January 27th Episode
01:00:30 Share

Welcome to Money Talks. My name is Mike Campbell. Hey, great show planned for you, Dave, because we're going to go further into the housing crisis. And I'm proud to say that we've been talking about this. We're about three years before anybody in government started to talk about the impact of increased immigration, but also the impact of increased student and work visas, which the government had no idea how many were listed. Well, now there's been some changes in that regard. But are they going to be, let's say, effective?

Well, Professor Mike P. Moffitt is going to join me. He's done fantastic work on this file, on this, especially that aspect of it. I think he brought to the public's and probably the politicians' attention about the significant role that temporary visas were playing in the whole housing shortage situation in so many urban centers. Anyways, Mike will be my guest coming up.

Also got Victor Adair. I've got Ozzy Jurek. I've got Mike Levy. Lots of stuff to talk about. I've got a great goofy, and I'll warn you right up front, we're going to be talking about the ruling in court about the unconstitutionality of initiating the Emergency Act. But first, recently, KIPP Charter Schools Network, that's an enrollment of 120,000 students across the U.S.,

Well, it recently eliminated the phrase hard work from its famous motto, work hard, be nice. They removed the work hard part. Why? Because in their words, the idea of working hard, in quotes, supports the illusion of meritocracy. Wow. I mean, that's something that's been on the list recently, part of the diversity, equality, inclusion ideology that does reject merit as the primary concern, diminishes the importance of hard work in advance.

And by the way, it's contrary to the attitudes of the majority of Canadians. I just saw this poll this week, Angus Reid poll survey done in partnership with the University of Alberta Sociology Department, and they listed the Canadians. Number one characteristic for success, hard work. Not shared in some quarters, though. And we got the renewed debate about merit and the diminished emphasis on achievement and work ethic. So I'm going to ask you a couple of straightforward questions.

I mean, God forbid, if you or a loved one needs life-saving surgery. But if you do, would you like the best, most qualified surgeon to operate? How about when it comes to education? Would you like your child or grandchild to be taught by the best teachers? One who is inspiring or someone who is lackluster? Because you're going to find both in the public school system. But I'm asking because I can't pinpoint the precise date when the whole concept of merit went out of fashion.

Was it when we started to view virtually everyone as a victim of his or her ethnicity or social background or gender or sexual identity? Was it when we viewed success as solely the product of exploitation or the result of privilege and nothing to do with hard work, ingenuity, long hours, dedication? Well, it's obvious that merit, hard work and achievement as the basis for advancement and rewards has given way to many other considerations. Maybe gender equality, maybe racial background, ethnic balance.

It's the stated policy of the federal government and so many other institutions. And you remember back in 2015 when Prime Minister Trudeau took office? Well, the number one criteria that they kept talking about was he wanted the cabinet to be gender balanced. What about in highly valued professions like teaching and nursing? Not only are the most mediocre workers paid the same as the most brilliant and dedicated ones, their representatives vehemently oppose any measure of performance which could be the basis of remuneration.

But come on, my point is that that approach has consequences in terms of performance. And is there a better example than government itself where measures other than performance are used, if any measurements at all? Yet we certainly care about excellence and performance when it comes to our favourite sports teams, where the selection criteria is obviously performance-based. So are we really saying that hockey or, like, football performance is more important than government activities like healthcare, education?

The management of every government department where achievement and performance are secondary to other consideration. Remember last spring's public sector strike? It was a great example. There was no talk about performance. Yeah, lots of talk about getting more money, but no talk about what we'd get for it. No talk of performance despite the massive increase in the size of the public sector. It's grown 31% since 2015. That's about 80,000 new workers. And that isn't including the record number of consultants on the payroll.

This is not to say there aren't brilliant, productive and dedicated workers in the public sector. I'm simply saying it's harder to identify them because performance isn't measured. Most times achievement not measured or rewarded. I'm also not saying that similar problems don't exist in the private sector, but the financial measures of performance inherent in business means that the sooner or later consequences of non-merit based employment or lack of performance have obvious consequences.

Well, of course you have consequences in government too, as it translates into unacceptable wait times, maybe to get a passport or get medical treatment. I don't know, anyone could be surprised at the relentless examples of waste exposed by both the Auditor General or the Parliamentary Budget Office, when so many programs have no measures or goals or accountability. Now, I don't expect union leaders to ask those questions. I mean, their job is to protect their members, even the worst performing ones.

And as a success of auditor generals have pointed out, tens of billions of dollars are spent without specific goals or measurable performance networks. And we had the parliamentary budget officer say just recently that there is absolutely no cost benefit analysis done on the $60 billion spent on the green agenda. So of course, we don't know which programs are most effective. We don't know which people are most effective. So is it any really a surprise when so many areas of government fail to perform?

I can't think of any other example where we'd spend such a huge chunk of our paycheck without questioning what we get for the money, where we don't care about performance or we're hiring based on other factors and excluding merit. It's a fascinating question, one that I think is long overdue. Why? Because the financial circumstances or government are such that the stakes are higher than ever before.

Hey, just a reminder, this is the last chance I get to tell you about the World Outlook Conference tickets coming up because, of course, it's next weekend. It's next Friday, next Saturday. And I really encourage you to join us. Come and say hello. Have a chat. Enjoy the weekend. It doesn't matter that it's winter. This is a great place to be. And I hope I see you there. And it's easy. Just go to Mike'sMoneyTalks.ca, click on Events, and get yourself a ticket. I look forward to seeing you.

It's interesting to note how housing has come front and center, at least for the politicians, but that wasn't always the case.

We had very fine researchers like Mike P. Moffitt. Dr. Moffitt was on top of this ages ago, ages ago. And I'm proud to say he was the one who brought to our attention. And it's over three years ago talking about temporary visas, for example, as being real pressure, not just obviously on the immigration broad system, but also on the housing market. And as I say, I've been greatly informed by his work. And I'm so glad that he's joining us today. Mike, thanks so much for finding time for us. Thank you for having me.

