May 24 Episode
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Welcome to Money Talks. My name is Mike Campbell. You know, one of the big challenges that we've been chronicling for a number of years is the cost of living.

And one of the places that hurts the most, I think it's the place actually, is the cost of food. For example, you know, since January, the cost, overall cost of food has gone up around 18% more in some categories. That's why I'm so pleased to have with me the food professor, Dr. Sylvain Charlebois. He's Dalhousie University. I think he's the top guy in the country. I'll ask him, why did Canadian food prices, for example, go up so much in April and yet

like almost double what US did. So what gives there that and many other things. I've also got Ozzy Jurik on with me talking about one of the big dangers in the real estate market, and that is no bid. What happens if you come to sell your house or condo and it doesn't sell? We're having that situation in many places, but especially the small condo market in Toronto. I've also got Victor Dare. We're going to talk a little bit about the bond market. I'll talk with Mike Levy about inflation. So lots coming your way. But first,

I've had two analysts in the last couple of weeks who, by the way, I'm happy to hear they say they're regular listeners to Money Talks, but both said they'd heard a change of tone in me over the last couple of years. They said I'm kind of blunter, maybe harsher. And they're not the first to say that, and I think they're right. But I want to tell you the reason. You know, I've got three grandchildren. I got three adult children. They deserve a lot better than a health care system that's better known for its wait list than treatment.

Not long ago, my daughter took her four-year-old to the emergency room

waited six hours before giving up and going back home, just like about 1.3 million Canadians did last year. Friends of my son, well, they deserve a lot more than the stress, the struggle of trying to find an apartment that's even in the ballpark of affordability, at least back to the levels they were before the government allowed unlimited temporary visas. And while having no idea, by the way, how many people are actually coming to Canada, along with no planning for the housing,

And then you get the municipal governments jacking up development fees and levies, etc. And that puts affordability out of reach. You know, something like 30% of the price of a condo in Toronto is related to government, 25% in Vancouver.

As for a young person buying a home, well, forget about it in our major urban centers. It's literally not mathematically feasible to save for a down payment in the first place. I mean, given that as much as half their paycheck goes to some form of government, to the three levels, with what's left over gets eaten by the ever-increasing cost of living, especially, as I say, food prices. It's not a political debate, though. It's a mathematical fact.

The mask says young people can't get into the housing market without financial help from other sources.

You know, National Post's Tristan Hopper observes, you used to be able to safely ignore politics in this country and life would generally be the same. That's not the case anymore. Because as you know, whether you're paying attention or not, we don't have affordable homes or we got wait lists. We don't have family doctors. The explosion of anti-Semitism. But here's the thing. Along with over 40% of young people considering leaving the country, and it's all a direct result of government policy.

Since the federal budget last April, if you take the federal debt growth along with the liberal promises, you're jacking it up by $287 billion in the next four years. And I agree with that time, Finance Minister Freeland's assessment, which is actually hilarious, one of the funniest lines I heard, which was, she said it was irresponsible to

to continue to offload debt to our children. Well, I agree, but we're still doing it. As speaking of fairness, how about this one? Canadians love to talk about fairness.

is the fact that millennials contribute 20 to 40% more in income taxes toward baby boomer retirements than the boomers did for the retirees who came before them. Is that fair? Is it fair to young people that the average price to income ratio for buying a house is twice as high today than it was in the 70s and 80s and 90s?

You know, the cost of living, cost of taxation from three levels of government, significantly higher for young adults than it was for their parents and grandparents. As for health care, here's another stat.

This is a system that refuses to make meaningful change despite the fact that seniors over 65 will consume more in medical care, and hence tax dollars, than younger Canadians will in the first six and a half decades of their life. So yes, I think the time to stop beating around the bush or soft-peddling it is long since over. We should stop worrying about political sensibilities.

It's long since time we put and prioritize the younger generation, let alone the reality for the rest of us, top and center. Our children deserve it. Jewish Canadians under attack deserve it. And millions of Canadians struggling financially deserve it.

Just a reminder, we've got lots of great things coming up on our Special Olympic Auction. It starts in a couple of weeks. I'll give you more details. I'll just give you a little hint, though. I'll be bidding on a lot of these, actually. Dr. Ramona Penner, one week's golf and stay in the world-class Vendanta in Puerto Vallarta.

This is a fantastic facility, fantastic home. And you can bid on that and spend a week and play golf. But other things, local things, you can have Vancouver Whitecaps. You get a suite for one of their matches. You can go to Troy and

Thea Silvert's Bluegrass Farms, a great family vacation. I'm giving you just a hint of what's aboard there. I look forward to telling you more. And first, another big thank you to all of the Money Talk sponsors who've jumped in to help Special Olympics and others. Great stuff. As I tell you, it makes doing this program more than worthwhile when you see the kind of people who are both listening and supporting us.

You saw the inflation numbers going back. I guess it was on Tuesday. You know, again, Canada inflation up. But the point that jumped out at me was looking at the food inflation. I thought, what a fabulous week. We'd already booked Sylvain Charlebois. He's the director of the Dalhousie Agri-Food Analytics Lab. But they do tons of great work. They're the people who put out, you know, price projections, what's going on in the marketplace, etc. Sylvain, thanks for taking the time. And as I say, I got a great week to have you on because you've been busy.

You saw things ahead of time. And frankly, I was concerned for a long time, but numbers are telling me now that we had every right to be concerned, unfortunately. And when you get to adopt bad policy, when you follow bad policy, bad things happen to a country. And that's kind of what the story is right now with StatsCan's numbers.

