Bank of Japan Rate Hike Sends Financial Markets into a Panic - The Loonie Hour Episode 148

The Yen carry trade blows up after BoJ announces surprise rate hike. Markets call for immediate rate cuts. AirBnb data in Canada suggests governments are misguided. Temporary foreign workers surge, pushing youth unemployment higher.
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[@AngelaPecoraro-v9z]

This year's problems will certainly be more difficult. Looking back, I realized that I was so preoccupied with my portfolio that I made bad financial mistakes throughout the previous year. I had to decide between boosting my investments and buying a house. After deciding to sell my investments, I learned that the home I had purchased needed more maintenance than I had anticipated. Trying to figure out how much longer I can tolerate this is becoming more difficult

[@TylerWilliams-s4b]

Take it easy, we've all made mistakes.

[@JosephBailey-m5s]

To diversify your portfolio, invest in companies with observable cash flows. I've earned money in over 500 different markets in the previous 10 months since I employed a planner to help me strengthen my portfolio at the end of 2023. If 2023 teaches us anything, it's that good fortune is temporary. Even in good times, we should put in more effort to prepare for the worst case scenario.

[@JanetLarson-h8g]

Okay how can one locate a reputable financial planner? I wouldn't mind searching the professional who served you. I'll be retiring in two years and may require some assistance managing my considerably larger assets. Don't want to take chances.

[@JosephBailey-m5s]

Lina Dineikiene is the licensed FA I use. Just google the name. You’d find necessary details to work with and set up an appointment. To be honest, I almost didn't buy the idea of letting someone handle growing my finance, but so glad I did.

[@JanetLarson-h8g]

Thanks for the lead, just searched Lina by her full name and easily spotted her profile, very professional.. already sent her an email and hoping she gets back to me soon.

[@larrymorley2579]

Once 'local workers' become displaced from low wage jobs it's hard to get them back simply by raising wages. There's also a social component to this. If entire construction crews are speaking their own foreign language, local workers get frozen out because they may no longer be able to communicate in the new job environment.

[@traceyshaw1799]

Hi guys. My husband and I have been watching regularly for about a year now and we really love what you have going on. I’m commenting to say that we agree completely with Rich’s so-called “rant”. Before our retirement, we lived in a small town outside Edmonton. Job vacancies were in surplus so unskilled workers had their pick which forced companies to raise wages. In fact, Tim Hortons restaurants were offering up to $20/hr which was a huge benefit for students, etc. Bringing in vast numbers of unskilled workers just allowed companies to hire those who were willing to work for less.

[@edubmf]

Canada is a slave ship

[@KY-jb4vd]

Totally agree. And now my 21 yo son has to work for $20 /hr as a labourer for a masonry company. Very hard physical labour with rarely a break in 9 hours. And wonders when he will be able to afford to move out and get his own place. Times are not what they were.. but the very least we can do is turn off the taps on the 'temporary' workers.

[@Chris-se3nc]

Temporary workers are deflationary. We want cheaper things right?

[@traceyshaw1799]

⁠@@Chris-se3ncI think in the interest of brevity, I didn’t complete my original thought. In my example, Tim Horton’s raised the wage they were willing to pay people to $20/hr. With this action, they temporarily improved working conditions by enticing enough people to perform the myriad tasks associated with the job. This wasn’t their only option though. They could have invested capital and automated many of the tasks thereby reducing the number of employees needed. Regardless the method chosen, Tim Horton’s increased expense translates to inflation which potentially holds true for the opposite. Increasing the volume of workers is potentially deflationary. I would argue however, that to improve the health of our economy, we need a healthy medium. We need just enough workers to do the jobs available and we need healthy competition to ensure the cost of our goods (such as a cup of coffee) don’t escalate to high too quickly. Some immigration is good and healthy for our economy; it’s the fact that the tap was turned full on before we were made ready that I have issue with. Vast increases to immigration in order to address the need for workers decreased inflationary pressure in one area (a cup of coffee in this case) but increased inflationary pressure in orders (housing, education, medical, etc). I can’t help but feel that had the issue been examined through a wide angle lens a more holistic fix could have been found.