Let me come to just cut to the chase, sort of surprise, and I absolutely don't let me put words in your mouth. But why did it take the federal government so long to figure out that when you add, you know, record numbers of immigrants or targets, you know, and they made that very clear in October of 2020. And I remember talking about it myself. But of course, as you brought, I think, to the public's attention, it was they had no idea how many were coming in on temporary visas, but they knew it was a lot.

How come it takes so long to them to figure out, you know, they got to live somewhere? I mean, that's my criticism is how slow they've been in reacting to this. Yeah. And I think that's a I think that's a fair point. The federal government had kind of always taken the position that higher education is a provincial responsibility, which it is.

So, you know, they should, if there were problems there, they should just let the provinces handle it. But, you know, I think there's more than that. When it starts to bleed into housing, and obviously it's a big component of our immigration system, the federal government system,

issues these student visas. So I think it's fully within their rights to do this kind of thing. I wish they had acted years sooner. You know, I think I wish they had been far less deferential to the provinces. But, you know, I'm glad we're here. It probably took a few years longer than it should have, but we finally got to the right place.

If we open a dictionary, it might be the definition of better late than never, I guess. Yeah, I think that's exactly what it is. Better late than never. Let's talk about what the changes are. They announced some changes that they're going to look at. As I say, they didn't even know how many were coming in through those temporary visa programs. But now they're talking about change. So maybe just in a nutshell, give people what the new framework would look like.

Yeah, absolutely. So until recently, the number of international students, there was no cap on it. That basically, if you met the criteria, you could come to Canada. So that was difficult for planning purposes. We didn't know if there would be, you know, 100,000 or 500,000 or a million international students coming in any given year. So what they've done is treated that like the rest of the immigration system by placing a hard cap on that.

And then what they've done is allocated that cap across the provinces in a per capita basis. So if you're Ontario and you have 38% of the population, you get 38% of that cap. And they're basically letting the provinces determine how to allocate the spaces among different institutions. So they're basically saying at that point, okay, well, if higher education is your responsibility, you dole out these caps.

And it's really interesting. So, you know, provinces that don't have a lot of international students, Quebec is one, Alberta, Saskatchewan are another. This doesn't really affect them at all. They could continue to grow their international student population and not really be restricted in any way. They'd go a long way to bumping into their cap.

But British Columbia and particularly Ontario that gets a lot of international students, we're going to have to cut back. Here in Ontario, we're probably going to have to cut in half our incoming students. So that's, you know, both BC government and Ontario's government, they have some really tough decisions to make.

Well, and obviously, you know, when you have this system in place for so long that you've got a system that is predicated on those international students coming in. I mean, I've been hearing for years that they, you know, especially in British Columbia, as you say, Ontario, even bigger, that they're the ones that, you know, a lot of money comes from that. I mean, they get charged extra tuition. So you've got a system that relies on that cash. I mean, I'm starting to read about blowback on that issue.

Yeah, no, absolutely. And so, you know, now that the colleges and universities are saying like, look, we're some of us are going to go broke. We don't have we don't have the money to pay for this in Ontario is particularly acute because we the provincial government funds our institutions far less than other provinces. We've been 10th out of 10th per student funding for 38 of the last 40 years.

So, you know, that's that's an issue. And the provincial government here put a cap on tuition, actually reduced tuition by 10 percent in the place of cap. So the schools are saying, well, look, you won't let us raise tuition on domestic students and you cut it. You're not you're not funding us. So, you know, if we can't get it from domestic students, we can't get it from the government.

the only place we can get funding is from international students. And now that's gone. So that's a really messy fight here in Ontario. And I'm sure it's going to be the same in BC as well.

where, you know, the government has to decide, okay, are we going to allow domestic tuitions to go up? Are we going to bail out the sector? Or are we going to let some of these institutions fail? And that's essentially what the federal government's done is put this onto the province and say, like, look, this is your mess. You clean it up however you want, but you're going to have to make some tough decisions.

Should those decisions, though, not the decision, sorry, but the size or the amount of temporary visas, as you say, coming through the provinces. But shouldn't somebody have been looking also that coincides with our immigration targets, too? I mean, just even a simple, hey, we're going to start letting in 500,000 people per year, which is a new record. And maybe I should check if anyone else is coming, too.

Yeah, I think ideally we should have been capping international students and temporary foreign workers years ago to better allow for planning. Because, I mean, that's essentially the challenge that, you know, if we don't know if our population's, you know, going to rise by 1% or 3%, you know, that makes a huge difference. I tend to focus on the housing side, but obviously it affects our healthcare system. It affects our infrastructure, our, you know, our...

you know, lower ed schools. So absolutely, there's a real kind of failure to plan here. And, you know, again, I'm glad the federal government's stepping in. They should have done so years ago. As you say, you also specialize in housing. And is that how you came upon this? By the way, you were looking at all the housing issues, you start noticing, hey, we've got a population issue too, you know, that size of the growth.

Yeah, absolutely. You know, I started looking at housing years ago in places like my hometown of London, Ontario. And, you know, to put it in context, in London, we started to have a big house price boom around 2016 and 2017 or so.

which is strange because we also had pretty much the highest unemployment rates in the country. And usually those things are correlated. Like if you look at Alberta, you know, home prices in Edmonton go up when the oil industry is doing well and they go down when oil prices are low. Well, in London, we had a really weak economy. We had many bad years for manufacturing and house prices were going up 20, 25%. So it's like something that's not right. Something is going on here. So we started doing research.

around, okay, why is that? Quickly, you get to population growth and going, okay, where are these people coming from? And in many cases, it was enrollments at universities and colleges. And what essentially happens is those students need somewhere to live. So investors start buying up single family homes and turning them into student rentals. And that creates all kinds of pressures on the housing market.

