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Email this6:20 pm
August 9, 2014
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Not particularly attractive, but maybe another alternative for some.
5:05 am
September 30, 2017
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Offer is still good. In addition, 18 month 5.15% also on the limited time offer.
11:05 am
October 30, 2022
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Jon, curious as to what debt you do find attractive right now? I am locked in at 5.7% paid monthly for 10 years, on account I think a housing correction will take a couple more years and I can lend against GICs easier then other bonds. Still relatively new to buying fixed income. Appreciate your ideas…
6:26 pm
August 9, 2014
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hayman said
Jon, curious as to what debt you do find attractive right now? I am locked in at 5.7% paid monthly for 10 years, on account I think a housing correction will take a couple more years and I can lend against GICs easier then other bonds. Still relatively new to buying fixed income. Appreciate your ideas…
I think globally, inflation is never going to come back down to a lower level even after the current spike of inflation caused by excessive money supply and normalization of velocity of money due to the end of lock down (more places to spend money = money flow faster in the economy) is being resolved.
(Money supply * velocity of money = price level * real GDP)
This is because:
1. Unwinding of globalization due to mistrust between government, which make the economy less efficient in making goods and services as suggested by the theory of comparative advantage.
2. Aging population reduced the size of labour forces, which increases input cost for businesses. (Think of the demographic collapse in China, and think about its impact to their manufacturing industries.)
3. Increase in investment for handling climate changes that will not significantly increase productivity, but leads to increase in tax, borrowing (this leads to higher interest rate), and insurance premium (more extreme weather events leads to higher payout and higher premium), further increasing input cost for businesses.
I don't have a crystal ball, but I think inflation of around 4 % will be the new normal. Unless a significant housing correction is going to happen.
6:40 pm
August 9, 2014
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As for hosing correction, I think the incoming conservative government may accidentally trigger that by reducing immigration.
(I do believe our country cannot handle the current level of immigrant, I also believe our country are having too many immigrants from certain nations all at once to the point that we cannot integrate them.)
However, I also know that housing price collapse is going to trigger a very serious negative wealth effect which significantly drag down consumption as a result. There is a real chance Canada going to fall into a lost decade as a result of this real estate correction.
Check this journal article out
To sum up, I think a 5.7% GIC may not be a bad thing, in light of the possible L shape "recovery" we may have for our economy base on experience in Japan. However, if a significant housing correction did not happen, than a 5.7% GIC is not that attractive in light of global factors that push up inflation.
(Peter, we may need a new thread here)
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