The Canadian Investor - Canada’s Economy: Better Than Expected or Worse Than It Looks?

Episode Date: June 6, 2026

In this episode of The Canadian Investor Podcast, Simon and Daniel Foch break down the increasingly confusing macro backdrop for Canadian investors. They discuss why Canada’s latest jobs report looked stronger than expected, but may actually make life harder for the Bank of Canada. They also compare today’s economy to the early 1990s recession, including the parallels around population growth, real estate, interest rates, employment trends, and household debt. Simon and Daniel also dig into bond yields, the risk of higher-for-longer rates, oil-driven inflation, consumer debt stress, rising delinquencies, and why Canadian households may be more vulnerable than the headline data suggests. They wrap up with a discussion on fiscal dominance, government spending, Canada’s trade challenges, and whether nation-building projects and AI infrastructure could provide a brighter long-term path for the economy. Watch the full video on Our New Youtube Channel! Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Asset Allocation ETFs | BMO Global Asset Management Sign up for Fiscal.ai for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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there's going to be some great opportunities for investors this has to be one of the biggest quarters I've seen from this company in quite some time there you're always we're back. Now I got to see if we're still on, are we still on Instagram? It looks like we're back on Instagram. I think we're good. Cool. All right. Yeah. Okay. Okay. Second time is time. Yeah. So, okay. So we were at like recession. So barely in a recession, right? Like one bad quarter, Q4 was bad. Q1 was not horrible, right? It was basically, I mean, like obviously you want to see economic growth, but it's not like, you know, massive drop in, in economic growth. No, exactly. And just to recap, because we restarted this live, we're going to be talking about the jobs numbers that we saw, of course, bloodbuster job numbers, at least for Canada, the U.S., also talking about bond yields out there going, and just as you mentioned, recession. So, yeah, my initial thoughts on the recession, I mean, it's interesting just looking back and trying to find parallels in history. And I dug into that.

And I know you did as well. So do you agree with me that the 1990s is probably the most similar? And there are some key differences. Don't get me wrong. But the one that stands out the most is what we're potentially seeing right now. Yeah, I think the 90s is a good comp. I mean, you had the population growth, like massive population growth. And I mean, the last time we set a population growth record was 1989.

It was 1.4%. And the first time we beat that was 2023. you saw house prices go up 30%, you know, double digits for several years in a row. Inflation was coming on pretty hard as a result of that. Population growth was running hot. People were piling into the real estate asset class, which we saw here in Canada in 2021, 2022. And then the central banks, basically in an effort to curb some of that behavior, started hiking rates.

And I think a lot of people, they dismiss the magnitude of rate cuts in favor. of the rate itself. Like, you know, people will say, oh, well, it's different because in, in the 90s, rates went to 8% or whatever. And it's like, well, rates started at 4%. And so they doubled. And we saw the same thing happen in present day, right? They went from 2% to 5 or 6%. And so I think that the magnitude, like, because the market doesn't necessarily care, like in the real state market especially, it doesn't really care what your interest rate is. They care what their total interest payable is and how that relates to their buying power. And so if you had a comparable magnitude of interest rate hikes, which you did, then you would get a comparable impact. Just because

the rates lower doesn't mean that there's any material difference. Your mortgage payment as a percentage of household income went up comparably. Your mortgage payments are going to jump comparably on the five-year renewals. And so that to me is kind of the setup. The one other thing, I'll add is, you know, you saw that big spike in immigration in 89 and in 23, 24. And then what happened was it organically started tapering off. Like, and policymakers started taking credit for it, right? They're like, you know, international student enrollment dropped like 80%. And then they're like, oh, we're going to cap international students because it's like, oh, there's an economic trend. We might as well take credit for it because it's already, it's a

populist thing, right? And that was even the Trudeau government. That was before Carney, right? And then temporary foreign workers, same thing. You started seeing temporary foreign workers because the promise of Canada's economy is no longer good. And so people stopped electing to move here to try and join Canada's labor force and be part of the economy or they started moving back. And you saw net negative non-perman resident growth in 90, 91. And we haven't seen that until present day where Canada's population is actually falling. So those things, I think, are what really tells me that the setup is comparable. And so the question is, like, do we end up with this long grinding recession that's not that

bad on paper, right? Like you get a couple of months that are okay, a couple of months that are really bad. And then you go to, you know, four years of very little economic growth. That feels worse to me than a fast recession where the central bank can come out with emergency rate cuts and try and stimulate their way out of the economy, right? Yeah, yeah, exactly. And I found like an interesting paper from this. how institute.

And yeah, they were kind of looking at that. And you can see, and I do like that they combined, they did the quarterly GDP, but they also combined like two quarters in a row. So you saw like a bit like you were saying, it's not like it was super deep for the most part. It was kind of whipsaw a little bit. And the most interesting thing, too,

that you didn't really touch on, but I know we talked about before that is the employment rate. So you kind of see employment rate starting, just kind of going in the 62% and going all the way down, slowly trickling down. And that's kind of what we've been seeing for the last couple of years. I know there's a lot of focus on the unemployment rate. And that's fine. I do, if I had to choose between the two, I'd choose employment rate over unemployment rate in terms of a data point.

Just because the unemployment rate excludes people that give up looking for jobs. And I think that just, to me, that never sat right. It just, you know, you give up because you can't find work. So you're excluded from the calculation. Like how does that make any sense? I don't think it makes any sense. I guess their justification is probably like, oh, people are lazy that are in that category, which may or may not be true.

