The Cruel Math Says Most Investors Will Lose Money From Here | Danielle Park

Summary

• Market Outlook: Valuations are historically extreme and higher-for-longer yields are tightening financial conditions, raising recession and drawdown risks in 2026.
• Housing Correction: Canada and the US face continued housing pressure as renewals reset higher, listings surge, vacancies rise, and builder rate buydowns fail to revive demand.
• Demographics & Supply: Aging boomers own most housing and equities and are likely to add supply by downsizing, intensifying real estate softness over the next several years.
• US Treasuries: Preference for intermediate-duration government bonds (roughly 4–7 years) as historical rate-cut cycles typically see Treasury prices rise even as risk assets weaken.
• Cash & USD: Elevated cash allocations and US dollar exposure are emphasized for liquidity, flexibility, and capital preservation amid rising credit stress and policy uncertainty.
• AI & Data Centers: Massive AI capex and data center buildouts risk overcapacity and delayed monetization, with some facilities underutilized and power-constrained.
• Commodities & Precious Metals: Oil and broad commodities show deflationary pressures, while gold/silver have surged but appear overbought, warranting careful position sizing and profit-taking.

Transcript

Anytime you've been over 35 historically, your forward returns have been negative over 1, three, five, and 10 year periods. >> So the probabilities are that people are going to lose money from these levels. [Music] >> Welcome to Thoughtful Money. I'm its founder and your host, Adam Tagert. Well, 2025 draws to an end in just a few weeks. What should we expect, especially in terms of the markets in 2026? To peer into the future for us, we've got the good fortune to welcome Danielle Park back to the program. Danielle is president and portfolio manager for Venable Park Investment Council where she manages millions for some of Canada's wealthiest families. She's also publisher of the daily financial website jugglingdynamite.com. Danielle, thanks so much for joining us today. >> My pleasure, Adam. Thank you for having me. Oh, it's such a pleasure. Um I I know we're going to make a lot of people happy having you back on the program and I'm so glad that you have been able to make time for us right here at the end of 2025 because I think as I said there in the intro, a lot of people asking, you know, what is 2026 hold in store. Last time you were on the program, you put together a great uh slide presentation that you walked the audience through about how you saw the world and what your outlook was for the future. And you have done the same thing this time around. So, I know people are going to have a strong interest in that. Um, before we just like jump to the slides, uh, if there was a word or a phrase to kind of sum up how you're looking at 2026, what would you pick? >> Oh, goodness. Um, crazy, um, volatile, uncertain. I mean, things are always uncertain, and I've always kind of poked fun at people who say things like, "Markets hate uncertainty." Because I always joke, "What's certain? I have no clue." like we we really don't know what's happening. Um but I I think the biggest issue here has been the disconnect between the real economy and the macro picture and asset prices because traditionally there's been a stronger correlation there and in the last few years there just hasn't. And so you know you wonder to yourself is it pointless? Is macro assessments or analysis you know no longer necessary? Is it a waste of time? Um, you know, uh, financial analysis, is that necessary? What a waste of time. We learned how to do that in all of our finance education. Um, so the only thing that I come to there is if it was completely irrelevant, why would big banks and institutions continue to employ whole legions of economists and analysts and talking heads to tell us all the time, you know, what they think is coming next. And I think the reason frankly is they do that because if they didn't it would look like we're just in a big gambling casino, you know, and someone once wisely said that casinos or or financial markets are casinos with better lighting. >> And I've recently quipped that I find uh most financial types to be sort of bookies, highly paid bookies, you know, like they just sort of keep taking your bets. Um and if it goes badly, oh well, so sad. it's not their fault and if it goes well well you know you won because they were smart or right or correct >> so it's it's a it's a bit of a mess. Um and you know things like they talk about well you know the Santa Claus rally is coming because seasonally this is the strong time of the year but it's true also that you know the whole year has been strong and that the spring part of the year that was supposed to be you know um also favorable was when we saw a big crash. So really upside we're upside down is up back is forward you know so it's it's very difficult to to get your bearings and I think that's why I just continually do the historical work >> because I believe that human behavior is consistent that has been my experience in my 60 years of life is that human behavior is consistent and um I take some comfort from books that are written you know 100 years ago and 200 years ago uh 50 years ago go um because they speak volumes of the exact same conditions that we're experiencing today. And of course, every generation thinks that we discover things fresh and it's only us that's ever seen this. And of course, that's rarely been the case. >> So that's that's my long story to say I wish I could see the future. I really do. I know some people confidently predict that they can. I've I've learned to be more humble uh over time about that. Well, I I I appreciate the humility and I love the fact that you do the work and uh and you're about to walk us through your conclusions from having done the work. Uh you know, I interview a lot of people, Danielle, and and I will say that the people who are the most steeped in in both economic history, you know, going back hundreds of years, uh some cases sometimes thousands of years. Um and also who are the most steeped in in just general history and in human psychology. Um and and I'm I'm I interview lots of people that are experts in each one of those sort of different areas. They like you uh they're the thing that they have the most confidence in is the consistency of human behavior. So yes, the technology changes and there are cycles and you know no cycle is exactly the same but there's a lot of rhyming but um while we might be on you know the eenth evolution of whatever technology that we're on we're still operating on wetwware 1.0 when it comes to how the human brain is wired and how human emotions work. >> Yeah, absolutely. And debt debt is a four-letter word. Uh it is the great elixir to add and make progress accelerate quickly and look like everyone's getting away with, you know, oh my gosh, everyone's made such great progress and then there's always a reckoning period that comes after a ma a massive debt expansion because the chair gets knocked out from underneath and there aren't any legs there, you know. So I think that's another major theme through human history and it's been one that's been with us incredibly in the last 20 years through the zero interest rate environment etc. And I think that's been a unique experience almost the fact that I I've never found another period where interest rates were held at zero for you know 15 years. Uh maybe it does exist but I've never seen it in my in my readings. And um I think that was a bit of an anomaly, but the the the impact of that was to magnify not to change uh to a brave new world where debt no longer matters, but I think to magnify the cycles that were moving through. >> All right. So, uh, I I interviewed recently James Grant, uh, of Grant's Interest Rate Observer, you know, probably one of the the most respected experts alive today on interest rates. And he was making reference to David Greyber's book, Debb, the first 5,000 years, right? So, which goes back through 5,000 years of history, >> uh, in in humanity's use of debt. And he said, nowhere in any of the pages of that book, you know, were zero interest rates ever mentioned, right? And that that such a unique uh production, you such a unique creation of of the the time that we live in. And I wonder Danielle um if you what you think in terms of your your your level of surprise of of how disconnected uh the markets are from from the fundamentals and how long that that has persisted recently. How much of that is due to the unprecedented developments a in the debt markets with you know zerp uh being pursued for a number of years um but also with just the unprecedented amounts of stimulus that were pumped into the system during co uh they they were just at levels of magnitude that that honestly before co I don't think anybody really could have ever believed that we would have done but but they're at at just staggering levels and has that just distorted the system so much that it's allowed for this divorce from reality. But but sort of like the the Roadrunner cartoons where the the caddy goes off the cliff and he's hanging there in midair and just looking down. You know, he hasn't fallen yet, but you do know eventually gravity's going to win. >> Yes. I think it was uh a function of the great financial crisis and the response that came from the governments and the central banks. Um because as we all know the system was in a lot of trouble from overlever and speculation in the late uh part of that cycle into 20078 and I think the Obama administration I said it at the time and I believe it in a completely nonpartisan I don't care what party you like the point is they had it in their hands to make major changes to the way that the financial system operates and the speculative nature in which you know Wall Street runs a muck and instead of doing that they saw their calling as the Affordable Care Act. Essentially Obama himself has admitted that President Obama and at the could have made fundamental changes like they did in 30s after the crash of 29. Instead they brought the bankers in and said it's okay boys we're going to we've got your back. And since that time, we've just seen one initiative after another after another, removing regulations, removing restrictions, making it easier to speculate, you know, the whole explosion of cyber stuff, cyber uh, you know, currencies and then all of the related infrastructure, everything that's gone on since has really been to magnify and add leverage. And so, you know, if you ask me why, one of the things I'm not confident about at all, even though I do all the macro work and look forward into the new year, is to the degree to which this new administration, I don't have any confidence that their appetite for clamping down on anything is more than the, you know, last couple. I think it's even worse perhaps in their in their sense of just everything is fine, all is well, let it all go. I mean, you know, the the president himself has got his own crypto coins and the meme coins and things