And let me just, sorry, I backtracked just for a sec. I should have asked what size of the problem when we talk about there's a lot of these visas coming out there. I mean, we're talking in the hundreds of thousands recently, aren't we? Yeah, absolutely. Absolutely. And, you know, to give you context, we have data on about 16 months worth of international student visas from beginning of January 2022 to the end of April 2023. And

And yeah, we're looking at close to a million. And, you know, some of these institutions are getting high. So one example is Conestoga College in the Kitchener-Waterloo area.

They admitted over 60,000 international students. Now, only half of them got visas. Only half of them were allowed to come in the country. The federal government actually rejected half of the applications. But that's still like 32,000 international students admitted in a 16-month period.

You know, one, you know, fairly regional college. So it adds up, you know, if you're dumping tens of thousands of additional persons, whether they be international students or anyone else in the Kitchener-Waterloo area, you know, that's going to absolutely start to break housing markets.

Who made the money on this? Like one of the things you've done, again, with what you've brought forward that I wouldn't have guessed it was so. I sort of thought these were all private institutions, you know, sort of sprouting up, pretty good business opportunity, you know, charge higher tuition, you know, sort of wink, wink, I'll get you a student visa kind of thing. But your research has found it wasn't that. It wasn't sort of a monster private sector push here. No, it really wasn't. So, you know, across the country about,

a little less than 20% of the students, uh,

were attending sort of private career colleges. The vast majority were in the public system. Now here in Ontario we have this kind of weird hybrid thing where we have these public-private partnerships where public colleges can recruit students and then outsource the teaching to private institutions. So we've really blurred the lines here between public and private but

You know, at the end of the day, this was mostly through the public system. I know we've seen a few reports here and there about shady, you know, private operators taking advantage of the system. And that absolutely exists. But, you know, most of this is happening through our public system. You know, Conestoga, for instance, as I mentioned earlier, that has by far more...

student visas issued than anyone. They're a public institution. They don't have any public-private partnerships. And they've massively increased their enrollment. They've had an operating surplus of over $100 million for each of the last three years. And they have a brand new campus in the city of Waterloo named after their current president and CEO. So there is an awful lot of empire building going on.

- Sorry, I can't help but laugh thinking about that. But we are talking big money, that's the bottom line. And we're talking big money that supports the public system

Any thoughts on, as you say, some provinces not impacted. Quebec's already said we don't want foreigners by our tuition structure. But Ontario and British Columbia as examples. I mean, this is going to be a huge hole in university budgets that I don't see how they're going to be able to fill it quickly, especially if this thing is kicking off September 2024. I mean, the clock's already ticking.

Well, the clock is more than ticking because the federal government has said that they will not process any visas until the provinces determine what their allocation system is. So everything is on hold right now. So absolutely, the clock is ticking. The colleges here in Ontario suggest that this is going to cost them $1.5 billion.

a year. Now, obviously, their costs go down as well. There's fear of teaching. But yeah, this is what we're talking about. This is a revenue in the billions that is going to be needed to make up somewhere.

Do you suspect there'll be some significant blowback? Because it's going to be jobs too. I mean, if you have less students at some point, you have to have less instructors or you will have less instructors. As you say, other parts of the infrastructure will be reduced. So, I mean, nobody likes to, I mean, I'm all for it. I don't want to lose jobs. I don't want people to lose jobs. It's, you know, you bring it down to a real personal level. It's a horrendous experience to lose your job.

I just can't help but think this is just such a fundamental shift after doing it one way for several years, huge amounts of money build up, and now we're going to stop that. And pretty fast, as you just said. I mean, they're already stopping it in one way.

Yeah, absolutely. So, you know, here in Ontario so far, the response has actually been quite positive. There are concerns about, you know, availability of housing and so on. And to give you an example, Patrick Brown, the mayor of Brampton, back in December, their council passed a unanimous motion actually calling for something like this, right? So you're actually getting municipal councils telling, you know, advising the federal governments like, hey, rein in the system.

Now, that said, you know, that could change, that the reality may sink in, that if we start to see institutions in trouble or institutions institute, you know, mass layoffs or something like that, you know, perhaps the public sentiment might change on this. But so far, it seems to be quite popular. And it's a little bit telling that, again, at least in Ontario, at least,

The provincial government hasn't really been kicking and screaming about this. I think they've kind of taken the temperature, recognized where the general public is on this and sort of realized, OK, this is this is probably not a fight we're going to to win. But, yeah, I think you're right that, you know, as the realities of this sink in, we might start to have those concerns about about jobs or about bailout of the sector and so on.

I mean, of course, it's become a prominent issue because of housing. You know, that, you know, I think it's something that's one of those issues that's well understood by the public and maybe oversimplistically, but they understand. You bring in a whole bunch more people, they got to live somewhere. You bring in the students, as you say, and especially in the areas around the university. And it also seems from reports, this isn't statistical, but that we failed some of those students. They came with the promise of there would be some place to live for goodness sakes.

But my point is the public seems to understand this. It's a straightforward line for them. And that's to me what put it on the agenda, especially at the federal level where we had the prime minister saying housing's not a federal issue. I think it was like in the summer. And three weeks later when the polls come out and say, well, that's all fine, but you're going to lose a lot of votes. And then we get what I call the announcement per week to solve the housing issue.

Yeah, no, I think you're right. I think that's what's really kind of mobilized the public on this, that it's really easy to understand. It's not some convoluted thing about taxes or regulations or something and how it affects housing. Too many people, too few houses is not that hard to understand. So I think that has got the public on board here, and I think that's what's made –

this a popular move. And yeah, absolutely. The international students themselves are often the victims of this. And that's one of the interesting things to see if you go on Reddit or some of the other places like that.

Some of the loudest voices supporting this are international students themselves. You know, naturally, they have some concerns, but a lot of them are like saying, like, look, there are too many of us for the housing stock. And had, you know, had I known what I was getting myself into, you know, had the recruiter painted a more accurate picture, I might not have come.

