SharperDingaan

Really says 3 things: Decision has been made to raise the long end of the yield curve. Own thoughts are 200bp+ over time, and primarily through new issuance of infrastructure bonds that include equity kickers of some type (crowding out). Target total returns of 6%+ to meet DB PP requirements. Decision has been made to denominate in CAD. GIC's at higher yields, raising fixed income receipts, enabling the risk-adverse to weather inflation. Denominating in CAD effectively flows QE (diff in rate x ppl) through fixed income earners, where it will be spent on higher COL Either pay through higher rates, or top-ups to pension accounts. Decision has been made to materially reform Canada's PP system - CPP. OAS, GIS, DB, RRSP, etc. Long overdue, most would think that portability and RRSP changes cannot be far behind. Own thoughts are that the age 71 RRSP forced conversion either gets extended or eliminated. Hard to be dissapointed. SD

Recent anecdote from a seller in our neighborhood. The house was too big for them. Could have hired cleaners, live-in's, etc. but they really needed to downsize - when and where to go. They bought a 1/4 floor of a new-build apartment block in a desirable location, and have rented a basic flat for one-year near a daughter with very young kids. Meanwhile the developer finishes the apartment to their specs. Per the specs it will be a vety nice place, everything on one floor, and with space for kids to stay and visit. Very smart, and a great many others in the neighborhood have similar versions of the above in mind, comes their turm. It is old housing stock being swapped for new, via a new way of doing things. Hard to knock it. SD

It's war-time spending, and hard to argue against - Covid has killed more people than died in WW II (US). This is a time when you ruthlessly fight to win, and the costs are secondary. Dead is not an option, surviving to thrive is. Media will focus on the spend. The real benefit is the planned change to the debt maturity profile - rolling out to 10yr and 50yr terms. Very likely as $CAD bonds, with inflation driven rate escalaors and reduced taxation depending on the type of bond (green) and term (infrastructue). Very elegant, very smart, very BoC alumni. Nice to see a much more feminist, and practical approach. Like it or not, 50% of the work force is female, and Canada does not have enough workers. There are a great many very smart/industrious women about, and $10/day day-care removes a lot of chains. Again, very elegant, and very smart. SD.

Blockchain/smart-contracts are the invention, everything else is just an application of the invention. Hurdles are par for the course, and ultimately 'bend' over time - to go with the flow. SD

It's not just 'cheap' house relative to what you are used to - it's the monthly cost of living as well. Pre WFH the aspiration was always 'live in the big city'. Lower COL in the burbs just wasn't on the radar, the conversation was all about the relative cost of housing vs the 'city', and the 'cost/length of commute'. Today, the mover saves on BOTH the transportation AND the COL - and sees just how much of a cash savings that actually is. Often the result is more space, a better environment for kids, and mom being able to reduce hours/stay at home - 'cause the savings are on-par/or-more than mom brought home net of all the costs of child-care and working. Mom can still work if she wishes to, and it is a much better quality of life for the family as a whole. Yeah, but post Covid everybody will go back to the office? Bosses might prefer it, but recent workforce surveys indicate that modified WFH is here to stay. The small towns simply gentrify and become more attactivre places to live - pulling in more buyers, new development, and better infrastucture. Everybody wins. SD

Couple of observations ... For decades the 'mantra' has been 'one house, one family'. Champagne expectations have progressively risen, on a beer budget that buys less and less - even when it is augmented with rental income and parental down-payment help. Obviously, there needs to be change. Around the world, multi-generation households are commonpace, and they have been resilient for very practical reasons. It is a great deal cheaper to re-model an existing house for multi-generational living (or sell and buy a purpose built), than it is to buy a new one. Mom/dad want grandkids, son/daughter/spouse cover the cost of renovation (mortgage), and improve ability to work (while grand-parents help look after the kids). Housing has a great deal further to run. RE is built on deal flow. Stay-in-place renovation, versus sell/move-on - seriously reduces total volume, total commission and associated sales revenues. There are also a growing number of blockchain apps, facilitating purchase/sale of partial ownerships in a house - further reducing house sales. As well as apps that facilitate seperation of land value, via a lease of the dwelling for X years. Again, housing has a great deal further to run, despite RE industry bitching every inch of the way. Not just RE industry bitching either. For many people, RE is a time-honored better investment than buying individual stocks/index funds; as partial ownership interests and long-term leases become more readily available - young money flows out of capital markets and into RE. Progess. Point? Housing has a long way to run, but if you insist upon last century approaches - welcome to your ulcer. The Times They Are A Changing - Bob Dylan SD

