The Accredited Canadian's Toolkit Sam

Canadians have a low birth rate. This should mean population decline over time. You can see it in many families. My mother had eight brothers and sisters. I have three. Between we four siblings who are all in our 30s, we have four children, so the seven of us including our spouses are not replacing ourselves either. The population pyramid is upside down in my family, and in many families. This means unusual family dynamics compared to what has traditionally been true, where grandparents need to alternate Christmas and birthdays with the grandkids because there are more grandparents alive than there are grandkids. An upside down population pyramid creates a lot of pressure for the younger generation. The attention of my wife and I has been pulled toward our ageing parents as well as childless uncle’s and aunts growing needs as they age. Fewer younger people to support a larger, ageing population is a recipe for burnout and economic stagnation. The only reason we do not have a population decline and the extreme hardship associated with it is because of our immigration policies, and on a recent podcast episode I shared how economist Benjamin Tal said the only reason we are not in recession is because of immigration.

Newcomers to Canada have been making the news as scapegoats for the housing crisis. I am familiar with immigrants to Canada because half of my staff are applying for permanent residency, and most of the new tenants that I have placed in the last couple years have been new arrivals to Canada, mostly university students and their families. The education pathway is very common for people trying to immigrate. They come for an education and integrate themselves into the community through work. I have found them to be extraordinarily hard-working, motivated and diligent. The brightest and most industrious people from other nations come here for a better life because life at their country of birth is very hard for them. I have heard stories of standing in lines and large crowds, attempting to get some cooking fuel and other basic needs.

There is a housing crisis in Canada. We have a shortage because not enough new supply is being built. Most of our rental housing stock is from the 80s earlier. Foreign students have been blamed for the high cost of housing, which is not fair to them. There is new and hasty policies put in place designed to curtail the number of foreign students who come to the country and changing financial requirements on those who can stay. I’ve linked an article in the show notes where the publicly funded colleges of Ontario are complaining about the new requirements and how unfair they are. https://apple.news/AvwEelGqcRvq6ITIA_L9VUQ


I have seen this firsthand hand with some of my tenants being forced to leave because they cannot afford the cost of living. They have high expenses, and frequently minimum wage jobs. To remain in Canada and have your visa renewed the rule used to be that they must show a balance of $10,000 in their bank account at all times. That dollar amount has now been doubled to $20,000. One of my good employees was told he would not be able to renew his work visa and his wife was not able to renew her study visa because they did not have the cash in their Canadian bank account. they have money in their foreign bank account, but they come from a country where the infrastructure is so poor it is impossible to withdraw funds without going there in person. This is the same place that has fuel shortages and food shortages at times so it is essentially a banana republic.

If my employee was unable to show he had enough money in his bank account then he would not be able to renew his family’s visa. His wife is taking a masters, as well as working as a teacher at an elementary school part time. I believe that he and his wife and his son would be valuable members of our society if allowed to stay, so I loaned him the money he needed. For another staff member, I have hired

Today’s headline news in my feed was that the bank of Canada has decided to leave the overnight rate at 5%. There’s speculation that the overnight rates will drop in the spring or summer. What does this mean for you as a business owner or investor?

The availability of credit pumps up asset prices. If the cost of servicing debt is very low, there is more willingness to pay more for the fixed amount of goods and services in an economy. If the cost of goods and services increases, this is inflation. The central bank can set the overnight interest rate in an attempt to influence the cost of credit and thus the prevalence of inflation. What do interest rates do in my industry of rental real estate? Higher Interest rates makes it more difficult for people to qualify to purchase a house, this keeps people renting for longer and increases the Tenant pool. Where I have property, it is difficult and expensive to build new property so a larger tenant pool increases the market rent,. Lower interest rates allows for increases of real estate prices values. The interest rate is more of a neutral factor. Overnight interest rates affects Short-term debt servicing like credit card debt and variable rate mortgages. Most of my mortgage debt is in fixed rate mortgages which are priced based on the Canada mortgage bond of various maturities, so changes to the overnight rate does not affect my business much. The overnight rate is a neutral factor.