So I think that's important to recognize as well, that the current system is not working well for international students themselves. I think obviously the increased level of attention by the public is positive, but I'm still looking at CMHC statistics that came out for 2023.

compared to what CMHC says we need in additional housing units, you know, to get affordability. Well, we're not even in the same ocean on those things. I mean, with, I know, I know the number I'm overly simplistic, but the number is we were flatlining to a slight decline, you know, when it comes to the construction of new units at a time when, if I looked at the numbers from the CMHC, they're sort of saying, I think you need about 700,000 a year for the next seven years. You know, those aren't the same. And, and,

I just don't see enough progress there. And I talked, in fact, on today's show, we're going to talk later to our regular Aussie jerk, but he was just hanging out with a whole bunch of developers and getting their take on it. And projects getting withheld, stopped. Another one of those disconnects between the private sector and the government about if you truly do want more units.

Yeah, no, absolutely. So the CMHC is saying that we need to somewhere between double and triple housing construction per year, depending on how you interpret that data. Well, if you look, last year, housing starts were down 7% across the country. BC was up, but most of the other provinces were down.

We're down. So, you know, if you if you need to increase 100, 150, 200 percent and you're going down by 7 percent, you know, that's that's making a bad situation worse. Now, a lot of that has to do with with economic conditions, obviously higher interest rates.

are affecting both the demand and supply side. So I think overall, we've had some pretty good policy, but it hasn't been able to counteract the effects of the global economy. So and the beginning of this year looks rough as well by all forecasts. So hopefully, you know, the end of 2024 should be better. But yeah, we're moving in the wrong direction. You know, we're not even staying flat at the time where we need to be doubling or tripling.

And I would think you had alluded to this earlier that, you know, it's just you're not going to solve a problem that's been years in the making in 15 minutes. So, yes, now it is on the public agenda. And a lot of it is photo op driven. And this is my this is not Mike Moffitt talking people. It's Mike Campbell talking, you know, but a lot of it's photo op driven. We're going to build 11 new units today.

in a city that's going to absorb 45,000 people. So I just think the task... I'm not particularly optimistic about this. I think the task is just too big unless there's even a more aggressive adjustment, sort of a timeout period for immigration, timeout period for... I'm just trying to...

adjust or address that demand side that's inherent people live somewhere so how about yourself am I am I too pessimistic but I don't see the numbers when you say you're going to decline like we did last year and going oh wrong direction

Yeah, no, I certainly think we are in a highly challenging environment. And I think we can get a little bit too glib sometimes about how easy this is going to be. Yeah. Okay, yeah. If we just, you know, allow fourplexes as of right, you know, that's going to get us there or whatever the policy solution is. This is a massive uphill battle. Like this is a generational challenge because this has been.

decades, uh, in the making. And then, yeah, you couple that with, uh, you know, increased population growth. This is, this is a massive challenge and I'd love to see governments, you know, all orders of government get together and go, okay, how do we, how do we better align these things? How do we better align housing growth and population growth and make, make sure that, you know, we, we have the labor, uh, we need to build because we have to make sure that, um,

that we have the skilled labor to do that. And, you know, part of that is going to be immigration, you know, making sure that skilled tradespeople can come to Canada. So it's just aligning those things. But right now, you know, we make our immigration decisions, our international student decisions, our labor market decisions, and our housing policy. They're all done in these silos. And it just leads to this discoordinated mess where, again, you know, population growth is going up, but housing starts are going down.

Well, I'll give you one example. I'm just saying you might not have been able to follow it because it was out in Victoria going back about a year ago. And they said, basically, you can add another house to your lot or more, you know.

and they had no applications. That's the thing I want to bring, you know, so they can say stuff, but you've got to get the development community on board and the investment community on board with this stuff. And I think there's more work to do when you look at the municipal level where there just seems a relentless increase in this fee or that fee, you know, report out of,

The Board of Trade, I think, pegged at about 25% of the cost of a new build was government related. You know, whatever it is, and it's different, of course, different municipalities, you know, but still, it's sizable. And it just seems like there's so many disconnects here. Like, I don't think the formulas may take time to employ, but it sure isn't helped when you're running across currents at times.

Yeah, no, absolutely. And, you know, we see that again here in many communities in Ontario, we're now allowing four plexes as of right. But, you know, if you've got a system where, you know, development charges on that are, you know, 4X and then, oh, by the way, we're going to put in a parking minimum. So each of those units has to have a spot, right?

You know, we're putting in height maximums and so on. It's like, yeah, you can legalize these things, but if you coat the rest of it in so much red tape, you know, they're just not going to get built. So absolutely. I think we need to do more to make sure all of these policies are aligned and look at, look at those outcomes and say, okay, you know, if we do want,

more row houses or fourplex or what have you, are all of our other places aligned to do that? Because yeah, if you start putting all of these other frontage restrictions and what have you on that, it's like, yeah, it's legal in theory, but not necessarily in practice because of this web of other rules and regulations.

Well, that is certainly an area that needs more attention. The fact that politicians are talking about it isn't a solution and we have to hold their feet to the fire. But I'll tell you, the work you do, you know, and people can find it at Mike P.

Mike P. Moffitt on Twitter, Mike P. Moffitt. I really invite people to go there. Always some great data, great insights from Mike. But that's what we have to do. I mean, this is one of those things, Mike, I was thinking the other day, you know, some people may not pay attention to municipal politics or provincial or whatever. And I go, well, guess what? You're going to wake up and you aren't living in the same neighbourhood.

This is a key subject, but I invite people to go to Mike, at Mike P Moffitt on Twitter. You do a great job keeping up to date and we really appreciate you finding time for us here. Well, thank you. Thank you for the kind words and thanks for having me today.

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Well, the World Economic Forum in Davos, Switzerland concluded, and I think it's fair to say that the most notable part of that multi-million dollar elite fest was a departure from the predictable blah, blah, blah, climate catastrophe message, inviting the rest of us to lower our standard of living in order to reduce our carbon footprint. Yeah, boring, same old song. But the big notable part was a speech by the new Argentinian president, Javier Millet,

caught, well, it caught so many people by surprise. I think it's absolutely the most notable word spoken at that conference as he departed from the usual fare of reinventing capitalism and individualism in favor of increased state control, a model that's produced inferior standard of living literally everywhere it's been tried, but that isn't discouraging them. And that brings me to his quote of the week.