[@jimmybaggs5342]

A truck driver in Canada now makes half of what their American counterpart does. The reason for this is that the TFWs driving trucks in Canada are not even trying to earn enough to support their families, they are just trying to stay in the country.

[@donm2067]

And boy are they literally dying trying to do it. Poor bastards

[@markhoffman]

I’d simply drive my truck from Canada into the USA and never come back.

[@TheWoodfordreserve]

@@markhoffman LOL Unfortunately for Canadians (but fortunately for the scumbags in parliament) - the USA has very strict immigration standards, 10x harder than Canada even though they have 10% of the social services.... go figure.

[@jimmybaggs5342]

Unfortunately Canadians are not allowed to pick up and deliver within the United States, because that country actually cares about protecting wages.

[@DiabeticDawg]

Happy birthday Rich!

[@chrisT16161]

Happy birthday Rich!🎂

[@TooBadToBeAway1]

A wonderful show. So glad the three of you are informing Canadians about relevant issues on the economy.

[@LeslieMiletich]

I really enjoy your humour. lol I learn so much from you all. Thank you.

[@Whistlerskiinskiout]

Excellent explanation about the BoJ and what happened in the markets. This is exactly why I follow your show each week, to understand the bigger financial picture. Great episode. Thanks.

[@sherdonforbes3480]

That cad peso is coming

[@Davidtbv]

I like to think of it as an ice peso

[@ethimself5064]

Na, US Rates will come down later this year and or next year

[@user-vi8ci2bi6b]

​@@ethimself5064 Ok then, Canadian peso measured against US peso.

[@diogobarreira3034]

​@@user-vi8ci2bi6bmeasured against what in the world. Us peso still better than every currency in the world.

[@TheWoodfordreserve]

Our peso _is_ here, large retailers like Adidas, Gap, etc actually sell their items for lower amounts in Canada vs the USA (once you factor FX), similar to the way they price items lower in Mexico. We are officially "Snow Mexicans.

[@StephenRoss-po1rp]

Have a fantastic Birthday Rich Peace and love from Vancouver Island

[@Macinro191]

This is the Best Canadian content. Anywhere

[@kevink4495]

Finally a normal episode

[@AmolGharat]

Asking for a typical Canadian: So Keith given all this chaos in financial markets is it a good time to buy a couple pre-construction condos in Toronto 😅

[@CristianEnacheRealtor]

Debate is good. Very important brainstorm on this episode again.

[@o362436o]

HBD Rich! Something to consider mentioning is yield curve control, but not by the Fed but rather the US treasury and if they are purposely trying to bring 5 and 10yr rates down by biasing their debt issuance more toward short term. Very convenient thing to do ahead of an election.

[@EatRadioWire]

I appreciated your revisiting the airbnb conversation. I still think its a good policy. Bringing any housing back to market is better than none at all (and the very real possibility of the problem getting worse).

[@marcoalbanese8221]

Happy Birthday Rich!! Have a great weekend guys and all watching

[@DarR1299]

We're always referring to the 5 year GoC bond yields for hedging a 5 year mortgages but that's not quite correct as the bank's hedging group don't match terms, they match duration. The duration on a 5 year mortgage can be significantly less than a 5 year bond because the mortgage's principal payments and the option adjusted duration due to the put option known as the pre-payment privilege which the borrower has. Consequently, the right bond to hedge would be an off-the-run bond somewhere between 3 and 5 years.

[@soniab1606]

Happy Belated Rich!

[@gordfowler3626]

Hi Fellas Great show, my comment on AirB&B ban in BC is a compete scapegoat by the BC NDP...the ban has severely damaged the Okanagan tourism market, business in the Okanagan depend largely on 4 months of summer tourism, many will be closing there doors if this ban continues.