like that. So, I think my my greatest fear looking into 26 is to what degree will they go to to prop out prop up or bail out any kind of implosion that happens. Um, you know, there's all this talk about who he's going to replace as the head of the FOMC. I have no doubt that he will try and find if possible someone who will slash rates down to zero if possible, you know. So, um I I worry about that because although I know the weighted debt ultimately is deflationary as we've seen in the last few years if they hand out enough to consumers like he's talking about handing out checks not just uh you know monetary policy being extremely loose and finding a yes person but also that they want to hand out checks to the public to buy votes again going into the midterms. And we've seen that that can have a very inflationary impact. Make things worse in the end. You know, not save us, not prevent harm, but actually magnify and make things worse, but in the meantime, possibly kick the can even further and allow bubbles to even get greater. So that's, you know, that's the reality of the conditions we're in. Finding adults is tough. Finding people who want to do fiscally prudent things is tough. I don't think our system even encourages it, frankly. So there there we are. Well, I think the challenge is is is pretty much we have a power structure. And by power structure, I don't just mean here in the US, Washington DC, we it's also the whole corporate CEO fleet and everything. It's just in in many cases the populace. I like nobody has any appetite for austerity. Um and to a certain extent, everybody just wants the status quo to continue for as long as it can. and that is cobbled together by a ton of leverage and to you know when it starts creaking they just put more on to try to you know smooth over things. So the problem is is there's there's very few people that are asking for the pain it will take to try to reform the system. So I here's my question for you, but I guess I know your answer, which is do you see a path of us getting to a better state >> um uh without a crisis or or basically are we going to try to, you know, continue to double and triple and quintuple down on this until it just literally can't work anymore and only then when the breakage happens will the discussion be okay, what's a better way to do this? >> I'm afraid so. I think that's the case. Um, you know, I think we not only had the zero interest rate environment for all those years, we also had this um unwinding of prohibition against gambling. And I think that really layered over perfectly because if you know like in the early 1900s and 1800s, gambling was largely illegal. Yeah, sure it happened, but it wasn't endorsed by the state. It was done in the back room of saloons or whatever. And then in the in the actually I was looking at the history of this because I was quite interested. In the 1930s they brought in um well first of all it was betting on on uh racetracks was allowed in the early 1900s and then in the 30s they brought in gambling in Nevada sort of in response to the depression. It was kind of like what can we do to to cheer people up and have some you know revenue and they brought in gambling. And then you've had it just you know it went to state sponsored lotteryies. it went to, you know, and and now we're gambling on absolutely everything, >> right? Sports gambling, now there's poly market, >> individual games, like it doesn't matter. And I'm quite convinced that that pendulum will definitely need to swing back the other way because there is such a loss to the population in terms of attention, in terms of of of focus uh on long-term pursuits that add value and you know earning a living over time when everyone's sort of thinking about how can we win and financial make the quick buck win not the future but >> financial tamement of course has been that other layer. Now we've got whole networks that are focused on, you know, tickers and bets and how do you play and how do you do this? So really all of these things have worked in concert to make a population that now is almost despairing of anything that's anything more than a you know something they have to do for more than a day or a week or a month. It's just the appetite or the discipline to stick with something to do some depth uh in-depth thought to develop discipline and habits that's almost uh I don't know it's extremely rare now I think and that's that's uh very counterproductive and I think that's why other societies in different times have come to ban these things because it just becomes such a debacle >> debacle well >> and I think that's where we're at now >> so so we'll get to your slides in just a second here but you know on this I I've I've observed again through all my interviews on this channel that um we have really both with carrot and stick um been training our younger generations to speculate versus investing which is essentially what you're saying there and and there's been carrot because you get the quick buck or the dopamine hit or the financial tamement or whatever right but there's also the stick of like you know if you're in your early 20s and you aspire to own a home and you're despairing at, you know, the unaffordability crisis we have here. You're basically telling yourself, you know, the only way I'm going to own a home is if I get one of these lucky lottery tickets, the crypto that shoots the moon or I buy the meme stock that catches fire or whatever, right? So, again, we are teaching people to only focus on today and to not do the long marathon grunt work that it takes to build long-term um wealth that perseveres. So, and saying all this >> also even the conversation around is education even worth it anymore. I find this absolutely appalling. Is education worth it? My gosh, we need an educated population. We need people to read all sorts of books in all sorts of disciplines or study all sorts of areas to be as well-rounded and educated as they can be. But because education became again inflated like a bubble through all the credit abuse that was put on and all the complexity added to institutions, >> right? And some would argue I think validly diluted too. So the the the quality of the education you were getting wasn't as good and what you were paying for it was going through the roof. Yeah. >> Sure. But it's always like compared to well if you can win money uh doing this or selling people that you know who needs an education you can just you can get rich doing this and it doesn't pay off to do a college degree. And I think that's very uh dangerous. I think that's the wrong path because we really do. Again, the only thing I've learned in my life is that discipline and thought and care uh are worth something and and I don't know the rest of it, the betting, the winning. The problem is you can win it all and you can lose it all. It there's nothing consistent or or or um what do you call it? Reliable in that approach. Well, well, as as you said, you know, the the the financial markets, I think I think you think this way, are basically a casino with better lighting, right? And what are casinos, right? Well, they're the they're the institutions that have the odds in their favor, right? Play the game over a long enough time, the house always wins, right? >> Absolutely right. And and the pro and like I've said this before, but gambling is one thing. I do think we have to get that genie back in the bottle. But the other thing is that when people financial markets are much more dangerous because they're pro they're put to people as if they aren't different from gambling. They're not gambling. They're investing. They're what you do with your when you're savvy with your savings. This kind of thing that should be true. But in the condition that we currently find them, I would submit it's more like gambling and casino based stuff. And people don't quite appreciate often the nature of that. Some people do. They figure it out and they go, "Oh, I got it. I'm not I'm not playing at that table anymore." But other people don't realize. They think it's different this cycle and they're fully loaded on risk and they're not appreciating that they're actually gambling to a large degree. They think they're doing something wise and they're that much older, which of course we can get into, but this is this is the problems I see. >> Yeah. And I I I was looking at my notes from the last time we talked and one of the things that we were focused on was uh which I still believe is true today is that uh the retail investor is has the most exposure to stocks in terms of as a percentage of their portfolio than they ever have and and definitely true for uh the cohort that is retired. >> Right. So, so, so you're saying, look, we're taking on too much risk because we're we're thinking more like speculators or we're acting more like speculators whether we know it or not than investors. Uh, and the numbers prove it out. >> That's right. And we've seen the same thing in the housing market, which we can talk about. But, uh, you know, that I guess that one, um, I'm taking some solace, I would say, because it was so evident to me that it's been so insane for the past few years. And indeed certainly in Canada and I know America too, prices definitely have peaked and are coming down quite uh sharply in many areas. And so math is starting to matter again. And so okay, eventually debt's a four-letter word. Eventually math matters. So >> yeah. So, you know, you're Let's now move to your slides, but as we do, um, you're reminding me it's it's sort of a meme online now, but it's it's a clip from a movie, and it's, um, Will Ferrell from Zoolander, you know, when he's he's shouting, I feel like I'm taking crazy pills because he he he sees the world so differently than everybody else, right? And I feel like that's kind of probably how you felt for a long time. And certainly I know because of having talked with you over the years you felt that way about housing because you're just like that all the math shows that housing cannot sustain at these prices. Yet it is. Well, now we're far enough along in the story where you you're starting to get some some relief to your sanity saying, "Okay, I wasn't wrong. This just took longer than I thought it could." But but math is finally making sense again. That that's the the pro. The con is is if that's proves to be true, it's not going to be a super fun ride for most people. >> No. No, it's not like uh you know it's like in the big short when the they're at the casino and they're celebrating because it's finally happening and I think it's Brad Kit Pit's character who says to the the young guys he says what are you doing? Don't celebrate. This is bad for people in this is going to hurt a lot of people you know realm of reality. We're not in the metaverse anymore. were actually in a PL. Can you remember in 2021 when people were buying property in the metaverse with real money like it was a real lot and stuff and Meta was doubling down on rolling that out. Now maybe that'll happen someday. Maybe we'll all be in the metaverse, but back then it made no sense and it turned out that