In concluding, I would like to leave a message for all entrepreneurs and business people here, and for those who are not here in person but are following from around the world. Do not be intimidated either by the political caste nor by the parasites who live off the state. Do not surrender yourself to a political class that only wants to perpetuate itself in power and keep their privileges.

You are social benefactors. You are heroes. You are the creators of the most extraordinary period of prosperity we've ever seen. Let no one tell you that your ambition is immoral. If you make money, it's because you offer a better product at the best price, thereby contributing to the general well-being. Do not yield to the advance of the state. The state is not the solution. The state is the problem itself. End of quote. You know, I find what's revealing.

is reflecting so many in the mainstream media is he's called, consistently called, from the far right. I mean, look what he did. He dismantled government apparatus and the failed Argentinian experiment, including within 48 hours of taking office,

He eliminated half of the government ministries. He cut government spending by 3% of GDP and devalued the peso. No, he was not part of the regular government agenda. And for that, he's called far right. But I'll tell you, his speech, worth looking up from the World Economic Forum, provided a breath of fresh air from the usual blah, blah, blah.

Number one worry for Canadians, well, it's cost of living and the economy in so many variety of ways, whether they're worried about taxation, as I say, cost of living, worried about economic growth, all of those things. So I'm bringing Michael Levy in there. He's got his eye on that stuff. Mike, I mean, I was asked this just the other day and I said, you know, I can't think of really a positive statistic when I talk about the Canadian economy.

Well, Mike, if it's a positive statistic, it's one that when you just sort of

burrow in a little bit and take a closer look, it's not that positive. But there's this great quote, Benjamin Tull and Andrew Grantham, both one with CIBC and the other with Commerce, Bank of Commerce, both talked about economic growth, the economy, GDP growth. But I love this quote from Benjamin Tull. The Canadian economy is basically in a purr

capital recession. And we have a situation in which economic growth is very close to zero. The only reason why GDP growth is still above zero is because of the population growth.

And you and I have been talking about that population growth, immigration, students that are in the country, the fact that the government's got 450 to 500,000 immigrants planned entering into Canada a year for the next three years. But that doesn't give us positive GDP. We're not in good shape.

Yeah, I mean, what they're describing here, and this is an important distinction, is of course the economy is going to grow when you bring in over a million people last year, 815,000 since June 20th this year, by the way, Mike. So of course the economy is going to grow. But is it meaningful? Because it's sort of like saying,

I've hired a guy. He comes in. He cuts the lawn. I hire 50 guys. They manage to cut two lawns. You're not better off. Of course, the output is higher, but not on a per-person basis. That's what they're all talking about. On a per capita basis, real GDP is declining. 12 of the last 13 months, too, Mike. What did Grantham say? Well, Grantham looks at it in two ways, the good and the ugly. But he's...

He and, I mean, one's in one bank, one's in the other. The good to Andrew Grantham is, is while aggregate consumer spending has risen by nearly 2% in inflation-adjusted terms since the second quarter of 2022, much of this has been driven by the sharp growth in the population has increased demand for essentials such as food. But to him, the ugly is...

While the spending has risen by nearly 2% in inflation-adjusted terms since the second quarter of 2022, much of this has been driven by the sharp growth in population that has increased demand for essentials such as food. Now, do you think Grantham and Tall were talking to each other before they both issued their statements? Not a chance, but they can certainly see it with clear eyes and make it evident to us what's going on. We are in a recession.

The economy is sluggish. And the only reason that the government can stand up and talk about economic growth, ergo full circle to us, is because there's so many more people. But that doesn't mean that we are getting economic growth for the whole economy.

And, of course, the other big that I know CBC has written on and others, of course, many others, is that, you know, as people have to come to renew their mortgage, more is going to go into mortgages, you know, in terms of spending, less available for other things in the economy. And they're still working for that to fully work through, which will take a couple of years. Well, Mike, I think that's probably the most important. Actually, on my notes, I've got exclamation marks written.

beside it because the concern is that when people who got their mortgages in 2019, 20, 21, they are going to be renewing. They are going to be paying more money. There is no doubt about it. And when they're paying more money just to keep their house together, their apartment, their condo, or paying much more money for rent, they don't have anything for the other part of the economy. And

I think that consumer spending in Canada is already weaker. And most people realize, particularly in per capita terms, already bringing weakness in employment in all sorts of sectors. So when we talk about economic growth, you really can't do it logically and say Canada in the same breath.

Well, it's not been a priority for several years. Other things on the agenda, which is legitimate, people can have their choices, but they have to live with their consequences. And we've had a choice of emphasizing climate change and that agenda,

you know, other gender related agendas, which is all good, but you have consequences. And that's what many people, former heads of the Bank of Canada, many chief economists have all mentioned. And of course, it's getting reflected in our economic growth prospects. It absolutely is. And Mike, right now is what we're experiencing is the starting of the tearing off of the bandaid. The bandaid's there and there's a wound underneath it. And we're

we are now realizing that we have to tear off the band-aid. It's not looking rosy going forward. And the Bank of Canada, one last thing, has changed their attitude a little bit. They are now not talking about being worried about having to raise interest rates. Now they're worried about where the economy is going and when are they going to be able to lower. Probably the second half of this year will be a start.

Yeah, and we'll finish on that positive note because we've already seen a decline in mortgage rates. The five-year rates followed the five-year bond. They're not waiting for the Bank of Canada. So that renewal prospect a little more positive. It's these negative stats that fuel the talk of lower interest rates. So I'll pretend that's positive. Mike, thanks for taking the time. Have a great week, Mike.