[@DiabeticDawg]

Supposedly the carry trade is worth about 500 billion in total value. 200 billion has been unwound.

[@reefermadnesss]

Sounds ideal. Likely complete bullshit though. Everyone stay calm, it's all fine. Perfect really.

[@alexandrejudkowicz6819]

Happy birthday Rich! Feliz aniversário!!!

[@johnnyboyvan]

The Recessions are here!! Unemployment is awful and cost of living is higher every week...sucks!! 😮 Happy birthday, Rich. Sadly, Rich doesn't seem to be 100 percent 😕.

[@quantifiablyqorrect2905]

Happy belated bday Rich! Funny how delicate the markets are from japan changing rates, it was a 150% increase though so maybe it was too much too soon, even if .25% is a joke still

[@mleghari786]

happy birthday Rich! 🎂🥳🎉

[@smartandrich1301]

in june 2002 cad was 1.6 to 1 usd. This time is worse. I speculate 1.9 almost 2 cad per 1 usd

[@thanks4that261]

Nah. I'll take the under.

[@assadsathian3368]

Happy birthday Rich 🎉

[@DanMaxe24]

You are great guys.👌🏼I don’t get who in their right mind would post bad comments here. And, Steve, we will have that long squeeze in GTA condo market. It always ends like this in this type of environment.

[@fromabove9774]

Oh Rich and his birthday slip, give the man a lemon loaf 🎉

[@maxamillion8384]

OK FRIENDS BASIC MATH LESSON HERE PIONT TWO FIVE% DIVIDED BY POINT ONE% EQUALS TWO HUNDRED FIFTY PERCENT INCREASE IN THE COST OF BORROWING

[@TheGamingAbyss]

Holy fuck I think my aunt got pulled into one of those RE investment corps that promised her like 15% a year or something. I won't probe her on it but she essentially fell into it because of what her other teacher friends were doing. Likely lost whatever money she put in by now. But again I'm not going to needle her about it.

[@rolandvencel4256]

Happy bday Rich

[@SeeItBelieveIt-n6m]

Too funny. Rich is now a grown up if he doesn't like celebrating his birthday. Happy Birthday Rich!

[@geraldbrowne]

happy BD Rich.. keep going

[@deep8174]

Happy belated birthday Rich!!! 🎉

[@Picklemedia]

@48:02 "manage your risks properly" = B+B+B

[@BobTheBob647]

I renew next year, so hoping rates come down as much as possible lol

[@SG_K]

On the topic of the Rich's rant at the end: locals don't want to work in some of the jobs. We owned a cleaning business in Calgary for 10 years and struggled with finding quality people despite paying the highest rates in the industry, providing quality training and all the tools and supplies. It is a physically demanding job and people don't want to do it, no matter what you pay them. Things turned the day we got an inflow of Ukrainian refugees - people appreciate the opportunity and have impeccable work ethics. All I'm trying to say, things don't always work in theory as they do in practice. There is an opportunity for Canada to have a value-add to the economy, but we are jost not doing it the right way.

[@rolandvencel4256]

"Locals don't want to work..." Maybe because they understand the real value of money & work, and compare it to costs of living that they're well exposed to. Ukranians got rescued from war... and don't understand what $100 buys you... or what you need for homeownership... something high on Europeans minds...

[@kevinkilgour1]

Happy birthday, Rich!

[@larapisicoli9614]

Happy happy birthday! 🎉

[@Observer168]

Interest Rates and Unemployment in Canada (1985-2023)* *Interest Rates:* - 1985: 11.4% - 1990: 13.4% - 1995: 7.1% - 2000: 5.7% - 2005: 4.1% - 2015: 1.2% - 2023: 1.5% *Unemployment Rates:* - 1985: 11.4% - 1990: 8.1% - 1995: 9.4% - 2000: 6.8% - 2005: 6.8% - 2015: 6.9% - 2023: 5.2% Please note that these statistics are based on historical data from reputable sources, including the Bank of Canada and Statistics Canada.