Existing payment rails are truly sh1te, and work only because we have laarnt how to make them work - patches upon patches, upon patches. CBDC is essentially everyone/everything in the country with an account at the same place, a payment is simply debit account X, credit account Y. Same output; just done very, very differently. Cheaper, faster, more reliable, more secure, yada, yada ... Fixed at 1 diigital fiat ($CAD) = 1 paper fiat ($CAD), there is zero value change. No different to your bank account today, where 'digital/cash conversion' takes place at either the ATM or tellers desk. CBDC has been live tested (eKrone) for some time now, and acceptance has been demonstrated to not be an issue. FX is problematic because there are different flows; tourism, trade payments, capital, etc. It becomes a lot simpler if capital flows can be shifted to a RBDC (Reserve Currency). The days FX rate then becomes the ratio that settles the days trade and tourism flows at zero. RBDC mechanics a work-in-progress There will still be payment intermediaries, but now they have to prove their value add. No getting paid anymore for simply making a payment happen, or being an order taker. Paying for alpha, is not a bad thing. SD

Whether digital, or paper, the country fiat will be backed by the CB and freely exchangeable on a 1:1 basis. You will just have 2 accounts - the account at your bank, and the wallet at the CB. Most will pay using their wallet, simply because it is faster, cheaper, and the amounts are guaranteed. Existing payment plumbing rapidly displaced over time. When a vendor can accept CBDC as legal tender, vs sh1te coin, the sh1te coin becomes worthless. Of course, if the market believes the coin has value (BTC, ETH, etc.), the outcome might be different - but what the participants think is irrelevant. Comes back to the great winnowing, and ability to short. We'll all learn something new SD

Digital currency. The other name for it is CBDC, for a lot of crypto token it is a game-changer. In many apps, a fiat currency is exchanged for a token that pays for activities within the app - but outside of the app, that token has little/no value. The developer in turn, supposedly used the fiat to develop the app promised in the whitepaper As CBDC is a token, users no longer need buy the app's token to pay for activities, they just pay with CBDC instead. The developer can no longer use seigniorage to pay for development, and the activities move to value-add commodity pricing. The party ends, and most app developers collapse. Winnowing the wheat from the chaff is not a bad thing. CBDC is country level digital currency, that most all counties will eventually go to. Reserve Bank Digital Currency (RBDC) is trade level digital currency, and most likely a decade long work-in-process. Eventually it will become the globes reserve currency, but after a number of iterations along the way. SD .

5% average inflation thing: Agreed, all else equal, there is little reason to expect significant inflation. The problem is that economic conditions are NOT equal, this is a 10-yr interval, and inertia dictates 'stay in place for as long as possible'. Someone wants the house? and cannot wait? just outbid everyone else (it's just money you cannot take with you). When they do - that sets the CAGR. Compare your cost of living today, to what it was a year ago - it is a lot higher than the BoC target inflation. There is also a limit as to how long asset and consumer inflation rates can be kept separate; eventually you get cost-push inflation at some trailing consumer inflation rate. Independent, rational decisions, by everyday people, in quantity. We just don't like what it implies. SD

Keep in mind that the 2M+ forecast is a projection, and as at 2031 (10 yrs out). I think it a little conservative. It is also not an isolated outlier, and price expectations like this are becoming increasingly common. 8.25% is nominal CAGR. If you expect that the average post-Covid inflation over the period turns out to be 5.00%, the real return is 3.25% - and actually not far off the historic trend. The pricing is rational. The houses themselves are 2,500ft+,open-concept, 9ft+ ceilings (20ft+ in the great-room), designer kitchen and washrooms, wide passageways to accommodate wheelchairs, etc. Condo clears the snow, mows the grass, shared use of the clubhouse, the complex is surrounded by quality medical, and has an adjacent 4500+ room high-end seniors retirement home. High-end market, between Hamilton and Oakville, and not on the lake. SD

We have a neighbor who bought their new build townhouse bungalow in 2011 for around 45OK net of upgrades. It is an airy, spacious and desirable house, in a desirable location, the complex has been complete for some time, the target market is retirees 55+, and there is a longstanding waiting list of buyers. Pre Covid, the median house sold for around 900-925K, and took no more than 10-15 days to sell. The neighbor is aging, and wanted to assess whether it was worth staying/renovating, or selling/moving elsewhere. They had an agent approach the buyers and ask for expressions of interest. They had their first expression in < 72 hours, at 1.4 million; by end-of-day there were 2 more averaging 1.5 million. Terrified, the neighbor withdrew the house, and chose to stay/renovate. The neighbor is well liked, it is a close-knit community, and a great many of the residents are retired/semi-retired senior executives. If the renovation meant they could stay another 10 years; most expected a future sale at around 2M+. The renovation pays for itself, implied nominal CAGR of around 8.25%. SD

