Nick and the family hit Wonderland this week.
His daughter, Ella, somehow did the impossible and won that big stuffed animal on the ring toss game.
The one where you throw little rings and try to have them land on the neck of different glass bottles.
You know that game, right? The one we've all spent money on and never won!
Somehow she did it! Incredible!
Wonderland is a perfect place to hang out right now because the rollercoaster rides perfectly reflect the current state of our economy.
Up, down, fast, slow, bumpy, smooth, upside down!
And you better believe we're in the thick of the economic rollercoaster ride of the 2020s right now.
Check this out...
Canada is set to raise interest rates again in early July.
The U.S. Fed just raised rates, with its single largest increase since 1994.
The 1990s gives our family flashbacks to horrible economic conditions...don't even get us started on discussing the early and mid 1990s, please!
The world of crypto looks like it's on a rollercoaster riding directly into a blackhole.
Bitcoin is getting its reputation and price thrown around like a soggy rag doll. Many dancing on its apparent grave.
The Canadian and Ontario real estate market has everyone scratching their heads.
Overall, it's a market trying to find its footing. Some sellers are holding out for better offers (so no real panic selling that we're seeing). Buyers are taking the time to look around and find a deal.
We're actually seeing multiple offers on some properties if you can believe it...just this week out in Brantford, Ontario.
It's going to take some time for this market to settle itself.
The Japanese Yen, an absolutely major global currency, is literally freaking out.
The U.S. bond market, probably the most important market in the world, is really going to tell us what's going on.
And several macro economists we enjoy reading believe the majority of tightening in the bond market may have happened.
The reason for this? The bond market is seeing a recession in our immediate future.
Do you recall a few weeks ago when we shared that "volatility" is the name of the economic game right now?
Can you imagine if later this year or early next year we get rate cuts or some other means of monetary easing? Talk about a rollercoaster ride!
Perhaps some cheques sent out to certain segments of the population?
We believe the rate hikes will have to stop sooner than the 5 or 6 more increases that were promised.
And the reason?
The U.S. generates about $4.2 trillion in tax revenues.
It's spending about $6.1 trillion a year right now.
This leaves a deficit of approx. $1.9 trillion.
This is all added to the $30 trillion in debt it already has.
Well, what happens when you raise rates? You typically slow the economy and decrease your tax revenues.
And if rates are higher, then the cost on your debt increases.
So we're in a situation where the central bankers are going to slow down the largest economy in the world and simultaneously pay more interest on their debt.
This will increase annual deficits further and faster unless spending is cut aggressively (not going to happen!) which ultimately leads to a debt death spiral.
Good luck with that.
Either inflation has to stay much higher than rates for this to have a chance at working...
Or we're about to get a reversal in policy over the next 6-18 months and the helicopter, easy money, flows again.
Either way our preference is to own good hard assets that we can control directly.
Hard assets that we own that have little or zero counter-party risk (more on this important point over the next few weeks).
To us that's still good income properties, in good areas. And the GTA and Southern Ontario have some of the best supply/demand dynamics for investors in all of North America (see the podcast we released with Mike Moffat for more on this).
Most beginners look at the price of real estate only and have missed out on over 14 years of increasing prices (with a blip in 2017).
We look at income, expenses, supply, demand, global economic trends, monetary policies, and more.
If you want to learn what some Rock Star investors are doing right now with income properties here in this area you can register for our next:
Introductory Real Estate Training Class
Finding Cash Flow Properties in 2022
Wed, Jun 22 at 7:00 PM on Zoom
Save your seat here
Knowledge is essential in markets like this, so if you'd like to ask us questions at the end we stick around to handle them all.
And this week we're releasing a new Rock Star Minutes episode which is a snippet of a live broadcast we did for Rock Star Inner Circle Members below, tackling a question about Bitcoin and if it can survive everything going on with it at the moment (our guess is it can).
You can find that below.
That's it for now; hold on tight as this economic rollercoaster ride is just getting started!
Tom & Nick
p.s. One day I'm going to win that ring toss game too!!