[@Casey-qm1nd]

I wouldn't use the term reputable to describe the cooks at stat canada. Considering there is so much more debt than the 90s, a double digit unemployment reading should shock no one. These cuts are transitory. You highlighted above, a 40 year cycle where rates went down. Now as we adjust to a higher for a longer era, there will be a tough adjustment phase in the years ahead. The next wave of inflation will not be primarily consumer driven, rather it will be driven by government spending and old debts rolling over to much higher rates. Go long commodities as the government inflates away debt at the expense of lower living standards. Seems like the logical hedge against debasement. Unemployment will be higher in the future because we added so many immigrants into a slowing economy. So that needs to be accounted for too

[@Observer168]

@@Casey-qm1nd it’s the central banks job to adjust rates to how the economy is doing. We are now in a recession so we will see more rate cuts.

[@BrentGleason-j1s]

Happy Birthday Rich!

[@meddlehedd1194]

58:00: "107,000 full time AB&B's added into the market is enough to house 3 months of immigration".. They live 10 to a house so it's actually 30 months worth of immigration.

[@austintrotta9417]

Could you guys give your thoughts on the Argentinian stock market’s performance?

[@karlkuepper-cp3lt]

good work gentlemen

[@chrisT16161]

GM!

[@Abdulrehman1976]

Happy birthday

[@_garycalgary]

HBD Rich :D

[@jungscabin]

Thank you for quick updating . I have a question, we need to renew home mortgage sep. 1st 2024. I got a offer fixed mortgage rate 1year filixed 5.64% 2year fixed 4.8% and fixed 3years 4.64%. Could you advise me which one to choose will be good for us? I look forward to hearing sooner, please. Thank you again for great information. I can renew 4 months eaerly next May 30th 2025.

[@diogobarreira3034]

For that 1 year, you may as well do a 5.75 variable while will have at least 1 more cut this year and be below that in a few weeks.

[@diogobarreira3034]

I'd probably gamble on that 2 year

[@roseoverdose6451]

you got me with "mike tyson". lol

[@DarR1299]

A third piece that threw a wench in the profitability of the carry-trade is the appreciation of the yen that neutered the profitability upon currency translation back in Japan. Mrs. Watanabe was not happy.

[@fretstain]

happy birthday R-dawg

[@headab9027]

Agree that the TFW program is exploitive and bad for the country. However, those criticisms Rich (Canadians don't want to work) are from the right, not the left. The reason for the expansion of the TFW program is corporate lobbying wanting to drive down labour costs. Lets admit that these policies are driven by the corporate world - they control these policies. And you can bet the Conservatives are all about supporting this policy. Also, there is a contradiction. The number of TWFs you are unhappy about is less than the number of Airbnbs taken away from the rental market. 100,000 homes is A LOT!

[@ffery200]

Happy birthday Rich!!

[@LynneMarieArbuthnot]

Airdna numbers are skewed … realistically 30k airbnb units are listed across Canada of which maybe 5k could move to long term rental

[@roseoverdose6451]

happy birthday rich. love you, in a platonic, youtube commenter kind of way.

[@peterokuonghae7086]

Happy birthday Rich. #MoreLife🎂 🎉🥃

[@laurentlethien]

Happy birthday Ricky D 😂

[@gedigan3346]

Basel 3 is already in effect, Banks % of physical gold to offset the risk on the balance sheet, reduce excessive variability of risk-weighted assets. Basel 4 : bank are expected to hold the garbage treasury bonds, as well as increase banks capital (equity) and lend less, risk assessments. That is if the housing market crashes and the balance is higher than the assets value they can call the mortgage due, you need to come up with $$ or refinance. The term "mortgage" comes from the Old French word "mort gage," which means "death pledge."

