Deep Dive
Shownotes Transcript
Welcome to Money Talks. My name is Mike Campbell. We have got so much planned for you today, but I've been really interested in the world of gold. After setting a new high, down $90, I'm going to be talking with Luke Grohman. I'm going to talk with Victor Adair about that, but much more. I mean, this big picture of the change in the monetary system must be understood. No better person to get on with me than Luke Grohman.
Of course, I got Aussie. I mean, there's so much action happening in the real estate market. Some updates on that suggestion that maybe or at least the discussion around taxing your primary residence, other changes. But I also think it could have been my shocking stat. You should see the full on breaks put on housing starts at a time when obviously we need more supply. Mike Levy on the latest inflation numbers and the implications for taxes. And of course, Victor on the latest in the markets today.
some big changes besides that on gold, which he'll chat with us about. But first, you know, in April, the head of Scotiabank Capital Markets, Daryl Holt, wrote an article. It was entitled, It's Time to Stop Believing in Policy Fairy Tales. Well, I said amen to that because this fairy tale of no consequences of a declining GDP per capita, but that's in conjunction with
with nearly a 14% inflation-adjusted decline in capital investment. And let's face it, you don't get capital investment, you don't get real economic growth.
Well, at the same time, you've got the government promising things like, well, it's free just about everything from unlimited health care to dental care, pharma care, child care, all of that stuff. Taxpayer funded affordable housing. But this is in an era of already escalating public debt, unfunded public sector pension liabilities. I mean, this could turn into an absolute I shouldn't say could it will turn into an absolute financial and social nightmare.
According to the polls, though, it already has for half of Canadians who are worried about their day-to-day finances, let alone the heavy hammer for millions of Canadians of refinancing at significantly higher mortgage costs, while property taxes and the costs of owning slash maintaining a home continue to rise. So my message continues to be, you've got to disabuse yourself of the fairy tale
that government is going to solve your problems because otherwise you're going to be in deep trouble. You know, since 2015, the federal civil service has grown over three times faster than the population. Wow. Up 39.9% in the size of government versus 12.2% size of the economy.
You look at the municipal and the provincial and the federal governments, they've added 972,000 employees. Now, we had parliamentary budget officer Yves Giraud on us with Money Talks, and he said, here's the question each of us got to ask, and that is, what did we get in return for the tens of billions more in spending and that huge growth, hundreds of thousands of people more working in government? Because it certainly wasn't affordable housing.
As government taxes, regulations, levies, all of that adds about 25 to 30% to the cost of a new home. On the rental side, come on, record population growth fueled by increased immigration targets and what the prime minister himself called uncontrolled temporary visas. Well, that was the main driver of increased demand, which results in those record rents.
I mean, we've now arrived at a point where the math dictates that the vast majority of young people can't get into the housing market, at least not without financial help from another source. I think what's continually overlooked though in that housing debate is that it's actually not feasible for a young person to be able to save for a down payment given that half their paycheck goes to some form of tax to the three levels of government. And if they do manage to scrape together a down payment,
Well, the vast majority can't afford to actually own a house. Why? Because of the mortgage payments, record property taxes, insurance costs, maintenance. And all of that's paid for with after-tax dollars. And it's not getting better. As Ozzie and I are going to discuss, I mentioned a moment ago, you should see the drop in the housing starts despite all the photo ops, right, and promises. I mean, the story of medical wait times is starting to get better known.
with the Supreme Court of Canada and BC, by the way, both acknowledged there are people in pain, suffering, and needless death on those wait lists. Between April 1st, 2022, March 31st, 2023, as SecondStreet.org reports, the total number of confirmed patients who died waiting for a diagnostic scan or surgery was 17,296. How is that acceptable?
Over 58,000 since 2018-19. I mean, this is despite record spending and record number of government employees in virtually every area of Canada, along with record tax revenue for government. Most people paying record taxes. I mean, the level of government intervention into society has never been higher. And the goal is to increase it. But Canada's economic growth literally can't support it. That's why the debt's going up, by the way. We're not paying for everything we've taken in.
Add in declining GDP per capita. Come on, that's a sure-fire recipe for a lower standard of living. My point, about half of Canadians are already living it.
We've got a great show planned, as I said for you, but I want to also remind you, please stay with us and go to mikesmoneytalks.ca. Sign up for five minutes with Mike. It's absolutely free. It's a chance just a few times a week. As I say, it's called five minutes because it doesn't even take that long to get a whole bunch of stats. I think in different areas and different subjects,
that you're not hearing in the mainstream media. That's the same stuff you'll get at Money Talks Tweets, Michael Campbell's Money Talks on Facebook. And just a reminder, you can join us on YouTube. We've got the Money Talks channel there. Get everything past, present, stuff coming in the future. But join us on YouTube on the Money Talks channel.
It's always a real pleasure to get a chance to talk with Luke Grohman. You know him as the president and founder of FFTT. That's Forest for the Trees. You can find him at Luke Grohman. That's on X, Twitter. What I enjoy too, though, he's on YouTube where he answers questions on a weekly basis. I mean, he's got...
hundreds of thousands of people throwing stuff at them, companies and institutions too. But I always find that a great situation where other people say, this is what I'm not quite getting or what's this relationship, that kind of thing. So yeah, I would invite you to go to YouTube and just look up Luke Roman, all sorts of great stuff. Luke, let me start with this. Uh,
Obviously, the things that you've been writing and warning about have been very clear. You know, you're more popular than ever because, oh, that's that guy who warned us about this. And, you know, a lot of that, I mean, look at you, main recommendations. We talked to you a few years ago. He says, look, just had a section of your thing on gold, a section of your portfolio, have some Bitcoin in there, all from the same thing, declining currency value or purchasing power, all of that.
But I was thinking, I don't want to get to all of that, but I want to start by just simply asking you, do you think government's actually happy with inflation? Because I don't see how they do well if it's deflation. Yeah, I think they say they're unhappy with it. I think they get nervous if it gets too high. But as long as it is low enough so as not to cause social unrest, then I think they're very happy with it.
Yeah, I'm thinking also in terms of, I mean, we've got record debt, you know, around the world. I think it was the last number I counted, $91 trillion. I actually didn't count it. I saw it. $91 trillion. You know, I mean, Canada's got a huge deficit and the States has been sort of jaw dropping. You know, let's just throw another trillion on the pile.