How often should reporting be done? Reflection on today’s episode of the accredited Canadian’s toolkit.

Horace Mann said “Until you have done something for humanity, you should be ashamed to die”

I’ve had the opportunity to reflect on the human condition recently. With ageing family members in and out of hospital and beginning to experience more frequent health problems, and a recent seminar that had many exercises to remind me of my own mortality, It has become a renewed topic of interest for me, and Ive spent some time each day thinking about it of late.

Many thoughtful people have commented on this, but a very interesting and fresh perspective for me is that of Christopher Hitchens. He wrote a series of columns in vanity fair, while he was in the process of dying from stage 4 esophageal cancer. his editor compiled them all together into a book. I’ll review the book and add my comments on mortality at the end. Feel free to skip this episode if the topic is not yes of interest to you.

I read an article today by Jennifer Dowty of the globe and mail. I’ve linked it in the show notes.

https://apple.news/AsTqUftr8R3StcKqNGFWjJA

It was an interview article of cibc economist Benjamin tal. Of interest he said the only reason we are not in recession is because GDP growth is being propped up by population growth. I found this funny because it’s this very population growth that is making negative headlines right now about how we need to restrict newcomers to Canada. I hope it is apparent that since immigration only thing keeping our economy from contracting, restricting immigration is the wrong approach. Most people would agree that growth of the economy is a good thing, and the fact is we need people to make that happen so rather than curtailing immigration, we should be building infrastructure to support it. Anyway, one of the first things Benjamin Tal talked about was a rally in the bond market, and how he thinks it has come too early. Higher bond prices means lower bond yields. This means lower bond interest rates are expected by the bond market. If Mr Tal is right, interest rates will remain high for the next six months with central bank cuts starting mid 2024. He predicts very low growth to Canada’s economy in the coming year.





I thought it was interesting that he mentioned the bond market because I have come to understand that the bond market is the leading indicator of all things in the financial system. If you could decipher what the bond market activity means, you know what’s coming next. I think that is because the sentiment of bond traders eventually becomes a self-fulfilling prophecy. The bond market is the largest market in the world. it dwarfs the stock market, and indeed the economies of most countries. The global bond market is 133 trillion. The size US bond market, the largest economy in the world, is 50 trillion. Compare that to other common financial metrics like US debt of 34 trillion, and the US GDP of 23 trillion and you see that bond markets are the biggest, biggest and most important part of our financial system. Bond markets are a reflection of how we choose to interact with each other, so I find it interesting how little bonds are talked about and how misunderstood and misinterpreted bonds are by many people, including me. I struggle to understand how the bond market actually works but I’ll share my findings below. I welcome any comments on this, so please reach out to me because I’d love to learn more about this.

This is a bit of a tangent, but I believe it’s worth saying. I think of the behaviour of the people that make up the bond market as the first mover. Whether there is no bond market activity and no availability of debt, prices and economic activity are low. When people invest in debt, economic activity rises. Similar to how having a positive mindset will generally lead to positive results. If you have hope for the future, then you will take actions today that may cascade into positive results. If you fear a bleak future, you will not take those initial actions. This is a tangent, but I think about how human agriculture was such a turning point in our evolution. The neighbours of those early farmers must’ve thought they were crazy, sacrificing today’s food in the hopes to yield more in the future. In cursory google searching I found some crops are much higher yielding than others. For instance, some US sources site that the average amount of seeds of corn planted per acre is approximately 30,000. 30,000 plants will produce one or two ears each. Each ear of corn has approximately 600 seeds. Ignoring all other inputs This means that nature allows us to turn 30,000 seeds into up to 36 million. 600 to 1200 seeds for each corn seed planted means the return on investment 60,000%. with yields like that it’s no wonder that we have corn in virtually every processed food, and even added to gasoline. Of course, not every seed you plant will ger