Let's talk about the food in particular. One of the things I'm actually proud of is we never focused on this show. We didn't focus on inflation. We focused on stuff people couldn't avoid buying because as we both know, 700 goods, I'm not buying most of them, so I don't care. But food is number one. Gasoline, energy prices in general, we'd be going up with that. And shelter. But I want to talk about food because again, there you go, popping up. What was it? 3.8%?

In April compared to last April? So, Michael, if you go back two months, not six months, two months, our food inflation rate has tripled, almost tripled in two months while in the U.S. The food inflation rate is actually dropping despite all the craziness around the Trump administration and tariffs because typically you would think, well,

If the Americans are actually putting tariffs on anything coming into the U.S., surely you would see inflation as becoming a problem. It's not happening at all because they have a stronger economy. There's more population density. There's more competitiveness there in the U.S. They can adapt. You saw Walmart. Walmart's jab last week against Trump was very much a political jab. They can absorb inflation.

The tariff. Walmart is huge and effective and competitive, so they can actually absorb tariffs as much as anybody, really. So that's why I think that Donald Trump makes a good point. Doesn't mean that his decisions are good or sound, but Walmart is just one example of how America is well-tooled to deal with tariffs, while in Canada,

We're not, and that's why our food inflation rate has tripled in just two months.

I'll come back to that in a second. I want to flesh out more with the food inflation because people are sitting there nodding their head. I mean, I'm looking at stuff like you recorded it and you've put it on the food professor, but you got beef up 16.5%. And again, I've been shopping recently, you know, and I told my kids they weren't worth the speak. Can you afford beef anymore? Yeah, no, exactly. Well, what was it, 16.5% April to April? Yep.

Absolutely. And we were predicting it. You and I spoke about the Canada's food price report six months ago. Everything that's going on right now, we predicted six months ago. So it's not much of a surprise. The 3.8% is a bit of a shocker, but we were predicting an inflation rate of up to 5% by the end of the year. So we're basically on target still. And we knew that beef was going to be a big driver because there's just no supply out there, both in Canada and in the U.S.,

And it is beef that's leading the way, of course. But I mean, it's not like meat products are getting less expensive. I mean, my gosh, they're bumping pretty good, certainly above wages for Canadians.

There are no. So we're into May, close to June. People are thinking about their barbecues way more often now, despite the lousy weather we're getting across the country, really. But I think barbecue season will actually burn soon for sure. And when people go to the meat counter, they'll notice that there are very few

good deals now. Last year, pork was the way to go. But this year, unfortunately, pork has gone up in price. The industry in Canada has

right-sized itself because of what's going on with China. Beef is still expensive. And of course, poultry has been impacted by the avian flu. So we are seeing prices creeping up despite being a supply-managed commodity, of course, and despite being a very, very efficient way to turn fiber into protein, chicken is still a problem.

Well, I'm looking at eggs. Of course, that's supply management. I'll get to that in a second. But we're looking at fruit up 5%. By the way, the most expensive chicken in the country is B.C., by far, actually. So B.C., if you look at the price of eggs and chicken, B.C. is typically about 20% higher than the national average.

Now, obviously, as I say, food is the number one thing you can't avoid. You've got to spend it. People on the lower end of the income scale, which now I think is around half the Canadians, you know, are really feeling this pinch food-wise. But, you know, I can't help, and I know you've done a lot of work on this, but I've got to bring it back to supply management too because that's government-mandated higher costs. I mean, I've read recent reports where if we didn't have that, you know, prices would be significantly less if we're talking about milk or cheese and, you know, yogurt, that kind of thing.

So it is possible, okay, that prices would drop, but...

Honestly, Michael, I've been studying marketing boards for 25 years, and I'm not convinced that retail prices are the most important factor when it comes to dealing with supply management. I think it boils down to competitiveness and innovation, which would bring more choice to the market and, of course, more competition. And typically, you see more stable prices. I've always believed that by...

trying to reduce prices of retail is really the wrong reason to reform supply management. But do we need to change the system? Absolutely, because the biggest victims are the farmers themselves. They're disappearing. The regime itself is designed to manage a declining sector. It is a no-win situation for everyone, starting with farmers.

And just speaking of competition, I mean, I'm going back to the Competition Bureau report about two years ago off the top of my head. And I think the Bank of Canada did one too. The lack of competition in Canada is one of the reasons, at least for that discrepancy between the U.S. and Canada.

Yeah, well, you always need competition. I mean, let's face it, even if we get more players into the country, we always need more competition. But what's ironic right now, Michael, is that while we're waiting for...

Mr. Wonderful to come into Canada and bring more competition like Little Aldi. Well, guess what? Canadian grocers are going south to the U.S. TNT, oh my la la. They just opened one store in the U.S. and they're looking at opening a second store in the U.S. Why? Because market conditions are much more attractive in the U.S. The government's job is

is to make sure that Canada is an attractive place to invest. And that's not what we've seen the last 10 years. Well, I'm looking actually in the States this week, and I didn't see how it applies directly to groceries, but their new, you know, their Trump administration has promised to lower the...

