 Welcome to Mind Your Business ! Consider this your weekly guide to understanding what’s happening in the worlds of economics, business and finance. By Peter Armstrong | | |  | Have housing prices begun to recover? (SERSOLL/Shutterstock) | | | We'll get the latest national housing data on Wednesday of this week.
These past few years have been a wild ride for anyone buying or selling a home.
When COVID-19 crashed into our lives, home sales took off. The pandemic was like rocket fuel. Condo-dwellers wanted more space, homeowners wanted more house and others looked for cottages to get away from it all.
They pushed Canada's already red-hot housing market to increasingly absurd levels.
Prices peaked last March and began to fall as higher interest rates kicked in. Since then, the national average price has fallen nearly 18 per cent.
But that doesn't tell the whole story.
Randall Bartlett and Marc Desormeaux from Desjardins wrote a fascinating report on the state of Ontario's housing market.
They showed how the correction looks when compared to how far and fast housing prices climbed leading up to last March. | | |  | | | That chart is fascinating.... but probably needs some explanation. On the left side, you can see how much prices have fallen from the peak.
On the right is how much those markets climbed from December 2019 to the peak.
So sure, prices have come down, but by not nearly as much as they shot up in the three years preceding the correction.
Bartlett and Desormeaux say they can now see the rebound waiting in the wings.
"In recent months, the pace of the housing market correction has slowed considerably. Indeed, we expect sales to find a bottom early in the second half of 2023 and home prices to begin rising shortly thereafter," they wrote.
It's one more indicator pointing to a solid rebound later this year. Robust job growth, resilient GDP growth and a resurgence in home prices may test the Bank of Canada's willingness to leave interest rates unchanged.
We'll get Canadian inflation numbers next week, but we'll get a preview on Tuesday, when the U.S. consumer price index comes out.
Markets are already speculating that the numbers will push the U.S. Federal Reserve to move ahead ahead with more rate hikes. | | |  | | | That chart was published shortly after the chair of the Fed, Jerome Powell, told Congress that he may have to speed up interest rate hikes to tame inflation.
There's no question the U.S. economy remains hot. American employers added 311,000 jobs last month. GDP has come in stronger than expected.
The Bank of Canada has to fight inflation north of the border, but there are real questions about how long it can leave rates unchanged if the Fed continues to push ever higher.
What do you think? How far can monetary policy diverge between Canada and the U.S?
As always, send me a note here: peterarmstrong@cbc.ca
Or continue the conversation on Twitter here.
If you like this newsletter, spread the word. I'm trying to grow our little community and would love your help. Just click on the share buttons below. | | |  | | We'll get the latest Canadian real estate numbers on Wednesday. Home sales figures will be released by the Canadian Real Estate Association and data on housing starts will be released by Statistics Canada. | | | | | | U.S. inflation numbers are out on Tuesday. Economists expect prices decelerated in February. The year-over-year number probably fell to six per cent. | | | | | | U.S. retail sales data will be released on Wednesday. Economic indicators have been coming in stronger than expected, which will push the U.S. central bank to increase rate hikes (which will pressure the Bank of Canada to follow suit). | | | | | Three things to read, watch and listen to this week | | |  | The Naked Emperor chronicles the rise and spectacular fall of crypto king Sam Bankman-Fried. (CBC) | | | 1. The Naked Emperor | | | F. Scott Fitzgerald once said "she me a hero and I'll write you a tragedy."
Imagine what he could have done with the sordid tale of Sam Bankman-Fried.
SBF is the famously bedraggled billionaire behind the crypto exchange FTX. At one point, he was rubbing shoulders with former presidents and Wall Street titans. His company logo was on the Miami Heat’s arena and his name was synonymous with a a concept known as effective altruism.
Today, he's destitute and facing life in prison.
So, what happened? I mean, what really happened?
A new CBC podcast from tech/crypto journalist Jacob Silverman endeavours to answer that. Silverman is a writer out of New York who authored the upcoming book Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud.
He's uniquely suited to decode precisely what went wrong with the FTX saga. And the podcast is produced by our pals at CBC's Front Burner.
I can't wait to dig in.
Episode 1 of the four-part series Naked Emperor launched this week.
Check out episode 1 of The Naked Emperor here. | | | 2. Social media trading scams | | | There is a weird confluence of forces driving some of the biggest scams in financial markets.
On the one hand, you have young people trying to come anywhere close to the kind of wealth and affluence previous generations had.
You have COVID-19 benefits and a two-year stretch when people almost exclusively worked from home. And lastly, you have social media.
Put those together and you have the potential for some very bad actors to take advantage of hopeful, slightly naive new investors.
