no small announcement.
I also listened to the Obama state of the union and while I must admit I like the guy as a orator, I also think I like the way he reached across party lines and tried to find a way to help all Americans benefit from the current growth in the US. I did not see a lot of happy Republican faces, but where before Obama was learning the job and the games and then had to be re-elected, maybe he meant it that he would use the 2 years he has left to do more of what people elected him to do the first time? If that happens it may have a spin off effect in Canada.
Why you might ask? Well if he can get people paid sick days, fair wages and maternity leave, maybe some parts of the US will have improved economies and this would further boost consumption of both US and Canadian goods, and if wages go up we may be more competitive in our labour costs. We do need to work on our productivity though.
The experts say they were caught off guard by the rate drop, and the Bank of Canada said they dropped hints and that the experts understood the effect the big drop in oil prices would have so they should not have been surprised. The BoC said this move was for insurance purposes and reminded us that the effects of a drop are never immediate ( 6 - 8 quarters to influence inflation) and that it could take a year to get back on track. They have room to go up, or down, if they still need to and with their models predicated on $60 it is going to be interesting. The recent death of the Saudi King may also lead to changes, overall it is a dramatic start to the year.
Will this help return "output to its full potential" or help "close the labour market gap?" Hard to say. I am going to agree with Michael Hlinka on this and I think there is far too much under employment and people who are in the wings with better educations and skills than the economy is putting to use. I do not think the Canadian economy is crashing and burning, but I also am not yet convinced that this one cut will give us the growth we need if governments and business do not start investing in infrastructure, growth and people. And I am not sure I see enough of that across the country to say that me might not see another rate drop.
The benefit to the consumer is delayed by banks who will not match the rate drop, and it may take time to work its way into mortgage rates, but I guess the one thing we can be sure of is that mortgage rates will not be going up soon. So if your personal economics and job prospects are good it is still a great time to buy, and a great time for those happy with where they are to pay the debts down even faster and free up that cash flow for a much freer life down the road.
The dollar remains low and this too will affect how Canadians spend their money. Higher food prices ahead.
Thursday, November 6, 2014
Youth are worth nothing to business if they have to work for free
The Bank of Canada Governor set off a new round of discussions about unpaid internships. I love all the coverage, but I must say that while some of the articles sound tough they are really skirting some of the really IMPORTANT points.
1) Bank leaders like Mr. Poloz and other "Lords" of industry I am sure do not have their children working for free. They probably call up a buddy at another company and get their kids on the payroll somewhere. It may be an entry level job, but it is a paid job with a future, barring massive stupidity on the part of the young worker.
2) Why is it that the young people in earlier generations took on these same mail room type jobs and got paid? In the 50s 60s and even 70s there were jobs, and they all brought about the equivalent level of skill and knowledge, for their time, to the table as the young graduates of today. Somehow businesses valued what they brought enough to pay them, sometimes not much, but it was a paycheque and a chance to prove oneself. Now, whatever work the interns are doing in the companies has no value and the students, or graduates, the companies bring on have nothing to offer, and the companies do not see them as having any potential. If they did then they would pay them right?
I understand that it will take a couple of generations to plant the seeds that this is OK, and that a form of serfdom is a way to get ahead. But even serfs were able to use some land to feed themselves and were entitled to protection, and justice. OK, so the state has taken care of the justice part, sort of, and the protection of things like OHIP, but what about the feeding part. I guess they have to work triple hours, most for free and a bit at the food counters to keep fed.
I am not seeing any great improvement from the Middle Ages in terms of treatment by the "Lords" of industry. Wage pressures continue increase the levels of poverty for those that are working, and now we are asking parents to carry the burden so multimillion dollar corporations can increase executive compensation and dividend payments to the people who can afford to own shares. (Yes, I know many of the parents' pensions benefit, but hey may never retire if they have to keep supporting their kids.)
Is anyone else seeing a problem with this?
I understand that it is an opportunity to build a resume, or try a new field, but people used to get paid to do the same work. I guess if I were an intern I would be happy to go in and observe the work of others, and see how it all came together, but the minute I actually had to do something I think it is fair to get paid. Right?
Maybe they think of this as an apprenticeship? If so, then if we are sticking with the historical references, then there was a legal agreement that the apprentice was bound to the master and got something in return.
What it was like to be an apprentice in early New England is indicated by these words from a 1640 indenture.