But then some might be leaching or looking to leach on the system. But what we're seeing is definitely the same kind of trend. So I was pulling the data here and it's not as clean looking. but just to give a little bit of a perspective. So the employment rate kind of peaked around 62.5% and that was in 2023. And it's been steadily trickling down. And now we're sitting at 60.7 actually went up from 60.5 in April to 60.7. But it's been below 61 now for better part of a year, essentially.

Yeah. since February of 2025 and been kind of trending sideways since, which is not the best indicator. And employment rate just looks at the workforce in, I think, working age, so 15 plus. So I do like it in terms of an indicator more than unemployment. Yeah, I think, I mean, there's a couple of other ones like hours worked. Like when I started to find there was like a lot of volatility in the jobs reports. I would look at hours worked. I would look at payrolls, right?

Like LFS and Cepf, the payrolls, payrolls lags a couple of months. But like if you catch it up, there's never been like a bigger disparity between payrolls and Labor Force survey. Because like Labor Force surveys, it's incomplete by nature, right? Like it's they call people and ask them if they have a job. And I think the sample size is like, what is it? 4,000 or something. So I've never got the call.

But, but, you know, and then they cast it over the entire economy to try and come up with with an idea. So, so like, and you would, you would think. There's a reason it gets revised all the time, right? Right. Exactly. Exactly. And so, yeah, I think that they're, you know, your, the reliability of the data is probably a thing.

But even if we, even if we don't necessarily, even if we try not to discredit the data, let's say, I think, you know, it's one good month after after four bad months. I don't necessarily, like, it definitely makes the Bank of Canada's job a little bit harder. And it's not like, I mean, you were talking about Fed Fund futures and how the markets. basically pricing in hikes rather than cuts, but do we see, you know, the Bank of Canada having any room to cut now after this jobs report? Probably not. I mean, I don't think they did anyway. I think like, you know, the market's basically saying there's more room to go to hike than cut. But like now they're just, they're forced to hold and wait to see if the Fed does anything. I don't, I don't think the Fed's actually going to hike, but they have hiked into oil price

spikes and recessions before. So you never know. Yeah, I think there's no chance for the foreseeable future, at least the Bank of Canada. I mean, what have we like? learned from Tiff Maclin since he's been governor, especially after the long, like lower for longer. Yeah, he's very careful. Yeah, he's been, since then, he's been like one constant is, and you listen to Carolyn Rogers is we will go with the data. Yeah. These said, like, if there is one thing they've said time and time again at every single press conference, I believe, is that they will act based on the data and now they're probably seeing the data being pretty volatile to be quite frankly quite honest and i think they'll just take their time i think in their view is probably

going to be less of an evil to just stand path see how things develop and then react will they be reacting too late or reacting the wrong direction very possible but they'll justify with the data yeah no but at least they can justify it right they can just say you know you know know what, we went what we saw in the data, whether they have the right, whether they're looking at the right data. That's another question. I think for the most part, banks tend to put a lot more emphasis on lagging indicators. Yeah. And then I mean, I think that they, they were, well, like, they were way too late in, you know, in the COVID era, like on, on inflation. When, you know, like when they were telling us that inflation was transitory for such a long period of time,

it's like, well, even if it is, like transitory it faster by hiking rates, you know, like, Like don't, let's not sit here and let it go to nine when we're at four, right? And that's what they did. And so, yeah, I mean, it would make sense that they would be more prudent to respond to, to data. Like, it seems like the right decision for them to be making right now, to be honest. And I guess the bigger question is like, where's the Fed at, right? Like, you know, we were talking a little bit about, like oil prices still, I mean, they're flooding the market with strategic petroleum reserves, right?

So, but, you know, the Fed watch is like, what, 99% chance of a hike by the end of the year? 100% chance. Not even 99. You'd think they'd give themselves a little bit of leeway. But if you, I mean, I'm not a mathematician, but if you add up the 25 basis point increase probability of 97.96 and the 2.0450 basis point increased by then, pretty sure that equals 100. So, I mean, I like, I pulled up the chart so many times that I won't, I won't even bother again. But like Fed Fund futures don't have an exceptional track record of being correct.

No, they don't. So, you know, like I'm still, I'm still comfortable fading this, to be honest. Like, especially with wars coming in, you know, with all of the drama around Trump installing him basically because he was most likely to cut. Trump obviously wants rates to come down. But, you know, he's not behaving that way with Iran because, you know, the easiest way for the two easiest ways to get rates to come down or spend less money and don't go to war to increase oil prices probably right now, right? So like I could see that both, you know, all like the Fed and Bank of Canada are kind of stuck in a hire for longer environment and not and stuck sort of waiting for the market to give them

data that that allows them to justify stimulative policy, but I can't see them hiking personally. Like especially if you look at the consumer, right, like the U.S. especially, but Canada is pretty disparate too. Like in the U.S., I think, like, 50% of your consumer economy comes from the top 10% of people. And, like, the richer just getting richer. But the working poor and the middle class is basically being inflated away or, or, you know, their debt serviced away, especially in Canada. Debt service rates are pretty high. And, you know, I think you put some of the Equifax reports stuff in here. But yeah, it feels like to me that, like, they don't have room to, to hike unless they really want to blow stuff up. Yeah, I mean, I think it's hard to disagree with you,

But I think they tend to look or I'm sure they look at all the data, but I feel like they tend to put a bit more emphasis on the aggregate data, the averages over the median, for example. And just to show here, the U.S. two-year bond yield, this had the biggest move today. So it went. I mean, it keeps going up. So now it's up like 13 basis point. And this one is important because typically this will be a good indicator of where the Fed's fund rate will be going. So this one is jumping at, yeah, it's 4.17. And it was, yeah, right around four before the employment numbers came out.