And part of the bill introduced this week in Congress was to do exactly that and hearing some of their top economists from the administration saying, that's what we're sort of putting all our – oh, what a terrible cliche, eggs in the basket. No, exactly. And we are talking about some important issues, Michael, right now. I mean, the last three, four months, if there is one thing we should be thankful for is the fact that we've actually –

increased our pressure against provinces to liberate us from ourselves by eliminating interprovincial trade barriers. If there is one province that can gain a lot from eliminating barriers, it would be BC. And of course, us in the Atlantic. And so that actually would bring more competition to other parts of the country. We all know what the old out is. The old out is in the east, particularly with Ontario and Quebec.

We haven't heard much from Quebec yet because they often use the language as an issue not to trade with other provinces. But I'm hoping that there'll be more pressure put on Quebec to actually liberate the market. Just this week, we saw a survey in Quebec suggesting that the majority of Quebecers are now favorable to a pipeline. That's a big plus. That's a huge plus. So it means that something's going on here.

The other thing, back to the food prices, obviously why we compare them to the U.S., but our food price increases have been worse than many of the EU countries too. I mean, it's not like we're doing well in the G7. So I do get that question a lot. So yeah, 3.8%, so what? I mean, if everyone is going through the same thing, we're not special. Actually, this time we are.

In 2022, when Russia invaded Ukraine, we knew we were going to be dealing with a global phenomenon. That's exactly what happened. And Canada remained in the lower tier to mid-tier, basically, as a country with a high food inflation rate. We weren't the top. Right now, if you look at the G7 group of countries, we're basically number two after Japan. And Japan is always a bit of a

A different case because it's an island country, 80% of what they consume they import, so it's a bit different. We don't have any excuse to be almost twice as high as America. For example, we're higher than Germany, we're higher than Italy, we're higher than England, we're higher than France, we're higher than...

Most rich countries around the world right now, which means that this thing is policy-induced. So Ottawa shouldn't be looking beyond Ottawa to try to explain itself or try to explain they came public while something has gone awry, which is why I think Carney's decision to

to reduce tariffs or eliminate many of them affecting the food industry is a good decision. Now, the way it was made was hypocritical as far as I'm concerned because nobody knew about it, but they did do it on April 16th and that went into force on May 7th. So we are expecting better numbers for the month of May and June.

Again, because tariffs, of course, have been in the news. You've got Loblaws president saying they got a T to tell you how much of that price increase was tariffs. But again, just in case people aren't up to date, it was in the middle of the election campaign, as you've just pointed out, that the government signed an order to reduce or eliminate the tariffs, retaliatory tariffs, I'm saying, tariffs.

On April 16th. Yeah, a huge number of those things. And of course, it's quite painful. Well, we know now, I mean, on April 10th, if you remember, Prime Minister Carney paused his campaign to meet with Cabinet. Well, we know why now. Basically, he wanted to depart from the Trudeau dollar-for-dollar response strategy, which I thought was an awful one. And I suspect that Mr. Carney agreed with that.

And so he had this pickle to deal with. So I think what he basically did is let's actually reduce most of the tariffs without any concessions with the U.S., which is not necessarily something that the elbows up crowd want to hear. But he did it anyways, and he got champagne to actually say something in front of cameras. But during an election, Michael, people pay attention to leaders, not the ministers. So that's why nobody knew about it.

Yeah, and it wasn't convenient politically given they were riding the wave of the elbows up. You know, I mean, to me, it's that blatant what they were doing there. But we have removed some. That's good news. You know, it's been an education, though, for a lot of people. When he first said retaliatory tariffs or Trump said tariffs. Let's be tough. Let's respond. And to me, I mean, there are better ways to do this. And so we were basically hitting, hurting ourselves. And the numbers that came out today.

are showing exactly that. Well, and I think that's what the education was. Oh, you mean we pay retaliatory tariffs or Americans saying, oh, you mean we're the ones paying those tariffs? And it goes to Ottawa? Yeah. But they still have tariffs on some things. I'm just thinking the orange juice and something that people will notice is coffee. You know, that's still there.

I'm not sure the rationale to keep doing it. You know, I'm not sure. It's symbolic. It's symbolic. Terrorists have become very political. It's a political issue. So, so the approach is still quite political. I'm frankly, despite the fact that I didn't like the lack of transparency, I,

Prime Minister Carney made the right decision for Canadians. And that's the good thing. That's reassuring for the future. How kind of you. No, I'm just kidding. Well, I mean, you have to kind of, I mean, I'm an academic. No, no, you're right. I'm not routing for one party or another. I just look at logic. And some decisions that were made by Trudeau were good, but most of them were really bad.

And so, and Carney's approach is different. He's got a different education. He sees numbers very differently. I think he actually cares about the economy. Now, how he sees the economy and how he wants to frame it is a different ballgame. But right now, dealing with this tariff war, I think he's actually adopting the right approach.

Yeah. And I'm with you. I think I said, by the way, we said on the show and day one when we announced retaliatory tariffs, I said, that is not the right approach. It's not something I've seen after. It was so blatant. I know we're going to make you pay, President Trump. We're going to pay more. I thought the logic was a little weak on that. But the good news, as you say, we've reduced some. I wish they were all gone. But that.

It's too easy to say our challenges with food are all about the tariffs, and they're not. I mean, this is something you've been writing about eloquently for years and saying,

There's several things that we have. I'll give you an example that most people won't think of. It's our labeling costs, our packaging costs. Those kinds of things have an impact. Bureaucracy in general. If you want to basically use one term, they call it bureaucracy. In the U.S., of course, they're dealing with that, which is why...

