I interpret what he says as, there's less cash sitting on the sidelines to the extent that people
have borrowed/hedged to make their investments. I read some of the gibberish at the Sitka
website and it sounded fairly non-committal like that spoken by Bernanke and Geithner
in recent months, when uncertainty rules. I also think he means even the mutual fund managers
have spent all their cash reserves buying into riskier investments aka stocks/commodities,
because everyone is seeing the only decent returns are in the markets now. They all want a
return well over basic safe investments like some bonds, treasuries, and money markets,
and their risk tolerance is rising. (btw, who is this guy Mish? never heard of him - fakir?)
So, wanna know what else I think? (too bad, I'm telling you anyway
This relates to my feelings and opinions about the Canadian economy only, btw.
I think everyone wishes they could get >5%/annum on a basic, safe, bank-booked savings account, right?
Well, that might be very unlikely for some time. It all started in 2008 with Lehman Brothers, US housing
meltdown, mortgage backed securities vanish back into thin air from whence they came, stock markets
retreat 50% over a week, interest rates are lowered to all time lows to try to get money moving again,
and "stimulus" is the buzzword that makes everyone edgy and nervous. The US is in trouble, and so are
we because generally, as they go, so do we, just not as far this time, luckily.
Ok, fast forward 2 years...... things are slowly improving worldwide (the current EU problems are
a different issue which were exacerbated by the global financial crisis, but which would have appeared
eventually anyway even without the aforementioned crisis).
I think there will be a very slow and measured rise in the BOC's interest rates over the next
few years, because of the unintended effects of historically low interest rates for the last 2
years. We dropped interest rates like the USA, but unlike them, it boosted our personal mortgage
applications as it made the money cheap for many who were waiting, and have now probably bought
more house than they can afford, the second our rates rise. So, to keep us from having our own
housing meltdown, we're gonna be stuck with low rates for a while. They tried to reduce our exposure
when they got rid of the "0 down" mortgage last year, but too many others got cheap money before
they could turn off the tap. It also means basic treasuries, and money market accounts, some bonds,
and everyday savings accounts will suffer low rates of return as well. If you want to make any kind
of return on your money now as I already said, you have to invest in risk, aka the market or
trade ETFs or buy into high MER mutual funds (our banks have to gouge, too, don't they?
I think you'll see Carney raise the rate 1/4 point and then watch the number of defaults, and if it looks low,
raise it another 1/4 point and so on, over a longish time. I think some people are already seeing the writing
on the wall and trying to bail while they can. I get MLS listings daily and I'm seeing a lot of high end resales
of properties which were likely purchased in the last 2 years with variable rate mortgages, which may now be
subject to tiny little interest rate hikes. Those who bit off more 2 years ago, are trying to spit, before they
have to swallow a major interest rate bump.
That's how I see it if things stay relatively stable elsewhere.
The wild cards are the US and Chinese economies, and what happens with them while we're doing our thing
up here. India maybe too, but they tend to be generally pro-USA and less of a threat to disrupt things,
than China could be. Iran may be a problem short term, as China apparently has a lot invested there,
as well as their undeclared interest in North Korea. The Chinese will probably make the first move, if it
comes to a standoff, and the US will have to respond.
And that's the way I see it.
Also, don't buy electric cars. They're a gimmick, just like the Edsel and the Pacer.