And I think this is just, this is a market saying that, look, the employment numbers were better than expected. Oil prices remain pretty elevated. We're starting to get pretty concerned with inflation and we think the Fed will start getting concerned too. But so like oil driven inflation is like super outside of the scope of control of the Fed, right? or any central bank. Are they hiking to take steam out of the remainder of the economy so that it also doesn't put pressure on inflation to try it. Like you're killing inflation with the wrong tool, right? I think.

I don't know. I could be wrong. But like monetary policy has nothing to do with oil prices really. I don't like maybe not nothing, but not nearly as much as supply. They can't print oil. Yeah. Yeah. I imagine they've tried.

An argument for it for a rate increase could be. that maybe they want to make sure inflation doesn't get worse. So it's maybe a way to contain it beyond that price spike. I guess that could be an argument made because the last thing you'd want is on top of oil inflation is you get everything else starting increase regardless if it has oil input or not.

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to invest, head over to Questray.com, open and fund your account with code TCI and receive $50. Conditions apply. Yeah, I think like the other pieces, like, we're just at the beginning of the agricultural cycle right now, right? So, yeah. All your fall food inputs are going up. So, so like, fall food inflation should be a lot higher just because tractors are being filled with fuel costs that are significantly higher right now. Yeah, exactly. And like, I don't know everyone listening, but I don't know about you then. Food does sure seem like it's not going down in price. I think it's the highest inflation right now, right, full 0.3% or something? Something like that. Yeah. So can you imagine if it's getting worse? Clearly, the bottom of the cave will be struggling even more. And look, in terms of just to touch on bond yields again, so the Canada five year has jumped as well today. So not as much as the U.S.

but now it's up, looks like it's up about, yeah, close to 10 basis points. So 3.05 to 3.15. So I know that's when you keep close eye on on your end, especially when it comes to real estate. Yeah, like your fixed rates are not going to be giving any relief to all the mortgages that are renewing this year. And your fixed rates are not going to be giving any relief to the buyers in the market right now. I mean, as it stands, like actually, I don't know if I've pulled this chart up, but I'll put it. I'll pull it up if I can can get it up here. but CMHC puts out like your residential mortgage industry report and they show what, what rates that people are taking.

And your consumers right now are actually taking the variable rate more, most commonly, which I found it would be kind of interesting. So consumers basically were taking three or fixed this time last year and now actually mostly taking the variable rate. So consumers basically think that rates are they're going to fall in three years. I mean, pricing aside, right, obviously pricing and maybe exit liquidity like aside because A lot of people probably also take the variable so they have the option to sell with a lower penalty. But if you set aside those two incentives, like if we're just assuming this tells us something

about what consumers think are going to happen with rates, consumers are behaving as though they think rates are going to fall either immediately or at the latest within three years so they can renew at a lower rate, right? They're like you. They're just betting against the traders and the CME. Yeah. They're just doing a contrarian bet. They're like, you know what?

They're pricing at higher rates. We'll bet against that. Well, I just don't like, what, what scenario is where we, like, I guess the scenario is like oil prices end up high and the consumer can absorb them, right? Like, but the markets like, if the market's pricing and hikes and inflation, like right now the oil, like you said, oil prices is down, but like the market's pricing and inflation as if oil prices are up significantly from where we are. So that's the part that's kind of confused me. Yeah, I mean, you had and I can't remember where I saw that, but apparently. Generally major oil, like the majors, especially in the U.S., are starting to sound the alarm that supply is starting to run real low in terms of reserves and what was available.

And they seem to be really concerned that we could see now, like, the oil shock really ramping up in the next few weeks. Just going on memory there, but when you have these CEOs that clearly know the market and have a lot of data available to them that are starting to sound the alarm, I think the market is still a bit too rosy on that side of thing. And yeah, I think you could really see that ripple into the economy. And obviously you talked about food inflation, but just the inputs. I mean, it was pretty clear. And we talked about it. I don't know if it was the last recording with it or a couple of them ago. But you are starting to hear major companies that are outside.

or not in the oil sector, and I mentioned Walmart, that are saying, look, we're starting to see pressure on our costs. It's starting to trickle through. And this can't last that much longer until we start passing prices. So at some point, it's going to happen. And it's probably going to start happening in Q3, I would say, like substantially, if I had to guess. And so then the question is, can the consumer survive that inflation? Probably more in the U.S. than Canada. But even in the U.S., like, I don't know, like if you look at your,

outside of the 50% of consumption that that is from the rich, you know, yeah, like can your, can your lower 20 or lower 80% of the economy withstand a, you know, a five or six handle inflation rate? I don't like, I don't see that. I don't think so. I mean, they'll have to make tradeoffs, right? Like at the end of the day, that's what you do. Like, if you need gas for your job, then you're probably going to be cutting elsewhere. Yeah, well, like less vacations, right? Like less luxury goods, you know, less discretionary expenses. But that's still contractionary on the economy, right? Like how many, you know, so is your, so are you still of the opinion that we see demand destruction and rates are more likely to come down than up? Or like, are you, is the

CMA? Yeah, the really the problem is you have yes. Like, I think what you're saying are all valid points, But is that offset by the top of the K? And also is it offset by the massive amount of spending that we're seeing in tech right now? Yeah. That also is like I mentioned this on our last week, one, the AI stuff is that also materializes massively in in government spending for infrastructure, which so if you're if you're a bond trader, you're like, I can, I can charge these governments whatever I want. Like, you know, like on the rate, right?