Ma held 76% of Ant Financial until recently, and with the recent IPO - is now a multi-billionaire in China. Just exactly HOW does one pull off this trick in a communist country? SD

This thread underlines that culture matters, and that in a large company - it is very much a product of the continuing long tenure of the men/women at the top. When they leave (Buffer, Munger, etc.) the culture leaves with them - momentum may continue for a while, but the new men/women will want to make their mark. Change. Culture and process substitute to a limited degree. A GS is as good as it is, largely because of its market driven internal processes. Up or out, is widely copied by many others, and very successfully. Obviously, it is worth something; but valuation is very subjective, and wide open to error. Analytically, the value of a Jack Ma, or an Elon Musk, should be worth MORE (than that of a Web/Munger) - simply because they have more 'runway' left to them. But would most actually conclude that? Nothing wrong with betting on the jockey, but there are limitations. Different strokes. SD

Very smart advice .. and just to build on it ... For the 1st year, rent vs buy, and rent in the bedroom communities around Toronto. Right now, you know squat: no idea how long this will be for, the better vs poorer communities/neighborhoods, costs, trains/traffic, internet connectivity, schools, etc. All you can hear is drumbeat - I have to get on the property ladder now, or I'll never get on! No different to a neophyte trying to buy units in a Bitcoin ETF. You get a lot more house for the money in a bedroom community. In 'normal' times, price for the same kind of house goes down roughly 100K+ for every community AWAY from Toronto. Live in a Bronte Creek, or a Milton - and the price will be at least 300K+ cheaper in return for the DT commute. If you don't work DT, or only have to go in 2-3 times/week - keep the discount. Sure there's a cost, but there's also a cost to screwing up. Most would expect that by 2 years+ out, the current price distortions will have worked themselves out, and new builds will be back in the market. Can't take advantage of that if you don't know where you would like to live, and don't have the means to pay for upgrades to your future abode (lofts, finishes, combining units, etc.) at the time it is being built. SD

Welcome to the board! Culture matters, but in a publicly listed company - it only lasts as long as the latest strategic plan. If the executive is long standing (ie: betting on the jockey), it will last for longer - but otherwise it is < 4 years; at best. The strategic plan is all about doing things today to position yourself for where you want to be tomorrow. Implementing change. Private companies are very different, and what you describe is commonplace. When the owner jockeys are typically both present and hands-on, the company is an extension of themselves, and the long-term view typically prevails. The better companies often have very good/experienced jockeys with long tenures, they are free of whining shareholders, ownership is by invitation only, and their reputation matters. SD

Couple of thoughts - particularly around the US. The 'recovery' to date has been K shaped. Not really happening for a great many (minimum wage), for a great many 'middle income' it just isn't worth mom working anymore ('she' cession, less work/pay, lower family income), and some who are doing as well/better than before. Poor people spend, rich ones do not - seems pretty clear that if pre Covid levels of economic activity are the objective, there is going to have be a national guaranteed minimum income (ie: permanent helicopter money). Per current legislation, municipalities have to balance their books every year; raise tax or cut services. Most would expect a 'temporary' change in the legislation. same as annual income tax is 'temporary'. Spend more than you take in and you have to borrow - assuming you can, and at a reasonable cost. If you think the market puts up the money - interest rates must rise (crowding out). If you think the fed prints the money - the USD must devalue, ahead of anticipated inflation. The US is not unique, many others are in a similar/worse position. If EVERYONE devalues at the same rate there is no difference in relative FX rates & international competitiveness (carousel effect). Commodities just cost more, most stores of value 'rise' in nominal value terms, but there's GLOBAL inflation. Same quantity of goods consumed, just more nominal fiat chasing it. Obviously, good for hard assets, hard goods, and critical commodities - as Dalio recognizes. The mystery is what happens when stranded assets write-down; obviously not good for the stocks in question, but are accounting rules 'temporarily' changed as well? We live in interesting times. SD

Define carry cost. In the 1980's, across Canada, mortgage rates of 5-8% were considered cheap. Rates subsequently spiked to 17%+ (Canada's debt wall) and have progressively come down ever since. The lower the rate, the more mortgage a buyer can afford; but if the supply of desired housing is lagging - it's higher prices for housing. Supply is inventory turnover + new build. Keep favoring some market segments over others (Condo vs SFH), and distortions magnify. SFH in the 'burbs are currently selling well, downtown condo's .... not so much. But in many major urban downtowns - carry cost + condo fee + ppty tax is still LESS than rent. SD

