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October 2021 Inflation
November 17, 2021
9:39 pm
Vatox
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I did not say the article mentioned inflation. I’m pointing out that people that have little wiggle room will be squeezed, by inflation, and most likely they will just borrow more to cover their standard of living and that increased debt will just add to the hesitancy to raise interest rates. That’s just going to make the eventual hit bigger. Just like how the markets are outrageously over valued, and they were overvalued already before the pandemic.

November 18, 2021
5:41 am
savemoresaveoften
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Vatox said
I did not say the article mentioned inflation. I’m pointing out that people that have little wiggle room will be squeezed, by inflation, and most likely they will just borrow more to cover their standard of living and that increased debt will just add to the hesitancy to raise interest rates. That’s just going to make the eventual hit bigger. Just like how the markets are outrageously over valued, and they were overvalued already before the pandemic.  

I am with you regarding while others downplay inflation, it is felt immediately by those that have little wiggle room, that is something that does not need to be debated at all. Instead of arguing from a math standpoint and say (A+B)/2 to be average inflation and is ok, its NOT for a lot of people in reality.

As for higher interest savings rates to catch up with inflation, it always lags and always wont cover inflation, like it or not.

November 18, 2021
8:40 am
Bill
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Thanks, Vatox, better sources, though I see lots of stats based on people's feelings about their situation (instead of actual data), and some indicate positive, some negative, so it's tempting to go with the negative headlines. And should fiscal policy be based on the half of Canadians that leave themselves no wiggle room vs the half that are reacting appropriately to the situation? I don't know. Seems to me if you increase interest rates you hurt the former group, and if you don't and thus let inflation rage you hurt everyone.

November 18, 2021
4:12 pm
christinad
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I always thought it was the big things that mattered with budgeting like housing and transportation. I think rising mortgage rates are going to hurt more than this inflation is. As for poorer people who may not be so great with their money i read they have a short term focus as they are focused on their immediate needs like getting food on the table. So unfortunately it seems they just view that extra money as a bonus to be spent still focusing on the here and now. Perhaps if someone here has been poor before they could explain the thinking.

November 18, 2021
6:01 pm
suburbs4life
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Vatox said
I did not say the article mentioned inflation. I’m pointing out that people that have little wiggle room will be squeezed, by inflation, and most likely they will just borrow more to cover their standard of living and that increased debt will just add to the hesitancy to raise interest rates. That’s just going to make the eventual hit bigger. Just like how the markets are outrageously over valued, and they were overvalued already before the pandemic.  

I agree with your sentiment here 100%

November 19, 2021
8:01 am
cgouimet
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November/December will be higher thanks to the BC flood issues impacting food supply ...

November 19, 2021
9:01 am
Bill
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Nothing helps the environment more quickly than major economic downturns, and that's top priority for people today (so they say), so continued higher inflation will be just one of the mechanisms used by governments to make sure the pre-virus age of consumption never returns. That's my view.

November 19, 2021
9:54 am
Vatox
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cgouimet said
November/December will be higher thanks to the BC flood issues impacting food supply ...  

November/December we’re going to be higher without the flooding. The flood issues just add more on top.

November 19, 2021
10:12 am
Vatox
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Bill said
Nothing helps the environment more quickly than major economic downturns, and that's top priority for people today (so they say), so continued higher inflation will be just one of the mechanisms used by governments to make sure the pre-virus age of consumption never returns. That's my view.  

With low interest rates, consumption will continue to increase as they desperately try to push the economic recovery forward. High inflation will destroy everything so I’m quite sure that it isn’t a government mechanism. Higher interest rates would do a better job to lower consumption.

November 19, 2021
10:45 am
Bill
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Guess we disagree, Vatox, I believe "destroy(ing) everything", i.e. jettisoning our previous way of life to "save the planet" is precisely the objective we all seem to be articulating these days, I hear it all the time. Inflation certainly helps that (and low rates help inflation), that's why I believe this inflation is not short-lived. I hope I'm wrong.

November 19, 2021
12:04 pm
Loonie
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Vatox, I find most of what you have said credible.
Here's my problem: if the stock market is overpriced (which I agree it is and likely will get moreso until it suddenly pops big-time, at which point all the "experts" will say they never saw it coming), the housing market is overheated, and interest-bearing is net negative and might become moreso if little is done to rein in inflation, then where do you put your money?
I have no confidence in the goings-on at the Bank of Canada. If they think the current situation is "temporary", they are delusional IMO. Ongoing and increasing natural disasters due to climate change can keep it going indefinitely.
I would love to think everything will sort itself out somehow. Heck, I'd even buy stocks! But I just can't see it.

November 19, 2021
12:07 pm
Vatox
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Bill said
Guess we disagree, Vatox, I believe "destroy(ing) everything", i.e. jettisoning our previous way of life to "save the planet" is precisely the objective we all seem to be articulating these days, I hear it all the time. Inflation certainly helps that (and low rates help inflation), that's why I believe this inflation is not short-lived. I hope I'm wrong.  