Or I can pay whatever I want for bonds. I get them as cheap as I want because they need like, it's very clear. clear how much money they're going to have to spend to do all the things that they want to do. Yeah, and they're big amounts of money. Like literally this year, I think they're on track at least. Like, I think I talked about the big five names that are spending on AI infrastructure. So you have Microsoft, Google, meta, Amazon, and Oracle. I mean, they're well on track to exceed $750 billion this year alone. So is it a strategy that they'll be spending a trillion dollars next year? Probably not. You're seeing Google tapping equity markets. So now Google probably is starting maybe a trend. I'm not quite sure. But they even announced today that instead of tapping 80 billion, they've increased that to 85. Berkshire was one of the companies that kind of they got a deal done for 10 billion worth of that 80. But it's also showing that they're tapping the equity market, the debt market, and their own free cash flow. And that spending is not coming down anytime soon. So clearly,

that is a big plus for the economy. And that's why it's such a weird time right now, because you have like massive spending, bring up the economy, but then you also have pressure on the other end on consumers and households and businesses that need oil as an input and more and more have to restrain their spending.

So it's just really hard to gauge where this is going. I'll be very honest. Yeah, yeah, 100%. Some of the other stuff you wanted to chat on, I think you put the Equifax report in the notes, jobs. Do we, do we cover jobs? I guess like jobs, anything stand out to there? Yeah. So jobs, I mean, a lot of private sector job growth, which, you know, like the last couple of positive employment rent prints have mostly been public sector and mostly part time. And so it was

easy to poke holes and they weren't positive. This is like a pretty clean positive print. Yeah. Biggest, biggest, biggest gain was construction. So that kind of tells you, okay, well, I mean, they are seasonally adjusted, but, you know, beginning of your construction season, like May May hiring is typically all your furloughed workers come back, you know, start, you know, working on site. So there's that piece. The biggest loss was in retail, right? So as the consumer tapped out, our, if retailers are starting to, to reduce spending on

labor, those, those kind of stood out to me. Youth unemployment is still scary high. I think that, that one bothers me. But it improved. It improved. Yeah, it improved. Yeah. And I think that that's an interesting one.

Like, you look at your temporary foreign workers, right? Like temporary foreign worker population decreasing. Tim Hortons came out, right? What was the Tim Hortons thing? 10,000. Yeah, yeah. It's like funny because I mentioned earlier like that how policymakers kind of start to take, starts to take credit for a lot of these like organic things that are happening in in the economy. And like Tim Hordes is doing the same thing right now. Yeah. Where they're saying, oh, we're going to hire locals and scale back our temporary foreign workers. But that like the youth employment is such a clear read on the impact of temporary foreign workers, right? Like all the jobs that you and I used to do when we were kids like in our friends, right? Like work at Tim's or like work at McDonald's. Like I remember. Growing up, you know, we were like all go and go to, go to McDonald's and like order a bunch of crap to like mess with our friends or whatever, right?

So and now like I, I never see a kid working at any of those stores. So temporary foreign workers coming down, Tim Horton's now saying they're going to start hiring locals because they don't have temporary foreign workers to hire from anymore, I think, right? I just thought it's kind of funny. Yeah, I mean, I think it's going to help, right? Like I, I think I worked most of my time through university in college. I did not work at Tim Martins, but I worked at.

pizza pizza amongst other places. A lot of part-time job guide in a museum too. So those are great jobs when you're you're in school to be able to work part-time. And I think, you know, I think Tim Orne's just a latest example. I think it's just good PR that they're doing it. But also raises questions like why were they using it so much in the last couple years? Yeah, like nobody's nobody got worse PR than them for it. Right.

And you, you know, it's palpable. Like you can see it in. feel it like you, you know, when you're, when you're in a Tim Hortons. And I mean, to, it's to the point where like people were using terms like the timigrants and like, that's the whole temporary form. Oh really? Yeah. Yeah. So like they got, you know, they had a massive. I mean, somebody even just said in the, in the, in the, in the, in our comments. It says boy, it says boycott Tim's, right? And then, uh, yeah, Tim, Tim, and. Yeah, Tim, and so it's, it's kind of like, you know,

it's, it's funny in that regard. Like they, they were really, nobody, nobody was a, a worse beneficiary from the PR of the temporary foreign worker program than Tim Horton's. But they're aware of it and now trying to walk it back. Anyway, are there anything else on unemployment? I don't really think so, to be honest. I think that I'm interested to see if it gets revised. I'm interested to see what payrolls end up at for that month because they are pretty disparate. I'll try and find the chart from Ben Rabidoo, but like payrolls and LFS are so far apart right now.

Like they've never been this far apart. Yeah. Yeah. And I mean, what's interesting, too, about the service, government's. saw 20,000 increase. So I thought they were supposed to reduce that. So much for our layoffs. It is interesting though because like it's all accounting, right? Like it's just because So Carney is like reducing the public administration workforce, but he's hiring on like infrastructure and spending it on CapEx. Like I mean, he's obviously talented and pretty brilliant investment banker. He just like literally

was like, yeah, let's see if they're going to. Well, and I honestly think like the average person isn't going to catch that like the jobs are just moving from OPEC to CapEx to CapEx. Like maybe not the same people or whatever, but like... Didn't he do that for the budget too? He's like, oh, no, we're looking to almost balance the OPEG's budget. But the deficit is mostly because we're just spending on CAPEX. Yeah, it's really. It's pure investment banking 101, man.

It's just creative accounting. And like, I mean, honestly, like, if you can sell that to retail investors and funds in 90% of cases you can, right, then as an investment banker, then you're probably going to have a hard equally easy time selling it to the voting public in a place like Canada. I mean, his approval ratings are like super high. And so like it's just funny, right? It's also funny.

