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RDS.B finetuning.

Hamilton

rds.b june 05 2015

As we get closer it becomes easier to calibrate this stock. $56 seems to be the best spot to buy. The yield is 6.40% now so by the time it gets there that should be, at least, 6.6% At that rate your money doubles in less than 11 years. By  that time  Christine Lagarde  may well be head of the Fed., with rates still at zero. If a Canadian man can become the Governor of the Bank of England, why not a French woman the Chair of the Fed.? Unlike the Bank of England the Fed. is still a private company with just a few international investors, just like the Beer Store here in Canada. At least as far as Canada is concerned, that begs the question if free beer would stimulate the economy better than free money. Unfortunately, Keynes himself did not offer any guidance on this matter.

Housing in Toronto, no bubble.

Hamilton

The Toronto Star is not generally admired for it’s business section, which, by the way, is often combined with the sports section. That tells you where the priorities are. Nevertheless, if you happen to live in the country this is the only paper available, and, on occasions they do come up with some real gems. Craig Desson’s contribution today is one of those gems. For 3 or 4 homes he went back to the 1915 (precisely a century ago!) offerings, compared those with what the Bank of Canada thinks is the inflation adjusted value today, and then compares that with the most recent sale price for that property. Here are two examples;

housing in TorontoHousing in Toronto 2

Assuming the math is correct houses went up in price, on average for these two, 20.52X as the result of inflation. Put in other words, you have lost a little more than 90% of the value of your money in 100 years. But, over and above that, houses are now 8X more valuable than they should be on an inflation adjusted basis alone.

It should be patently clear from these numbers that there is no reason whatsoever to think that there might be a bubble in Toronto!