that yeah, it wasn't a good investment. So anyway, um, so, uh, yeah, I just I I update I looked, it was 3 months almost to the day that we talked last, so I thought I would update a few of these macro things just to see if anything's changed. The 10-year yield, of course, uh, was about 407 when we spoke last. It's 409 today. And the point being that, you know, this sets uh loan rates, interest rates for borrowing the economy, not publicly traded companies who do so at market rates, but for the banking system, for regular people, uh for mortgages. So, the 30-year mortgage is fixed today at 625, which is not much different than it was when we spoke three months ago. Um, but it's more than double it was in Janu. And this is the the piece that I speak about. So, so yeah, so the the mortgage rate is still about a double from Jan 2021. And I've suggested all along that that matters. Uh I know there was a lot of mortgages that were at um less than 3% from the low rate environment, but those have been coming up. And I saw a chart recently that there's more uh mortgages over 6% now in America than there are less than 6%. So, I think we hit the tipping point there where people have been refinancing. And, you know, I didn't buy that argument either for a long time, people were saying, well, don't worry, they've got long-term rates uh at low long rate. And who would worry about in their long in their low rate? But in the pattern of the way a way the way Americans typically do it is they refi and harvest equity out of their homes. And so that has been the habit for many years now. And that means that when they go to refi, they are in fact having to deal with the current rates. They don't get to sit in their, you know, sheltered in their pre um prehiking rates. So that matters and it matters in Canada too because as you know we have typically fixed rates that are three or five years. So the fact that um mortgages are today around 4% um because Canada's actually, as you know, the Bank of Canada has cut interest rates more than the Fed has. And so we've seen our mortgage, our whole yield curve come down more than you have in America to date. But the point is that even around 4%, which is historically not high, it's a low rate, it's still double what people were taking out during the pandemic. And um that that era of low rates did nothing good, I'll submit. Um it made it look like people were getting away with uh you know have buying lots of stuff with very little income and they were. But what it ended up doing was in fact just inflating the price of housing, inflating the price of goods um and inflating household debt as a function of GDP which is shown in this chart. And 74% of Canadian household debt is mortgages and about 70% in America. So this matters a ton. You know, most people have the bulk of their net worth in whatever home equity they may have. And it's levered. It's a highly levered asset. So rates really matter. Um, and as you can see there, Candace household debt has been trending down. Thank goodness. We got to 112. We're about 97% now, but we got a long way to go to get back to any kind of healthy level. And that's tough right now because our economy is very slow. So GDP is not growing very well. Um, and the debt's just sitting there like an anvil around the neck of people. And now we've got >> real quick, let me just ask you one quick question. Um, go just go back to the US Treasury uh or sorry, the US um uh policy Fed policy rate there. Sorry, this is the Treasury. Sorry, it's 10 year Treasury yield. Um, so, you know, it's been flat now for a good while. >> Um, and I sort of think of this as, uh, you know, for for the the um the the Fed policy rate, everybody was talking about higher for longer, right? What are the impacts of higher for longer going to be? And we had a lot of discussion certainly on this channel about the lag effect and when that was going to come into play. Um, I'm looking at that that sort of stuck Treasury tenure yield there and I'm thinking of higher for longer, right? That this is just staying high longer than most people thought because the Fed has been cutting and whatever, but it it really that that tenure hasn't budged. And the longer it stays up there, the more kind of gravity it exerts on the economy and on uh levered consumer households and things like that. So, um, uh, I I believe that's kind of part of the message of your charts here, but just correct me if I'm wrong, but it's saying that the longer we stay up here at these these levels, it's just going to be slowing things even further. Um, I also want to note, if you flip to the next uh slide there, um, that even though mortgage rates have come down, you know, in in in America, it was all about survive to 25, you know, so the Fed will start bringing Fed will come to the rescue. It'll bring rates down. That'll bring mortgage rates down and and uh everybody will be able to keep their their nice high housing price and the mortgage market will will thaw out and activity will come back to housing. Um obviously we're seeing less progress on bringing the mortgage rates down that you've seen in Canada, but in Canada as rates have come down, prices have come down at the same time, right? So so lower mortgage rates are not quote unquote saving the housing market. They're they're they're not keeping those elevated prices elevated. Uh it's not enough to keep the price correction from occurring. Correct. >> Absolutely. And I have that as we get along here. Absolutely. Um because and that was a message I wanted to sort of share with my American u readers is, you know, buyowns are happening. So builders are buying down rates even into the threes. And yet new home sales in Canada are in the toilet. Like they're the lowest they've been in decades. it's not rebounding and that's because price is still so uh such a huge multiple of income and and I get to that. So about 31% of mortgages are now up for renewal in 26 and these were the ones that were taken out the 5-year fixed terms that were taken out at less than 2% during the pandemic. Uh so we still have a pretty rough go. This is going to be the biggest amount of mortgages up for renewal that are going to face a potential, you know, tripling or doubling of rates depending on the credit quality of the borrower. Uh so that's that's mattering and we're starting we've been seeing that in 25 there was a almost 30% of the mortgages came up for renewal and that's what sparked a lot of uh resales or listings to hit the market and we've seen that a lot. Um but in fact in real terms residential sale prices are off 25% in Canada since February of 2022. 18% nominal. Um and here's the point that we were just referencing. The reason that even with lower rates and prices coming down, the fact is that the um the prices of the properties went up about three times faster than the average pay of workers um into 2022. And that was a function, as I say, of governments intervening in the housing market, uh, buying back mortgages, uh, deferring payments, allowing people not to pay, um, you know, slashing mortgage rates to the lowest in ever in history. All that was, again, this quick, how do we avoid any pain quickly in the near term? How do we pump this all up again fast? And they did, but it didn't serve anyone in the long run. It made it worse and us weaker. and people are continuing to struggle. Um so this >> well it's sorry one question on that too. So um I just interviewed housing analyst Melody Wright and and she caught some heat this time around because she made a pretty bold prediction where um she said that the housing correction kind of peaked to trough um in the US on average she could see being somewhere between down 38% to to down 50%. um you know when you measure it from from the height to to whenever the dust settles a few years from now uh and you don't necessarily have to agree with that but your your your chart right previous to this one showed that from the 2022 peak in Canada prices were down already what 25% and >> seems like >> yeah in real terms and it seems like you expect prices to continue coming down uh in the future I'm hoping they do. I'm a homeowner, okay? I have I have a dog in this hunt, but I hope they do because they became impossible and it wasted a ton of of money and ine it's it's so inefficient uh to spend a million and 2 million for a house that uh 5 years ago you could get for half that. It it just means people are in debt that much longer. They don't get to savings for retirement or education or any other reason. They're just debt slaves. and your uh president's latest idea of 50-year mortgages is just like the epitome of tonedeaf uh in terms of you know we don't want people in debt for 50 years. We want them to get their house paid so that they can save for retirement. Um so yeah I I don't know of course how much things could come off. I know that nationally it was off about 39% in your last downturn uh in 2006 to the low and it didn't recover for years. That's the other important point, right? When these things tend to happen, real estate cycles tend to take several years from tr from peak to trough and prices don't recover typically for several years after that. They're often a very long cycle. And so, um I think that's we have the setup for that again. Now again, will the Trump administration suddenly uh start buying up mortgages again to, you know, artificially support the housing market? Uh will they, you know, I I don't know what inter I mean, we've learned to to love the bomb here. Like whatever they come up with, whatever crazy scheme, people will think, oh great, then housing's a go again, whether it's, you know, uh re meaned enough or not. So, in the US, you're you've come off much less, but also your your inflation, your um multiples of income, as I'll get to here, are much less. >> They weren't as crazy as Canada, but they weren't great. And I'll let you get here, but just let me ask the question I was trying to get to, which is showing that severe price decline in Canada. And and again, correct me if I'm putting words in your mouth, but the likelihood that the momentum is going to continue downwards for some good while is your would your message to the US market, which again, we've seen some metros correct and some by as much as 25% if you're living in Austin or whatever, but nationally, we still haven't had a a year-over-year price uh average price decline. We might end up this year, probably will next year, but still very slight. My question for you is is Canada a preview of coming attractions to the US? If I'm watching this as a US person and saying, "Well, the US market hasn't really dropped yet on average. We're going to be fine." Would you say no, look to Canada? >> Well, I would say that uh the true north star should be household income as a prices as a multiple of household income. M >> so historically about 3 to four times is considered max in terms of affordability and you guys are today around uh five times. So on that like you're again your average home price uh home sale price your recent data was 416,000 that's up from the lows uh a few years ago but