Well, I don't see how they can afford a slow economy, how they can afford to have their own economic or their business and their individual tax receipts go down. I mean, that seems to be the kingpin in all of it. That's right. Ultimately, they need growth, GDP growth, to be...
well above interest rates, the interest rate to pay on the debt. And when you have debt to GDP in the United States of 122%, 7% deficits at near or at full employment, uh,
growth or G has to be above R or rates, or else you go into a debt spiral. And this is just sort of sixth grade math. It's really not very complicated. And so that's not to say we can't have slowdowns, recessions, but what it does mean is that if G, if growth, forget about recession, I actually don't think a recession is mathematically possible with deficits this big. But if growth just slows too far,
you're going to have a situation where you go into a debt spiral, where rates go up in a slowdown, which typically is not how things work in the US and in other developed markets, but that's how they work all the time in over-indebted developing markets and have for decades in those developing emerging markets.
And so it's going to, and then you'll get a response, which is, or a choice, which is, do we let this debt spiral drive treasury market dysfunction, economic calamity, markets down, or do we simply inject more dollar liquidity under the auspices of treasury market functioning, et cetera? And the reality is, we've seen this four or five times since 2019, that when faced with a choice of,
let free markets set the interest rate of borrowing for the U.S. federal government or
Inject more dollar liquidity to make sure that growth is high enough to cover the interest rate. They always do the latter. They are four or five for four or five. And they're going to continue to be because the alternative is simply not politically, economically palatable, sustainable, etc.,
I think that's such an important point to make, though, is because if somebody says that now, you go, no, no, it's already happened. You know, you're late to the party. I mean, we made a big deal out of September 16th, 2019, when the Federal Reserve just intervened in the overnight markets, you know, and just said, oh, what the heck? And that sort of began. But we've seen it in Japan in a big time way, seen it in the UK with their pension crisis. I just think people have to get real and say that's the playbook.
And then we start talking about, well, what's the implication of the playbook? - That's exactly it. And people, many investors and analysts wanna comfort themselves or their clients by saying, well, September 2019, the repo rates spiked, that was just regulatory. And there's an element of truth to that. Some of it was regulatory. But in the end, repo rates went to eight to 10% and the Fed faced a choice, stand aside and let the entire yield curve reprice off overnight markets
or intervene, start injecting data liquidity again, start regrowing their balance sheet and get yields down and let the liquidity be the release value. And they did that. And they did it again in March of 2020 when the off the run treasury market crashed at the lows in COVID. And they did it again in 3Q22. And they did it again in 1Q23. And they did it again in 3Q23. And so for me, I'm surprised
I'm both astonished and I'm also thankful that there's still so many investors insisting that this isn't what they're doing. I thank them because it gives me more time to make sure
I can really get the message out to my clients. Hey, listen, you need to own some gold. You need to own some Bitcoin. You need to avoid long-term Western sovereign debt because on a, it's fine on a nominal basis, but on a real basis, it has been and will continue to lose value against gold, Bitcoin stocks, industrial stocks, et cetera. It has to, it's a, it's a mathematical formula when that the GDP is as high as it is. Uh,
So I remain, like I said, surprised but thankful for the dogmatism of a lot of analysts that just refuse to sort of, you know, if it quacks like a duck and it swims like a duck, it's not a regulatory problem. It's a duck. Yeah.
Yeah, there's so many implications obviously for individuals. I drill down to what it's like and we can see it already though that maybe you got lucky in your own assets, you know, and you got lucky and you, not lucky, you did choose Bitcoin or you did choose gold, you know, you chose to try and protect yourself there. But
But I still find I'm really worried about this gap between the haves and the have-nots. Not everybody owns a home. Not everybody has the wherewithal to purchase, you know, an ounce of gold. In fact, I just gave one of my kids a recommendation. He's doing well at work and just said, hey, I just want you to set money aside.
you know, every month, don't spend it all. But what I really want you to do is set it aside and look at Bitcoin and look at gold and, you know, looking to protect that purchasing power so you don't wake up 10 years from now. You said, I've done all this saving and I can't buy anything. You know, it's, was that the Greenspan line? He says, yeah, your pensions are secure. The bad news is you'll buy a cup of coffee with it.
He said, we can guarantee you social security and Medicare, Medicaid out as long as, as much as you want, but we cannot guarantee the purchasing power of those, those, you know, under congressional testimony, he was under oath and he said that. And it's kind of one of these things where people don't believe it. Number one, they don't believe it can happen. And then even when they believe it can happen, they believe that they'll have more time. And sometimes they do, but more often than not in these types of situations,
you know, it's little by little and then all at once. Yeah. Well, that's that old Hemingway line that I do love. How did you go bankrupt? Slowly than all of a sudden. What about the people who say, well, look, you know, we've been running these deficits for, you know, for how many years, whatever number we want to throw on that major U.S. deficits as we were alluding to at the beginning here and Canada's followed suit. And they'll say, well, it hasn't made that big a difference to my life.
Help me with that one, because I think that's what's behind the devalued purchasing power. You know, I think it depends. It's, you know, you go to me and say, hey, what was the price of a house in Toronto when you started working? And what multiple of that of your earnings was it when you started? And what is it now? You know, Vancouver. What could you buy a house for in Vancouver in 1990, 1995, 2000? And what
Does the average house in Vancouver cost now? And my guess is it has an extra comma now versus what it did 20 years ago. And incomes don't have a second comma. So some of that has been due, you know, that's not all strictly due to inflation. Some of that has been particularly here in the U.S., but, you know, through the dollar everywhere to a certain degree, inflation.
the natural outcome of various policy decisions that were made around financialization and trade policy. So it wasn't all sort of balance sheet expansion, money supply growth, et cetera, but a good chunk of it was. And so, you know, for the people saying that,
It's sort of all fun and games, but again, you don't know when it starts to matter from a social aspect. So, I mean, I saw a chart a couple of weeks ago. I actually put on my Twitter feed because it was so startling to me. It was Canada showing Canada's population growth against Canada's real per capita GDP growth.
And population growth is going up and to the right at a 45 degree angle. And real per GD, real capita per GDP is going down and to the right. It's negative at like a 15 degree slope, negative 15 degrees. And that's how every revolution in the world has ever started. Like cram more people in and then start taking away, start shrinking the size of the pie and then wait.
Like, I don't know when, maybe it's five years, maybe it's 10 years, maybe it's 20 years. But I can almost guarantee you that if you wait long, if you run those two lines long enough, keep running population up and keep running, shrinking the pie down every year at that decline, you're going to have severe political fallout. It's just a question of when. And of course, you know, no one's going to make the connection to the
to the deficits to any of that it will be you know like because that's how things go they point that that you know like what we're doing here in the us oh it's those people are evil or those people are evil it's the left it's the right it's you know and of course it's it's like if you asked a fish to describe his environment the very last thing the fish would describe would be the water and in this case the very last thing anyone's describing is the money it's the money system well and and that you know of course you have a presidential election that's uh
Peculiar to say the least. But it doesn't matter who wins that presidential race. Neither of them are talking about the fiscal situation that you're referring to, the sovereign debt situation, the deficit situation. And especially because I think you make a case and you were the first to do it of how mathematically compelling it is when you're now well above 100% for just military interests.
you know, for entitlement and interest payments. Well, which one do you cut? As you've pointed out many times. Well, none of the above. Oh, that's a problem. Yeah. And to me, people say, well, when's it, when's it that going to matter for the U S it started matter in 2022, you know, I mean, it started matter in 2019, arguably with repo, but for sure matter in 2022, because that's when the gold market told us it mattered.