It keeps taking jabs at the Trudeau government before. Oh, yeah. Oh, he just, it's, I mean, I find it hilarious because it's still the same party, but I guess they have taken a different direction. But I guess you were talking about the Equifax survey. So Canadian Consumer Dead. So that came out. That was for Q1, 2026. So Canadian Consumer Debt was up 3.8% year over year, reached 2.6.

$460,6 trillion, but non-mortgage debt fell by $487 million. Overall, it seems like Canadians are trying to rein in the debt a little bit. New credit card originations hit a four-year low, but there was growth in the subprime and near-prime segment. So that's not the best kind of news, just because it also shows that that bottom of the king may be needing a bit more credit, but it's also the more at-risk people. And you're also seeing the delinquencies rise. So the 90-day delinquency rate by balance rose over 4% you over a year. And by volume it rose by more than 2% you over a year.

So overall, it's not the most encouraging survey. Miss payments are not exploding, but they still remain elevated. In the quarter, 1.5 million Canadian missed at least one credit payment. and for Q1. Having cash on hand is essential for any business. Traditional business accounts hit you with high fees while paying little to no interest on the cash you need for day-to-day operations.

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Did you see that Bank of Canada report? I think I sent it to you, like consumer paths at mortgage delinquency. Yeah, yeah. So do you want to explain or do you want me to explain what that is? Yeah, I can explain it because I think it lends itself really like well. to this. So basically the Bank of Canada put out this report called Consumers Path to Mortgage Delinquency. And in it, I mean, it's basically like it's a staff working paper. So it's a lot of like pretty heavy like math and economics. But basically what they show you is like on the path to somebody

going, it shows like people who end up being delinquent, which is your solid lines here. It shows the rate of credit use. So like how how they're increasing credit use creeps up towards them and it's credit cards and then personal lines of credit. And then this is the crazy one, right? Like it shows you how they start piling on, or this is the delinquency rate, and then they also have the utilization rates and how they start basically just like ramping up. So what happens is people start going delinquent on credit products like the ones that you just mentioned. They, their credit gets damaged.

Well, first they rack up a bunch of credit card debt. And then they, you know, if your credit utilization rate goes way higher than you, your credit's already like starting to get damaged, right? And then eventually you go delinquent. and then your credit's really damaged. And so now you have no exits, right? So if you do end up going delinquent on your mortgage or you're, you're tight eventually, like, you know, why are people rocking up credit cards?

Well, they can't afford life because their mortgage payment's too high or whatever. So they start piling on and dealing with inflation by taking on debt. And then eventually they run out a room and they can't pay their mortgage. They can't refi out, right? They can't use more. You can't get more debt because your credit's damaged from piling on too much debt. And then you end up going delinquent. And this lends itself to the, to the Equifax report that you just mentioned.

And I'll pull up some charts from that as well because there's some that stood out to me. But, you know, we're just seeing, oh, and that process takes two years based on the Bank of Canada's analysis. Right. So we're just seeing the, the beginning of the rise of utilization rates and delinquency rates. That to me is like, okay, we, we're just like, we're not even getting, we're not even close to people mortgage delinquencies. if those indicators tell us anything. Yeah, I mean, it kind of confirms what a lot of people have been saying for years is people will make their mortgage payments until they really can't, right? So they will stop making other payments well before they can't make their mortgage payments.

And that paper essentially confirms that. But what's really interesting is what you mentioned is kind of that two-year gap that they found. And really the one of the big takeaways from the Equifax report is things are not looking good in three specific provinces. And I know you know which ones they are, but it's Ontario, BC. The third one, I was kind of surprised. I guess I don't pay as much attention to Manitoba. But Ontario, B.C., so the two provinces where the real estate really got out of control, I guess. You tell me whether that's an appropriate term or not.

And then you have Quebec, Saskatchewan, Nova Scotia and New Brunswick that actually improved on those delinquency. Yeah. I mean, Ontario, like the Ontario delinquency and also they had, I got to find it. So where was it? They should have Ontario XGTA and GTA. Yeah, they should. Yeah, I feel like that's probably skews things because, I mean, Ottawa's market has gone down, but it's, I feel like it's kind of weird to group it with Toronto. I mean, look at it like, look at your 90 day delinquency rates on mortgage here. So 90 day delinquency rate in Ontario versus everywhere else in the country. It's just like, it's just astounding. Right. I mean, BC's creepy up. But like BC is like, you know, it's like it's there. But it's, I mean, it's still below the national average. I mean, I guess the national average is obviously just purely skewed by Ontario, but that's like all households. But yeah, it says Ontario and BC face the strongest and most persistent increase in delinquency rates. I mean, the jump up here is is is just massive in in Ontario. And. And, and it says,

There was another one that showed, where was it? It was Ontario homeowner, there it is, homeowner insolvency volumes, jumped by more than 11% from the previous quarter with over 90% of these individuals choosing consumer proposals over bankruptcy. So homeowner insolvency volumes up 11% quarter over quarter, not even year over year. So in a three month period. Yeah. Scary.

For Ontario. Not scary for like, but you know, it's not looking good. for Ontario. No, exactly. And another survey that kind of confirms similar thing, it's a bit different, but it's, I don't know if you looked at that one, the MNP Consumer Debt Index. Yeah. And yeah, still same kind of thing, right? Canadians are still feeling financially squeeze. The debt index held steady, so they have a wave calculated in it. I won't go into detail there, but there's definitely cost of living pressure points. So one key point here is 73% of those surveys say they're cutting back on spending.