um in Canada we got to 837 which was you know uh was like 8 to 10 times household income. I mean, bonkers. Absolutely bonkers. And still, we're about seven times uh the median household income of 94,000, even though things have come off as much as they have from the peak. So, this gives me co uh reason to believe that we're not done the downside in the Canadian housing market, if it's at all left to its own market forces, if there's a whole bunch of intervention again to prevent this from happening, you know, all bets are off in the short run. But in the long run, I think the weight of this will have to at some point it has to connect with rents. You have to be able to have a positive carry if you're going to invest in the property. So the price matters relative to the rent you can get. That got completely out of whack. As I said, people were buying properties with negative carry of 1 2 3,000 a month. Made no sense at all except they thought, well, prices will go up, so it'll make sense, right? And so, um, I think you guys still have some downside work just because you're about five times the median household income on average. Now, some cities and places you're you look this why, you know, Revententure app is good for that, right? You can go in and look at a specific area, zip code, neighborhood, etc., and see how much is the median home sale price that's transacting, not what people are asking. Asking is different, right? People are asking all kinds of things and the market's frozen and nothing's selling. But the ones that are transacting now, what price is that relative to the uh median income in that area and that'll give you a sense of whether prices are starting to come within the realm of reality. >> Okay. But it looks like in both markets you you think the likely direction is downwards in Canada probably still more than the US. >> Yeah. Well, also which I'll get to is the pent-up demand in listings is extraordinary. Right. So, we've got this number of unsold homes sitting on the market. This was uh a as of um August, the end of August. I couldn't find this chart updated more than the end of August, but you can see there we're approaching, this is American data, we're approaching the US uh um housing peak in terms of just dead weight sitting there. And again, a lot of people have had homes for a while and home equity and they're anchored, this is classic human behavior, anchored to the peak price that they thought of a couple of years ago and they want to get that. So they're really starting to uh you know condos there's was a huge overbuild as you know in the past few years and this is true in Canada and major centers like Toronto near where I live uh but also in America there's this extreme uh supply of condos and they're still coming on the market by the way over the next year we expect to see a significant increase in completions in this space while sales were at 35-year lows. So I would suggest that there's quite a bit of downside still to go in the house in the condo market in particular. But it's also interesting because people have been talking about well in in in again in Toronto where the you know the largest population of Canada lives in the greater Toronto area. So not just Toronto proper but all the environments sort of within an hour of there. And um it's not just condos that have been extremely weak. In the latest data, it's single family homes, uh, which everyone said, "Well, they'll never come down because everyone wants a single family home." No, they've been coming down, too. They've been sitting. We've got this balloon in listings, as you can see, um, existing home and active listings versus sales. And the the U ratio there is just pretty heinous. Um and what you're seeing is that um people in both the US and can Canadian and most of the markets other than a couple you know sort of Saskatchewan, Reginaina and Winnipeg, they're kind of holding in there for their own uh reasons at the moment, but they also didn't go up as much as Ontario and British Columbia in the pandemic boom. Um but their their numbers are um are looking really rough and um a lot of dellistings going on. And this this is the US uh chart, but 50% of the people are taking properties off the market and they're saying, "Oh, well, my neighbors have done this recently on my street." I've seen this where they listed for kind of top dollar. Uh maybe dropped the price once, then got annoyed and said, you know, to hell with it. We'll we'll go south for the winter and we'll we'll try again in the spring. I bet you the spring's going to mean February this year because people are so anxious and there's such a huge amount of pent-up supply and people are going to keep hoping that they can get this price that they had in their head. Um and you know then the other thing that people are doing is in the interimm they're looking to rent right so again think of all these layer on layer on layer this parade of horriles as as people call it but um the VBO Airbnb thing right that went crazy in the last few years in terms of you couldn't even get uh you know people couldn't find a place to rent regular in in major cities all around the world because this lovely idea which started out so great for us all that we could go everywhere We're in rent places wherever you go in the world and who needs a hotel? Well, it became such a huge percentage of the of the rental stock that people in regular, you know, regular workers couldn't. This just made it all that much worse and the affordability metrics that much worse. And so they brought in um regulations in many areas to restrict the amount of of this activity that you could do or you had to rent for a minimum of 30 days, this kind of thing. So all of a sudden short-term demand went away and that was artificially propping up rent rental income because people could get a higher rental income stream than they could if they rented regular on on a one one-year lease. So that allowed people to justify paying more too because they were like, "Oh, well, you know, we're going to get this amount of rent." Well, now the reality is that the slowing economy, there's less movement in terms of travel. Uh people are are doing stations. They're staying local. There's all these things happening at the same time that more people are feeling the weight of their real estate and saying, "Okay, let's just find a regular tenant. We can't we can't we're not renting it enough to carry. The mortgage is coming up for renewal or just did. Holy cow, payments have gone up. Everything's going up. Utilities are going up. Thanks, data centers." Um, all everything's going up, right? So, people are thinking, "Okay, well, let's rent it." So again, back to how do you know if prices are at all reasonable in an area you're considering? One of the the best northstars that you have is to look at how much could you rent? How much is a is this type of apartment renting for in that area relative to what would be the mortgage, principal, interest, and taxes like carrying costs if you were to buy it as an investment and try and rent it to someone for positive carry. can you and in many areas this the math is still just no no good at all like you're still uh negative and subsidizing and you know so a lot of people are now trying to list so we've got immigration flows slowing in Canada and America uh and you've got this surge in active rental listings so that's another telltale sign of stress >> law of supply and demand you get a bunch more rental units out there well rents are going to come down right and as you said earlier you Did the cost price of a house tied to what you can rent it for? Well, if rents are going down, your home price needs to come down. >> Exactly. And this is the same data for uh the US and I noted recently that it's uh the highest vacancy rate um in the data series that I was looking and that's better for renters. So that's good. Again, keeping in mind that shelter costs are a huge component, a third to 40% depending on what you count of the CPI. So a lot of the inflationary impulse came courtesy of this insanity in the housing space over the past few years. So this is uh disinflationary if not outright deflationary. Um >> I'm sorry. Are are are you of the mind because I asked this question to a lot of people. Are you of the mind that that inflation is measured by CPI will be coming down in the next couple years because the the housing the lagging housing data is finally catching up to the CPI >> calc. Yeah, sure. I mean it's absolutely feeding in and it is a disinflationary or potentially deflationary impact. Now the the extent to which as I say policy makers go back to trying to inflate the bubble or doing all manner of crazy things to you know the extent to which tariffs impact the CPI the c cost of goods. I mean there's a lot of moving parts in there but as far as the shelter component I would say it's going to be do continuing to do work to the downside which is helpful. It's better for uh real people working in the economy. It's better for household formation. It's better for the birth rate. I mean, this is all connected, right? So, that's that's good. Uh it's not so good for investors who paid too much and can't now rent again. They they were renting uh a negative carry before, but now their cash flow in other areas is drying up and now prices aren't going up. So, they don't know. And REITs are interesting because REITs as an investment class have basically done nothing now for many years. uh depending there's a few exceptions but generally speaking they haven't been good as a rent as an investment uh as a sector. So Canadian rents have in fact come down nationally um and that's dis that's deflationary. Um but there's that Winnipeg Manitoba is sort of the anomaly in this data set but rents are coming down so that's good. And I like I think I talked to you about China the last time but I in my mind they are about three years ahead of us in this process. They also built their brains out in real estate. 