Three Dog Night


By Miles Clyne

A three-dog night is not just the name of an old band, but originated for a very cold night where herders would find or dig themselves a hole for the night, and the colder the night, the more dogs they’d burry themselves in. A three-dog night was a very cold night.

I feel nights are getting colder out there for many people. In our monthly report for January we estimated the cost of rising interest rates on mortgages. Rising rates obviously will apply to all forms of debt. Along with this we’ve see the rising cost of fuel at the pumps, at the time of this writing we’ve seen the price rise by over 20%.  

The concern about the above two issues is that the average Canadian household has the most amount of debt ever. Check out household debt at Stats Canada. This is the average levels of debt, so this means many families are extremely over extended. Regardless of your financial affairs, costs are rising for everyone.

Add another factor, the rising cost due of property taxes on our homes and businesses. The aggressively appreciating real-estate values in many parts of the country has impacted every Canadian, regardless of whether you own or rent properties.

I hope you are understanding the worry about it being a three-dog night for many.   We are very likely near the edge for many to sustain the cost of their life styles. 

What then? We should see spending scaled back. IE: fewer new cars sold, people driving less, cable and any number of other services reduced as households are squeezed and try to balance their budget.

If we start to see spending fall, it will likely indicate a slowing economy. Add to this the outcome of NAFTA negotiations and Canada could be shaping up for a bit of a rough ride. We are currently in the midst of a pullback in the stock markets, which could clearly get worse if the data suggests the economy is slowing.  A slowing economy means less jobs, which compounds the problems for many who are already stressed beyond their limit.

Is there any good news out there? Yes, that individuals, banks and governments learn from their mistakes. But it all starts with individuals, doing what we can truly afford, and not what institutions like banks will allow us.  There is no incentive for banks not to keep lending, that’s their business. There is no incentive for governments to put rising real-estate prices in check.  They are making more revenue every year on property taxes and sales tax every year. Then say they are doing another study to see what can be done.

Money & your life are really quite simple. Do what you can afford. Understand not only the best-case scenario, but also the worst-case scenario when you take on any kind of debt.  Then never forget that the answer to high prices is simply high prices.  Virtually everything goes through price swings, the most evident recently has been real-estate, crypto currencies and cannabis. What goes up the most, typically will fall the most. 

Eventually when prices rise too much, most stop buying and prices fall.   Then when prices fall, they can become so discounted that people start buying.  These are the simple laws that we forget when prices of anything move aggressively.  For those who have saved for a rainy-day, opportunity comes knocking.

I have no doubt, regardless the direction of interest rates, taxes, and the economy, banks and governments won’t be looking out for our best interests.  Usually, the tougher the lesson, the more we learn. But the smarter folks among us learn from the mistakes of others, and do their best to avoid digging the deep holes.

Whether there is a three-dog night looming or not, start getting your sleeping arrangements sorted out based on what you want to happen in your life.