U.S. real rates, which is just the interest rate on 10-year treasuries, 10-year real rate is just a 10-year treasury yield minus the rate of inflation. And if you turn that, if you invert that rate, so inverted 10-year real rates, that has always correlated very tightly with gold over virtually the entirety of my career. And I've been doing this 29, almost 30 years now. So the...
Those two things have always correlated, which makes sense, right? The lower, if you have negative real interest rates, gold should go higher. If you have positive real interest rates, you are being paid a positive return over and above inflation on a 10-year treasury yield that competes well with gold. Gold should go lower. And that always held until 2022, when all of a sudden those two things diverged. And that was a really critical moment that I still see many people in mainstream finance thinking,
They don't even pay any attention to it, let alone really highlight the message of it, which is that rates going up with debt to GDP and deficits to GDP this high increase
the fiscal risk, increase the default risk of the US government now because debt and deficits as a percentage GDP are so high. Now, the US is never going to default. They can print the money, which is exactly why real rates, why gold is diverging from real rates is the market is going, oh, they can't make this math work unless they print the money.
unless they slash defense or slash entitlements or slash interest rates. And we've done the math where people say, well, we just we're running a deficit of 7 percent of GDP at full employment. We just need to cut four points of GDP. You know, we have a deficit of four percent of GDP. And you go, OK, great. Let's let's let's run through that. The great financial crisis, U.S. GDP fell three percent and it was enough to bring down the whole system.
I mean, we were within weeks or days of the system collapse. That was a 3% decline. We're talking about four points here. So you're going to take four points of GDP out. So your GDP is going to fall probably by quite a bit given the leverage in the system. Even if we assume that GDP doesn't fall, which would actually leave that the GDP higher, not lower than GDP cuts or from deficit cuts, paradoxically, you're still a 4% cut
a 4% of GDP cut to the deficit. Mathematically, if you're not going to cut rates, you're going to still fight inflation. Then really the only things big enough to cut are defense and entitlements. And that would require a 25% to 30% cut permanently, immediately to both. You're going to have a political revolution in this country. And that sets aside, like economically, you're probably going to have a depression. And critically, if you have a depression, you're going to have to stand aside as you have this fallout like you had
in 2008 when GDP fell three and you do nothing. Banks need to bail out, do nothing. Depositors lose all their money over $250,000 per account, do nothing. Layoffs occur as corporations lose their money over $250,000, do nothing. And
And that's, of course, that's never going to happen. So it's the old Sherlock Holmes. Once you eliminate the improbable, no matter how, you know, once you eliminate the impossible, no matter how improbable, whatever remains must be the truth. And you kind of eliminate all that, whatever must remain is the truth, which is they're going to have to print the money. They're going to have to print the money. And that's what gold real rates divergence in 2022 began hedging and continues to hedge.
And I think of all the geopolitical fallout also. I mean, there's many fallouts. I mean, you're talking about the U.S. dollar in quotes, the reserve currency, the medium of exchange, you know, and trade. As a store of wealth, I think people are already starting to vote on that. Exchange, I think, gets more difficult. But I'm thinking of countries that have borrowed. You mentioned at least the U.S. borrowed in their own currency. What about the countries that did not borrow? And now you've got commodity prices going up.
to compensate. One of the pieces you did that I thought was terrific is going a little bit deeper and saying, well, where are you going to find copper that was cheap? It's not the so much copper that you can't find anymore. You can't find oil. The extraction process has just got so much more expensive. So I just look at all this coming at me, you know, and saying, I'm a third world country. I got to sell my treasury bills because I need U.S. dollars to buy energy. You know, it's I'm just pointing out how interconnected it all is.
Yeah, and it does have a geopolitical angle, right? Because Japan needs to sell as oil prices go up and the yen goes down. They need to sell treasuries to buy dollars or to raise dollars to buy oil. China doesn't. China can print yuan for oil through gold and is doing so. And so there is this view, well, let's just strengthen the dollar and we will blow up the world and we will be the last man standing. The problem is we won't this time.
At least we will be the last man standing relative to our allies, Japan and Europe, Russia and China. They'll take some pain, but they're not going to blow up like our allies. And so it's almost akin to like this weaponizing the dollar is a little bit akin to like a strategy of the U.S. going and bombing Europe and bombing London in the summer of 1940 to soften it up for Hitler. Like, yeah, what a stupid idea. Like we would never do that. Well, that's essentially what we're doing here.
As long as China can buy oil and other critical commodities in their own currency through gold and through their own production, right there, who wants you on? Nobody wants you on. Well, the Russians are taking you on and then they're recycling it into Chinese goods and into gold on net.
Everybody wants gold. Everybody wants Chinese goods. For as much as you talk to any American senator, politician, consumer, executive, they can spend all day bad-mouthing China. And then you can ask them, how much did you buy from China last year? And they're not going to answer that question because they know the answer is they bought a lot. And so everybody hates China. China's uninvestable.
go great go three months without buying anything from China tell me how your business is doing at the end of it so there's a geopolitical angle to it that is um it is a western policymakers certain western policymakers at least laboring under a misapprehension which is like let's weaponize the dollar like we did in the 80s and the whole world will burn down we'll be the last man standing and we can buy up the world on the cheap and de facto we're watching some places yes or tell you worse than others but we're we're
We're going to take down our allies first. Our allies, Europe and Japan in particular, UK, are going to go down way before the Chinese do. We've already seen it. American banks have gone down before the Chinese have gone down. Why? Because they can print dollars for energy. That has never happened before. None of us alive have seen a cycle, certainly as investing professionals, where another country, another major business,
and oh, by the way, the world's biggest oil importer can print their own currency for it. It was always only dollars and that's not true anymore. The marginal barrel of oil globally is now priced in yuan, not dollars. - You know, there's so many things and that's what I mean. It's a complex subject that you guys do great at, you know, Forest for the Trees. A couple of things just jump out and one is pretty straightforward. I know you get asked this all the time, but I'm not looking for a crystal ball. I'm looking for a direction. So for example, in Canada,
2015, it took $1,500 Canadian dollars to buy an ounce of gold. We're now at about the $3,300 mark. As an example, we, of course, get chronicled every day on what's going on in the U.S., in U.S. dollar terms. But are you looking for a big monster move in gold over, say, five years or so? I mean, again, I'm throwing a time frame at you. You can use your own. Just to give people a sense of it. I think about gold to me is one of these things where
You have to be there. You have to buy a ticket on the ride to go on the ride kind of a thing. And we've seen that even this year where nothing, nothing, nothing, nothing. All of a sudden it moves 30% in three months in dollar terms. And what is so crystal clear to me is that gold is coming back into the system as a neutral reserve asset.