The Western Canada Monthly Income Fund is starting pre-sales on its new project called Portal. This waterfront development in Maple Ridge is expected to sell out quickly. The fund is making limited amounts of investment available. If you're looking for a secure investment in real estate and relatively quick turnaround, what would be better than using your RRSP and TFSA to help build much-needed homes for Canadians? It's common sense investing. A

Established in 2018, the fund pays a monthly fixed target interest plus a generous participating profit share. Request your investor package today at easy-invest.ca. That's easy-invest.ca. Conditions apply. Past results are no guarantee for future results. Check the website for details. Time now for the shocking stat of the week.

California's rooftop solar industry has received government subsidies for years that offset installation costs for homeowners and businesses. In California, all new homes must have rooftop solar. And if the home products, you know, if the home actually produces excess power, well, the government actually rebates up to two to three times the price of wholesale electricity to the homeowner. Obviously an incentive to produce energy, even if they know it exceeds demand.

Well, that way, more well-to-do families who can afford the solar panels can reduce their electricity costs to zero. But you know, somebody has to pay. And as usual, it falls to lower income groups who can't afford the panels or don't own a single detached family home.

But in December of this past year, no, December 22 it was actually, the state reduced the subsidy for excess power by about 75%. So up to this point, they've been paying two to three times the price of wholesale electricity to those homes that have excess power put into the grid. Well, as I say, reduced by 75%. And it revealed that the industry was not profitable unless it had that government subsidy. So here's the shocking part.

reported in the Wall Street Journal. California's solar and storage industry claims that the reduced subsidy has already resulted in one year in the job losses for 17,000 people. And why? Because installation applications fell by 80% without those government subsidies. So now, Solar Insure, that's one of the big companies there, says that three quarters of solar installers are high risk of going out of business.

Well, in fact, it wasn't much of a business. It was only a business because it had those government subsidies. Every week, it's the same thing. Tons happening in the real estate market. But I'm going to bring Ozzy Jurek in right now. Ozzy, you're judged by the people you hang out with. And I know you've been hanging out with real estate guys, especially on the development side. Tell me a little bit. What are they saying? You know, I mean, it's not on camera. It's not on the microphone. What kind of things are they talking about?

Well, yesterday I attended the Urban Development Institute annual sort of conference, and Michael, it was sold out. There was 1,200 people there. There was no room inside. And the neat thing, it was a casual conversation among five developers together with a moderator, and they talked about everything in an off-the-cuff basis. And so in general terms, the highlights were authentic.

It came from a year of complexity and uncertainty, and they feel that 2024 may still have complexity, but we're getting back slowly towards a more normal world. But we're not that optimistic that we actually will sell or build more units. In fact, they're looking at building fewer units in 2024 than they did in 2023, and it'll be one of the lowest in 10 years.

And that comes on the heel, of course, of CMHC numbers last week telling us that we've had a shrinking of 7% in housing starts. Now, that could be condo, multi-unit, and really that took place in single detached, as you've been telling us. Huge drop off in single detached, not a drop off. It was like 1%, I think, in multi-unit. But yeah, 25%, I think, off the top of my head in single detached.

Well, the interesting thing was they actually credited CMHC. I mean, without the CMHC program for rental financing, there wouldn't be any construction because the costs have gone so crazy. So they feel they need the kind of program for financing, the mortgaging and so on. But they also need easier capital investment. Capital is so much harder to get. You know, they were saying you need six banks to get together to give you a construction loan when before it was easy to deal with just one bank.

And obviously that's playing a role. I mean, lots of variables involved. But if you can't get the financing, obviously you're not going to build. And we do hear stories across the country of developments that are being put on hold or canceled.

Well, a lot of times those developments are put on hold simply because, as you and I discussed, there used to be a GST on rental construction, at least the government did away with that. But there are sometimes unintended consequences where, and they talked about it, the municipality seems to have in fights with themselves as to what they want, and then they decide, oh, let's charge it all and let's preferably charge it to the developer.

But interesting thing on interest rates, the developers thought it wouldn't go down any more than a half a percent to three quarter percent. But they did a new thing. They had everybody in the room and now they're all in the real estate industry. They're all builders and developers. They are the group that should know that interest rates are going to go. Certainly, I'm interested.

And they voted all what they thought it would be like. There were 6% thought it would be higher, 10% thought it would be lower, but 78% thought the rates would not go down more than between three-quarter and 1%. So, you know, we're looking for... They're looking for the rates to be almost the same. Yeah, and of course the impact...

also will be felt in the market. But it's interesting that juxtapose that with, I think when you look at the economists, I mean, I know Reuters interviewed 34 economists this past week and said very clearly that, you know, the majority have now moved their outlook to a June or later decline. So they're only looking similar, but maybe as much as one and a half percent in this cycle. So it could take place early to 25.

but in this cycle. So nobody's calling for some big drop to match what we experienced in 2020, 21. Well, and the thing to remember is when we talk interest rates and the real estate side, the mortgages rates are actually down already 1%, a full 1% of where we were just three weeks ago. So, you know, if that's the only concern, you can get a five and a quarter percent mortgage, even if you are not the greatest credit risk. And if you are like we talked the other week,

They whisper that you could get even better than that if you had a good credit recipe.

The interesting thing I thought was that one of the developers felt that the BC government actions on taking over or telling the municipalities what to do, he says they were essentially firing the municipality. And he said it's better to have action than inaction and constant talking. But he says, of course, the devil will be in the details. Nobody really knows what the specifics will be that are required of municipalities and developers. And they're looking forward to seeing that.

Let me switch gears here, quickly go to commercial, you know, office space, that kind of stuff. What did they have to say? Did they feel it's still as black as it was in 21, 22? You know, clearly people working from home, those kinds of trends. Now, of course, we're influenced by what we read out of the States, too. But I mean, the commercial sector is different than it was, say, three years ago, four years ago. No question about that. There was a feeling the retail sales have come back strong in the suburbs and

And people are moving back into the office, but not in droves, but there's a real move underway. I mean, I'm an old manager. I feel my people would have to be in the office if I had a large company. How can you build a culture? But the thing is, they were very concerned with...