"Know all men that I, Thomas Millard, with the Consent of Henry Wolcott of Windsor unto whose custody and care at whose charge I was brought over out of England into New England, doe bynd myself as an apprentise for eight yeeres to serve William Pynchon of Springfield, his heirs and assigns in all manner of lawful employmt unto the full ext of eight yeeres beginninge the 29 day of Sept 1640. And the said William doth condition to find the said Thomas meat drinke & clothing fitting such an apprentise & at the end of this tyme one new sute of apparell and forty shillings in mony: subscribed this 28 October 1640." (http://www.lni.wa.gov/TradesLicensing/Apprenticeship/About/History/)
While not always treated fairly, they were housed and clothed, I am not seeing that today, that burden is shifted to the families, who may also be struggling.
We are sort of getting the points across in the media, but the media also seems to be missing a big point. Just because those who shape society want us to believe it is OK to work for free and thus also enslave our families who then have to feed and clothe us, does not mean it is actually a right and just thing. For the leader of the Bank of Canada to say this proves that he is part of the machine of mistreatment and not looking to the companies to help grow the economy.
Saving a company a few dollars is nothing compared to the value to an economy of giving any person paid employment and having them contribute to the economic life of the whole society in a meaningful way. Do not forget the more impoverished the family they less likely they are to be able to navigate the system and crime for some, even middle class youth, may becomes a more enticing future because there is money in criminal behaviour, right big companies?
1) Bank leaders like Mr. Poloz and other "Lords" of industry I am sure do not have their children working for free. They probably call up a buddy at another company and get their kids on the payroll somewhere. It may be an entry level job, but it is a paid job with a future, barring massive stupidity on the part of the young worker.
2) Why is it that the young people in earlier generations took on these same mail room type jobs and got paid? In the 50s 60s and even 70s there were jobs, and they all brought about the equivalent level of skill and knowledge, for their time, to the table as the young graduates of today. Somehow businesses valued what they brought enough to pay them, sometimes not much, but it was a paycheque and a chance to prove oneself. Now, whatever work the interns are doing in the companies has no value and the students, or graduates, the companies bring on have nothing to offer, and the companies do not see them as having any potential. If they did then they would pay them right?
I understand that it will take a couple of generations to plant the seeds that this is OK, and that a form of serfdom is a way to get ahead. But even serfs were able to use some land to feed themselves and were entitled to protection, and justice. OK, so the state has taken care of the justice part, sort of, and the protection of things like OHIP, but what about the feeding part. I guess they have to work triple hours, most for free and a bit at the food counters to keep fed.
I am not seeing any great improvement from the Middle Ages in terms of treatment by the "Lords" of industry. Wage pressures continue increase the levels of poverty for those that are working, and now we are asking parents to carry the burden so multimillion dollar corporations can increase executive compensation and dividend payments to the people who can afford to own shares. (Yes, I know many of the parents' pensions benefit, but hey may never retire if they have to keep supporting their kids.)
Is anyone else seeing a problem with this?
I understand that it is an opportunity to build a resume, or try a new field, but people used to get paid to do the same work. I guess if I were an intern I would be happy to go in and observe the work of others, and see how it all came together, but the minute I actually had to do something I think it is fair to get paid. Right?
Maybe they think of this as an apprenticeship? If so, then if we are sticking with the historical references, then there was a legal agreement that the apprentice was bound to the master and got something in return.
What it was like to be an apprentice in early New England is indicated by these words from a 1640 indenture.
"Know all men that I, Thomas Millard, with the Consent of Henry Wolcott of Windsor unto whose custody and care at whose charge I was brought over out of England into New England, doe bynd myself as an apprentise for eight yeeres to serve William Pynchon of Springfield, his heirs and assigns in all manner of lawful employmt unto the full ext of eight yeeres beginninge the 29 day of Sept 1640. And the said William doth condition to find the said Thomas meat drinke & clothing fitting such an apprentise & at the end of this tyme one new sute of apparell and forty shillings in mony: subscribed this 28 October 1640." (http://www.lni.wa.gov/TradesLicensing/Apprenticeship/About/History/)
While not always treated fairly, they were housed and clothed, I am not seeing that today, that burden is shifted to the families, who may also be struggling.
We are sort of getting the points across in the media, but the media also seems to be missing a big point. Just because those who shape society want us to believe it is OK to work for free and thus also enslave our families who then have to feed and clothe us, does not mean it is actually a right and just thing. For the leader of the Bank of Canada to say this proves that he is part of the machine of mistreatment and not looking to the companies to help grow the economy.
Saving a company a few dollars is nothing compared to the value to an economy of giving any person paid employment and having them contribute to the economic life of the whole society in a meaningful way. Do not forget the more impoverished the family they less likely they are to be able to navigate the system and crime for some, even middle class youth, may becomes a more enticing future because there is money in criminal behaviour, right big companies?
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