Amusing thread. Throughout history EVERY fiat currency issuer has debased their currency, most often via inflation. When everybody has been doing it, and for a very long time - historic fact it clearly screaming that it must be an advantageous thing to do so. Buy a house for 1M, mortgage it for 1M with a floating rate HELOC; assume inflation is 5% this year, the interest rate on your HELOC rises by 500bp to compensate, and you are ONLY paying interest (tax deductible in the US). All else equal the value of your house rose 5% to 1,050,000, the mortgage remained at 1,000,000. You are UP 50,000 in equity, but paying an additional 5% (50,000)/yr in interest. You cant afford the interest, sell this house, and buy a cheaper house someplace else. Either buying a cheaper house in a poorer neighborhood, again with 100% debt; or a better house in a better neighborhood with debt + equity (from the house exchange). The buyer of your house makes improvements, further raising its value. Everybody along the value chain benefits But apparently ... this a terrible thing? It's only terrible if you're that person who had to downsize. SD

Number of annual active consumers across Alibaba's online shopping properties from 4th quarter 2015 to 4th quarter 2020 https://www.statista.com/statistics/226927/alibaba-cumulative-active-online-buyers-taobao-tmall/ As at Q2 2017 it was 454M - as at Q4 2020? 779M. Then look at what Chinese Consumers consume, and compare it to the US. www.credit-suisse.com › media › assets CSRI Special Report: The Chinese Consumer in 2017. Hardly surprising the world order is in flux. SD

It's more about the size of the consumer market, and it's ability to consume. China has the most people at 454M (2017), followed by Brazil, India, and the US (325M). However, the US dominated forever because it had a big market, that ALSO had the discretionary income to spend - and multiples of times more people than the next nearest rivals with similar ability. Globalization made poorer countries richer - wealth & industriousness have given China's consumers discretionary income; at 1.4x the number of people, with rising vs falling (US) discretionary income, they are knocking the US off the roost. Particularly aggravating as until recently, the bulk of goods have been built to American consumer tastes. You can't just build more to flood the China market - 'cause you're building the WRONG goods. Good thing overall, as the vigorous competition forces both cultures to continually adapt and 'breathe'. Time continually moves on, if your solution is to simply put your culture in a bottle - you end up similar to the Amish/Mennonites. Conflicts resulted because ambitious men (usually) at 'the top', saw an opportunity to exploit it. Today, we have much less damaging solutions to that. SD

Mechanically, most applications don't need a blockchain. The Wust/Gervais paper is a good reference for determining when it is required. https://www.researchgate.net/publication/328820555_Do_you_Need_a_Blockchain Thing is - mechanical efficiency is NOT the key metric, public acceptance is. The blockchain is trusted because the data is immutable ... whereas in a DB, not so much. Hence a strong preference for critical, and source information, on a blockchain. Often the best application is a PRIVATE blockchain (only some can chain to it), allowing public access. Best example is your medical record - from birth through to death. Only the hospitals, etc., can chain to it, but you the owner/patient control who can see it. Every time you go to a clinic/pharmacist they can see your entire record, be confident that it was entered by a reliable source, and that nothing has been altered. Sure, it could be done with a DB as well .... but there's little/no user confidence in the data itself, unless the source is reputable. Public acceptance trumps efficiency. SD

I see what you are saying, being able to know that a set of specific data for a problem is unchanged can be a very useful thing. I'm not saying it doesn't have uses outside of CryptoCurrencies, but I'm still struggling to see a wide or valuable set of use cases. And I'd really like to. Because then I'd build one. There are a lot of them, but I can't disclose. However, think along the lines of global fish stocks, agriculture, pollution, etc. ... to whom that data might be useful, and how it might be applied? Weather feeds into thousands of daily local forecasts (worldwide) each paying an access fee, farm policy, insurance, and all more productive at a lower cost than today ...... ;) Put up satellites for weather observation ... when they aren't observing weather, they are beaming internet (or both)? More satellites, the lower the unit cost. Ability to read blockchain records via a DB? a multiplier. SD

So it's a trustworthy blockchain full of data you can't trust? It's full of data verified by a second source, that cannot be changed - a lot better than data coming from a DB in a corrupt country. Doesn't mean that the data is right, anymore than the data in a DB is right. We just don't want to hear it. SD

Nothing prevents the 2nd verifier from being a 'bot', which it will be. If the reported data is the same as it was over the last two recordings, it doesn't verify the block, and it doesn't chain. Could be the sensor is buried in snow/ice - don't care, it's sending bad data, and it doesn't chain. No humans involved, no manipulation of data (scrubbing), therefore trusted. Practically, the globes sensors would be queried once/twice a day at most. The read just capturing new records since the last read, and as at a set time (GMT) - there is no waiting for a new block to chain - it either has or it hasn't. The sensor itself could be in space, sea, or land, and just pinging once/twice a day. And only periodically, depending on the local condition. It's just a different approach, 'not invented here'. Preferred for a great many global applications, not so much for others. SD