Truths

So 68% of the herd is dosed in Canada, at least partially. Provinces are pushing for 75% (Ontario) or 85% (NS) within a few weeks. Reopening will be faster, wider and wilder than seemed possible even weeks ago. Covid will go from pandemic to just endemic. Like the flu. You won’t hear daily case counts anymore. You’ll get a yearly booster. People will still get sick. Outbreaks will occur. ICUs, vents and deaths will occasionally happen, but the health care system will cope.

This is what Mr. Market always forecast. After brief days of panic and confusion in the third month of last year, the trade has been about recovery. The advent of vaccines gave it rocket fuel. Government and CB spending provided the grease. Now we have the S&P ahead 12% so far in 2021 and 34% above year-ago levels. Even Bay Street has been cavorting, passing the 20,000 mark and 72% above its Covid-induced crash of last March. Check out Ryan’s weekend piece for hard news on what this did for bank stocks and ETF investors.

It’s not over. Not even close. The reopening, the vaxxing, the robust corporate profits and a coming surge in employment will likely propel financial markets higher. Commodity prices have benefitted (oil is near $70 again) and all that damage the virus did to the supply chain, plus spendy politicians, is helping goose prices and feed inflation.

Thus, it’s not hard to see where this is going.

First, inflation will soon give central bankers the willies and benchmark rates will rise. Not precipitously, but steadily. The prime rate at the chartered banks could double over the next few years, with the same happening to five-year mortgages. People buying and borrowing now have to make allowances for this happening when they renew.

Did you hear what US Treasury Secretary Janet Yellen had to say about this? Biden’s big spending will help stoke inflation, she admitted. That will cause interest rates to rise, “and that is a good thing.” There ya go. It’s official.

Creeping rates will be but one more reason the parabolic real estate charts will flatten and eventually dip. No crash. Prices are not falling by half. Don’t expect or plan on that since the impact of the virus was just too profound over the last 12 months to be fully reversed. But combined with increasing supply, tighter lending regs, serious over-valuations and affordability at a crisis level, peak house is behind us.

Moreover the housing windfall in Armpit and Bunnypatch could soon turn into a rout. Suburban, hinterland and hick city values have just experienced the most irrational and profound inflation in national history. Here is where the real danger in home ownership lies for those pandemic buyers who sucked up big, cheap mortgages to gorge on personal space thinking they’d be able to WFH forevah.

Here’s a nice summary of the complex issues involved…

A Bloomberg poll found 39% of American adults would consider quitting if they’re forced back to the office by their evil overlords. That number rises to almost 50% for shiftless Millennials and Gen Z workers. Currently about 30% of workers in the US are back. In Canada almost five million people remain in their jammy bottoms giving the dog belly rubs with their pinkies while they Zoom with colleagues groomed from the waist up.

Of course, some employers will allow remote work. Some will let employees go hybrid, coming to the office a few days a week. Many will want the corporate culture, collaboration, mentoring, sharing, innovation and productivity (plus measuring) that only WFW allows. And workers with hustle plus career ambitions can’t wait to go back.

In New York realtors report the tide has turned, with more people flowing back into the urban core after fleeing to the burbs. “In the U.S, the biggest demand for housing over the last month has been Manhattan apartment buildings as companies have started to tell people to get ready to come back to work,” it’s reported.

Will places like DT Toronto repopulate as inoculations spread, the office towers slowly fill, the restaurants, bars, clubs and venues open again, immigration is restored, renters flood back into empty condos, uni students come back and as single-family homes have passed the ability of people to buy them? Of course. Lock it in. This is as irrefutable as the conviction markets had that the pandemic would end.

You want a nice, cheap house in Sudbury or Tillsonburg? Just wait.

*     *     *

Well, we’ve officially devolved into that cancel culture discussed here last week. A loud, illegal, vandalizing throng of ruffians who think they know more than you toppled and wrecked a statue in the Toronto core last night. More proof the collective IQ of a group drops with the number of people joining it.

Applying today’s moral code and ethical compass to people who lived 180 years ago and wasting time trashing their markers seems beyond pointless. By the way Egerton Ryerson (the dude being decapitated in the picture below) founded Upper Canada’s school system, made education free (for the first time), diminished the role of religion in learning and founded institutions that would become the University of Toronto, the Royal Ontario Museum, the Ontario College of Art and the Agricultural College. Alas, his theories were also used by those who thought, mistakenly, that native kids would be better off being turned into white ones.

History teaches us. Erasing it is the real crime.

About the picture: “I just wanted to send a note to say thanks for the blog posts,” writes Alberta in North Vancouver. “My husband and I have been reading your blog for the last nine years. I have to say the cherry on top of the daily post is always the dog photo. Here is a picture of my special girl Belle on her 13th birthday. Belle is a gourmand who loves supervising in the kitchen.”