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Inverted Yield Curve risk
August 28, 2019
1:30 pm
Vatox
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Loonie said
I'm not an economist but it seems to me that lower rates encourage more borrowing. This is bad for consumers because it creates more indebtedness that may not be sustainable. And corporations are not reinvesting like they should be so lower rates won't do much good there either. I can't imagine the banks even like it because it reduces their spread.

As an aside, the other day I was at a credit union branch and the rep told me with great excitement that their five year mortgage rate was now X (very low). He knows I have no interest in mortgages, that I'm only interested in higher rates, not lower. It kind of turns my stomach when I see them getting so excited about things like this. It seems like the only thing that gets their juices flowing is more loans, but these can't fuel the future if they can't ever afford to raise the rates because people won't be able to afford to sustain the loans  

Totally on the mark Loonie. A rate drop is a bad idea. But the government wants to sell their bonds easily so they can keep wasting money. It all depends on the BoC team and whether their focus is on serving the government or serving the greater good health of Canada.

Edit: but governments love it, lowering interest payments on the bonds they issue.

August 28, 2019
3:34 pm
Loonie
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I suspect that Poloz will march to his own drummer. Govt will be reluctant to even appear to be interfering after the Lavalin business. although I believe the latter was just business-as-usual for any govt, just not good enough for Jody.

August 28, 2019
6:55 pm
Bud
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Im thinkin a miscalculation of inflation could be the bogeyman this time around underestimated i.e. condo market. Who can afford to buy or net worth is being wiped out by housing costs. If china goes down the tubes they easily represent half the buyers whose gonna pick up the slack.

August 28, 2019
8:15 pm
Kidd
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In 2006, the TOTAL Canadian government debt was $2.7 TRILLION. That's federal, provincial and municipal debt. I have no idea what the total government debt in canada is today BUT i would hazard to guess a LOT higher. Canada has a population of 37 million, Italy has a population of 60 million. 2006 numbers are according to the fraser institute... link below.

https://www.investmentexecutive.com/news/research-and-markets/total-canadian-government-debt-2-7-trillion-fraser-institute-says/

August 28, 2019
9:17 pm
Vatox
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4

Kidd said
In 2006, the TOTAL Canadian government debt was $2.7 TRILLION. That's federal, provincial and municipal debt. I have no idea what the total government debt in canada is today BUT i would hazard to guess a LOT higher. Canada has a population of 37 million, Italy has a population of 60 million. 2006 numbers are according to the fraser institute... link below.

https://www.investmentexecutive.com/news/research-and-markets/total-canadian-government-debt-2-7-trillion-fraser-institute-says/  

Lol, you have to compare apples to apples. Federal debt without unfunded liabilities is just under $694 billion.

August 28, 2019
9:31 pm
Vatox
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August 28, 2019
10:36 pm
Vatox
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If I go with 2.38 trillion euros as Italy debt converted to Canadian dollars its $3.52 trillion Canadian dollars to Canada $694 billion. The population difference is 1.62 and yet Italy’s debt is 5 times ours. Yikes!

August 29, 2019
6:25 am
Bill
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"Corporations are not investing like they should be". In fact, that's a misunderstanding of the function of corporations (I assume what's really meant was "businesses"). Corporations "should be" doing nothing that isn't in their own interest, within the laws. Governments, public sector bodies, non-profits, crown corporations, public regulators, etc might have various requirements but profit-seeking corporations are created to do whatever they want (within the laws), that's how the wealth is created to employ tax-paying workers so that all the public sector bodies can get their money to do all their "making life nice for us" functions.

August 29, 2019
9:46 am
Doug
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Vatox said
4

Lol, you have to compare apples to apples. Federal debt without unfunded liabilities is just under $694 billion.  

True, but I'm of the opinion we should be including unfunded liabilities and contingent liabilities at all vertical levels of government. Governments (especially B.C.), federally and provincially, like to distinguish between "taxpayer-supported debt" and "Crown corporation-supported debt," but at the end of the day, there is only one taxpayer/ratepayer. Thus, that's government spin. sf-cool

Cheers,
Doug

August 29, 2019
10:46 am
Bill
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Doug, you are bang on, everybody's financial picture would look rosier if they left out any of their various liabilities, especially those that are "unfunded"!