And, you know, they're saying also around that same percentage that rising prices for essentials like food and gas are straining their finances. And that starts to get concerning. And there's 43% of Canadian that are $200 or less away from financial insolvency. So that kind of ties into that Equifax survey that there's still a big chunk of the population that is in a pretty tight spot despite, you know, some encouraging job numbers. I think that's more of, yeah, it's better than bad job numbers, but it still won't make up for a lot of the data points that we're seeing right now.

Yeah, yeah. Yeah, that's my thought, too, is like there's no, like, other than a job sprint, there's really no bright spots in Canada's economy right now. I think it just takes time for it to accumulate negative data points. I still think the Bank of Canada is stuck, though. Like, I think that they're stuck. They're not like, even if we get, unless we get like, okay, this is a clear economic emergency and we're willing to sacrifice the Canadian dollar to solve it, they're not going to cut ahead of the Fed, I think, right? Like, and we just don't have that yet.

I think we're going to have a steady grind down of, you know, some things getting worse, but not bad enough that they're going to come out swinging. That's my, that's my read on Bank of Canada's positioning right now. What do you think? Yeah, yeah, I think so. I mean, again, I think it goes back to Tiff Macklin, right? it was there during the last bout of inflation when we saw inflation spike. What did it spike to? Like 9%?

8. Yeah, 9. I think it was 9 in the states. Like CPI always reads like, like, about 20% lower than the US basket. It's funny because like when, you know, like when the government was like, oh, we have the lowest inflation in the G7. It's like, well, like they're not like CPI isn't the same in every country. Right.

So you can't like that. You can't say that, right? But I think we peaked in like the eighths and nines. I think it was eight peaked in the eights in Canada. Do we really think Mackleman will want to risk having another bow of inflation? Even if he can't really control it, he's going to probably try everything he can to control it, even if we're starting to see a whole lot of indicators showing that there's a whole lot of stress.

Canadians household are indebted. I think what was at 177% the latest? So well, but that's like that's their problem to be honest. Like that's the thing. Like he like his problem is inflation. Like his his mandate is to control inflation. That's it. Like he doesn't care if if like realistically it does suck. It sucks for all those people that they can't withstand higher rates. But like it's not his mandate to save homeowners. Right. Like the Fed, the Fed will do enough on a policy perspective to try and do that. Though I think that they will try and they'll try and soften like they'll try and do a soft landing to not overshoot and cause deflation.

right, which I had like deflation, probably not a likely outcome, but like too little inflation, I think, but I, I can't see that like, I can't see him all of a sudden caring and empathizing with all of these, you know, people who just levered up up and, you know, had horrible, like we, you need economic Darwinism to take place. You need people to realize that those models aren't safe or sustainable and that that's not a good way to behave as a consumer in order for our economy to heal and go back to, you know, a proper gross scenario. And we, like, Unless I'm wrong, like on the math, like, we can't really grow as an economy with our household debt to income at 177% unless the like the return on capital that you can get

from the economy is higher than the return or the cost of capital that you're borrowing, your 177 debt to income. So your wage growth needs to outpace that. Your GDP growth needs to outpace that. And neither of those things are taking place right now. So we're always going to have to pay, you have to face the music or whatever the right term is at some point because you're borrowing from your future self, right?

And right now we're just getting to the point where we're like kind of paying, we're paying the price for the debt binge that we started when Carney was central banker, really, like, you know, 08, everyone else de leveraged and Canadians started levering up. I don't see how we get our way out of this unless Canadians starts to de leverage. And they're not, they're not behavior. They did. I was feeling like hopeful when we came down from like 188, to 173 or something

and then we started up like on more debt man I'll pull the chart up it's like holy crap anyway well I mean I think a lot of people are just stuck in that situation where they the only option

they or at least I mean that the thing they have is just using that to pay debt which is never a good good situation to be in it you can't solve a debt problem with a debt problem as far as my I know I know

I mean but that's what governments do right and Canadians too like you know we keep like look at this chart right like it'll go to 08 like UK and the US look at the de-leveraging that took place and then look at Canada like we just started climbing that was like when you know we just started our addiction to credit and so we if we keep as individuals keep piling on debt we also have the same problem that the government does which is at some at some point you got unless people are just assuming that they're just going to outlive the debt you know and like oh whatever it's my kids problem or like you know my state's problem like sorry kids we're not as rich

you thought I mean you can deflate it away right that's high that's yeah that's yeah if you have a high enough inflation and wage growth you can definitely deflate that dead away but then that has other consequences and we had a question like what would happen if

Canada said we're broke and your bonds are getting chopped in half sorry I mean it's a good what if it would never happen because they will print before I mean historically not just Canada about countries that can issue their own currency and especially issue bonds in their own currency, they'll never pretty much default, right? Well, they all like nobody, nobody comes out and says it, but they all believe in modern

monetary theory, then that they can just print money into private savings and that's good for the economy and that they will eventually have the mechanism of being able to tax that wealth back out of the economy. But, you know, like, that's what I like, I don't think that any, any policymaker believes anything else, right? Like ever since that modern, have you watched the documentary on that, by the way? Is it called Finding the Money, I think?

No, I haven't. It's so good, man, like to just understand. Like, I'm, I don't believe that modern monetary theory is like a good policy choice, but like the math of it is obvious. Like, it, you know, it's like, yes, like if you print money into, and it goes into private savings and it gets, yes, it's obviously going to exacerbate disparity. That's the problem. but it's also not false.