I'm concerned about our future, our agri-food sector's future, how competitive it will be because, well, in the U.S., they're actually eliminating bureaucracy. They're not dealing with the carbon tax or any carbon pricing mechanism federally. While in Canada, we still have the carbon tax up the food chain, the industry carbon tax.

That's impacting our competitiveness and, of course, the bureaucracy. But like I said, we're starting to hear premiers looking into this, which is good news in general.

Well, I think it's like many of the things. They have to make it a goal. You know, one of the challenges, and this is a legitimate part of a political debate. I say they do too many things. They're trying too many things. And then, hence, too many things are done poorly. I'm not debating even the merits. I could do that in some instances. But it's very difficult to find something they're doing well, and they keep on expanding what they're doing. So I think that's a challenge. But I would love to have them say with meaning,

we want to get our food sector more competitive. I'm going to bring prices down with that competition and choice, et cetera. They've got to make it a goal because there's a little list that I know that if they, they have gone to you, by the way, you have testified in front of the comments committees, et cetera. Oh, many times, absolutely. And you kind of have to go back to last week when the cabinet was appointed

I don't know how you felt about the cabinet, but I came out of the experience being even more nervous. You saw similar faces. When it comes to ag, we saw a new face when we actually had a very competent ag minister in Cody Boyce. He's a liberal, but he's voted against his own parliament, his own party at times, on committees.

I thought he was the right person. Mr. Carney didn't appoint him, unfortunately. And two, transport is probably arguably the second most important portfolio for the agri-food sector. And who's in charge? Christopher Inland. And her track record is not great when it comes to being part of the cabinet.

Our goofy last week was, it was just an interesting thing, whether it was a huge amount of the public voting or Mr. Carney appointing cabinet, track record didn't seem to be the priority consideration. You know, I mean, I'm not even sure where to go with that still. You know, we're not talking about track record, you know, the facts, the research, et cetera. I'm not sure what the conversation is, but

Yeah, I think that's one of the things he's going to have to overcome if he wants confidence to be restored. Because Chrystia Freeland, as you say, now taking over an important aspect of the agricultural market and her track record in finance wasn't very good. It was awful.

It was awful. Yeah, I think that's a better way of putting it. And we can't really have that for the agri-food sector. We need someone that is authoritative, that doesn't really just talk the talk, but actually does something about things that needs to be done, especially for BC. I mean, logistics are so important for this province. We experienced that many, many times over the years.

Well, we'll have to see. So let me finish with this. I know you've got a huge day ahead of you, and we appreciate so much of finding time for us.

If you were going to look for a good sign in the agricultural sphere coming from government policy, and they're not going to sort of be able to do it all in five minutes, we'd like to hear about it. But just if you saw, okay, that's a really good sign. Like I agree with you, interprovincial trade barriers have been a bugaboo for years. I mean, they're costing the economy a ton. But I'm saying beyond that, or maybe that is the one that they have to make progress when it comes to agricultural products when they talk interprovincial trade.

Yeah, I will be looking for two things. One, the government's commitment to processing in particular. And by the way, Michael,

The Liberal Party was the only party that actually promised something about food processing in its platform. So it's $200 million. It's not much. It's not much, but it was there. So I'm looking for that commitment, if they're going to deliver on that. And two, in their platform also, they've promised to look at all policy issues through an economic lens. CFIA, Health Canada, anything that has to do with agri-food, it has to.

It needs to be a business case for everything they do. So I'm going to be looking for that. They've promised it, and I hope to deliver on it.

Yeah, I'm with you. I hope they do. Don't ask me to bet. The platform looked nice. Yeah. Don't ask me to bet a nickel. On execution, sometimes, well, there's something lacking, unfortunately. Well, I'm going to call on you again. It's always terrific. I know you got to go, but it's terrific to get a chance to talk with you. And people can find you at The Food Professor on X, on X, and check it out.

tons of great data that I get. I check on it every day to see, okay, is there something else? You do. Thank you for that. Yeah. No, great stuff. The food professor. Sylvain, thanks for finding time. My pleasure. Time now for the quote of the week. Well, as the evidence mounts, I think it's become clear, at least to an increasing number of people, that the main theme of the federal election campaign, i.e. stand up slash talk tough to Donald Trump, was a charade.

The elbows up mantra was exposed as lip service by Mark Carney when it was discovered that as early as April 10th, he called the cabinet together. And on April, what was it, 17th, they gave the order to remove billions of dollars in retaliatory tariffs. By the way, I'm glad they did that, but they never told us about it.

No surprise, given that would undermine Mark Carney's most effective campaign message of taking on Donald Trump. I mean, 49% of voters over 55 said it was their priority when it came to the election. But as soon as the election was over, well, Prime Minister Carney dramatically changed his tune.

You know, now we had a transcendental presidency. But remember when he said this, the old relationship with the U.S. is over, specifically citing security ties is gone. Well, now he wants to partner with the U.S. on the Golden Dome Missile Defense Shield. I mean, this major about face. Now, it's interesting here, though. It infuriates some Canadians. I think, suspect mostly those are the ones who oppose the Liberals. And it's ignored by others.

Which brings me to the quote of the week by the astrophysicist, cosmologist, and author Carl Sagan. In quotes, one of the saddest lessons of history is this. If we've been bamboozled long enough, we tend to reject any evidence of the bamboozle. We're no longer interested in finding out the truth. The bamboozle has captured us. It's simply too painful to acknowledge, even to ourselves, that we've been taken. End of quote.