You know, places like Coquitlam, they have amenities, they're building a community, they're cheaper. And so people move there for that. People want a community and same for Vancouver. In some of the areas, actually, it's kind of decrepit. You know, we're not bringing back enough people into the city center because if you bring those people back and have eyeballs on the street, that'll help retail.

And if retail is busy, then you have a more vibrant city, but we need more cultural events, not just the Canucks, which are a great thing. But one of the developers says in Victoria, for instance, they moved the gallery downtown from a suburb. Do things that get people into the city core, and that would revive Vancouver. And they spent a lot of time on that.

Well, I'm putting you under the gun because next Saturday, of course, February 3rd, the conference starts February 2nd, but Ozzy will be speaking February 3rd, Saturday. You want to be there. There's lots to talk about. But, Ozzy, I'll also put you on the spot. You've had an excellent track record in recommending areas to be in. You know, I mean, I still recall when everybody else was, you know, getting out to –

you know, thinking about ending their own lives because of the decline in 2008, nine, 10, 11 kind of thing. You were down in Phoenix and that was a heck of a gig. You used to go down to Phoenix, but you also bought in Phoenix and did very well. Basically a money talks thing was the Canadian dollar, but an Aussie juror thing is wait till you see that's where the people are going. They're moving into those areas. So I want to just know a little preview. Are you going to be telling us what you like in the real estate market next Saturday?

Exactly. And I'm going to have some specific small towns that I like and not just in B.C., but some specific small. You know, not real estate is good, but not all real estate. I also want to talk a little bit about what you should not buy, but also some of the programs that people are using that they're not really fully understand, like the most mortgages and other things. It'll be one hell of a show.

I have no doubt, super popular, seriously last year, super popular presentation last year. I'm looking forward to it personally. I always have a pen, a paper out there, make notes of where Ozzy says is a hot place, somewhere to go and somewhere to avoid. I'll be doing all that next week. Ozzy, I look forward to seeing you in person there. I'm in training now, Mike. Okay. And people in the meantime don't have to wait that. They can go to ozbuzz.ca. Okay.

The Western Canada Monthly Income Fund is starting pre-sales on its new project called Portal. This waterfront development in Maple Ridge is expected to sell out quickly. The fund is making limited amounts of investment available. If you're looking for a secure investment in real estate and relatively quick turnaround, what would be better than using your RRSP and TFSA to help build much needed homes for Canadians? It's common sense investing. The

Established in 2018, the fund pays a monthly fixed target interest plus a generous participating profit share. Request your investor package today at easy-invest.ca. That's easy-invest.ca. Conditions apply. Past results are no guarantee for future results. Check the website for details.

I want to go live to the trading desk now, bring Victor Adair in. Hey, Vic, is it in my imagination? Am I reading too much into it? But has sentiment at least shifted a tiny bit? I mean, it seems sort of euphoric. We're going to get lower interest rates and soon we'll sort of go back three, four weeks. But it seems the market may have just tempered that a little, the enthusiasm a little bit.

Yeah, the market definitely has, Mike. I think as we began this year, the market was pricing in six times 25 basis point cuts from the Fed. They've dialed that back by at least 25 basis points. And it's not really just

The market got ahead of itself. The data that's come out, we've had indications, hard data, I should say, stronger GDP, stronger ISM, home sales are good, consumer sentiment and consumer spending has been strong. And at the same time, inflation has been softening a bit. So yeah, the market has tempered their idea as to how aggressive will be the Fed or really going around the world, any of the banks are going to be cutting rates.

Well, and plus, we're coming in the aftermath of a huge move up to, you know, a consistent big move up. Well, let's talk specifically. I should have been more specific. The U.S. stock market has had this sort of relentless move upwards and, you know, some significant points. So it wouldn't be a surprise to see a little rest there or a little profit taking.

Yeah, I mean, you can make the argument we've got in the, again, in the United States, unemployment is basically at all time record lows, give or take a bit, you know, the spending is strong. The stock market is strong. Is this the kind of environment where the Fed should be aggressively cutting interest rates? The answer is no. You know, so the Fed and it's not just the Fed, the central banks around the world are

have signaled they're not going to raise rates anymore, but they're really reluctant to move too quickly to start to cut rates.

The other thing is, I think when you're looking at the market and the movement is, you know, you're still getting 5% in a money market fund. You know, that's and, you know, we were pretty tortured with very, very low rates for a number of years. So that five's got to look good to some people who are saying exactly what you said. Hey, I've got a little profit. I'm going to take it. Or I think the risk is escalating, maybe just in the Middle East or something, or maybe just in China, whatever it is. But, you know, getting paid 5% to sit short term on the sidelines is not too bad.

Mike, I really have been thinking that this rapid run-up that we've had in the stocks, and put that in scale here, I mean, we're up 6,000 points on the Dow from where we were at the end of October. Now, that's only 18% these days. NASDAQ's up better than 20. But I think this really rapid run, especially given that the stocks are kind of outrunning us,

all on their own while the rest of the market bonds are falling back. U.S. dollar is strong. You know, foreign currencies are weak and the gold price is drifting lower as well. I think

Given the uncertainties that we have in the world, that somebody that maybe benefited from this terrific run to the upside might be saying exactly that. You know, let's take some profits here. 5% or better in a money market fund might not be such a bad idea given the uncertainties I see. Well, maybe it's a stretch on my part, but I think that's what the central banks have been saying too. They're getting data, they're getting this, but really none of them did anything.

Yeah, well, there's been this dichotomy or bifurcation, to use that fancy word, you know, the survey data where they ask people, how do you feel? You know, people are concerned. But when you look at the hard data, the economy is just chugging along just fine. So like nothing to worry about. Or in my sarcastic frame of mind, I'd say, what, me worry? Yeah. Yeah.

