Yes, it’s time.
It’s time for the Leafs to exercise some serious demons.
The Leafs have not won a playoff series since beating Ottawa in 2004.
My son was 2. He’s now 21.
It’s been a long time.
And we’re pumped for it.
Last week, we were down 1 game to 0 and I was expecting the worst.
Now we’re up 3 games to 1 and I’m expecting the best!!
See that picture up top?
That’s the front of our office.
And do you see Nigel Ito, Rock Star Operations Manager?
He never has a moustache like that.
But after the big win on Monday, he knew some type of facial hair support was in order. So he shaved but left the moustache in a sign of singular solidarity with the cause.
And we proudly support Nigel’s decision!!
Myself, Nick, Nadeem, and Mike are all off to the game together tonight.
GO LEAFS GO!!
I’m freaking out. It’s sad I know…but it’s the truth.
OK, enough of that.
We’ve been chatting with multiple real estate and banking “professionals” over the last few weeks and so many of them have the same comment…
“Well, how are real estate prices staying so high? We don’t get it? I mean, how much higher can they possibly go? Can’t be much, that’s for sure.”
You know what we say?
Slow your roll.
So many Canadians do not understand what’s going on.
Real estate values are not actually going up.
It’s the same house.
Think about it this way…
Picture a house that you bought ten years ago or a house your parents bought 50 years ago. Whichever, doesn’t matter.
How much was that house?
Or if you don’t have an example, here’s one we can all use…
Our parents' house in Mississauga bought in 1976 cost $91K.
4-bedroom, fully detached, two car garage, walk out basement…near Dixie and Rathburn Road.
Now imagine that $91K in one hundred dollar bills.
A stack of hundreds.
Now imagine that stack of $91K in one hundred dollar bills sitting on the front lawn of that house from 1977 to today.
That house is worth, let’s say, $1.7 million today.
Now most people will say…“Wow, the value of that house went up a lot! That’s a big change in price!”
But what changed?
It’s the same house.
In fact, it could use some updating even.
Now think of the $91K still sitting on the front lawn that was originally used to buy that house.
We have a question for you…
Did the value of the house change?
Or did the value of those dollars sitting on the front lawn change?
Hmmm….
It’s clearly the dollars.
They lost value.
They actually lost so much value that it requires more than 10x the amount of those dollars to buy the SAME house today.
The value of the real estate did not go up.
(there is nuance here of course but stick with me for purposes of this example)
The value of the dollars went down. They became “worth less”.
And guess what…those dollars are going to become “worth less” faster and faster.
How do we know?
Check out this chart.
(Source: Luke Gromen FFTT Newsletter April 21, 2023)
See the blue line?
That's U.S. deficit spending. When the line is below zero it means the U.S. government is printing money because it’s spending more than it earns.
It’s running a deficit.
This money creation devalues all the other dollars in existence.
Now look at the red line.
That’s the inverted demand for U.S. debt.
When you see that line going up on the chart it means there is LESS demand for U.S. debt.
When the lines diverge there is not enough demand for U.S. debt.
That’s bad and that can’t happen or the U.S. won't be able to pay for all its spending.
So what do they do?
They create more dollars out of thin air…making the ones already in existence “worth less and less”.
(Quick aside: dollars are more accurately described as “debt receipts” but that’s a nasty topic for another day.)
See the gap that’s growing between the red and blue lines?
And see the dotted blue line?
That gap is about to rapidly increase.
Which means the amount of new money that needs to be created is HUGE.
HUGE HUGE.
In fact, the latest GDP figures coming out of the Atlanta Fed yesterday are showing the U.S. economy that was growing at 3% in March is now at 1.1% growth 30 days later.
Their economy is slowing down badly.
And guess what doesn’t slow down? Their spending.
In fact, during recessions they try to spend more!
And guess which country mimics all of this stuff?
Canada.
How the U.S. goes with money printing and economic recessions is how Canada goes.
So we can expect a lot more money creation here too.
Now, back to the question, “How can real estate prices be so high? They can’t stay at this level? Prices must come down.”
Ah, we’ve got news for you.
In short term spurts, sure prices can come down.
But over a year, two years, five years…in an economy with this much REQUIRED money printing…the dollar value of real estate only has one direction, UP.
Our humble opinion, of course.
Because it’s not right. It’s not good. And it shouldn’t be this way.
But the divide in society between those who have good assets and those who don’t is about to get real.
There is a “wealth transfer” under way. From those who only have incomes to their name to those who have assets.
Again, this is a shame. It destroys. It causes anger in the population.
But it’s happening anyway.
The Canadian dollar will become “worth less and less and less” when measured against burgers, steaks, eggs, properties, gold, Bitcoin…anything that is more scarce than the sheer volume of new dollars that’s about to be printed.
So although rates are high now, get ready, because over the next six months, year, 18 months or so…there has to be some new easy money flowing into the economy or the whole debt spiral collapses it all.
Perhaps interest rates stay high. This could happen and there could still be inflation because the new money can enter via “grocery rebates”, “dental payments”, “first time home buyer grants”, “longer amortizations” etc etc etc.
So we’re not guaranteeing that rates must come down to tame inflation.
But inflation can still happen with higher rates.
Brace yourselves. These are the most wild and volatile economic times we’ve seen in our lives and we lived through the deepest recession and real estate collapse this country has ever seen in the 1990s.
Here’s how we are protecting ourselves:
If you are a Rock Star Inner Circle Member we have a special treat.
For years we have been asked to do a member-wide networking event.
And on Tuesday May 9, 2023 we’re finally doing it!
It’s the Rock Star “Members-Only” Networking Bonanza!
You can check out all the details at that URL above.
This is your chance to continue to build your own network and hang out with local Canadians adding hard assets to their lives.
Share information, brainstorm together, and have a few good laughs.
Nick and I will be there all evening to chat about anything you’d like.
And our special guest, Ben Rabidoux, will be giving a brand new presentation on the state of housing, interest rates, mortgages, population growth and housing supply in Ontario. He’s awesome…it’s going to be a treat.
If you have already registered, we'll see you there!!
If you haven't saved your seat yet, do so now at www.RockStarMemberEvent.com.
And remember, the next time someone says real estate is going up in value…it’s actually the value of the dollars in your income, in your bank account, and in your pocket that is going down.
Unfortunate but true.
You can overcome the trend. Many of us are.
And with that, we’ll leave you this week with:
GO LEAFS GO!!!
Come on Leafs, please Leafs, I’m not beneath begging…do it for us. Let’s go!!
See you next week.
Tom & Nick