Well, there's lots to reflect on there. Stay with us. I still got a lot of good stuff. I've got Aussie Jerk. We got to talk about this liquidity crisis. I got Victor Adair and the gyrations in the market. And of course, I've got a goofy award.

Well, there's so much going on every week, but one aspect I want to tap on is that there was the inflation numbers coming out for April. They rose 1.7% year over year, but there's a lot more to it. And I'm going to bring Michael Levy in to talk about it. Yeah, Mike, we got 1.7. That's the rate of which prices grew, but there's a couple of mitigating circumstances there.

Yeah, Mike, that price is down sharply from the 2.3% in March. But that slowdown in the growth or the rate of change of inflation is attributed to the fact that the drop in energy prices with the removal of the consumer carbon tax. So let's take that away for a minute and let's take a look where it hits everybody's pocketbook today.

And food, again, is more expensive, Mike, especially some areas of the food market. And that's hitting consumers and hitting them hard. Yeah, I'll come back to just the rate of inflation. Just keep in mind, they remove the carbon tax. You do get that bump down, but it's not going to change inflation over time because that's the rate of change. So let's say we get that one time hit.

Well, it doesn't change, you know, and it's going to have actually an upward pressure when we compare year over year next year at this time. You know, the impact is a one month impact. But overall, as we say, we look at the pricing there. And, yeah, as we were talking with Sylvain Charbois, I mean, what does jump out at us is the food prices. Well, Sylvain always nails it when it comes to food prices. Mike, he's just such a valuable resource.

And let me just give you some numbers after we take a look at the fact that the rate of inflation slowed. Year-over-year acceleration in April, fresh vegetables up 3.7%. Fresh and frozen beef, Mike, up 16.2%. That's a monthly increase. Coffee, 13.5%. Confectionery, 8.5%.

restaurant prices increasing 3.6% yearly after a 3.2% gain in March. Well, I'm throwing a lot of numbers out there, Mike. The fact is the numbers are important because every time you go into your pocket and pull out your wallet, you're giving more and

and getting less. And just a reminder, those are yearly comparisons, compared to April last year. So that 16.2% in fresh and frozen beef. By the way, I thought frozen beef, we don't eat a lot of beef in our house. It's got too expensive, but I'm certainly not opting for frozen when I do. You know, can you give me a beef-sicle? But, you know. Yeah.

The other number that's very important is when you look at the rise in food prices since January. Well, you're talking in the neighborhood of 18%. As you're pointing out, Mike, it's what we pay is what people care about. No one ever comes up and says, gee, that rate of inflation is lower. I sure feel good about paying $25 for something. No, it's the price. And food is the number one item that people can't avoid. They can make switches within food.

but they can't avoid buying food. So that's why I think it's the most prominent number we should be looking at, which we do. And Mike, I mentioned restaurant prices. And before I came to do my piece with Money Talks, I went and got a muffin

And a latte, a muffin and a latte at the coffee shop next door to us. $11.50. I mean, that impact. Yes, I can afford $11.50. But the fact is, everybody looking to go out and eat, whether it's just for a cup of coffee or anything else, costs just a heck of a lot more. And my point out one other thing, the Bank of Canada,

There was thinking that they were going to start to lower the bank rate again. Well, what's going on with inflation? I think that just negates it. My opinion, they cannot lower the

the bank rate with the difference in the rate of inflation going up every month. Yeah. And they'll look inside that number, that 1.6. They're not going to be fooled by looking at that and saying, oh, things have changed. No, they understand exactly why we had at 1.7 it was, you know, for that period. Two other things I want to point out though, Mike, when we look at the food prices,

If you get somebody who's very well-to-do, the percentage of their income that goes to food is relatively small. You get somebody at the lower end of the income scale, like that, you know, whatever that is, and we could define it, but they're going to spend a higher percentage of

of their income on food. So it's a much more pressing issue. That's why we look at food, shelter and gasoline. It's hard to avoid those things, you know, in your cost of living. And again, you made that distinction right away, cost of living versus inflation. I think it's an important one. The thing is, it's getting more expensive to live in Canada.

And just to close off quickly, Mike, with a couple of things. TD's chief economist said Tuesday of this week that Canada is entering a recession and will soon bleed another 100,000 jobs.

That's number one. And I was looking down south in the United States and the debt and deficits they're racking up. If the U.S. continues to spend and rack up debt, interest alone on their debt will move up to over $1 trillion a year.

One trillion dollars. I think the problem is becoming that the numbers mean nothing to us, like a trillion, billion, hundred million. You know, I just noticed that in the public discussion, you know, and that, of course, is a very serious number with implications. And we'll be able to do that another time on Money Talks. But for now, Mike, let me just say thanks. Have a great week. You too, Mike. Thank you.

Time now for the shocking stat of the week. You know, I have to admit that I feel like I'm just talking to myself when I start warning about the fragility of the credit markets. Certainly no politician wants to acknowledge it. Neither does a simplistic mantra that the debt is sustainable. I mean, that caveat is in big, bold red letters. It's sustainable as long as investors are willing to finance our debt. As we've been correctly saying, and it was since September 16th, 2019, that the debt

problems with sovereign debt are going to manifest in the credit markets. So that's where the focus should be. Now, if you're a regular listener, I appreciate that I've been talking about this since that time in September 2019, when the overnight lending market froze up. Nobody wanted to lend. And in order to attract investors, interest rates went up about 500%. That's right, 500%, which forced the Federal Reserve to step in, buy the bonds at a lower rate.

