I must admit, people bidding up house prices amidst the deepest recession in living memory is something I definitely did not see coming. Segments of the Real Estate market remain red hot across much of Canada, although mostly for single family homes. It’s certainly a head scratcher, and defies all rational logic.

However, as the old saying goes, “60 million Frenchmen can’t be wrong.” Essentially it is based on the idea that the crowd is collectively smarter than any one individual. This collective intelligence was first stumbled upon by the late great statistician, Francis Galton, who in 1906 observed a competition at a local fair where approximately 800 people tried to guess the weight of an ox. To his surprise, the average of all the guesses was 1,197lbs. The real weight was 1,198lbs. Countless studies have been done since, all showing similar results.

Herd following has been a key success for legendary investor George Soros. Soros, who is considered one of the greatest investors of our times has been quoted as saying, “Being so critical, I am often considered a contrarian. But I am very cautious about going against the herd. I am liable to be trampled on. Most of the time I am a trend follower, but all the time I am aware that I am a member of the herd I am often on the lookout for inflection points. I watch out for telltale signs that a trend may be exhausted. Then I disengage from the herd and look for a different investment thesis. Or, if I think the trend has been carried to excess, I may probe going against it.”

I guess this ultimately begs the question, are we nearing an inflection point that could potentially derail a multi-decade long bull market? Being a contrarian on the Canadian housing market has not been kind to its doubters… But surely something has to give?

According the Canadian Bankers Association, 743,000 mortgages have been deferred, about 15% of the total mortgages outstanding. The deferral cliff nearing is not for the faint of heart. Furthermore, it’s becoming increasingly obvious that the great re-opening is not so great after all. Infections are ramping back up, and some businesses are opting to close stores once again. For example, days after closing 11 stores in Arizona, Florida, North Carolina and South Carolina, Apple confirmed it has also closed seven Houston area stores. An additional 14 stores in Florida will also be closing once again.

Lucky for Apple they have more than enough cash available to close down a few stores. Other businesses won’t be so fortunate. White collar jobs are next in line on the chopping block.

But then again, perhaps the wisdom of the crowd will be right once again. Nothing else matters but the money printer. Central banks have flooded the financial system with unconscionable sums of liquidity, evaporating any form of free market price discovery. As fiat currencies are debased at an unprecedented pace, cash is finding a home in hard assets.

It certainly feels like we are reaching a tipping point, one which will have long lasting impacts on society. It has never been more important to open your mind to a vast array of possible outcomes.

Three Things I’m Watching:

1. Canadian 10-year bond yields are trading at their lowest level in history. The housing trade in one chart.

2. There is no V shape recovery in current business conditions across the US.

3. Only 50% of U.S. small businesses say they are bringing back all employees all hours.


  1. Too soon to call. What are to economic positions of the buyers? Are they buyimg up – down – across? I dont believe you are compilng data thaat shows true picture. Most telling moment in “BIG SHORT” qoute was “Bury- house are goimg up but incomes are flat , the houses are debt not assets”
    Residential realestate is mainstreet not wallstreet. Mostly still looked upon as their biggest investment and a roof.
    Be patient… watch Bloomberg frontrow interview with Barry Sternlicht 4 days ago. The man manages 60 billion in realestate. His anxious honesty is a “poker tell” moment.
    If the pandemic does what experts expect we are in for a “W” style decline


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