Like it's, you know, they put money in there and then everybody ends up getting richer. Like, you know, and the economy ends up being more productive because you create the thing and then you measure the economy with the thing, right? Like, I don't know. It's just kind of funny. But do you think, yeah, I don't think it would have ever happen. I mean, what would happen if it was chopped in half? Probably a pretty severe recession, if not depression, right?

Like, I think that would be, it would be long term. it would probably be a better outcome than just inflating the debt away and ever so increasing the money supply and inflation, but no politician or central banker in Canada would, I don't think they would ever want to do that. Like they'll always choose the soft default, which is another way of just, yeah, just creating inflation, devaluing the debt over long periods of time. That's why there's an inflation target. That's why price stability is, I'm not sure why they use that word.

It just makes no sense. Like, stable prices does not mean the increase 2% per year. Right. It means they're stable. It's just, I laugh every time they talk about that because, like, how can you talk about stable prices? Yeah. Yeah. These guys need to hire branding experts.

Yeah. What else did we want to get through that we haven't covered yet? Well, I think one of the really interesting things with the setup right. now is just the trade realities. Like obviously the Canada and U.S. are in trade negotiations right now, but the Canada-US free trade agreement came in, in effect, on January 1st, 1989. So that was a new trade relationship, of course. It was very different back then. We were accelerating globalization, which started more, I think, in the 80s, and then that accelerated, of course, in the 1990s. But the reality, it was a different trade environment to what we had been doing.

used to. And I think now we're just seeing the other end of that. We're going from, you know, a lot of dependence on the U.S. and Canada was much less dependent on the U.S. prior to that Canada-U.S. free trade agreement became more independent as a side effect of that. And now we're kind of seeing the other side of things where we're trending towards more protectionism, Canada trying to make trade relationships or divert some trade with other countries other than the U.S. But it's still, trade different trade realities. And that, yeah, it's just logistics to me. Like, it's so easy to say, like, oh, we should, we should diversify our trading partners. Like, you know, we should diversify before we diversify our trading partners, probably our economy, right? Like, we should,

we should also make interprovincial trade easier? Yeah, like, sure, should we trade other, other places? Where it makes sense. How many cases does it make sense? Like, where can we actually be competitive with our currency, with our labor costs, with the costs of our goods, And the logistics costs of getting goods halfway around the world, right, like from either Canada or- With their natural advantages too, right? Right. Yeah. Well, and like, and then, okay, like, let's say we want to start processing and refining our oil

and trading it to other places from Canadian ports. We don't have the ability to process our own oil. Like, it goes to the U.S. And then the U.S. makes the money exporting it. So, you know, it's like, we're not. I don't, it's just like the logistics are, to me, it's like, do you want to drive something across the border or put something on a train and push it across the border at a way lower cost per good for, or do you want to put it a bunch of them on a ship? And don't get me wrong,

like shipping is actually a very cheap way to move goods, but it's still not logistically the same as pushing something across the border on a train. And that, I think that it's just like, yeah, everything makes sense other than geography to me. I don't know. It's hard for us to be competitive. That's the easy way to say. It's not a stupid idea. It's just very difficult for us to be competitive in markets that are far away. Whereas it's way easier for us to be competitive in a market that we're very close to. Yeah, for sure. I mean, on the oil front, we also shot herself in the foot for a few decades in terms. We could have been very competitive. And especially, I think right now, we have a window of opportunity with what's happening in the Middle East. We talked about that

quite a few times where even if you're not as competitive as what is available in the Middle East, security of supply, just countries are putting more and more a premium on that. And they're willing to pay a premium if they can secure a supply, a more consistent supply. And it is something that we'll have to see whether the Carney government comes through for that. But I think, I mean, my whole point there was just to show that, yes, there were some trade uncertainties back then, it was different than right now. I think Canada benefited as a whole a bit more, but there were definitely industries, especially manufacturing, that took a big hit

because things were just more efficient in the U.S. and they lost jobs to the U.S. So you saw some disruptions back then. And of course, right now you're seeing disruptions because some industries just can't be as competitive when their main market is the U.S. when you factor in those tariffs. Yeah, I think, I mean, you go back to the 1990s comparison where we started at the top of the show. And like, I think that that period of time when, was when Canadian manufacturing basically got hollowed out, right?

Because of comparable economic setups. And then I think the, like, you know, what was remaining pretty much got crushed in 08 when the Canadian dollar was trading higher than the USD for a period of time. And like, why would anybody buy from a Canadian consumer when the currency, you know, You had the exchange, like your Forex just made it uncompelling. So, yeah, it's a weird setup. I think we're not in an exceptionally compelling. Like to imagine that we're going to resurrect Canada's economy on a manufacturing basis,

this doesn't make a ton of sense to me. I feel like it really has to come from natural resources. Like, why don't we lean into where we are the most well positioned on earth to be successful or second or, you know, I mean, well, I think Russia is, you place that as more. I think we're number two. Yeah, Russia has the most. but like, I don't know, it doesn't seem like a lot of people want to trade with Russia right now. No, and I guess maybe a way to finish it.