So since that time, by the way, we've seen the same kind of central bank action in the U.S. many times in Europe and the U.K.

The point I continue to try and make is how vulnerable the credit markets are to an interest rate spike and shock. And you should at least prepare, at least understand that risk, which brings me to the shocking stat of the week. Again, it's barely rated a mention, if any, but I want you to consider in Japan, the world's third largest economy, its 30-year government bonds, their yield has surged to the highest level in history, 3.2%.

Now, for decades, Japan was known for its long-term low interest rates, but that's now done. Now they're dealing with high inflation, a shifting policy outlook, a whopping 260% debt-to-GDP ratio. I mean, this week, Japan's Prime Minister, Shiba, called the situation worse than Greece.

Think of the losses, though, that somebody owns a bond. And you've got to keep in mind, if they had bought it just a few years ago, like, say, 2016, the yield on that 30-year bond was 0.15%. It's 21 times higher now, 3.2%. The losses on the books are huge. What if you were renewing some sort of bond at that level? You're getting killed.

And one aspect that could cause huge waves in the currency and interest rate market is that Japan is the largest foreign holder of U.S. debt. They got about $1.1 trillion. What if the situation worsens and Japan's forced to unload a huge amount of U.S. treasuries? Well, my gosh, that would put U.S. interest rates higher, the U.S. dollar lower, and the big threat would be some sort of contagion.

If it forced others to down, you know, to offload their own U.S. treasuries. I mean, obviously, we're going to keep a close eye on this, but it's one of those things. Come on. Their interest rates went up 20 times, 21 times from the mid-teens to right now. Just something we should be aware of. That's the world we're living in. And I say ignore it at your peril like our politicians do.

Arguably, the biggest danger to your standard of living is lack of liquidity in your assets. Now, if you're lucky enough to have assets, I may want to acknowledge about 50% of Canadians are suffering all the way through at this point. They didn't get the benefit from low interest rates or the Bank of Canada guaranteeing mortgages effectively. So that I want to acknowledge. But I

People who have assets, I think the biggest danger is lack of liquidity. I talked about it with the shocking stat with the Bank of Japan. I mean, the bonds that those people hold are basically worthless or is it 10 cents in the dollar or something like that? Well, it's also happening in the real estate market. And it's something that Ozzy Jurek has been talking about on ozbuzz.ca, talking with our Money Talks listeners.

I want to bring him in now, Ozzy, you know, you, you, first of all, you were talking about the lack of, you couldn't sell in the Toronto condo market. Let me put it that way, you know, and well, so you think you got money, but you can't sell your asset. Yeah.

Yeah, and the thing is, it's sort of become a worldwide thing. And that's where your point about liquidity in generally may be in a crisis. Because if we look at, first of all, we have $950 billion in commercial mortgages coming due in 2025. Even in places like Germany, loans for office buildings have dropped by 26% in the first quarter. And U.S. banks have increased their loan loss reserves and their foreclosures.

focusing only on clients with strong fundamentals. So it's lost a lot of less money that they have to lend. So they want to make sure it is absolutely safe. Yeah. And again, if you want to come to sell something, you say, okay, I need to liquidate this for some whatever reason. You know, obviously we've seen the drop in sales in the Canadian market and the rise in listings, but it's especially, it seems to be a special problem when you're in the big cities like Vancouver and Toronto, you can't sell your unit.

No question. And again, staying with the commercial market in Canada, according to Altus Group, in the first quarter, we lost about 31% decline in sales over the first quarter of 2023. And the residential market, US mortgage rates are now over 7%. There's a real affordability issues. And

And the IMF said Canada has the highest risk of mortgage defaults among advanced economies. Now, what else can there be that is pressuring the buyer currently? That last point is so important, though. As we lose perspective sometimes, we've been in a hyper-politicized environment for a number of years, but obviously coming out of the election campaign, these things aren't discussed. But when the IMF says, you know what, you've got the highest risk of mortgage defaults among advanced countries. I mean, it's a simple thing.

If your debt load doesn't go down, like the amount I borrowed a million bucks, it doesn't go down. But the value of my asset covering it can't. I think that's one of the reasons that the federal government is saying we can't have housing prices go down. I mean, the debt problem that may cause, that's all I'm bringing to people's attention. And then you say, well, I'll be forced to sell. And I'm saying, good luck with that.

Yeah, there's no doubt about it that we've slowed down and we hold in my newsletter since 2022. We projected, you know, what we sold like 15,000 units in 2020. And now we're selling 7,000, say, on single family homes. And it's not just tariffs. It's everybody says it's Trump's fault. We've been going down for five years. And there's all sorts of reasons. You can blame government or whatever. The fact is right now we have an increase in listings, a decrease in sales. There's pressure on it, you know, on the.

on the May 31st Key Marketing is offering one of its clients HiRise that is already finished.

And they're offering a 25% discount on it. That brings it to around $700-ish a square foot. Mike, this is really a good price. And they're going to be good deals. And people say, oh, this is the end of the world. No. We've had a leaky condo crisis. We had a dot-com bubble. We had a 2008 crisis. We will muddle through. But the thing is right now, as we've been saying, is it's a tough world out there. Definitely.

maybe you won't be able to get a mortgage if you don't. So take a look around as a buyer, you have all the power. Yeah, and again, you stand back and there's both sides of that equation, as you say, and we've said on this program, this could create some real buying opportunities for people. I wouldn't

invite them to be too worried about it. If you've been waiting to have a chance, at least examine the market, at least see what's out there. And as Ozzy says on ozbuzz.ca and on YouTube, make a bet, you know, like make an offer out there. But I want to come back to the financial challenge on the bigger scale. Individually, you might not be able to sell at least at a price that you're willing to live with.

