“We are seeing some signs of extrapolative expectations and speculative behaviour,” Tiff Macklem, the current Governor of the Bank of Canada, said last Wednesday. “Our concern … is that against a background of rapid price increases, people will extrapolate. They will expect that those price increases will continue indefinitely, and they will overstretch to buy houses. That would be a mistake.”
It should come as no surprise to our readers that Macklem joins what I think are the majority of financial experts in knowing how this all may end. This week, for example, the CEO of National Bank warned that regulators must (a) stop allowing blind auctions and (b) encourage buyers not to waive conditions for a home inspection or financing. If the market doesn’t slow, he added, it will crash. “The bursting of a speculative bubble in this segment of the economy would have very negative social and economic consequences.”
It is almost impossible for that type of information or statement not to be common sense at this point, as we have come to realize. Still, the housing market is, in fact, the single most prominent thing that is preventing our economy from collapsing at this very moment. It may not be the only warning sign as unemployment remains relatively high, comparatively speaking, but it is a critical one nonetheless.
Real estate continues to forge ahead as a national issue at this point. Prices in almost every province in Canada are still rising dramatically and have done so over the last 12 months. Along with recreational properties and several other types of real estate related assets, we continue to make the argument at Delta Harbour that all investors should complete extreme due diligence and be cautious when it comes to investing in real estate at this point.
The side effects from artificially low interest rates have yet to be felt long-term. They have manifested themselves in the form of significantly higher housing prices coupled with pent-up pandemic buying and the fact that many people who can save and put money away at this point are choosing to spend it on real estate itself, this is called “FOMO”, or the fear of missing out.
But real estate is not the only type of hard asset that is a performer. If you are a reader of this newsletter or have followed my writing over the years you will know that I have been an enormous fan and have benefited from ownership of both physical gold and silver. This week, particularly with these warning signs starting to present themselves in many places, I thought it would be important to review the simplest of examples of the ownership of just one precious metal that I believe is the most undervalued of all precious metals. And that happens to be silver.
Here are three examples of ways in which you can own silver through Delta Harbour Assets:
1000 Oz of Silver purchased three different ways at a spot price of $26 and what it would take to double the value of your holdings:
Home Delivery or Storage Vault - $37,000 CDN
You can purchase silver for home delivery or your storage vault through Delta. 10 x 100 Oz Royal Canadian Mint (RCM) Silver Bars would be approximately $37,000 CDN.
To double the value of your investment, the price of silver must move up $26 to a price of roughly $52 Oz on a gross basis.
Bulk Bullion - $34,500 CDN
This is an option to own physical silver, but not anyone specific bar, instead having 1:1 ownership and buying or selling in 1 oz increments.
It avoids the high premiums often associated with smaller bars.
A Savings of $2,500 or the ability to add up to $2,500 more worth of silver
Collateral Financing - $8,600 CDN
In this example, an investor would be able to hold back $28,400 in dry powder to be saved or used later for more purchases, other investments, or to convert your account to like or unlike product and take home a combination of bars and coins long term.
In this example, the price of silver would need to rise by only $6.85 to double the value of your initial outlay.
Will Covid 3.0 ignite housing further? Will it inflame prices in the far reaches of suburbia, make it harder for employers to regain offices, destroy the client base of city businesses, discredit governments, ratchet up the debt of an entire generation and set the stage for an inevitable correction? I do not know, but anything is possible.
That’s scary. Or is this the new normal? That’s terrifying.
Yours to the penny,
Darren V. Long