[@richardpetts9661]

Excuse me Keith, "The 25 people that follow you" !? 26 including me, thank you very much. Haha

[@AquaVivaFit]

Bonne fête, Rich!

[@huskavarnaband]

Wow, good advice. !! After an hour of this I learned. markets could go up, markets could go down. Wow, I'm ready to make(loose) money now. Lol..

[@marcgatto9675]

If you get too loose with your money, you may lose money.

[@ontheroad2371]

Happy Birthday Rich! 🎉

[@DmitriiSokolovMD]

Are you saying BOJ increased rate by 2.5x? 😂😂

[@DarR1299]

IMHO, I don't even think a stock market crash would rattle Jay Powell enough to end QT. However, a credit crisis would. Most likely he will just let pre-payments on MBS do its work as they roll-off the FED's Balance Sheet. The best we can expect is a 2 handle in front of the FED Fund rate.

[@Observer168]

The US will be forced to do .50 rate cuts to stop this recession caused by high interest rates. Canada is already in a major recession with massive job losses in construction because projects are being cancelled. We need interest rates back to 2.5% or unemployment will hit 8%. High interest rates haven’t helped with the cost of goods. Things are still as expensive as before. It was the CERB checks and supply issues that caused a massive run up in consumer goods.

[@dirtlump]

"High" interest rates ????? 5% or 4.5% is "HIGH" ?????? your comment should highlight the underlying now ridiculous DEBT fundamental that really.... just isn't even remotely sustainable going forward.... given the 'all used up' future gdp capacity/servicing gdi(gross domestic income). Simply put.... a gdp fundamental that is now completely reliant upon ever increasing consumer DEBT.... is NOT fundamentally sound nor sustainable when to function it requires 'interest' rates below the 'real' zero bound inflation target to continue ? it becomes very simply currency 'debasement' based and self-imploding !

[@Picklemedia]

​@@dirtlumpwithout easy credit how are we supposed to reward the asset class on the back of future generations?

[@dirtlump]

@@Picklemedia Exactly.... the systemic financial 'entitlement' obligations.... are now completely unsustainable by future gdp/consumer gdi capacity without a now equally rapid 'debasement' based inflationary curve that lowers standards of living into social unrest. The fact that an even 4.5% to 5% Monetary Policy rate is absolutely collapsing economic activity should highlight the unsustainable DEBT fundamental..... that requires rate relaxation below the 'real' zero bound inflation target to facilitate further DEBT expansion unfunded in future servicing capacity.... should highlight the negative feedback loop into currency collapse now impending !

[@Observer168]

@@Picklemediathis is how fiat money works. Value of money always goes down or the system becomes unstable.

[@Jo-mf2vu]

Historically rate cuts have never staved off a recession. Even massive rate cuts of .50 plus have not helped. And Canada will get it worse than the US this time because of our debt load.

[@MP-gx5nc]

Happy birthday Rich 🎉🎂

[@AR-pr6mt]

Happy Birthday Sweet Rich! Any single, intelligent ladies (I'm too old hehe), should join Rich at the Wedding! He seems so sweet, and your mom would LOVE him ! :)

[@valerienikkel3072]

Happy Birthday Rich! 🎉🎁🎈

[@gedigan3346]

Could you guys cover some solutions, hypothetical of course not financial advice, as to the ongoing fiat debasement + inflation that creates a 13% hurdler rate for breaking even. Just getting a 13% return or wage increase is break even, not even making $. With the incoming rate cuts, QE $ printing, the dollar will be going down. What move into USD/higher risk markets to see any return? Thanks

[@lucg2321]

HAPPY BIRTHDAY RICH!

[@Murdernadofdeth]

Love the loonie hour

[@mogulrider]

It was far more complex than the CarryTrade.