That's when you see the headlines that central banks bought record amounts of gold in 2022, 2023. They're looking at even more in 2024, including some developed world markets by central bank, developed markets, central banks buying gold.
I look at gold as it's coming back in as a neutral reserve asset for a very simple reason, which is America told the world in 2022, if you do something we don't like politically, we will take your treasuries with the Russians. Yeah.
I think ultimately it's actually probably a really brilliant strategic move by the U.S. because ultimately for the U.S. to reshore and to rebuild its defense industrial base, it needs to discredit treasuries as the primary global reserve asset. And this says de facto has done that. I think gold is coming back into the system as a neutral reserve asset for commodities, which is to say when China, nobody wants you on, nobody trusts you on.
they will take yuan because those yuan are good for Chinese goods. And to the extent there are certain yuan surpluses left over, they can buy gold with them. And the price of gold and yuan is going up. And so holding gold increases your yuan purchasing power terms, which increases the amount of stuff you can buy from China, which is good for your quality of living, your standard of living. It's a virtuous cycle. So I think when you talk about the price of gold, I think about it in terms of it,
relative to commodities, specifically to oil. A, oil is the biggest commodity. B, it's just easier to quote. In 2008, gold bought you eight to nine barrels of oil. Yes, eight to nine barrels of oil. In today, it buys you about 30.
And I think that number over time is going to 100 to 200 barrels per ounce. I think that's where this is going. Could that happen in a quarter? Yes. Could that happen in 10 years? Yes. Ultimately, I don't really care because the increase in that for the average investor shouldn't care about it either. We're talking about preserving and growing standards of living. And all that matters for your standard of living is energy. That's the key.
And if you don't believe that, like fly commercial and then fly on a Gulfstream 5. You know, who lives the higher standard? The guy on the Gulfstream 5 private jet or the guy flying, you know, commercial on Southwest? So gold...
I think will continue to rise versus oil. By virtue of that, I think it will rise versus virtually all currencies. You can make cases about which ones it goes up more or less than. I think Bitcoin probably does this at least as well as gold. That's how I think about gold is this as it comes back into the system because the dollar, the Treasury bond is not trusted as much anymore as a reserve asset.
for both economic and geopolitical reasons. And there's no one else that's either trusted or big enough or even wants it. Like even if the Chinese could, they don't really want this. The Japanese can't, the British can't, the Europeans probably could once upon a time, but not anymore. And those are the other SDR currencies. Other than that, there's nobody else big enough to do this. So it has to be gold. And that's what we're seeing. And it's still very early days.
Yeah, it's interesting to think as you're saying that. I just gave the example of $1,500 Canadian and $215 now buys, you know, it now takes $3,200, $3,300 for gold. Very similar with oil. It was $56 Canadian, $56.50 generally around the beginning of $215. Now it's about $110. So in gold terms...
you know, it hasn't moved, but it's doubled your costs in dollar terms, which is the point you're making. It's just fascinating to see. You put up a couple of charts very recently on Twitter. And again, you just go to at Luke Grohman on Twitter, just showing how, you know, how stable the price of oil has been if you are measuring in gold terms, you know, and that's, again, the point is protecting your purchasing power, you know, as we go through. Let me just finish one last thing. Just again,
just that people are concerned, obviously, about interest rates. You know, one of the things that occurs to me is that the U.S. Federal Reserve doesn't control interest rates, maybe as much as people think, because as I say, if some other country starts dumping their long-term treasuries, of course, that means the price goes down and the yield goes up. It just feels like a more volatile situation than generally, I think, appreciated. I think it depends on
It depends on the currency, right? So the Fed could buy every piece of paper Treasury issuances or issues. Good point. And in extremists, they could, and I think they eventually will for a bit. The higher the debt goes, the more – the higher the debt and deficits go, the more likely that outcome becomes. And we saw that in World War II.
You know, people say that all the time. It's like, well, that the GDP was 110% after World War II we got out of it. Sure we did. Inflation was 13%. The Fed bought every bond that Treasury issued. They bought the front end at three ace. That's where most of it was issued. They bought the long end at two and a half. And bondholders lost a lot of money on a real basis. Have a good day. Thank you for your donation to the war effort. And that's how it's going to go again in some way, shape or form. So
In a vacuum, the Fed has less control over the yield curve than I think is often said. The more indebted you get, the more you get into a fiscal dominance type of situation. To me, it is not true that the Fed can't control it. They absolutely can. But the higher the debt and deficits go, the more extreme the inflationary outcome will have to be for them to maintain control. Because
You know, the dirty little secret in all this is that, you know, treasuries are the collateral underpinning everything else. So if you do get some sort of bond market calamity, that's the collateral underpinning everything else. Everything else goes down. But the everything else, stocks, et cetera, et cetera,
drive the marginal receipts in the United States. So stocks go down and stay down in the United States. You're going to see receipts go down and stay down. We saw this in 2022, 2023, your deficit's going to blow out. So your issuance of treasuries is going to go up, which means the rates would go up more, which means the stocks would go down more, which means the issue, the receipts would go down. You go into this debt spiral. And so it's, it, the, the barring a productivity miracle, the path is very clear. There's, there's, there's,
Will they stand aside and let a debt spiral happen or won't they? And if they won't, then the Fed at some point will, barring that productivity miracle, have to buy enough issuance to create probably pretty high rates of inflation, significantly negative real interest rates.
And again, I think you've described beautifully what the situation is and then how do we protect ourselves. But that's why it's on an ongoing basis. And Luke, I really recommend people go to at Luke Grohman, go to FFTT, go to, and as I say, tune into YouTube, check out what Luke's doing. The Q&A from the public and his subscribers is excellent. And we really appreciate you finding time. Great job as usual. Thank you very much for having me on, Mike. It was great catching up again.
Time now for the quote of the week. This one comes from Oren Kass. He's a chief economist at American Compass, a conservative think tank, and writes the newsletter Understanding America. Now, it's a long quote, I warn you. But in a democratic republic such as the United States, where the people elect leaders to govern on their behalf, the ballot box is the primary check on an unresponsive, incompetent, or corrupt ruling class.