80% of Chinese net uh net worth for households is in real estate. They were making it uh you know zero down and state formed state enterprises were subsidizing so everyone could get a house for nothing to try and keep the population sort of thinking that they were getting somewhere, right? Uh so but then since that bubble burst you've had real estate deflation on top of aging demographics which we now have in most developed economies including our own including China and low immigration. So you put all these things together and you've got this very disinflationary or outright deflationary force that's happening and the Chinese property market is in its fifth year of decline or going into its fifth year of decline and still uh not having any signs of life. They've tried all sorts of short-term tricks again. How do we get people back to the gambling mindset about, you know, seeing property as the win? and it hasn't worked because there's just too much supply. They overbuilt like crazy. The the builders are still the developers are going bankrupt. I mean, it's quite a mess. So, I think >> ju just this week, we got new news on that, right, with um the property developer. What is it? China Venkey, if I'm pronouncing that correctly. >> But it's it's another potential sort of um uh what was it? Ever Everrand. >> Ever Oh, for heaven's sake. Yeah, I think >> now now it's left me. >> Okay. >> Yeah. >> Yeah. But but but anyways, >> Ever Grand. Ever Grand. That's it. Yeah. Yeah. >> Yeah. So, the the hits are still coming in that space, right? It's it doesn't seem like it's healing. They're still having some guys, you know, teetering on on the edge of their chairs. >> Absolutely. And so I I think you know when the bubble burst at home China you know because they because after the great this is all connected after the great financial crisis first of all everyone thought China would be insatiable in demand into the peak in08 then everything burst then China decided to double down on real estate and that helped pull everyone out of the great uh financial crisis and then they overbuilt and overlevered classic and then the bubble burst there and now they've been scrambling to try and find new catalysts for growth. It's not easy. And they've got over they went into all kinds of alternative energy products and things, production EVs, all that stuff. But the race to the bottom in terms of price is that they're trying to sell it all to the rest of the world. And that's their deflationary exports, right? So they've been this this plays into why you guys now are why the US is looking for tariffs. It's all related to this sense that China is exporting deflation and we can't compete because they've got excess capacity and excess supply in so many things. So we see this in the price of oil which matters a lot to Canada, right? Like it was our uh our our go-to for so long and back in 2008, you know, people were predicting that it would be 200 a barrel in no time when it was 148. Well, in fact, it it it turns out it's a demand-based uh consumption. And even though there was a lot of speculation and financial shenanigans going on in futures markets etc to pump up the price when the demand cycle uh turned we were left with excess capacity and supply and we've had a struggle ever since. I mean you know geopolitical conflicts wars um even the reflation trade in China with the the excess building of everything which is very commodity intensive. We still have seen oil struggle to find a bid and our uh target has been the $40 range as it was in the 2008 cycle. And indeed, I noticed JP Morgan recently came out saying they expect about a 50% decline into 2027. I don't know if that'll happen, but again, to the extent to which market forces have anything to do with what goes on in these in these financial markets, um I think that there is um a still a deflationary side there. And again, if the price of oil fall continues to fall and the price of gas continues to fall, that's also helpful in this whole struggle to get back to a cost of living that people can afford. So, uh, it might not be great for investors in the short term if these market forces are allowed to play out, but I think it'll be healthier for rebalancing the overall market forces and for allowing um, households and businesses to have some reasonable input costs. Again, tariffs is a bit of a wild card in that, but to the extent to which we can have better more efficiency and better cost structure, uh, lower commodity prices would be helpful. And of course there's a whole bunch of dynamics around that and the you know the um special metals that we use in in and all the uh AI and uh you know special technologies that's a wild card in this whole thing. But it's interesting that even with you know 7% of the CRB index is precious metals which you know all about have had an extremely strong run in the last year and yet the CRB is still really rangebound. It's it's looks like a flag like a pennant. it's just been stuck since the peak of of speculation in 2022. Um, and it really hasn't made any headway here. So, the longer it kind of holds on there, um, again, as the economy slows, as demand cycle turns down, I think, um, then, you know, we have the proxim the the probability of lower commodity prices in general again. Um and uh that impacts of course the Canadian economy you know like 75% of our exports go to America. Uh a good portion of that is in the prochemical side. Um and we are we are you know doing things like leng link LNG ports in British Columbia to try and you know get energy sent to Europe and Asia and different places but you guys have been our main customer for so long and of course that we we've seen now we've got housing is not helping you know housing was really after the bubble burst in 2008 we had some commodities renaissance into 2011 which helped Canada again with China's big overbuild in the in the property property sector um where they were you know they were taking down something like 70% of all the world commodities at that point to try and build out their property sector and that as I say ended or burst and now we're really struggling we we we doubled down on housing to try and keep the economy afloat and for a few years there it was literally 100% of our GDB GDP growth was coming from overinvestment in the residential real estate sector and now you see that >> I didn't realize it was that high >> yeah it That's China right there. >> It was tough. It was tough. It was hard to watch. Um because I kept saying, "This isn't helping us productivity wise. This isn't helping us make anything useful. This is just bidding up. This is a casino bidding up the price of our shelters, which is costing us in the long run." And so, uh Candace unemployment rate has been rising. Um, I think there's a risk here that we could see, you know, again, housing downturns tend to be the deepest, longest corrections and have the um the worst impact on the overall economy. And considering Canada was so highly levered to it, I'm I'm worried that we have uh quite a bit longer to go here in terms of our unemployment uh cycle. And of course you now are starting to see that pick up in America as well where you've got now you know 54% more layoffs in the first 11 months of 25 than you had in the prior year. So the you know that's I know there's been efforts or I'm not sure if it's intentional or not about the hiding of the NFP data and the house all the employment stuff being delayed and then not issued. But, you know, we do have these alternate uh sources of information that are from the private sector and they're saying, "Hey guys, we've got a lot of layoffs coming." You know, this was the other thing that caught my eye here is it's the small businesses which we know create the lion share of jobs in the economy. And indeed we have here them uh doing the most cutting because they're looking at you know questions around where is the demand coming from where is the where is what areas are growth and and and yes they're all investing in AI you know uh depending on the survey 80 to 90% of companies are saying they're trying to figure out a way to use AI but only you know 5% of them are saying they found any actual efficiencies or way to generate revenue. it's mostly just how do we cut overhead? And so the that marries up with this chart of well, let's cut people. We don't need as many people uh for all those reasons. So that's um and then this chart really I thought was interesting because of course we all know the crazy stats on was it 70% of the free cash flow of the companies of the AI leaders was going into building the infrastructure of the data centers. Um and um even so they've they've now had to start borrowing a ton because they want to even ramp that up further. But in the process, you're seeing this rollover already in non-residential investment in the economy. So notwithstanding all the hyperbole and you know we're going to spend even 75 more times and all this stuff um at some point it's not driving enough. It's not keeping the business investment component of GDP afloat. It's still trending down. So that is another problematic because you know uh the US has the bulk of the world's data centers and I know some of your guests have talked about many of them are sitting empty waiting to be hooked up to power or you know so this idea of overbuilding because money is cheap or you know available. Um, and when I say that, I mean the AI companies have been borrowing in the private markets through uh, you know, the asset bubble that's enabled them to have cheap financing because of their share prices and their their debt uh, being so inflated. So, they've really got a bunch of free money and they've thrown it around like drunken sailors again. And we'll have to wait and see to the extent it's a good investment. That remains to be seen because there's no revenue coming from any of this. So, it it's tricky. Um, and See, see, you may get there, so you can delay your answer to this question, but I'm I'm very curious to hear if you think that um the promise doesn't prove out on the timeline that Wall Street is currently assuming. >> Well, it it never does. Again, I think if you think about it, investing again is a long multi-year process and building infrastructure is essential, but none of it is a quick uh turnaround or an easy path to riches. Um, you know, and and the other this chart just speaks to the, you know, the computer build out for the infrastructure in the 80s and then the internet boom, which we lived through in the in the late 90s. Yes, that was all putting in like, you know, cable and and um networks that that supported us for the decades after that, but the loss the techled loss cycle for jobs was still went on several years. Like it wasn't something that just cleared in a couple of years. And I think that the AI buildout um and and to the extent that it replaces humans, I mean, computers did too, internet did too, but you know, there's a it's a messy process. it takes time to move people around or to find them other occupations etc. So I think that um maybe the lo the job loss to date may not even really be about AI. I think it's really got more to go in terms of that theme and maybe the job losses are just as we say about uncertainty in the economy, small businesses not finding a way to profitability. And then this is interesting because you know the credit cycle as I say debt we have to keep our eye on that because we know that that households and businesses are very highly levered now and you're starting to see well we know the student loan that's policy again right student loan policy was suppressed for so long payments were deferred that didn't do anyone favors because people went out and borrowed more thinking they didn't have to make payments which now they're having to make and so the defaults are really spiking on that. Same with auto loans. You know, the people bought too many too much vehicle on huge payments because rates were low and now they're struggling to make those payments. Credit card defaults have delinquencies. Uh 90 days delinquent credit cards are up now approaching um you know the highs we saw during the great financial crisis. So I think those are all certainly question marks. Um