But it does create a financial challenge. And again, I'm just reminding people because we don't talk about this. We didn't talk about it in the election. Liquidity can be a huge problem. It's manifested in the UK, manifested, as I said earlier, manifested September 19th, 2019, September 16th, in the repo market. I'm just saying, understand.

That's why, by the way, Ozzy, you know, and I know you can do very short term. You go, OK, I'll do a variable and then lock in, you know, at some point. But I'm not worried when people lock in at rates. You know, you can still find the odd one at 3.9 for five years. I'm not upset that they didn't get 3.7 because the real danger is all of a sudden a spike for some other reasons.

That is so true. You know, people seem to remember that 2% mortgage. You're never going to get it back. In fact, over 50 years to get under 5%, only out of 50 years, we only did it 42 times. We were over 5%. So a good rate. And we're talking about your home, not the investor. I want to be in my house. I want to sleep. I don't want to get surprised.

3.9%, that's a good rate. If you want to stay there, if you're going to move, well, of course not, you know, then get short term. I want to send a big message to our politicians and our housing activists here. You know, with that assumption that real estate always goes up, hence we can tax it, even if you haven't sold it, you know, that kind of thing. We're in an environment where that's proven to be wrong. We've had several others in the past. Yeah, over time, it's gone up. I think it's a reflection of the declining purchasing power, but they've gone up.

I'm just reminding people real estate does go both ways. Not the normal individual. It's those people who want to increase taxes on real estate. Hey, remember, it goes both ways. Yeah, and they should also remember that politicians and diapers must be changed often and for the same reason. Yeah.

Ozzy, good stuff. I look forward to seeing your next posting on YouTube. I just type in Ozzy Jerk and I can find them there on specific subjects, many of interest to me. But also sign up for OzBuzz, ozbuzz.ca. Get the weekly notes that give you the information, some take by Ozzy, ozbuzz.ca. Ozzy, go out and have a great weekend. You too, Mike, and all your listeners. It's sunny. Ha, ha, ha. Ha, ha, ha.

You know, if you talk to traders around North America or investment analysts, et cetera, the bond market is front and center on their screen because there's so much action going on. I want to bring Victor Adair in with me, VictorAdair.ca. Victor, obviously you're watching this like a hawk, too. I think one of the things that confuses people is that it looks like, you know, pretty much consensus view that the economies are slowing down.

Well, normally rates fall down with that, but they didn't is my point, as I was alluding to earlier to the Japanese bonds. We'll get to that in a moment. But, you know, just that concept is, wait a second, I thought weak economy, you got lower interest rates. Well, that's not how the bond market reacted.

Mike, you know, so many times I talk about correlations on this on this show. And when you have a correlation that works, like you're just saying, bond prices will go up if the economy looks like it's slowing. If that doesn't happen, then you say, why is that? You know, what's changed that correlation? And I think what's changed that is people are getting.

They're not just getting nervous. They're demanding to be paid more for taking the risk of buying a bond. Well,

Well, what's the risk in buying a bond? Well, one risk is that you don't get your money back. Well, with the government, they can just print it. So yeah, you'll get your money back. But basically the risk is your money won't be worth as much in the future as it is now. So you want to be compensated for that. So we're seeing particularly at the long end of the bond market. In other words, you know, you can buy a four-year bond, you can buy a 40-year bond. At the long end, we're seeing that the premium that investors are demanding is really growing.

Guys, look at that U.S. 30-year bond. I mean, again, it's back to levels they haven't seen in a couple of years, basically. Well, actually, it's more than that. The 30-year bond, we hit a high of about 5.15% this week. That's the highest since October of 23. But really, Mike?

That's the highest since 2007 because we had a couple of weeks there in October 23 and Janet Yellen came in and pulled back some of the size of the issuance and we came off of that. But yeah, we are essentially at these 18-year highs in terms of bond yields right now in the state, the long end of the market.

What jumps out at me, though, is that anybody who bought bonds at lower rates, and we had lots of those sold in 2020, 2021, 2022, et cetera, they're in a lost position if they have to sell. I mean, who the heck wants a, let's say I got it a few years ago, a 3% bond, and now I could get a 5% bond. Well, I'm not buying your 3% or without a huge discount.

Yeah, we had that blow up with a Silicon Valley bank. Remember, there was March of a couple of years ago. One of the reasons for the blow up is they were getting such a run on assets. They had to sell some of their bonds and the bonds were destroyed.

Trading at well less than face. Now, the government came in with a program where they said for those kind of people, they could carry the bonds. They would lend them enough money so that they could carry those bonds at face value. But yeah, when you buy a bond and interest rates are, say, 4% and you pay $100 for it,

If interest rates go to 6%, you know, your bonds probably worth 75 instead of a hundred. So yeah, we saw that also with the UK pension fund. I can't remember. I think it was October of 222, but their central bank came in with about 60 billion pounds to store up that or shore up that market. But you,

You mentioned more, we did in our shocking stat, we talked about the Bank of Japan, the 30-year bond rate there going from, you know, fractional, fractional, you know, throughout the last decade, all of a sudden to 3.1, 3.2. I can't imagine the losses on the books. Now, you have to sell them to take the loss, otherwise you wait till maturity, but the losses on the books must have them quaking in their boots.