Or as Democrats may be learning, a ruling class that insists on a candidate who voters no longer believe can lead. If those in power come to believe they are the only logical options, the people can always prove them wrong. For a frustrated populace, an anti-establishment outsider's ability to wreak havoc is a feature rather than a bug.
I mean, the elevation of such a candidate to high office should provoke immediate soul-searching and radical reform among the highly credentialed leaders, whether talking government, law, media, business, academia, and so on. Collectively, the elites. The response to Mr. Trump's success, unfortunately, has been the opposite. Seeing him elected once, faced with the reality that he may well win again, most elites have doubled down.
We haven't failed, the thinking goes. We have been failed by an American public. And some telling grievance-filled Americans simply do not appreciate their prosperity. And others, they are incapable of informed judgments, leaving them susceptible to demagoguery and foreign manipulation. Well, I think that sums up much of what's happening today. Certainly food for thought. I'm going to bring Mike Levy in here, talk about what's arguably the biggest story of the week. And that was, of course, we got our inflation numbers.
Now, we're looking at inflation for only one of two reasons. One is that still the number one issue for Canadians is cost of living. So when you get the inflation, it tells you about the rise in prices. Second reason is, of course, the Bank of Canada is watching the same thing.
thing so when we get what i'd say more positive numbers i.e lower inflation rates that opens the door bank of canada meets on wednesday and i'm going to get mike levy in here with me mike uh so it looks like the consensus is the bank of canada like and i'm talking 90 95 consensus they're going to lower rates this coming wednesday another quarter they are
Yeah, Mike, I couldn't agree more. They came from 2.9% in May, 2.7% in June. And the reason they came down, there's one reason. Gasoline prices aren't increasing as fast, as quickly. And that's one of the major drivers of inflation or inflation coming off. Just a couple. So your key point, they're not increasing as quickly. That's what inflation rate means.
So if they get to there and they are, they've been I think the last three months they're at their 2% target sort of. But it's a 2% gain, you know, on what you paid. But it's interesting on gasoline. I was thinking about this. If you look at, say, national average of gasoline, like kind of right now, you know, depends if you're out in B.C., that's a dollar 80 a liter. But across the country, because Alberta is much less, etc.,
prior to 2021 like halfway through we'd be at record prices right now but we kind of feel they're down you know of course they are down but you don't hear it talked about like you don't hear darn it i'm paying 180 at the pump or darn it i'm paying 160 but go back just to 2021 22 we'd be screaming about this so kind of interesting but your point's well taken uh
I mean, as you've been reading also, so this really does open the door, I think, for the Bank of Canada to drop the rates.
Absolutely. And the Bank of Canada was looking for a reason, like a reason that was going to confirm they were going to drop rates. This certainly is it. Just one more thing about inflation, Mike, is food inflation. I just have to say it's still there. The headline cost of food inflation is up by 22% the last three years. Every Canadian knows that. But that aside, Bank of Canada next week is going to come in and they're talking now possibly four rate cuts between now and the end of the year if we don't get any kind of a
bump inflation but continue down that's made easier by the way that the rates you know the probability of rate cuts in the states have risen you know i mean they've been all over the map we're going to have 75 rate cuts this year down to none you know but but they are now the probability the markets are saying very high probability that we will get cuts this year
So as you've been saying, relatively speaking for the Canadian dollar staying up, that's good news. Why? Because they're not going to get better rates in the States necessarily or things aren't going to change that dramatically. They're not. And the only reason they're not raising now or sorry, lowering rates now is because we're in the midst of the nomination cycle. So you can look at the U.S. They would have done it, in my opinion, differently.
in July also. They're going to wait till September, but then you can see them coming off from September to the end of the year because they'll be out of that nomination cycle. And as you said, Canadian dollar, now that it looks like the U.S. is going to be lowering rates also, the Canadian dollar should be steady. A
around 73 cents we think oh great no that's not great but okay it's not going to be worse i think that's a great point mike obviously we'll be watching closely on wednesday to see what they've got to say and not just what they do but what they've got to say you know about it and of course
you know, the political season, the convention seasons on all of that kind of stuff. But the change, it is a change in convention in the States. Mike, we'll check in with you soon or next week, rather. Pardon me. Have a great week. And you too, Mike.
One of the best things about Money Talks is I get the opportunity to drill down into what's really going on in the world of business and finance and investment, all of those things, but with people who are doing it on the ground. We're not talking theory. We're not talking about people who come in every day and have to deal with all of these issues of the broad space of finance for individual companies. That's why I'm so pleased to have the managing partner of Sequoia Management Group,
does a great job. As I say, they operate throughout the whole sphere. I mean, they got questions on all sorts of things, but I've got their managing partner with me. Ali Akeemzadeh is on the line. Ali, first of all, I really do appreciate you finding time. Let me just ask you,
What's kind of the most asked direction that you're getting right now from different businesses? - Yeah, well, firstly, thank you very much for having me on your show, Michael. It's a pleasure to be here and speaking to your audience. Yeah, you know, in this day and age,
Investing in the small cap, what we call public venture capital world, obviously is a perilous task at times because there's a whole myriad of different companies out
There is very difficult to and not a whole lot of information necessarily. So it takes a bit of expertise and due diligence and whatnot to figure out what is what and how to do this. I've been doing this kind of work for the last 25 years, of course, as an investment banker previously started up Sequoia Partners as a merchant boutique merchant bank that effectively what we endeavor to do is find good management teams
back them with right kind of capital, bring capital market partners to it and help them essentially execute their business plan.
You know, in Canada, we do things slightly differently than in the United States. Over there, they have a very organized venture capital marketplace from an institutional perspective. In Canada, we have the public markets that effectively fill that void. And so it's very interesting. It's different, but it can be very rewarding.
It looks like that, you know, I'm just looking at the track record. I mean, you've been involved, I know with, well, you're on the board of American Pacific Mining Corp. So obviously dealing a lot in the mining space, but also the tech side of things. Yeah.
Again, I'm just wondering, they're very different industries. I would think it would be tough to stay abreast of all of that that's there. I mean, also, by the way, I remember first hearing your name as executive chairman of Plurilock, which we featured several times because cybersecurity is a big time deal. But, you know, you helped with that company, making it financially viable, refinancing. I looked at the stock recently. It's done very well. That seems like a heck of a lot of different areas to be involved in.
Yes, 100%. And again, my area of expertise is working with the management team, empowering, bringing the right amount of capital and capital structure to it. So it's less about the knowledge of the industry, which obviously given the number of years that have been added, I know enough to be dangerous. It's more about guiding them and providing them with the tools necessary to execute their business plans.
In the case of American Pacific, a great mining company operating in the western United States, gold and copper assets. They have a partner out of Japan that is essentially funding a good portion of their drilling costs, about $17 million of loan this year. And they've got great prospects. We're very pleased to be involved with them.