[@EvanDunville]

Happy birthday 🎉🎉

[@1ag18]

Hbd rich!🎉

[@roseoverdose6451]

interesting fact. right now warren buffets fund has more t-bills than the federal reserve!

[@dr_bullseye]

the government wants you poor, in pods, eating bugs with all the low wage TFW

[@joshualamoureux2520]

Boomers been watching the princes of the yen

[@quixomega]

Bonne fête Rich.

[@Lord_Enwar]

You're telling me at 14:55 that Japan gave in to pressure that the world is shorting their country to oblivion? Is that what I see when I read between the lines?

[@themickles]

Any assets trade 24/7 with deep liquidity? Funds with margin calls would probably use that

[@isabelbozzo6945]

Happy Birthday!!!❤

[@Joe-mz6dc]

Time to buy.

[@Dean_W-Cdn]

It's BS that you have the EFT pouch!

[@jpboulais4373]

Bonne Fête Rich!!!

[@morgank.1249]

How did my sub get unsubbed 🤨 🤔 🤔

[@edubmf]

Steve was *completely* wrong about rate cuts.

[@talkstockswithme]

Second! Great show guys!

[@DarR1299]

Not to disagree with Keith as he probably don't invest in China but China's PBoC Interest Rate Decision is taking place on Monday, August 19 th at 01:15 GMT

[@DarR1299]

@icecapassetmanagementlimit849 The whole debt laden planet is in trouble. Everything is hypothecated (if that's a word) N'th times. In 2008 the notional values of OTC derivatives was over 1 Quadrillion. ISDA thought it was too high and brought it down through manipulation and alchemistry. It's way over that now in multiples.

[@DarR1299]

@icecapassetmanagementlimit849Just my personal opinion for what that"s worth: The US is the largest debtor country in the world and with limited manufacuting capabilities. It's not just the government, it's the population that's in over their heads. The infrastructure is crumbling. IMHO, the US will collapse like the Soviet Union. The question is when?

[@DarR1299]

@icecapassetmanagementlimit849 Sure China has its problems but so do every other country. However, it's the world's largest manufacturer, creditor as well as the largest holder of gold and also the largest producer thereof. Contrast that to the US. The US just printed a monthly deficit of $243.7BN, the second largest July budget deficit on record.The US budget deficit for fiscal 2024 has hit $1.517 trillion. By April 2025, it will hit $1.7 trillion at which point it will be by far the single biggest outlay of the US government. The United States biggest asset is the dollar which is approaching the Minsky Moment. While the DXY would soar as other Fiat's are worse, the USD will fish-line relative to gold.

[@oceanbearing]

Good show. Let's have more discussion on possible solution on fixing housing, fixing canadian productivity and fixing immigration. . I will tell you the first step vote out Trudeau. Next step dunno.

[@shanesteele778]

The solution is to protect the boaders that we have and stop the open door policy and get back lower and vetting immigration

[@meddlehedd1194]

Boomer: "I'm not a rock and roll guy". Me: What's his position on gold bullion?

[@meddlehedd1194]

well, I am surprised and impressed the best performing asset class over the last 3+ years doesn't usually get much love from money managers.

[@SzymonStas]

I'm just going to say this: I have never once stayed in an Airbnb that looks like it's not a full-time Airbnb. Have you? Has anybody?

[@wesleylawrence6439]

I have stayed in three air b&b that were the owners primary residence.

[@Relaxlifeisshort2]

There you go again keith lost in halifax

[@uncubicle5993]

what's the Nancy Pelosi ticker symbol?

[@Nauseum]

Good episode, always appreciate you guys. I do have one quip though, crediting Bernie Sanders with the idea that immigration depresses wages was a little ridiculous. That's been a foundational right wing talking point for centuries at least.

[@kqh123]

I find the show is getting a bit haphazard these days

[@MrJaywed]

.

[@Picklemedia]

@1:01:41 Rich explains how Trump got elected

[@maxamillion8384]

HAHA SNEAKY JAPANESE