Speaking of the frigid temperatures the Stock Markets have been ice cold over the last month with what could be described as a Bear trap market. Knowing the present negative tone, the markets show days of upbeat moments, enticing investors to jump in or face the consequences of missing out (FOMO).  The tone at the end of 2021 was bearish due to the stance of Central Bankers. Their focus was to end stimulus and focus on controlling inflation. The course of action has always been to gradually raise interest rates to curb the excess money supply. With more money flooding into the marketplace, individuals can bid up commodities like housing, goods and services, outbid competitors creating inflation.

Consequently, increases in interest rates also have a negative effect on equity markets. The fact of the matter, it limits investors from access to credit facilities unless they are willing to pay more. It becomes a vicious circle of debt. If the money put toward the investment doesn’t materialize then the borrower has to continue paying the cost for the funds borrowed. Nothing is free in this world. If the investor comes to a point whereby he/she cannot meet their financial obligation then a liquidation sale of assets is probably their only hope if no one close to them (family) is willing to help.

A wise man, now the Principle of OwlMortgage.ca once mentioned to me how he got into the business of financing. It was a lesson taught by his Father.  An immigrant who arrived in this country with no education, unable to speak the language yet arrived with a passion and desire to work. Sacrificing everything by doing whatever it took to raise a family and provide the opportunities to educate his children, nothing was taken for granted! Then the day came that the lesson was spoken, “Son, there are more people in this world that need money, than have money”.  Today Vince Gaetano is not only one of the best in the Mortgage Industry, he is educating his clients at OwlMortgage.ca and the public at large. Catch his informative Podcasts by clicking on his page above. 

Many people are simply living above their means because they fail to;
1) Manage properly
2) Understand Interest Rates and contractual obligations
3) Lack of Risk Assessment in Investments

The cost of money is relevant to the times. For example, in the 1950s when waves of immigrants came to Canada or America from war-torn Nations, the wages were low but the value of money was whole, meaning a dollar was worth a dollar. Coinage was made from Precious Metals and struck in Silver while the monetary system was backed by Gold.

A home that cost $5000 in downtown Toronto in the 1950s is worth well over $1 million, if not more in today’s market. It is true that wages have increased but the true value of money has eroded. The value of money has been fractionalized and people working at the minimum wage level are basically at a subsistence level. It is not only the cost of living and inflation that continue to erode individuals’ quality of life, People are now forced to make choices on where they can live, the food that they eat and many more decisions affecting their wellbeing. The American Dream has become just that, a dream for many.  Most are just cast aside because they can’t afford to compete.

The week opened with Mfg Indexes slipping in both Canada and U.S.A. in January.  Canadian GDP came in +0.6% expected (0.3%) MoM in November. Down from the previous month (0.8%) in October. But a more telling indicator is ADP employment (Private Sector Employment) in America drops <301k> Vs expected <207k>, as the short-term Holiday hiring quickly dissipated. Further Eurozone Consumer Price Index surprises to the upside at 5.1% expected (4.4%) in January, previous (5.0%).  Troubling times for people that are strapped with no work and increasing expenses.