Random Thoughts – 05

Interest rates are on the rise.  Central banks only control short-term rates, the bond market via mortgage lenders controls the rest.

Household debt in Canada is roughly $1.86 for every dollar earned annually.  The US is at roughly $1.00.

The average home price in Canada rose over 20% in the twelve months from February 2021 to February 2022.

How long can this go on?  How long have we been saying that?

My thought is that this era will end with some big winners, some big losers, and a lot of pain.  Be thoughtful and have a plan for every eventuality.

The war in Ukraine rages on, and we hear stories daily of the destruction of people’s homes. 

The vacation rental company Airbnb has reported a surge in business in Ukraine – apparently an effort to send money directly and immediately to the Ukrainian people.  The renters have no intention of going, of course. Airbnb has temporarily waived their (substantial) fees for Ukrainian rentals.

I just went online and noticed that while the Airbnb fees are waived, there was still a $15 cleaning fee for a Kyiv apartment.  I don’t think that’s going to cut it…

My great-grandmother fled Ukraine for Switzerland and France in the early years of the 20th century.  My family is saddened to see this intolerable suffering happening again.

China is seeing a resurgence of coronavirus in certain areas and apparently 50 million people are on lockdown.  Some analysis suggests it’s because their domestic vaccine is not as effective as those used here. 

Because manufacturing is reduced as a result of lockdowns, oil prices are dropping in concert with reduced energy demand in China. I wonder if we’ll see another supply chain disruption.

Back to interest rates.  Central banks kept them close to zero for a decade and poured money into the system.

Now those same bankers are signaling multiple rapid rate increases, a cessation and indeed a reversal of monetary support.

When we look back, we’ll see a crazy rollercoaster ride graphing of policy.  A large action in one direction usually results in an equally large reaction the other way.  It appears to have arrived.

Stay safe,
Alain

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