lenders rejecting credit applications. We've seen this before, you know. So again, people have this perception that, well, it's not a problem. People just refi. And this has been the habit of many. We'll just refy and get a bigger loan and we'll pay off these other credit cards and these other things. But at some point, you're you're so levered and maybe you don't you've lost some income or banks will cut you off. Yeah. >> Then suddenly when you need it the most, they're saying, "Oh, well, no, we're not going to approve that refi. We're not going to approve that." Uh so then you're seeing an an increase in bankruptcies and and uh reorganizations as well which is all part of this cycle again how we restart it's a healthy part of it because if people have got in over their skis they have to find a way out uh or we don't have data prison anymore someone has to allow them to restart but anyway so this is an interesting stat as well and then that just brings us back to this you know this I just you there's a million of these charts and everyone goes well valuations don't matter they're irrelevant Okay, they're irrelevant. Um, but that's what they were saying about housing and rents and income ratios and all that was irrelevant, too, because housing, we didn't understand, housing only goes up. And all I'm saying is at some point here, you've got this record price that you've paid for record assumptions of forward earnings. Um, that you know, once you're priced for this kind of perfection, nothing's ever perfect. Nothing ever goes ideally. No, no, no time in human life is not without surprises that, you know, positive surprises, great, but there's always some bad things that will hit. And that's why debt is a four-letter word because your stability is very uh diminished when you're highly levered. And these markets are just full of crazy speculation and products that have been rolled out, like I said, since the great financial crisis. It's just um it's like uh you know, I don't dividing cancer cells or something. has just gone ballistic in terms of the amount of levered products and and things that people are doing that is really gambling thinking it's investing. Um this was a good chart um just showing you know we're now something I think we're actually more like 42 capex at the moment. I haven't looked at it in the last day or two but um anytime you've been over 35 historically your forward returns have been negative over 1, three, five and 10 year periods. M so the probabilities are that people are going to lose money from these levels. Now again there could be some intervention in the next few months that might slow that down delay it make it worse but not cure it not fix it because you know you have to have the cleanout phase to actually fix it and it's not just the US you know I think it's very interesting we we are very fixated because the US is highly concentrated in the handful of tech companies and you know the the bulk of the of the other companies have not done nearly as well and many are flat since 2022 since the big peak uh in the in the metaverse mania let's call it from 2122 many companies have not made back those highs or made any any progress since there but the US markets been boyed by this handful as you know of of the big tech but it's also the global stock market that has been inspired to madness because you've got if this is a market cap of globally stocks as a percentage of global GDP just to show that you know again we We we're we're higher than we were in the tech wreck of 2000. We're we're getting back to where we were in the in the mania of 2021 just before we had that sort of big selloff. Um and the TSX, you know, uh in Canada, again, I mentioned that there was this euphoria around China and commodities in the 2008 cycle and it peaked again in the 2011 uh uh period. Um and then again as China was building and demanding and gobbling up all the the hard stuff they needed to do this this bubble build uh in real estate. But since then you know Canada really topped out for you know 15 years there 14 years it didn't really make any new highs. Um this is just the price of the of the shares those big swings and then back down and then co of course retested and then in the last sort of 18 months you've really seen inspired by the precious metals boom has really done a lot for sentiment around Canadian the Canadian stock market again but you've got parabolic moves. So, you know, I just think um the the chances of keeping this is not good. And the downside test from here is, you know, sort of back to where it peaked in the last couple of cycles around the 15,000 range. And I think people will be absolutely shocked to learn that's even on the table or a probability. Most people think they're on an elevator or or an endless escalator. They don't realize that it goes the other way. Um so or they they're willfully blind to that. This just shows the sectors in Canada. So this goes back to my point. REITs have been negative. Uh this goes since 2022. Um while the property market struggles, uh the rest of the gains in Canada have really happened in 2025 led primarily by gold shares which have been late cycle performers and um and that's great. um and and you know, good for for people who who have made gains, but I'm worried that they don't appreciate what's been driving the TSX. So there there's a whole bunch of portfolios and ETFs and funds that are, you know, tracking the TSX thinking it's a diversified portfolio. Actually, it's much more concentrated than America in terms of its top 10 companies and in terms of its top two sectors, which is energy and financial shares. and the two of them together. Oh, I just released some balloons. I don't know how to stop that. It happens so rarely. >> Don't worry about it. >> But um anyway, so it just shows again the vulnerability of the of the basket. It's not that diversified. It's very concentrated now on a couple of bets and it makes it wobbly. Um >> so this price of gold, >> sorry, can I just ask a couple quick questions here? Um so first off on the um on the previous chart with the you know gold mining shares having done so well. Um is is that getting caught up in the speculation and is this a sign of just you know another sector uh partying on or as some think um is this gold sort of finally reflecting uh all the the detrimental things that have been going on? And so this is, you know, I guess the big question is, is this sustainable for gold or do you expect gold to eventually have a big correction like a lot of the other asset classes we've been talking about? >> Yeah. So it's a very good question because the price was flat for so long. For years, the price of gold was just sitting there, right? Or trading in a narrow range. And people would say that gold was doing well. And I would always say compared to what or how are we measuring that, you know, and they would often talk about well in some other currency or whatever. But I'm like, "Yeah, but for a Canadian or for us Americans or Canadians, how how are we measuring whether it's doing well?" And the the argument that I always thought was strongest was it's there as a uh you know, you hold that bullion as a as a rainy day fund as a if all hell breaks loose, if the banking system collapses, you can pull out your hard metals and actually have a currency. But what happened was people as they do they lose interest as something goes sideways or doesn't perform for a period of time and people were sort of either forgetting about their holdings or selling them and that was creating perpetuating weakness because people have very short appetites for holding unless it's going up. And then what happened is you could you could argue that gold shares really caught up. They finally gave back. you know, all the returns that people are um happy they've received in gold now has really happened in the last 18 months or the last two years, let's say, right? So, you could say, well, that was paying us back for the last 15 years because that that you know, we were due. And I would say, yeah, that's that's an argument for sure. My concern is that Wall Street being what it is and Bay Street being what it is, what you've seen is this. Um, as soon as the public is interested, as soon as something has made a big parabolic move, um, you get a piling in of all these short-term focused again, people with low, uh, tolerance for any kind of patience or time to wait for anything. And they're they're piling in just like they're piling into crypto, like they're piling into meme stocks, like they're piling into anything that they think they might bet and win on. And so this is why I think it makes it that much more vulnerable, you know, because those guys are not into the long run. They're not there to, you know, uh, well, they can't clip their coupons with gold. Um, but they're they're there just for the bet. And if the bet starts to go the other way, I think, you know, you're going to see selling pressure, not to mention margin pressure. And this is just, you know, I know people think, well, relative strength doesn't matter anymore. Well, you know, it's mattered in the past at peaks and we've seen that um the overbought condition was this extreme only at the sort of top in um the 7980 cycle when inflation was nearing 15% at that point. So, I don't think this is anything to do with inflation. I think it's possibly to do I think it started out with the US freaking everyone out by confiscating Russian assets. I think that was a legitimate catalyst for the international population to go, "Wow, we're kind of nervous about the way the US confiscates things. Let's have some of this alternative currency or store of value." I think that all made sense, but I worry that we've really kind of gone to the edge of sanity here again, at least in the near term. Um, and again, it could go on further. There's absolutely no no um question about that. But the question is, how do you risk manage it? If you've been in this and you've made a 100% in the last year, let's say, um, historically that's never been something that you retain like indefinitely. There's give and go. There's takeback periods, especially when things are as overbought as they are now. And of course, the same sort of thing applies with silver. And I remember I used to tell a story about Silverman from uh 2011 who was this person who had put all his net worth in four silver companies and quit his job and then was borrowing against his portfolio to buy a to build a mansion uh all on leverage and he didn't and I said to him when when I looked at his portfolio I said to him why in the world have you only got four silver companies? Well because those are the things that have been going up. And I said okay great. Um why did you quit your job? Well, because I'm a full-time investor now. Okay. Why didn't you sell some to build your house? >> And he said, "Well, because it's going to go up more." And of course, what happened was the price collapsed. And I don't know what happened to Silverman, but I'm pretty sure it wasn't good. Uh because he was spending four or five million of his $15 million portfolio to