Are Negative Interest rates possible?
This is one of our favourite topics. Working in financial services, Vince and I see first hand how leverage and interest rates effect our entire economy.
On Thursday, “Bank of Canada Governor Tiff Macklem said negative interest rates remain an option.” https://www.bloomberg.com/news/articles/2020-10-08/bank-of-canada-keeps-door-open-to-possibility-of-negative-rates
So what does that mean to us?
As Canadian Cashflownaires, we believe in buying assets instead of liabilities. Even better, we believe in buying assets that provide us with steady cashflow.
Based on these comments by the Tiff Macklem, it tells us that the Bank of Canada and our government are willing to do anything to keep asset prices strong, including devaluing our Canadian dollar.
To us, we take this as hard assets are king (“cash is king” is old news!). And it is not because we think hard assets are going up in value. It is that our government is printing so much money that it is devaluing our dollar.
Check out this chart from our friends at Rockstar Real Estate, which compares individual income growth to Toronto home prices:
Our central banks are creating massive asset inflation, and those depending on their incomes and savings are being left behind.
If we just pay attention to asset prices, fundamentals tell us that we should see an asset crash/correction, but this is absolutely being delayed by central banks. And we don’t like betting against the government.
We’ve been saying “that property is too expensive” for the last 7 years. But we still purchased them.
Because, we believe that long-term, our hard assets will get us ahead. Our income and savings will not.
That is why in this month’s Canadian Cashflownaire Newsletter, we discuss how you can prepare for a crash, while still making moves to get ahead. The newsletter is available to all of our Canadian Cashflownaire Members.
You can’t just stick your head in the sand, telling yourself “I’ll make a move when the market crashes.”
Because odds are, you’ve been telling yourself that for the last 10, 20, maybe even 30 years. And slowly, you’ve fallen way behind.
Hopefully this shed some light on asset prices. The writing is on the wall that our government will do anything to keep them from crashing. Let’s try and take advantage of this, while doing it in a safe manner.
Have a great Thanksgiving weekend,
Vince & Mike
P.S. Strive everyday to keep learning. You may disagree with us on certain things, but different points of view are a good thing. They keep you and your mind sharp. So if you have a different opinion, shoot us an email. We love hearing what you guys have to say.