Well, for years and years and years, the Bank of Japan had what they called yield curve control. The Bank of Japan now owns about half of all the Japanese bonds because they bought all those bonds to keep the prices from going down. And they finally backed away from doing that as inflation is rising there and they're letting the market find its own level again.

But, Mike, I'm telling you, in the back of my mind, the thing I'm really wondering about is this idea of sell America.

where we've got the U.S. dollar this week, where basically U.S. dollar index is at a three-year low. I mean, even the Canadian dollar is rallying. You know, things are so bad. The Treasury Secretary of the United States came out at the end of this week and said, the U.S. dollar is not falling. It's just those other currencies are going up. And I thought, oh, my God, really? You're saying it that way? But that's part of what's happening. We've had...

On this program, I've said so many times over the years that capital comes to America for safety and opportunity. And that actually becomes a virtuous circle. And the United States became a magnet for capital. And as that money rolled in, it boosted the asset values of American things, particularly American stocks. So they got so much more valuable than the rest of the world that maybe America was due for

a bit of a correction. And hence, we've got the U.S. dollar down. We've got bond prices down and we've got some tremors in the stock market. And of course, you know, here at the end of this week, we've got gold. Looks like an all-time high weekly close.

Which is music to the ears of every Money Talks listeners who took our advice. Vic, as I say, it's a busy week, lots of things happening, but I'm glad you've pointed on this one because, as I say, I think the bond market's where a lot of the action is, you know, to date. And as I say, you know, the old thing, you know, gentlemen prefer bonds. I'm not so sure that's going to be the case going forward.

Well, yeah, it's a great market to watch. I love trading the bond market. And I think actually outside of currencies, if I only could do one thing, I'd trade the bond market. Well, I'm glad you're sharing it with us, Vic. Go out and have a great week. Thanks, Mike. VictorAdair.ca. Check him out. They got the trading desk notes there, but the charts also. He'll be writing up. He'll be talking bonds this week. I didn't even have to ask Victor if he was doing that. I'm pretty sure he will be. He'll be doing that. So stay with us. I got a goofy award for you.

Now for this week's Goofy Award. I'm going to start with two quotes that sum up the Goofy perfectly, I think. The first comes from Nobel Prize winner Maria Ressa. Without facts, you can't have truth. Without truth, you can't have trust. And without trust, you can't have democracy. Her point? Disinformation on social media isn't harmless noise. It's corrosive. And when misinformation becomes the dominant currency in political discourse, well, democracy itself is in jeopardy.

Second quote from former UN Secretary General Kofi Annan. When leaders peddle falsehood and half-truths, they erode trust in institutions and sow division among people, threatening the very foundation of democratic societies. This stuff isn't theoretical, by the way. It's actually happening right now from Sri Lanka to Germany, Bolivia to Turkey. Trust in political leaders and institutions is collapsing in real time.

And to that, the disinformation campaigns waged by state actors like China, Russia, Iran, and combine it with AI-driven amplification, I think the risks are only growing. But today's focus isn't on foreign interference. It's on politicians and partisans at home spreading misinformation,

with near total impunity. And the goofy part? We tolerate it. We tolerate lower standards in politics than we would ever accept in business or our personal lives. I mean, seriously, who wants to work with people who lie and manipulate for personal gain? So why do we accept it in politics? Why do supporters defend it? Why do we let partisanship override basic principles of honesty?

I don't have an answer to that, but as Maria Ressa and Kofi Annan mourn, I know the price. The price is nothing short of public trust in our institutions, and it's collapsing. You know, every hour on X,

You can find partisans spreading baseless claims designed to discredit their rivals and sow distrust. Come on, during the election, a single photo of Mark Carney with Ghislaine Maxwell sparked a wild conspiracy theories linking him to Epstein. With zero evidence, though. This week, liberal partisans, not MPs, I want to be clear. The partisans claim Pierre Polyev racked up $9 million in MP expenses, including travel and hospitality.

Well, it's completely false. You know, Polyev's actual MP expenses in 23-24 were $241,000, zero for travel, zero for hospitality. And yet, they've spread that misinformation, despite the fact that the numbers are publicly available through the House of Commons Proactive Disclosure Portal.

Critics misleadingly lump in the leader of the opposition's official budget that covers 118 MPs, staff, research operations as if it was his personal tab. That's not an error. That's deception. The point is, the goal is to undermine confidence in the individual, which ultimately leads to erosion of confidence in the system itself. Look at the increasing number of people who question election results.

You know, in his 2004 book, The Post-Truth Era, Dishonesty and Deception in Contemporary Life, Ralph Keyes examines how lying and distortion had become normalized in public discourse. He states, we live in a post-truth era, warning about the erosion of trust in facts, institutions, and even honesty itself. The goofy part is that in politics, most people only seem to care when the lies come from the other party.

Hey, that's all the time we have this week. And a reminder, I'll be putting more stuff on the Special Olympics auction coming up. If you can help, please go to mikesmoneytalks.ca. And while you're there, sign on to 5 Minutes with Mike's. Lots of great stuff to talk about these days. Really pleased. We've got tens of thousands of people joining us on that 5 Minutes with Mike. Hope to see you there. We'll fill you in about three times a week. In the meantime, I hope you have a terrific week.

Bye.