build this house, which he had borrowed against the portfolio on margin. I mean, see, this is the problem. people really fall in love and fall asleep and they don't realize they won a bet. They think they're investing and that's how they get set up for a lot of pain. So, I worry about this in silver as well. Um, and this is what I was speaking of before. S&P, Bitcoin, TSX, gold, really everything has had this positive correlation in the past few years. uh kind of all up together and then liquidation selling and up together and liquidation selling and that really makes diversification tricky. Um and now people are talking about well central banks are cutting again and I made this point before you know when they started cutting the last time because they've paused in their cutting cycle so people think it's all different this time but when they start cutting it's typically in response to weakening economy and surging unemployment so they chase the stock market all the way down. It's not they cut and everything's saved, at least not in the near term. And that goes back to the lag effect that you and I are aware of, but has again seemed irrelevant because you know this time's different. But the the reality is the cutting is in response to weakness. And that's what uh President Trump is arguing right now, right? That the central bank's behind the wheel too late Powell and you know behind he's asleep at the switch and things are getting worse because he's kept rates too high too long. The reality is that stock market typically falls as they're cutting rates, not it's not a quick sort of lifeboat to save anything. Um, and so I guess it's my age, Adam, I don't know if you feel this way, but my tolerance for nonsense has definitely been going down with time. And I work I work in a world that is nonsensical most of the time, so it gets to be a bit much. But this is just the kind of commentary that you read uh or see um in the mainstream media or even from so-called analysts. And this was just a something they put up to say, "Hey, don't worry because even if the S&P goes down a lot, you can hide in the equal weight S&P where you'll not actually lose money because look, in this last cycle, your your return was positive over this period of time." time. And I'm looking at this chart and I'm thinking, well, I you mean it lost half as much, but it still lost 21% over this period. Um, but the the commentary around it was you can be safe there. And you know, the reality is that this is what really happened is that it fell 36%. And that's assuming if you invested all the dividends, which most people aren't because they're paying fees and taking withdrawals. Um, so they're not reinvesting all the dividends. So they're not dollar cost averaging as it's falling. So they typically fare even much worse. But this is what really happened. You lost about 36% of your money and it you spent years trying to get back to square. So this is the kind of thing I I I cheer myself up by going and finding real uh data because I actually lived through it. So I remember what happened. So when someone tells me a story I go that's cute but I actually remember what happened. Um and this is the other thing. this was that 20202 tech bubble because a lot of people are saying well it's a US tech bubble don't worry international markets will be fine it's only the tech the tech sector etc that's a problem no the general markets uh didn't go down 80% like the NASDAQ but they went down by half and that's sort of uh been that when you get valuations like they are now it's been a handful of times in history but every single one of those times you had a greater than 25% % decline in the stock market and other countries went along for the ride. It's not like you can hide in islands in Europe or Asia or somewhere because of this interconnectedness. And I've shown this chart before, but it's again speaking to the the notion that dividend stocks are protecting safe haven. They can be defensive to some degree. They may go down by less than the tech big tech names, but they are not cash good, right? Un unless you have the timeline and nerves of steel and you're reinvesting the dividends, not withdrawing it in your retirement and trying to live on this pool of money. Um they're a rough ride. They can be a really rough ride and and it's something you have to keep in mind. Um treasury yields on the other hand, I know there people love to to hate treasuries, but the fact is that they when they're cutting the yields tend to fall. Now, it'll be interesting to see. I know I've listened to some very learned people explain. Jeffrey Gundelock is one of them where he thinks that longer yields will go up this time while they're cutting. Um we'll we'll see. But historically, um since 1966, whether you get a recession or not, uh Treasury prices rally as they're cutting. So it'll, you know, we'll see if this time is going to be different. I'm also the wild card is whether we're going to start seeing quantitative easing start up in uh 26 uh to support the Treasury market. You may well see that um in in which case, you know, um they'll do buying to try and bring the long end down again. Uh Lord knows they've done that playbook before uh and they just stop QT. So there's that. Uh the US dollar, we watch it very closely. Um, it's actually an asset class that we make capital gains in as Canadians. Um, and uh, it it when it when it goes our way. Anyway, it's in a rising channel since the great financial crisis when everyone was talking about the demise of the dollar. So far, not not saying it can't be, you know, a problem or that it won't lose its its uh um, you know, dominant currency status, but it's still within the upward channel so far. Um and 30% of the population are now over age 55. Uh and they own more than half of the housing market. So that's more than one in five uh over 55 have multiple properties. This speaks to where supply can come from too, right? People think you've got to build only new houses to create supply. I would submit to you that baby boomers that have two and three properties and are now looking to sell is another way to get supply into the market. And we're starting to see that. Um and sorry but that I've talked a lot with housing analysts about this um both in theory and some are now saying it's becoming reality. You know next 20 years every day the the the demographics are going to create 10,000 baby boomers who need to go off to the nursing home or to the cemetery. Uh so there's going to be this relentless uh tsunami of supply over the next couple of decades in housing which is not something we've really had to deal with uh in recent memory. >> And they own the bulk of the really expensive housing. So I I really think that is you know I said to you last time I believe the real estate cycle with the demographic impulses here is a bigger story than tariffs. it doesn't get as much attention. Um, but it's it's I think it's much more impactful for all the reasons we've talked about. And um, you know, 79% of the stock market is held by people over age 55 today. They're holding these bubbles thinking they're investing, not realizing they're putting down on the on the, you know, blackjack table here. Um, and I think that that will also collide with their motivation to sell real estate or downsize real estate should you get a decline in asset prices in the in terms of the stock market and and corporate bond market. They tend to trade together. So, if they, you know, start selling off in any significant way again, I think that could also intensify the urge to downsize real estate and create more uh supply coming into the market. And this is the youngest third of baby boomers are hitting 65 over the next four years. So this pig is p is passing through that python. It's we're now down to almost everybody's, you know, in their well, everyone's in their 60s now and almost everybody is going to be over 65 in the next four years. So that's something we've never seen in our lifetime, this degree of aging in this mass, right? And them owning most of the assets, most of the housing. Um, so the the need to to raise cash, lower expenses, I think these are massive themes that are really coming. We've been talking about it for 20 years or more, but it's really getting down to the short strokes now, right? So, I think we're going to really uh be aware of this more and more. And um, you know, just that that Ned Davis comment so worth remembering. The stock market has spent 24% of its time making fresh gains in the last 120 years. most of the time it's just trying to make back losses. So you have to keep that in mind when you've been given a big gift in a short period of time. You need to take profit. You need to resize. You need to scale back so that you're not just still sitting at the table at 4:00 a.m. with a hangover and needing a toothbrush. And uh anyway, I I always like I I have all these books. I've read them all. Um I've read I've read a lot of popular uh positive books as well, believe it or not, but I don't find them as u particularly helpful in this context as today. And um just there's a reason that uh you know extraordinary popular delusions in the madness of crowd has been in print since it came out 185 years ago because it is relevant for the reasons we touched on at the outset. >> All right. All right. Well, Danielle, thank you for putting so much uh effort into creating this this excellent chart set here. Great discussion. I got to ask you the question that I think is on most viewers minds right now, which is okay Danielle get it made a great case here. How does one invest for this environment? >> So, like I've I've u mentioned a few times, you look at your asset asset allocation. Um, you know, it's very rare that people talk about this stuff, but um, if you have more than 5% in any one company, I suggest you should look at downsizing that. That's a lot of risk for your capital. >> If you have more than 10% in any particular sector, I suggest that you look at pairing that back. And I mean, the thing is, again, if if if you had 10 or 20% of your money in something that's gone up a 100%, guess what? you now have a big chunk of your money in that um that sector and you should look at scaling that back again, resizing it. That's very important. Um I also think that cash will never be a bad thing to own in this environment. Um um and I mean liquid cash. I don't mean you know uh private equity or the the fact that private credit is coming out with funds that it's pretending are liquid now and selling them to people as a place you can park your money. uh when the underlying assets are illquid. I mean, there's so much going on there. Anyway, cash, you know, um money market, things that are truly cashlike. And also, as a as I we still have a good weight in um you know, government bonds as a as a one of the rare asset classes, US dollars, we still have as well that >> what type of duration in those bonds. >> Yeah. So that's we have not gone very long for the reasons that I've outlined just in terms of wild cards that can happen but basically in the sort of four to sevenyear range