In the case of Plurilock, which we just mentioned, again, I recently got involved with that company.
The reason I got involved with it was we actually ended up selling another company to a private equity firm out of San Francisco by the name of Banneker. The company was called HS GovTech. It was a government software company, very similar in certain ways to Plurilock, also operates in the government space. So from that perspective, I had the background and experience to understand how that works, working with governments. And that was actually quite attractive.
because government tend to have very sticky businesses. They are great clients. They pay late, but they always pay. So that was something that we were looking for. And Plurilock really just needed a little bit of a push, a little bit of support. Again, we brought capital to it, as you mentioned. We brought a bit of a restructuring and some new energy from a public markets perspective.
So in both those cases, we've been very successful in returning shareholder value. So, yeah, they are divergent in terms of spaces, mining and technology. But again, the small cap world is really what we're focused on, the public venture capital. It would seem, Maxime,
makes a lot of sense that people could have a different expertise. Like, for example, I understand, like if I did, I mean, I understand the whole process of mining and I'm in there. That doesn't mean I can manage a company or it doesn't mean I don't need help managing the company. And then within that, you know, look at the financial sphere. How many different questions can come up about that? Whether it's, I think, should I go public as an example or I am publicly
What can I do? So I can just see that it makes a ton of sense that people need that other expertise and they can be excellent at the business they're doing. So I can see the demand for that. Do you find anything in particular lacking as it,
Is it a realism? Do they understand that? And that's why they come to you. They go, hey, there's a bit of a gap in our knowledge base. We're small companies, as you said. We can't afford to have a 200-person management team, which is great news for investors that they don't. But that's why they come to outside. Well, that's right. That's exactly right. Because management teams, they know their business. And they want nothing more than to have ample time to spend basically operating their businesses.
So when folks like myself come along and can take and lift some of the burden of the capital markets off their shoulders, that's usually welcome. It allows them to do their day-to-day speaking with their clients or operating their drill rigs or whatever the case may be, and less time dealing with the public market.
And so the division of labor and the burdening of multiple sides of the business is really what it's all about, bringing that kind of value to it. And it would seem essential. You know what I mean? I'm just saying a lot of times we fall in love with a sector, for example. And again, just because we mentioned it earlier, you know, I like the gold sector, you know, and I'm waiting for, in general, the gold sector.
stock side of things, obviously the metals performed, you know, we heard from Luke Roman earlier in the show. I mean, the metals performed, I think there's more to come over time. Well, that should be great news if you're in that sector, but you've got to execute it properly. So I'm sort of sitting there, you know, just wait, I believe it will happen, but I'm waiting, but it's got to be well managed to do that. I guess that's, I mean, hardly an insight, but that's what I think I'm waiting for. And that expertise I think is,
It's not lacking, but it's got to be welcome. - No, 100%. It is the world of the haves and have-nots. And as you mentioned very astutely, the fundamentals of gold price, copper price, these things are near all-time highs. And some of the juniors aren't necessarily tracking that same direction, but they will. That part is something that we certainly are betting on, and we think we will be correct in that thesis.
They will. And so you want to be ready to take advantage when the tide turns to be essentially on top of the wave, riding it all the way. And in order to do that, you need to have all of your ducks in a row. You need to have your finances in order. You need to have your operational team moving. You need to have your partners set up. And that's what will separate the wheat from the chaff, so to speak.
You should be writing a newsletter. No, but that's the question is you come and it's a large sphere. And I'm with you, by the way, I've said on this show so many times, I've quoted Hemingway. I think I did with Luke. You know, he says, you know, how did you go bankrupt slowly than all of a sudden? Well, it's also how do you make money? You watch how abrupt some of these moves are, even golds. And I know it's been, you know, having a nice chart. If you look at the longer term chart, looks great.
But you do go through periods and Silver's just done this. You know, let's have a leap forward. I think it's very difficult to get involved late in that. You know, people just have a tendency to want it. Well, I'll get it if it ever gets back to that again. And, you know, on a strong move, it doesn't. So I really appreciate what you're saying about you've got to be positioned. You have to I think you have to have a list.
You know, of saying, OK, if things start moving and I have a trigger point, I'm going to jump in. Let me let's just finish with this. And it's a completely different hat. But I want you to put your you know, you got your nephew come to you, you know, that kind of thing. And they say, well, how do I select one of these juniors? What are the things that I should be looking for that? You know, I have a checklist. Obviously, management is. But can you drill a little deeper for me?
Yeah, 100%. Management is always key in these small companies, of course. You have to back the right teams, and that's the start of it. The other thing is, for example, in the case of Pluralog, which is cybersecurity, you're looking for big themes.
Cybersecurity is a big theme. Every day in the news, you're hearing something about, for example, Live Nation and Ticketmaster. They got hacked. Half a billion accounts got compromised. This, everyone's going to get affected by that in North America. That's actually more than the population of the entirety of North America, right? So it's a big theme. And we want to always go with...
the reward side, right? Risk reward, you wanna go for the reward side. And from there, you're looking at technologies, you wanna be a little bit different than the others in terms of competitive advantage. You wanna have a great management team that's proven in terms of their track record. And then you drill down into the financials, make sure that they got enough money to execute, speak with the team, ask them the hard questions,
and drill down, find out who else is an investor. You know, smart money should follow smart money, so to speak. And that also applies in the mining world, really. - Just one last, how long should, you know, people have a bit of a, what have you done for me in the last 15 minutes kind of approach. So if, what's a realistic timeframe? Is it three years? Is it five years when you guys approach a company?
Yeah, no, we actually have a long-term view on these things. Our previous company that I mentioned, HSGovTech, we were involved with it for, I believe, about seven years. So four to eight years is the timeframe. Clearly, if something is not working out and you just do not have the conviction with it, then you must cut your losses off.
And that happens also, right? At the end of the day, we are talking about venture capital stage companies. And you're going to have a few winners, a whole lot of companies that do mediocre and a few that actually don't. So you've got to cut your losses. But certainly you want to ride and back up the truck on the winners.
Well, good stuff. I really appreciate you finding time for us. I know you guys are busy and that's a good thing for you. But managing partner of Sequoia Partners, Ali Akeemzadeh, great stuff. I hope we can visit again soon. Thank you, Michael. Pleasure.
Time now for this week's shocking stat. Maybe it should have been a goofy award, I don't know, or just downright silly. But I thought to myself, here we go, when the IMS forecast that Canada would have the fastest growing GDP in the G7 this year and next. They're projecting 1.5% this year, 2.5% next year. Better than the other six G7 nations. But no surprise that government proponents are all over this. But you know what? It's a useless stat.