Sometimes the best, most thoughtful, most effective journalism doesn't come on your evening news.
In this case, the best segment I've seen about this story came on the comedy program The Daily Show.
Jon Stewart built a brand around scathing bits punctuated with fart jokes. In a segment on scams ranging from FTX to simple pump-and-dump stock schemes, Hasan Minhaj picks up that mantle and runs with it.
Minhaj digs into the various crypto scams that are still unfolding (and let's face it, there are a lot of them), asking why and how they were allowed to prosper for so long.
"It's never been easier for total idiots to pass themselves off as stock market gurus to millions of people," said Minhaj in the segment.
He also takes aim at the celebrities who endorsed FTX, including the NFL's Tom Brady, the NBA's Shaquille O'Neil and Canadian investor/reality TV star Kevin O'Leary.
Minhaj says people like O'Leary should have known better than to endorse FTX (let alone invest some of his own money in the platform).
O'Leary, to his credit, agrees to a sit-down interview with Minhaj. It's a actually a really interesting conversation.
Check out the social media scammer segment on The Daily Show here.
Check out Hasan Minhaj's interview with Kevin O'Leary here. | | | 3. Let's talk about grocery prices | | | I'm not sure we ended up any closer to an answer last week as to why grocery prices are so high.
Food prices are rising at a relentless pace. They're growing way faster than the rate of inflation and they're forcing Canadians to make some tough decisions.
Grocers say they're simply passing on the new higher price of stuff they buy. Others say they're taking advantage of inflation to hike prices by more than they need to.
So, the CEOs of Canada's biggest grocery store chains were summoned to Ottawa.
Michael Medline, the CEO of Empire Food, the company that owns Sobeys, told the committee that these companies are not profiting from inflation.
"It doesn't matter how many times you say it, write it, tweet it. It is simply not true," he told a Commons committee.
But that's not entirely true. These chains are undoubtedly benefiting from inflation. I tried to explain how in a piece I wrote.
But the main thrust of it is that grocers make money by charging a slim margin on the price of the goods they sell.
Loblaw CEO Galen Weston says his company makes $1 of profit on every $25 basket worth of groceries.
That's a four per cent margin. If you sold $1 million in groceries, your profit would be $40,000. But if prices rose, that same margin would bring in more money.
A four per cent margin on $2 million worth of groceries would be $80,000. The margin didn't change, but the profits went up.
There is also the accusation that these companies are taking advantage of inflation to drive up prices more than they need to.
Grocery chain earnings don't show that that's happening, but they don't paint the full picture, either. Take Loblaw, for example. Its grocery store earnings are mixed in with everything else the company owns (drug store chains, fashion outlets and financial services products).
The remedy here isn't all that complicated.
Partha Mohanram, an accounting professor at the Rotman School of Management in Toronto, says they could just release the data and let consumers see for themselves what's actually pushing prices higher.
"If they break down their segments and say that, 'OK, this is what I made from groceries versus this is what I made from my drugs and cosmetic business.... And you can see my increased margins are coming from the drug business, not from groceries,' that'll allay a lot of concerns," Mohanram told CBC News this week.
That may be a long shot. The companies have no requirement to disclose anything more than what they do.
And for all the anger and frustration over grocery prices, these chains are hardly alone. Banks and energy companies are two other Canadian sectors seeing record profits as the inflation crisis wears on.
Check out Pete Evans's piece on grocery store prices here.
Check out my piece on The National here.
Check out colleague Don Pittis's column on how this fits into the bigger picture of prices and interest rates here. | | | How the economy looks beyond Bay Street | | | A little context, s'il vous plait | | | The "relentless" increases in interest rates have been tough for a lot of Canadians. Especially those with variable rate mortgages.
The "sharp" increases of 50 (and even 100) basis points are a lot to get your head (let alone your household budget) around.
But it's important to zoom out now and again to see how "relentless" those "sharp" increases have been.
Thanks as ever to University of Calgary economist Trevor Tombe for putting things in context. |  | That's not to say the pain and hardship some households have felt as borrowing costs shot up isn't a big deal.
It is and it remains one of the most important features of the economic landscape today.
But when I look at that chart, I can't help but see rates that remain well below the historic trend. And that stretch of near-zero interest rates remains one of the weirdest periods of Canadian economic policy.
I'm not sure where things are going. I'm pretty sure all the crystal balls broke after the last financial crisis.
But look at how much of the last 80 years the bank's key overnight lending rate was above five per cent.
What do you think? Where will interest rates head this year?
I'd love to hear from you. Drop me a line at peterarmstrong@cbc.ca | | | Share this newsletter | | or subscribe if this was
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