is I think the sweet spot of the curve right now. So um yeah that's it. It's not very sexy but we're trying to manage through the full cycle for real life humans with finite lifespans and uh we don't want to put them in in the hospital with stress and that's basically what the game is about. The Irish say it's it's a good game played slow. That's what I think of of this market environment. >> Okay. Uh and I can understand why. So So here at the end of 2025, as we're going into 2026 with the concerns you have, um a lot of these are still macro concerns. Um in other words, the market hasn't woken up to them yet. And so, you know, how are you dealing with the tension of well, I don't just want to sit entirely in short-term uh government debt? Um because there's there's still a market to be >> played here. And I hate to use the word play, but yeah, there's still a market there's a market that's performing here. Um how do you I guess here's my question. H how are you planning on d-risking in 2026 if and when the market starts to show you signs that it's longer just a happy place. >> I believe you need to do this before it starts showing you signs. I mean it crashed from February to April and that is not a good time to be doing right sizing of your holdings. Okay. So, what you need to do is, as I say, have an asset allocation system that defines your maximum exposure to things and and cut that back to size. I would do it every quarter. I would I would look at your holdings and resize down to your target every quarter. So, that's that means to me that now is a good time to do it. It' be another good time to do it. Next month, like basically it's it's an ongoing it's like pruning a garden. >> Yeah. So, so basically you've got your cash allocation, which is okay, I'm not fully invested in the market. I'm making up a number, not saying you have this. I'm 40% in cash. So, I'm still 60% long assets, >> other securities. Yeah. >> Hopefully, I have, you know, sized them so I'm not too exposed to any one of them like you just said. And as they continue to grow, as the market continues to power higher here, >> great. Trim those gains back to your target positions on a frequent basis. And I guess just just do that. Okay. So let's let's say you're doing that right now. Let's say the market actually starts to break. Do you have a a plan for additional like have have you created a pre-plan for d-risking in that scenario? >> Abs uh not derisking for buying. >> So we have you see it has to be this notion that you can be perpetually at all times in stuff constantly moving is the financial tamement brainwashing. It's propaganda. You need to have cash stored and target buy lists so that you know when it would be valuable to you and using some of these fundamental principles which I know people are say are pass a but just as an example as we said with real estate if you're looking at a property and it's three times your household income or you could rent it for you know two a thousand bucks a month more than all your costs it's a it's a good valuation so you know that in advance you define that in advance so that when you see it you go ah I know what that is yes, I'll buy that. Thank you. And you need to have done the pre-work. You can't be emotionally, you know, reacting. You have to have done the math, done the pre-work, made your buy list, and set aside cash so that you have liquidity so you're not forced to sell something that's falling in order to execute on your buy list. >> So, I'm a thousand% behind that. Um, but there is likely to be time between the market rolling over and the great values that you want to enter in on. And if I if I took good notes, you're not saying this is what's going to happen, but you're saying it wouldn't shock you given the distorted market valuations we have right now that the S&P could get down to like 1500. Did I hear that correctly? >> Well, I'm I have no idea, but that would be No, I I was speaking of the the TSX, the 15,000 range being the top of the last few cycles. >> Okay, that was TSX. >> The TSX, right? which would be a which would be a 50% drop for from where it >> Okay, but okay. So let's let's say S&P 3500 you basically 50% down from here. >> Yeah. >> So my my question is sort of if we start experiencing uh a rollover that you think okay market's down maybe 12% right now but I think it could go down as far as 40 50%. Are you going to do anything then portfolio-wise to say I was 40% cash but maybe I might go 60 now or something like that to just be less exposed to the downside before you're like hey yeah I think there's going to be great values to buy at the end of this but but we're going to have some pain before we get there. >> Well you see if you've been position sizing and sector sizing and cash raising in advance of this then you don't do you don't do anything just because something's gone down 10 or 15%. It has to hit your sell targets if sorry your buy excuse me your buy targets. If it hits your buy targets then you already know okay and you might buy it and it might fall further but you can leg in tanches as well. You can do that in halves or thirds knowing that you're not necessarily ever going to get the bottom but it's more like well this is good value. We said if it got to this level that would present good value that makes good investment sense and that's why you deploy the capital not because you think it's you know um dropped like it's going to drop more. I mean, the thing is that's completely unknowable, you know, like these things have become so manic that if you're just putting your finger to the wind and going, um, oh, it's dropped 20%, I'm going to buy it. But you haven't done any actual valuation work to know why you're going to buy it. You're just saying because it's then you're just gambling. You're just betting like every and you might win. You're right. You might win. And people have one by buying the dip, but they don't actually know why they bought it. And they didn't have a they don't have a sell rule because they didn't have a buy rule. Right? So, this is the thing. It's it's it's something you need to construct and lay out for yourself as a road map before all hell starts breaking loose. >> Okay. All right. Well, I I uh totally am again a thousand% bought in on doing your your preparation work in advance of this stuff and knowing, you know, when to get back in and knowing how to um what do you say? What what what sort of um airbags/ crash cushion you want to have before you even get in the accident. So that all that all >> and when you say knowing when to get back in, nobody knows when it's the bottom, but you say I'm comfortable with this level of risk. >> Right. >> Right. >> And to your point, you've done the work where you've said, "Hey, fundamentally, I know this thing becomes a good value below this price." >> Right. >> It might go down further, but even if it does, I'm holding it for at least five years or whatever your defined terms are. I know this is not money I need to buy something next year or next week. this is my long-term money and I'm happy with this income stream, this dividend rate, this whatever the the investment income that's coming off of it. Now, it gets harder with things like precious metals if there's no income that that makes it hard to have evaluation rules around it, but again, that's when I go back to position sizing, making sure that you don't keep having more and more riding on that horse. >> All right. Well, very well said >> because that's that's the problem. >> All right. So Danielle, so people who have both really enjoyed uh well, first people who really enjoyed your analysis here, if they want to follow you and your work between now and your next appearance on this channel, where should they go? >> Um, juggling.com is my daily blog. I'm at KD Danielle Park on uh Twitter. I hope he's going to turn the name back to Twitter. Um, and uh I've heard he is. Um, and uh, venibalpark.com is the is the website for the company. >> Okay. And then my second question was going to be to that, which is um, if somebody presumably Canadian uh, says, "Hey, I think Danielle's really got this well under control. I want someone like her managing my money." That's where they would go to learn more about your wealth management services. >> Yes. >> Okay. Fantastic. So Danielle, when I edit this, I will put up the links to your various websites, your Twitter handle, etc., so folks know where to go. Folks, those links will be in the description below this video as well. Um, I can't thank you enough, Danielle. Um, thanks so much for coming to the >> This was a marathon. We are both exhausted. This was like a UFC fight. >> A fight. I know. I >> Not a fight, but it was a duration contest. >> I thought like I was just drinking from a a fire hose that just kept going. But I loved every minute of it and I think I think the audience did too. Um I'm pretty sure we're going to get some comments uh based on your comment there Danielle. People saying, "I wish it was twice as long." >> Oh, I hope I hope not because I'm I'm ready for a sleep. >> Well, I appreciate again all the work that that you put in to do this. And uh and again, um I very much look forward to doing this for you, you know, at some point in the first half of of uh 2026. So you can kind of tell us, hey, is the year playing out the way that you thought it might or if there's, you know, as as you said, there's a lot of stuff that should happen by natural market forces. Will those forces be allowed to play out or will the interveners intervene? That's all TBD. >> That's all TBD for sure. >> Well, folks, please join me in thanking Danielle for putting so much obvious hard work into the uh preparation of her presentation here, but also for just being so generous and specific with her insights and her outlook. Uh, so please join me in thanking her by hitting the like button and then clicking on the subscribe button below as well as that little bell icon right next to it. Uh, if you are a Canadian with some assets, uh, I highly recommend you reach out to Danielle there at her website. Uh if you're an American watching this and would like to get some uh help from a professional financial adviser uh about how to potentially position and prepare for a lot of uh what Danielle laid out for us here, uh if you don't already have a good professional financial adviser advising you, uh consider scheduling a free consultation with one of the ones that Thoughtful Money endorses. These are the firms you see with me and this channel week in and week out. uh to schedule one of those consultations which are totally free. Just fill out the very short form at thoughtfulmoney.com and one of the firms will be in touch with you right away. Uh Danielle, I I I can't thank you enough. Uh like I said, uh just so much work that you put into this is so obvious and so valuable. Very much appreciate this. Would love to have you back in early 2026 to give us an update. And uh again, just can't thank you for enough for all you do. >> Thank you very much for having me, Adam. I appreciate it. and everybody else. Thanks so much for watching.