That's like saying, hey, 25 relatives moved in with me in my home, and presto, our household income suddenly grew faster than our neighbors. You know, since 2020, or think about this, since June 20 last year, Canada's population has grown 1,462,000. Are we really surprised that those people had to buy clothing or food or maybe gas, anything else it takes to live?
Of course, GDP went up, but that's why economists look at your economy per capita, GDP per capita, far more useful statistics in measuring how's the economy actually doing and the potential impact on our standard of living. It's also why polls find, and we get this all the time, that despite the economy growing, a huge percentage of Canadians don't feel better off. Why? Because they're not.
I mean, I got to say, you look at the last couple of years, what's shocking is that we've added over 2.2 million people to the population. We've had record government spending and economic growth is still so anemic. I think this also should get us asked this question. What growth do we need in order to support our existing level of social programs? Now, there's a lot of variables. Inflation would be one or the cost of programs going up and population growth, all of that.
But let's assume no major changes or additions to the social programs. Just to let you know, you'd need the economy growing by 4% plus, and we're not even close to that. But what I find noteworthy is there's a lot of people who, I mean, I would support our social programs, but they want to keep expanding them. Well, they're not even asking the question about how fast the economy would have to go to grow to support it.
I want to bring Ozzy Jurek in right now. Ozzy, just a warning. I got three subjects. I want to hit them fast. People can go to ozbuzz.ca where you are covering all of them. Let me just start with, you know, it's the attack on assets, I call it, but they're different. The wealth tax proposal, the primary residence proposal, and, you know, the list keeps going on. You know, the capital gains exemption rising, or not the exemption, rather the capital gains tax inclusion rate going up.
Mike, I've had a slew of messages on people wanting to have an explanation on both the capital gain exemption, the wealth tap, what is it, several people mixing them up. The point is there is at UBC a group that's called the Generation Squeeze, and it's that group that also our prime minister and our finance minister apparently met with, according to the Financial Post.
The thing is, the capital gain exemption is sort of felt almost like being an enemy that old people have squeezing the younger generation out of out of the rightful inheritance.
and they have had it on their plan forever. And when you look at our federal government now, charging, you buy a new house in the first year, you're already being charged a flipper's tax of 100%. That's very easy to extend to two years, three years, four years, so it might be there already. Hold on just for a second on that, just to be clear. So if I buy a home, and even if I'm living in it, it is my primary residence, but if I sell within the year...
then the CRA can decide, well, you know what? That was your business. They get to decide that and it's 100% taxable as income.
100 percent it doesn't never mind capital gain exemption but the wealth tax is any house over one million dollars in canada anything above that should be taxed and if you go to the website of generation squeeze they make it very clear that they they want to have either deferable surtaxes capital gains taxes and the wealth tax would be one percent so if you had a 2.5 million dollar house in vancouver
One and a half million at 1% is 15,000. In 10 years, you owe the government 150,000 because that's the average price in Vancouver, right? Now, maybe it doesn't apply to small towns in Canada, but boy, the big cities, everybody it would apply to. So wealth tax doesn't need any statistics. It's just simply you have a house, anything over a million dollars is taxed 1% forever. Now, speaking, I'm going to change gears just for a second because
Speaking of, you know, the impact of taxes that they redistribute taxpayers, not just money. But I'm looking at those CMHC housing starts, Ozzie. That is really disconcerting. Federal government themselves says 3.9 million new houses need to be built.
you know into 2030 well gosh overall housing totals across the country are down uh nine percent i think this past month but my god look at the big cities like vancouver and toronto well the housing starts according to cmhc last week said toronto's down 60 compared to june 2023 and vancouver not far behind down 55 i mean this is huge because 2023 wasn't exactly a banner year either
Well, and this comes back to what you've been talking about on AusBuzz and talking about with us is you get, you know, I need a PhD or a law degree to figure out all the changes. And all it's done to me is say, I don't want any part of this. They've made it unattractive, confusing. I call it the last straw approach. Well, I've hit my last straw personally, but I'm not alone. Look at the investors leaving in droves here.
Yeah, in droves is the word. I mean, look, we had an empty homes tax, speculation tax, school taxes. We have vastly increasing property taxes. And then we have the killing of the short-term rental, the bread and breakfast attack, the draconian landlord and tenant legislation. And the result is investors are leaving, as you put it, leaving in droves, and developers are taking their properties off the market.
And that's the key. And I know you chronicle that on a regular basis. You talk to people in the business. But, yeah, we're seeing project after project either delayed or just, hey, forget about it. You know, and that's despite, you know, like as Michael Levy and I were talking about, pretty clear indication or at least 95% of the market says we've got another rate cut coming, maybe a couple more. So it's really interesting that rate decrease happens.
didn't at least result in some sort of big move into the real estate market residential side.
Well, I was talking to Carl Green from Green Mortgage, and he makes an interesting point. Psychologically, we are now all seem to be waiting for prices to come down. Last year, we jumped in, and now we're saying, "Well, just a minute, maybe." And in his view, we need a full 2% before it even makes a difference. Even then, the prime rate would go from 6.95% to 4.95%, and it won't be that big a difference to the market. So
We're in for some tougher times. Yeah, I mean, there's just so many aspects. And I'll say this, I don't want to put words in your mouth, but government is making the situation worse if I'm looking for affordability. You know, I'm looking for product out there. My gosh, I need a place to rent, for example. I just think it's been completely puzzling how they've done stuff that's the opposite of what was needed to be done to increase supply, make it easier. And of course, people can find that on ozbuzz.ca.
Thank you, Mike. Look, it's summertime, and I seem to always be negative. I'm not. I love it here, and I love the time when you can do nothing. But you know, Leslie Nielsen said, doing nothing is very hard to do. You never know when you're finished. Right?
By the way, we're not being negative. What I'm worried about, I'm being worried. I'm worried about people looking for affordable apartments. I'm looking for housing the people. So it's not negative. I am worried about these stats, and you've done a brilliant job at OzBuzz.ca chronicling what's going on there. Oz, thanks for taking the time. Talk to you next week. All the best to you. ♪
I want to bring Victor Adair in here right now. You can find him at victoradair.ca. Vic, I've got a couple of things I want to hit you with right off the bat. I was talking earlier with Luke Grohman about gold. So it's really fascinating. And my big thing is it's a buy on dips. I'm not a momentum trader. I don't chase it. I felt pretty good about that by the end of the week. Well, gold hit an all-time high in the middle of the week here. And by Friday's close, we had backed off about $90.
I pay a lot of attention, and we talked about this before, to positioning. And in the gold market, the speculators have got on their largest position since the Ukrainian invasion two years or so ago. The open interest in the futures markets has jumped 35% in just the past four weeks. So make a picture here.