August 29, 2019
11:15 am
Jon
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Liability that is funded implies that there are assets to pay for them. So they really isn't a problem, this is similar to people borrowing money from their HELOC to invest (assuming the underlying assets does not lost value).

Crown company's debts are NOT equivalent to government debt because government only have limited liability over those companies, just like the private owner of a company. It is a misconceptions by the market that it believe they are the same.

The "wrong investment by company" implies that companies are borrowing money to buy back stock instead of expanding their business. This suggest management team does not believe the economy have a rosy outlook. Additionally, borrowing money to buy back stock create demand for stock of the company, which make the bonus from stock options become more lucrative for the management team themselves.

The interests of shareholders doesn't always align with the interest of management team.....

(Fix a few mistakes)

August 29, 2019
12:39 pm
Loonie
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re: Bill's comments.
Corporations are not as free as Bill suggests. They are all regulated by laws, which are subject to change. They are part of the structure of society, not separate from it.
Further, they never have any difficulty asking for and accepting various kinds of grants and bailouts whenever they fall short; we pay.
For a society to work, all its parts need to figure out how to work together for the best result, like it or not.

August 29, 2019
4:27 pm
Bill
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Loonie, you say corporations are not as free as I say, then you repeat what I said: they're subject to the law. Ok. And it's stating the obvious that laws change, we all get that doesn't really affect the fact corporations must adhere to the laws, whichever ones are in place at any moment.

Also you do not mention that corporations, indeed proprietorships and partnerships too, all structures of businesses, do sometimes fail in our economy. In downturns the bankruptcy trustees are busy people. I think what you're referring to re grants and bailouts are the very few largest corporations, and it's true that often the public will, expressed via their elected representatives, is that Canadian jobs (especially unionized) are saved using taxpayer money for grants, tax breaks, bailouts, etc. That's not really news.

Jon, that's a very useful observation, that the interests of management often clash with those of shareholders, i.e. when we say "corporation" who do we mean? Corporations include various stakeholders: employees, managers, owners, the communities and societies in which they operate, often even suppliers and customers, and all their interests are usually not perfectly aligned.

August 29, 2019
5:27 pm
Bud
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Canada trade was good tmrrw gdp expected to show 3% growth

U.S. 10yr 1.5%
CDN 10yr 1.15%
Philippines 4.385 sf-wink

September 3, 2019
9:08 pm
Bud
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Just when yield investors r comin off low rates the stuff booked 2 3 yrs ago yielding 2.20-2.35 the yield curve hits record lows somethin is fishy

September 3, 2019
10:29 pm
Vatox
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Bud said
Just when yield investors r comin off low rates the stuff booked 2 3 yrs ago yielding 2.20-2.35 the yield curve hits record lows somethin is fishy  

So what’s fishy? What would you expect instead?

September 3, 2019
10:37 pm
Loonie
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Bud said
Just when yield investors r comin off low rates the stuff booked 2 3 yrs ago yielding 2.20-2.35 the yield curve hits record lows somethin is fishy  

Why does "Bud" alias hotmony alias dealjunkie keep changing his name?

September 3, 2019
10:40 pm
Vatox
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Loonie said
Why does "Bud" alias hotmony alias dealjunkie keep changing his name?  

Ah, that’s what’s fishy! Now it makes sense to me.

September 4, 2019
7:04 am
Bud
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There's another cu fighting to keep a gic offered @3%/3yr rate not posted

September 5, 2019
12:03 pm
Doug
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Loonie said

Why does "Bud" alias hotmony alias dealjunkie keep changing his name?  

I think they're separate accounts, Loonie, because usernames can't be changed only the display name can be changed. That said, they do have similar posting styles (extreme brevity, frequent typos, lack of clarity in what they're asking, asking the same question across multiple threads, etc.) and I haven't completely ruled out that dealjunkie/hotmony is operating two accounts, which, if that is the case, would be in contravention of the forum's rules (specifically, provisions #6 and #10).

Edit: Great Scott, you're right, Loonie. They are one in the same because dealjunkie was the creator of the "Surtax the big 6" thread, which is now showing as Bud. Oddly, though, his login name shows as "Bud," so he must've requested that the forum admin (Peter) change his login name to match his display name. As to why keeps changing his login name and/or display name, I know no idea, but I have some theories, which I'll keep to myself for now. 😉

Cheers,
Doug

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