You could be right. Destroying everything is a way to force everyone to change their standard of living, people are not very good at doing it on their own initiative.

November 19, 2021
12:30 pm
Vatox
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Loonie said
Vatox, I find most of what you have said credible.
Here's my problem: if the stock market is overpriced (which I agree it is and likely will get moreso until it suddenly pops big-time, at which point all the "experts" will say they never saw it coming), the housing market is overheated, and interest-bearing is net negative and might become moreso if little is done to rein in inflation, then where do you put your money?
I have no confidence in the goings-on at the Bank of Canada. If they think the current situation is "temporary", they are delusional IMO. Ongoing and increasing natural disasters due to climate change can keep it going indefinitely.
I would love to think everything will sort itself out somehow. Heck, I'd even buy stocks! But I just can't see it.  

I think your question is where to put your money? The best answer I can give is the same as I’ve said in the past. Buy hard assets that are useful or always in demand, regardless of what the future holds. Things like a whiskey distillery that isn’t located in a flood plain or beside a raging river. A greenhouse operation in a safe location. Etc.

I also think piping systems will always be needed, sewer, flush toilets, showers, drinking water. Perhaps an investment in a solid plumbing company.

Even if our society crumbles, the things I’ve mentioned will be desirable.

If you can’t buy them outright, then buy shares.

November 19, 2021
12:41 pm
Bill
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Inflation, deflation, whatever, aside from hard assets nothing & nobody functions without internet any more, I can't see (example) Bell shares tanking.

November 19, 2021
1:41 pm
Loonie
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These are probably good suggestions, but also beyond my abilities to figure out which specific shares would be good investments. LMK if you find a mutual fund that uses these parameters.
It's true telecommunications isn't going away. I'm just not smart enough to figure out which providers have disaster-resistant infrastructure.

November 19, 2021
5:29 pm
canadian.100
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Loonie said
Here's my problem: if the stock market is overpriced (which I agree it is and likely will get moreso until it suddenly pops big-time, at which point all the "experts" will say they never saw it coming), the housing market is overheated, and interest-bearing is net negative and might become moreso if little is done to rein in inflation, then where do you put your money?
I have no confidence in the goings-on at the Bank of Canada. If they think the current situation is "temporary", they are delusional IMO.   

I do not think the whole stock market is overpriced - for sure some stock valuations are quite stretched - but more so in the US Markets. Canadian stocks are not as stretched. eg P/Es now for Canadian bank stocks are only around 11 or 12 which is really not excessive. You say the market is overpriced now and you expect a big time pop - you did not say anything about the market being very underpriced in spring 2020 after there was a huge pop but it was downwards? A significant number of people (and several in this blog) did recognize this and picked up very underpriced bargains - bank shares being just one, likely the most conservative you can get. However, I admit I thought the Canadian housing market was very overpriced in 2019 but obviously I was quite wrong - looking at price levels today. I actually know people who have not bought a house because they thought house prices were exorbitant 10 years ago so they still rent and now will likely never buy because they think house prices are now very overpriced - so it is all relative.
I do agree with you that the inflation situation is not temporary - we may have run away inflation because the BofC will delay as long as possible to raise interest rates. Very unfortunate for savers and purchasers of GICs.

November 19, 2021
7:20 pm
Kidd
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Princess Margaret's lottery draw. When PML announced tonight that they have sold almost 10 million dollars worth of tickets for their 50/50 draw. (This is in addition to their home draw) I thought, Canadians have more money than they know what to do with. Maybe the likes of Rogers, air canada and every insurance company in this country are right to charge more for their substandard service, because Canadians are filthy rich.

Maybe I've been looking at our economic picture with my head in the sand. My view has always been, the glass is half empty, maybe if i had a smaller glass it would be over flowingly full and my outlook would change to the positive.

I give up, i surrender. Who cares what the inflation rate is or will be, we have the money, so let's party on.

November 19, 2021
8:24 pm
Loonie
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I do enjoy your humour, Kidd. There is far too little of it on this forum.

November 19, 2021
8:41 pm
AltaRed
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canadian.100 said
I do agree with you that the inflation situation is not temporary - we may have run away inflation because the BofC will delay as long as possible to raise interest rates. Very unfortunate for savers and purchasers of GICs.  

Not necessarily. Five year GICs are heavily influenced by the 5 year BoC bond and those yields have climbed in recent times. With BoC no longer a net buyer of bonds, bond yields are going to be market driven

November 20, 2021
6:03 am
canadian.100
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AltaRed said

Not necessarily. Five year GICs are heavily influenced by the 5 year BoC bond and those yields have climbed in recent times. With BoC no longer a net buyer of bonds, bond yields are going to be market driven  

I believe the 5 year GoC bond has now increased to around 1.5% up from almost 0 last year. Still a big difference from the inflation rate of over 4%.

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