 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 | | |  | Falling interest rates have not led to a resurgence in the housing market. Yet. (Andrey_Popov/Shutterstock) | | | I want to talk about the housing market this week.
There was a fairly clear consensus that as soon as the Bank of Canada started cutting interest rates, the housing market would take off.
After all, we've seen it before. Canada's notoriously bonkers housing market usually doesn't take much at all to nudge it to ever-higher records.
Indeed, the Bank of Canada hinted it was keeping rates high last spring because it was worried a sudden flurry of real estate transactions would come once interest rates started to come down.
And yet, so far.... not so much.
"It will clearly take deeper rate cuts to stimulate demand in a material way, as buyers continue to contend with high ownership costs and poor affordability," wrote RBC economist Robert Hogue.
He makes a good point. Home prices were already way too high. Add in higher interest rates, and the prospect of buying a home was out of reach for a lot of Canadians.
So sales activity across the country has stalled. | | |  | | | | | That was last month. We will get the latest numbers on Tuesday.
But there isn't much in the data nor in the anecdotes you hear that suggest the market is preparing for liftoff.
There has also been a boost to the number of new listings. You can read that a few ways.
It could be people listing in anticipation of a market bump. It could be homeowners who are struggling with higher mortgage payments (even as rates come down, they're still much higher than they used to be).
But there's another issue.
"In some cases, such as in Toronto, it reflects the completion of many newly built units (mainly condos) that owners (mainly investors) are looking to offload," wrote Hogue.
In that case, imagine someone who invested in a pre-construction condo (buying a unit before it's even built). When the building is complete, those owners owe the remaining amount.
For a very long stretch there, those condos would have soared in value, interest rates remained incredibly low and the investors made good money.
Now, they owe the remainder on a condo unit that is worth less than it was when they bought it. So a lot of those units are being sold at a loss.
Now, correlation is not causation, but as those units are completed, we are seeing a change in the rental markets of major metropolitan areas. |  | | | I’ve been thinking about that number a lot. Because it tells us two very different things about the housing market.
On the one hand, it means rents are going to fall further. I reached out to John Pasalis to make sure I was getting this right. And he agreed.
“Rents are down around five per cent over last year. Hard to say how much further they will fall, but very possible we will see a dip, especially since this is the low season for rentals,” he told me.
And that’s unquestionably good. Renters have been clobbered over these past four to five years.
But it also means that there aren’t going to be as many investors as there were. And that means it will be harder to get new units built going forward.
And that will eventually drive up rents.
What do you think?
As always, send me a note.
My email is: peterarmstrong@cbc.ca | | |  | | We will get the latest Canadian housing numbers this week. The Canadian Real Estate Association releases this month's data on Tuesday. | | | | | | The marquee event of the week will be the release of the latest inflation numbers on Tuesday. Economists expect the year-over-year rate of inflation dropped to around 1.8 per cent. | | | | | | On Wednesday, we will get the latest manufacturing sales and orders data. That should give us a glimpse into whether the economy is continuing to weaken. | | | | | Three things to read, watch and listen to this week | | |  | A new HBO documentary explores the history of the person who created bitcoin. (HBO) | | | 1. Was bitcoin's mysterious creator a Canadian? (Maybe) | | | I still find it remarkable that after all these years and all the hype surrounding bitcoin, we still don't know who created it.
The cryptocurrency is held by millions of people. It has a market cap (total outstanding value) of more than $1.2 trillion US.
We know it was created by someone (or a group of someones) named Satoshi Nakamoto.
"Now, a new HBO documentary has opened the case files again to point the finger at a new candidate: Canadian crypto expert and software developer Peter Todd," wrote my colleague Alexandra Mae Jones.
Todd joined the bitcoin project in the early days in 2013. He has connections to some of the people who were key to the creation and rise of the cryptocurrency.
But until now, he hasn't been subject to much speculation as to whether he's the mysterious Satoshi Nakamoto.
The doc looks fascinating. It may not provide a clear or definitive answer, but it adds some important context.
"The documentary ties circumstantial evidence together to paint a picture of Todd as an unlikely candidate hiding in plain sight," wrote Jones.
The case for Todd is mostly tied to a comment he made in an online forum 14 years ago. It was in reply to something Satoshi Nakamoto wrote.
One character in the documentary suggests that reply was actually Todd attempting to continue a thought as Satoshi and accidentally posting it while he was logged into the wrong account.
When this theory is prevented to Todd, he responds with a laugh.
"I'll warn you, this is going to be very funny when you put this into the documentary and a bunch of bitcoiners watch it," he said.
Watch the trailer for Money Electric: The Bitcoin Mystery here.
Read Alexandra Mae Jones's piece on the bitcoin mystery here. | | | 2. Will AI take your job? (Probably not yet) | | | The Eh Sayers is back with a really fun episode looking at what impact AI may have on the Canadian jobs market.
The Eh Sayers is the (wonderfully named) podcast put together by Statistics Canada.
In this segment, host Tegan Bridge speaks with AI expert Tahsin Mehdi, an economist with Statistics Canada.
