September 22 (Athens – Saturday morning)

On Friday, markets rebounded a bit as the S&P 500 was up 0.55% and Toronto was up 0.15%.

The Canada 5 year bond yield is at 4.25% and mortgage rates are once again on the rise. This is not good news for the markets. And it’s horrible for those with large mortgages that are going be renewing. Many people will see their mortgage payments rise by 50% and more. There WILL be collateral damage to smaller private lenders for sure. The big banks will likely not suffer too much and in any case are almost certain to rebound over the longer term.

Canadian Western Bank is fundamentally not as profitable (ROE) as the big banks for various reasons. But I do like its chances to out perform in the near term becasue if has almost no unsecured personal loans such as credit cards. It does have a residential mortgage business but I am told it never offered any variable rate mortgages. It will face some defaults but in most cases the house will still be worth more than the mortgage owed.

Okay, a few random topics for this weekend post:

With the massively higher interest that people and businesses are already paying (and more to come) there has not been much discussion of who benefits. It’s not primarily the banks and their share owners – look at banks share prices – mostly down. The interest mostly flows through the bank to various depositors. Just look at the massively higher GIC rates and the daily interest available in brokerage accounts (see information on this at the bottom of the stock / investment table on the subscriber home page). Pension funds and money market funds are collecting massively higher interest compared to two years ago.

Sadly, it is younger people that are facing the huge increase in mortgage rates and it is often mostly older people collecting the higher GIC rates. I don’t begrudge that and it includes me. But it amounts to a massive generational wealth transfer in the opposite direction to the one that is usually talked about. First many or most – but certainly not all- boomers benefited from massively higher home prices and it was younger people having to pay the higher pries and now mostly the same home owning boomers are collecting far higher interest that is indirectly flowing in from younger people with mortgages. This is not a good thing for our society.

In my travels this past year be it to Maui in January, Ontario in May, Maritimes in August and now Athens what I observe is most of the people on the planes are seniors or close to it and frankly they are mostly white too. Not many young people traveling for leisure and definitely not many with young children. Young people often can’t afford children much less to travel with them by plane. Yes, there are also a lot of seniors who struggle. But there is a large contingent that is very well off indeed. I don’t begrudge the well off but I do think the young people are getting a raw deal in a lot of cases.

Okay, next random topic – Canadian Pension Plans and their funded status. I have not seen any mention that these higher interest rates are massively improving the funded status of the big Canadian pensions. Ontario’s Teachers Pension Plan, the federal employee pension plan, Alberta’s government pension plans etc. These were already mostly more than 100% funded because contribution rates were massively increased in the past 25 years in response to lower interest rates. In addition the calculations of the funded status are conservative by law. The calculations use bond interest levels even though most of the money earns far higher in equities. The bottom line is that most of these pensions will now be extremely well funded. Most big corporate pensions (there are some left like the rail roads and utilities) are also extremely well funded especially with the higher interest rates. Oh look, another win for the seniors! (Not all seniors).

Okay, moving on to talk about inflation. It’s awful. The best we can do as individual consumers is to try to vote against it with our wallets. Most of use are not coupon clippers but maybe we should be if we have time. And let’s all try to shop around more and simply refuse to pay the highest prices. Wait for a sale. Buy the cheaper store brand. Review that cable bill with all the channels we never watch and cut it back. Check out Dollarama. It all takes time but if enough people do this it will absolutely have an impact. The sooner inflation can be tamed, the sooner interest rates can start to come back down.

Next topic Athens. What I observe is a sprawling low to mid rise City. No tall buildings are allowed in order not to block the views of the Parthenon. Athens is clogged with cars and motorcycles and has many narrow streets. Downtown traffic moves pretty slow. Cars seem pretty inconvenient here and yet people drive. It sems clear that people value having their own car. It’s going to be a long time before ride-sharing and driverless cars ever get most people to give up their affinity to drive their own vehicle. I see almost no bicycles downtown core. The City appears not to accommodate them and it may be a cultural thing. Motorcycles (mostly scooter style) are extremely popular and are allowed to lane split and there appears to be a lot of free street parking dedicated to them. Restaurant meals are cheaper here than in Canada. Portions can be massive too. I’m not sure how they manage to offer the better prices but being very busy might be part of the answer. Locals apparently are not expected to tip. But tourists are expected to usually tip 10 to 15%. Service was prompt and friendly – these people hustle! Everyone seems to speak English at least to us tourists. English speakers are truly privileged that way. We should be thankful. Imagine going to other countries adn we just start talking English expecting the locals to respond in English – and they usually do. There seems to be big use of cash and less use of cards. Restaurants did not bring debit machines to the table (maybe if asked they would?), we paid cash. The City was bustling but is generally pretty run down. Many (or most) older buildings appear to need work and not much work is going on. When it comes to restaurants they appear to be almost all private, not chains. A lot of the retail also appears to be local shop owners but certainly some of the big chains are here. I did see one Starbucks and one McDonald’s near our Hotel (in main tourist area) but definitly not a big proliferations of those two (yet?). What else? I found the City to be clean and I think very safe. Anyhow that’s just my impressions of Athens for those interested and its based on just two days here, so take it with a grain of salt. Or just come and see for yourself.

I’m active on twitter ( You can follow me there @investorsfriend for lots more of these type of comments. See link to twitter above.




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