People have really lurched into the gold market as it's made these new all-time highs. Now that it's backed up a bit, it may be anybody that got in too late on leverage may be in over his head.
And let me add one more thing, and it's something that you write about on VictorAdair.ca, is the sort of momentum, trading, selling begets more selling. Margin, as you just said, people have gone in and bothered more. The other one is, I don't want to let my profits go away. So you get some of that also. So it's going to be a fascinating market to watch. I haven't changed one bit, as Luke and I talked about, on a long-term basis.
But as you say, you know, these markets run away to the upside. You've got to pay attention because there are vulnerable at some point. Yeah, my focus, of course, is very short term. I mean, I was short gold from two days ago. And when I saw it make these new all-time highs and break down, and I'm comfortable with that. I've got stops in case something happens. It's just another trade for me. But it just seemed as though there was a situation here where across a lot of markets,
What I'm going to call risk assets. OK, that's the metals, whether it's the precious metals or copper, the stock market in particular. There's been a lot of capital gone into those markets. The positioning is very, very bullish and markets are ripe for correction. Certainly the story of the week has been what's happened in the Nasdaq. You know, it's it's a down about six and a half percent from the highs it made last week.
Well, my sort of straightforward warning to people is you can fall in love with the story. Copper is another example that you've written about on your blog. I mean, everything positive. We talked about it on Money Talks. That does not necessarily justify the price. That's what people really have to remember is that the story doesn't have to change, but the price has, and you've got to be careful. And as you said, the NASDAQ, you were on here.
two weeks ago and last week saying, you know what, you thought that rotation was coming. And we, you know, I know we talked about Kevin Muir and our friend, Tony Greer, that rotation was coming. Well, my goodness, it didn't have much of a week. That's for sure.
But the setup here, Mike, I mean, we made those lows in the stock market last October. And since then, you've had a very persistent, steady rally, you know, without hardly any kind of a correction. And people that were maybe on the outside looking in were thinking, oh,
geez i gotta get into this market i mean is it too late no i'm gonna get in i'm just gonna get in so we've had a lot of that kind of positioning there i've i saw the positioning of small speculators in the s&p futures was at the highest it's been since we had the rally from the covid lows in march of 2020 for the for the next uh well at least 12 12 months that the
speculators really came into that market, small speculators. And of course, then we had the correction in 2022. So,
Markets go up and down. When they have a run to the upside, they don't correct by going sideways, as Bob Farrell used to say. Yeah. Let me finish with the Canadian dollar because it's been really interesting talking about that huge short position. Speaking of positioning out there, huge short position. U.S. dollars seem to reverse a little bit this week to the upside. It had been dropping and then up.
What's your take on the Canadian? Yeah, the big short position, speculative short position in Canadian dollar has been tempered a little bit, but it's still large. The market's expecting the Bank of Canada cut rates again this coming week. And I think that is, I think that's really the Bank of Canada is worried about the mortgage payments that are coming up. They're trying to get interest rates down.
I'm not sure why those speculators are short, but as we've talked before, if the Canada, which is near two-year lows here, if it does start to break down, those shorts are going to be right. Sometimes positioning is something you fade. Other times, positioning is something you want to go with. Canada right now...
Usually takes its lead either from risk assets like the stock market, call it the S&P is my favorite barometer, or what other currencies are doing. If the euro is going up, for instance, the Canadian dollar is probably going up. If the S&P is going down, the Canada is probably going down. This week, Canada has been, again, in a very small range, but I think it's vulnerable.
Well, we'll check it out. Of course, we got that interest rate announcement as I talked with Mike Levy about earlier, but you don't have to wait for that. Go to victoradair.ca, victoradair.ca. Vic, you go out and have a terrific week. Thanks, Mike. Time now for this week's Goofy Award. You know, I can never tell if a politician is gaslighting us or they understand economics and finance, or are they assuming that we don't?
And personally, that's what drives me nuts. There's all this gaslighting. They say stuff that they know is misleading or is just simply not true. It really pushes a button of mine. I'm not sure if it does for you. But I want to give you a case in point. This week, Finance Minister Chrystia Freeland, repeating a theme that the government's always done before, is taking credit for that June interest rate cut. And of course, maybe one coming this week. But she stated in quotes, inflation in Canada fell to 2.7% in June.
For six months in a row, inflation has been within the Bank of Canada's target range of 1% to 3%. In June, the bank lowered interest rates, making Canada the first G7 country to do so. Our responsible economic and fiscal planning is working. Are you kidding me? The Bank of Canada lowered rates because inflation has fallen in the face of a weak economy. And you're boasting about it? Weak declining consumer demand. I mean, look at all the ways we can measure it.
As I mentioned earlier with Michael Levy, I think the market puts a 95% probability of another rate cut this Wednesday. It's not because the economy is strong.
I'm actually flabbergasted. He wants to take credit for the weak economic conditions that have seen youth unemployment, for example, 15 to 24 year olds. Their youth unemployment is 13.5% in June. Now, if you remove the two pandemic years, that's the worst since 2014. Overall, unemployment's jumped to 6.4% in June. And the forecast is it's going to raise for a rise further in July.
And note, job postings for construction, manufacturing, installation, maintenance, they're also down sharply. Since the 1970s, and you look at the trough to the peak, a 1.6% increase in unemployment has never happened without the economy going into recession.
That's the green light for the Bank of Canada, the lower rates. You look at long-term joblessness for people who want to work, it's also rising. Productivity has declined five of the last six quarters. On the housing front, as Ozzie and I were talking, the CMHC says our annual housing starts in June fell 9% compared to May.
Well, that takes the pressure off the Bank of Canada. They've been worrying that if they lower rates, there'll be a big boom in the housing market. Well, we've had sharp declines in sales, not just year over year, but well below the 10-year average, along with this sharp rise in listings.
And the Bank of Canada's latest surveys, well, they did it for individuals who are pessimistic and business who are also see economy as weak and are planning to spend less than their average. That's the kind of thing the bank's looking at and go, hey, we've got no risk in lowering rates and encouraging more inflation. I mean, there's just no inflationary fears. I've got to give you one more, though.
When it comes to Canadian households, TranUnion's latest report found 57% of Canadian households said their incomes are not keeping up with the current rate of inflation. 58% reporting they are not optimistic about the state of their household finances over the next 12 months. So let me repeat, the decline in interest rates is a response to a weak economy.
That's all the time we have this week. Hey, I want to remind you to go to Mike's money talks.ca. Love to see people signing up for five minutes with Mike's had some great stuff this past week. Great feedback also. And speaking of feedback, I truly appreciate it when you join us on money talks, tweets, or join us on Michael Campbell's money talks on Facebook, but especially when you recommend it to friends, there is just so much happening out there that never makes sense.
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