Bridge begins by asking about a deceptively simple premise:
"As long as we have to rely on work to make a living, it's not unreasonable to feel uncertainty about the consequences of a technology with the potential impact of AI," she said.
We all have ideas about this. And in my case at least, it's mostly based on various 1980s science-fiction movies.
Mehdi offers up some fascinating numbers and research.
"Results show that around 60 per cent of the Canadian workforce might be in jobs that are highly exposed to AI," said Mehdi. That was about eight million workers in 2021."
But he points out that it's important to distinguish between the impacts of AI and the impact of a more basic idea of automation.
"In the past, it was assembly-line and industrial workers who were mostly affected. But with AI what we're seeing is that professions requiring higher education, such as informational technology, education, health care, business and engineering, might be affected as well," he said.
That said, Mehdi emphasizes about half the jobs "affected" by AI will actually be "complimented by AI. Those jobs won't disappear, they'll use AI to help them do their core tasks."
But the other half work in industries who may see their actual tasks replaced by AI.
Of course, all this comes with significant caveats. The biggest of which is that this research shows jobs that are "exposed" to AI.
That doesn't mean businesses will follow through. It may not be viable or make economic sense to replace anyone with AI.
But it's important to know and important to study these changes and what they may look like.
Especially if you, like me, keep thinking of Blade Runner, War Games and The Terminator when people mention AI.
Listen to this episode of The Eh Sayers here. | | | 3. What happened at TD Bank? | | | It can be hard to wrap your head around the enormity of what happened at TD Bank last week.
Canada's second-biggest bank pleaded guilty to multiple charges, including conspiracy to violate the U.S. Bank Secrecy Act and commit money laundering.
The Wall Street Journal broke news of the plea and set up a flurry of news stories through the end of last week.
U.S. Attorney General Merrick Garland said TD created an environment "that allowed financial crime to flourish."
"By making its services convenient for criminals, it became one," he said in a press conference Thursday.
Garland said TD admitted that it allowed money-laundering networks to transfer more than $670 million US through TD Bank accounts over a six-year period.
He said many employees were aware of the scheme, but it somehow went unaddressed.
The Globe and Mail has done some spectacular reporting on this. Columnist Tim Kiladze did this really smart and accessible podcast episode at the end of August. That episode came before many of the details released last week. But it does a great job of laying out what happened in broad terms.
He and Institutional Investing Reporter James Bradshaw had another great piece on Friday with details about how pervasive and well-known the issue was among senior bank executives.
"One of the most prolific criminals who targeted TD, David Sze, moved more than US$470-million in illicit funds through TD Bank branches in the U.S. over a three-year span. He repeatedly deposited large amounts of cash into accounts opened by other people, asking bank employees to send wires and issue official cheques," wrote Bradshaw and Kiladze.
They quote some emails sent within TD about some of those transactions: “You guys really need to shut this down LOL,” wrote one branch manager in August 2020.
In one unusual transaction referral filed in September 2020, an employee bluntly reported to the bank’s U.S. anti-money-laundering program that “EVERY DAY CUSTOMER DEPOSITS A LOT OF CASH.”
Bloomberg's Christine Dobby has had some fantastic reporting on this story, too.
As part of the plea deal, TD accepted a cap on its growth in the U.S. That could end up being a far more punitive action than the $3 billion in fines.
"Analysts and investors have feared that TD’s growth in the U.S. could be constrained by a cap similar to the one imposed on Wells Fargo & Co. in 2017, which limited that bank’s assets to about $1.95 trillion. Almost seven years later, Wells is still not out from under that sanction, which has been a major drag on its share price," wrote Dobby.
TD Bank has called this "a sad day in our history."
Outgoing CEO Bharat Masrani spoke with analysts on a conference call last week.
He told them the bank's money laundering systems failed, but that “we are fixing it and I’m 100 per cent confident that we get to the other side and emerge even stronger.”
The fallout of this story is far from finished, but these are the reporters I'll be following as more details emerge.
Check out the Globe and Mail's August podcast here .
Read Kiladze and Bradshaw's coverage here.
Read Christine Dobby's articles in Bloomberg here | | | How the economy looks beyond Bay Street | | | Feedback follow-up | | | One of the most consistent pieces of feedback I get in this newsletter is that I often write about a subject that's coming in the week ahead and never follow up and say what happened.
I get that.
The idea behind this is to always look ahead and set you up with a sense of what's coming this week.
But I've been trying to figure out a way of incorporating something of a follow-up. Did the data I wrote about end up matching the forecast? Did the story change in subtle or important ways?
So, this week, I'm including this chart from the bank of Canada's Business Outlook Survey. This chart looks at investment and hiring intentions among Canadian businesses
Last week, I used the previous version of this as an example of how negative sentiment can build up and weigh on growth.
Well, look at the (slight) uptick in hiring intentions at the right end of the scale. | | |  | The survey found employers may be starting to think about hiring again. That certainly matches up with the jobs numbers released on Friday. Canadian employers added 47,000 jobs and the unemployment rate unexpectedly ticked down for the first time since January.
It's not a big swing, but scale that out across the businesses in this country and it can have a big impact. Mostly, it may be a sign that sentiment is starting to turn. | | | Share this newsletter | | or subscribe if this was
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