Bombardier Inc. T.BBD.A

Bank of Canada

[clubhouse19]

Expected to raise interest rates by .75 
Hotter inflation than expected.

Not good for stocks overall.

Not a good time to be on margin for sure.

[flamingogold]

Equity markets have the next rate increase mostly priced in. What's not priced in is in real estate. Buyers have dried up and the sellers are unwilling to drop their ask. The canyon is widening as buyer FOMO turns into JOMO... the Joy of Missing Out on real estate prices falling another 30% at least from here.

[BBDB859]

I'm in total agreement with assesment Flamingo of a 30% from here in TO. In fact that already on the heals of a 15% initial drop since March. I think the house flipping, because of low interest was the biggest cause for the housing inflation here in TO. Coupled with the foreign (Hong Kong) demand. But then that's JMHO of course. Cheers

[clubhouse19]

859 The house flipping is like trading in stocks. In fact you may see soon as the interest rates rise, people having to short sell there homes because they will not be able to service their mortgage if it is not fixed for a good length of time.  

[BBDB859]

Funny you said that Club. As I was writing the post I was making the same analogy. There are definitely lots of similarities. 

[flamingogold]

859, there is no thinking required lol... interest rates and real estate prices are inversely related. It is no coincidene that the apex of real estate prices occurred during covid when interest rates crashed to historical lows. Going back 40 years when borrowing rates were double digits close to 20%, the opposite was true. On an adjusted inflation basis, home prices were at their lows.

[PabloLafortune]

With the caveat that new immigrants are buying houses with cash - they don't care about interest rates, they just want to get out from where they're from.......and start a new life in Canada.. you didn't have that factor to contend with 40 years ago. Just the comment from TD CFO at the last quarterlies was an eye opener. 

[BBDB859]

Hey Pablo. That's partially right. It's true on the Chinese/Hongkongnese population Immigrating here. As a matter of fact those wealthy groups are still buying for Cash here in TO. But that kind of wealthy Immigrant Immigration, is not the target now by the feds.. The Ukranian type of poor Immigration targeted will be problematic for us. That's Trudo's plan. To bring the $15.00

[Shamhorish]

those were dark days, when mortgage rate reached 18-20% let us hope bank of canada or the fed do not have a hiddin agenda and will drive interest rate to those carzy levels, even 10% rate will have drastic effect on the other hand, if i remeber well, BoC to have a further 75bp of hikes, bringing the overnight rate to 4% in the fourth quarter of 2022, dropping to 3.75% in the third

[BBDB859]

They're dreaming in technicolor if the Feds think that they're going to reduce the Inflation rate to 2% next year. If they're going to drop rates in 2023 the way some suggest, then? Inflation will keep rising from the current 8%, to 10 to 12% by the end of 2023. Btw. where did you read that Sham? No, the overnight rate will go to 5%, even higher if they have to, in 1 to 2 years from

[Transit77]

I see double digit interest rates coming. Housing will take a serious wipe out. Going to be dark days ahead.

[johnney]

Hey Pal, nothing is impossible, what we may think, and what they they will do, is very different! If they didn't bleed enough the population, they will continue to go on, and we have nothing to cry about it!!

[BBDB859]

You're right buddy they gave us free money up till now to keep us quiet. Now they'll just take it from us. They're used to stealing from the public. They do what ever they want.

[Shamhorish]

IMO,  there is no such thing as free money many reasons contributed to lowering interest rate, most of it was declared to mr and mdam every one one of the the hiddin ones was to raise real estate value extimated by the cities, by encouraging people to buy properties, and reals estate was on fire, prices doubeled or trippelled in some case and that is what they wanted so they can do new city

[bicente]

Montreal residents are receiving their property assessments as of today and some of them have seen their property double  in value since last assessment . The city says they will not raise taxes because they will lower the taxation rate but we all know what comes next ... costs for owning property will keep going higher and it's nothing new , my dad paid 23% in interest rate and survived

[flamingogold]

My dad was buying commercial real estate in the 70's and 80's with interest rates close to 20%. Properties were cheap compared to annual household income, roughly 3x which is the traditional average. Up to the peak this year, real estate values were up to 15x annual household income. Surviving real estate corrections depends on which side of the interest rate battle one is one. It is

[BBDB859]

Well said Flamingo. My sentiments exactly. One can't explain it simpler than that. This recession is going to be the shake down for everyone that overpayed. We haven't even started it yet. It (rate increases) only started in March/22. Cheers

[gas61di56]

Flamingo, your father seems like a wise man. Unfortunately the young generation that just bought their 1st house will find it hard to make both ends meet when their mortgages will be renewed especially the ones that bought a year ago. I know some that bought on a variable rates even though I was telling them it wasn't the time to go variable. Variable IMO should be taken when interests are

[flamingogold]

My parents arrived from Europe in the early 60's with a suitcase in hand and a few bucks in their pocket and passed away as millionaires and no debt. I have two millennial children, both of whom are renting because they understand the inverse relationship of rates and house prices and that the FOMO would eventually end. In a few years when the average price drops another 30% from here, it will

[gas61di56]

Time is often a good tool...

[BBDB859]

Ya. I think that we're going to be in this recession for 2 to 3 years for sure here in Canada. This Inflation is stubborn.

[flamingogold]

Housing recession... yes. But, equity markets will be moving to the upside well before the maximum pain is felt in real estate.

[BBDB859]

Definitely. Equities like bombardier will probably do pretty well in the next couple of years. This trend, has to do with price. Equities are affordable. Where as house prices have gotten outrageous. So all the Investment money flow into Equities. That doesn't mean that housing won't see investment. It just means that the value for the housing investment has to be right. Every home sale or

[clubhouse19]

It.s all up in the air right now. Everything is not priced in as they only expected most likely a .50 in Canada. A recession is expected next year here while in Europe it is already there to a certain extent. These bear market rallies are to be expected some more pronounced than others.  As interest rates rise, many more will be parking their cash into fixed income such as GIC's where

[flamingogold]

GICs are fully taxable like rental income. I won't be parking any free cash there. Preferreds offer a higher return and are tax advantaged too.

[clubhouse19]

Of course preferred are more advantagious if you know what you are doing and where.  I gave GIC's as the least risky and for people who want to wait this out, that is where they are going to park it. Many funds as many have  stated are holding more cash now than they have done since the last recession some as high as 60% and they have become traders also in many cases selling into