I know we talked about government debt, but I have a question for you. How much flexibility do central banks have, like, whether it's a big OC or the Fed? I mean, governments are spending. Like, are we just not entering a fiscal dominance? That's what I've said for a while. Like, I felt like we were in a period of fiscal dominance. Like, who was it? Was it, I think it was it Powell when, I can't remember who was Treasury Secretary.

he was at Yellen. And he was like, they were talking about rates and he's like, I have to remind you like, I'm not the one spending the money, you know? Like. And I agree, man. And this is like where governments are, I mean, Rich Diaz from the Looney Hour podcast makes this point all the time. He's like, you know a really good way to, it's obviously not going to happen, but you know, a really good way to reduce the cost of borrowing is stop spending like drunken sailors. Like, you know, stop like, it's a pretty easy way to do it. So yeah, is the Fed losing control? I mean, in the U.S., like clear fiscal dominance, I would say, and it's clearly the inflationary force, how much can they do with the Fed funds rate to really slow that inflationary impact of all the

spending? Probably not a ton. Canada, the same thing. I mean, you literally have a former central banker of two of the largest economies in the world running the fiscal side and believing that he can call the shots and behaving as such. That's going to change the effectiveness of both the, or at least in Canada, the effectiveness of what the Bank of Canada can do with the policy side. Yeah, because if you start including provincial government debt along with so total government debt to GDP, like it is much higher than right now than it was in the 1990s. Yeah. A lot of people focus on the federal debt, but let's be honest, like if provinces start defaulting,

do we not think the Bank of Canada won't step in as a buyer of last resort? Of course they will. On sub-sovereign, yeah. Like it is funny because it's funny because Canada always says like, oh, like Canadian policymakers are always like, oh, we have the lowest, you know, the sovereign debt in the G7 or whatever. It's like, yeah, because you're excluding subsovereign debt. Like, you know, it's like that would be like saying the EU has the lowest sovereign debt in, in the world because they're the EU. But they, you forget about all the other country. Because like we're like the way that our, our debt structure is set up is that we have, you know, the sovereign and sub sovereign similar to the EU, right?

So I think it is, uh, man, I mean, it's like. They would of course step in, though. Yeah, they would step in. Like, there's no chance they wouldn't. Or the Fed would and then, like, they would, they would do some sort of swap where the Fed would set, like the Canadian federal government would step in, backstop the provinces and then the central bank would backstop them. Yeah. It's all. But that is essentially the setup we're in right now.

I mean, there's no way. And look, I can understand Carney in terms of the spending and those projects. and building Canadian resiliency, like, look, I think there's some good arguments to be made there. But the more you spend, the more this becomes unsustainable. There has to be a release valve, like, somehow, right? Either it's going to be the currency or it's going to be the debt market, like something will have to give and at some point they will have to choose. Or the release valve is that you're crushing the population who cannot afford the, you know,

Like the consumer is ultimately, like who pays for the budget, right? Like who pays for deficits? Consumers. And so the release valve is that you have to tax consumers more and consumers have to are the ones who actually have to bear these higher rates. Like again, who services the debt? Well, taxpayers do. Right.

So that's the current release valve. I don't, and how long can they push the consumer by eroding their after tax income and and eroding their, or inflating their cost of living, we're about to find out, man, because they're not, they're not stopping, honestly. And I think, like, I mean, historically,

this, like, you know, this always leads to a revolution. Not to say that I don't think we have a revolution in us in Canada, but, you know, historically, like, you get disparity of this level. When do you get to civil unrest and all this stuff?

I don't know. It's weird. It's like, uh, yeah. Let's finish on a positive note. Anything, uh, in the markets right now?

Oh, I mean, like, JobSprin was a bright spot. It surprised me to the upside. And I, and I, and I'm not, I won't try and belittle it. I think that that's good. You know, I think that, uh, Canada's AI strategy was interesting. Curious to see how that plays out. We can, we can talk about that maybe on another episode, but I would say like, if we can figure out how to get past our own like bureaucracy and red tape, I feel like

Canada could actually do exceptionally well with a lot of these nation building projects, are we going to do that as the big question. And I, and I think like, you know, like, Carney clearly has a pretty low tolerance for BS and, and like, you know, the bureaucracy, et cetera. So is he going to start like really, really using more strength to push through some of that crap to, because like otherwise he's going to run out of room to actually execute anything within a term, you know? You know, he talks about like all of these projects. It's like, well, those projects take three years just to get permanent and you know, you need to spend millions or billions on consultants and this and that and blah, blah, and, you know, do we see positive direction in Canada becoming less bureaucratic as a.

result of that that probably that would be my hope that's the bright spot I think right that yeah nation yeah I think so yeah and I mean we've talked about a lot about spending and honestly look at least right now we're seeing I think we've been spending a whole lot over the last what decade plus at least now I think we're spending on things that will probably provide some long-term benefits to the country or more significant than what we were doing like 10 plus years ago. So I think that's a, that's a positive for me. And, you know, the other positive of people looking at stocks, I mean, the NASDAG is down 3% today. So if you're looking. Yeah, stock sales. So I'm not saying that stocks are, especially not tech stocks are cheap, but it can create some

opportunities, right? So on the Canadian investor podcast, like people, we talk about investment. So there could be some good opportunities, especially right now because just a good job print can do that, can bring the markets down. So it's the kind of good news, bad news type of deal. Yeah, 100%. Cool. Yeah, let's leave it there. And I'll see you again next Friday. Thanks for everybody to tuning in. These lives are fun, man. We had a couple of people say, you know, in the comments, thanks for everybody who is there, like in the comment section. Yeah, thank you for joining. That they, that they like these unscripted episodes. So I guess we'll have to keep them up. Yeah. It's funny. Like, I spent like three, four hours researching yesterday. And I think we only covered part of it,

but it's still fun. Like even if we got enough material. Yeah, we got enough material for next week anyway. I mean, it's not like, let's see how much stuff changes between now and then how much more we got to add. But yeah, we'll leave it there and we can cover the rest of it next week. Sounds good. The Canadian Investor podcast should not be construed as investment or financial advice. The host and guest featured may own securities or assets discussed on this podcast.

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