And let me just finish with oil because it finally reflected a little bit of the uncertainty going on in the Mideast. You know, up to this point, I don't think it has, but, you know, it had a fairly strong week. Yeah. If you look at WTI, we traded a $95 handle up in September, I guess. We traded all the way down to about 67 bucks in December. Now we've bounced back after, you know, making a bottom here for the past month or so. We traded above $78 this week. Yeah.

And during that decline, the positioning in the market from the speculative side got very negative. So certainly you got to think that part of this jump back up here is people having to cover some of those short positions.

And again, talking about markets that sort of ignoring, in this case, some bad news is, you know, China looks like it's, you know, it's recovery. They've had to pump in a whole bunch of money, all of that kind of stuff. So it still had a little bit of a bounce here, as you say, 67 to 78, you know, against some bad news other than the geopolitical risk, I guess, is positive for it.

Yeah, that's part of the story, certainly, when you have to have all of the traffic go around the Horn of Africa instead of through the Suez Canal. And I think the central banks, you know, part of their reluctance to cut is they don't want to be fooled again. You know, if they cut and then, oh, gee whiz, we got to put rates back up again. They don't want to be in that spot. So I think certainly they're

reluctance to cut is that they just don't want to look like they've made a boo-boo.

Well, Vic, I got to let you go because give me any more time and I'll convince you to do the polar plunge with me in Aussie. So you're on fair warning, but I will see you next weekend. I'll see you for the World Outlook Conference Friday night, Saturday. Vic will be there, obviously a chance to chat. He's going to present too, of course, but really looking forward to it. Mike, I'm super looking forward to the World Outlook Conference. I do every year and I don't miss any of it. So yeah, I'll see you and all the other speakers as well.

Good stuff. And by the way, you can still get tickets at Mike'sMoneyTalks.ca. Mike'sMoneyTalks.ca. Just go and click on the events button there. I hope to see you there. It'll be fun. Thanks. Time now for this week's Goofy Award.

Well, arguably the story of the week in politics was the federal court's ruling that the federal government's declaration of the Emergencies Act was unconstitutional, in quotes, unreasonable and ultra vires. In other words, outside the scope of the government. It was not a ruling, though, on the validity of the protest itself or the tactics used by the truckers. The ruling dealt specifically with the government's decision to suspend civil liberties, including freezing the bank accounts and credit cards of Canadians.

that had not broken any law. All they did was support a legal protest, and then they were left with no recourse. Much rarely noticed, by the way, if you were part of a joint account or you were part of a credit card that had other people's on it, well, they lost those rights too. But of course, the government and their supporters think that's okay.

I mean, the court was ruling, though, on whether the invocation of the Emergency Act, the Emergencies Act that is supposed to be employed when all other remedies have been exhausted, they wanted to rule whether it was justified. Now, that score, Justice Mosley, a Liberal appointee, ruled that the government had not met the threshold of a public order emergency that existed throughout the country. There was no threat to the security of Canada, as the government claimed.

You've got to forgive the sarcasm, but not even the bouncy castles, the children, the protesters singing across from parliament buildings met the threshold. That doesn't mean that people weren't inconvenienced or business and trade weren't disrupted or that protests didn't attract a few yahoos threatening to oust the government. But the judge found that didn't justify a full-out assault on individual freedoms.

There were other means available through the criminal code and federal law, as demonstrated, by the way, in Cootes, Alberta, where arrests were made by the RCMP using the criminal code. Of course, the government disagrees with the ruling. They think that they should be the final word on what constitutes a threat to the security of Canada, which could include just about anything. It could include other protests, could be a labor dispute, or things that counter to the government's climate agenda. And I find that scary.

Well, not surprisingly, the ruling has become instantly politicized. And with that comes a convenient memory loss for a lot of people, including in the media, who think the Emergency Act was justified. They forget that CSIS, the RCMP, Ottawa Police did not consider the truckers' protests a threat to the security of Canada. And most importantly, they did not request a declaration of the Emergencies Act.

For example, CSIS Director Vignon told the Emergency Act Inquiry that, in quotes, he felt an obligation to clearly convey the services position that there did not exist a threat to the security of Canada. He went on to say, at no point did the protest constitute such a threat.

RCMP Commissioner Brenda Luckey stated in a letter to Cabinet, in quotes, I am of the view that we have not yet exhausted all available tools that are already available through the existing legislation. There are instances where charges could be laid under existing authorities for various criminal code offences occurring right now in the context of the protest. When asked specifically by then-Senator Vernon White, a former Ottawa Police Chief,

As a law enforcement agency with primary primacy for national security, did you ask the government or representatives for invocation of the emergency act? Commissioner Leckie replied in quotes. No, there was never question of requesting the emergencies act. Senator White went on in quotes. So you never asked for it. Do you know of any police leadership that specifically asked the government for the invocation? No, replied Nucky. In other words,

led by Minister Marco Mendicino, the government misled the public in stating several times that the act was invoked on the request of law enforcement. It was not. It was a political decision made in cabinet that the judge has ruled unconstitutional and unreasonable. And I suspect that the fact that it was not requested by law enforcement or CSIS because they didn't think it represented a threat that couldn't be handled by existing measures played a significant part in the judge's decision.

That's all the time we have this week. Next week, as I've been saying, looking forward to it,

Your chance to come and join us all at the World Outlook Conference. Time to get tickets by just going to Mike's Money Talks dot CA. Mike's Money Talks dot CA. And of course, as always, and every week I feel the same way. You go to Money Talks tweets or Michael Campbell's Money Talks on Facebook. And I can tell you, you're going to find dozens of stories that you don't see in the mainstream media that are part of important context of what's happening today in the world. And I'd encourage you to do that. Plus, I'm going to give you a fair warning.

I'm going to start reminding you and seeing if you want to make it for a fantastic 2024. I got a two-prong recipe. Come to the Outlook Conference and then join me in the Polar Plunge on March 2nd. Uh-oh, he's warned you. Go out and have a terrific week. ♪ music playing ♪