Dec 16, 2021
There is no doubt that housing in Canada is expensive, but are
we really in a bubble? Today on the show we explore the user cost
equation and how it can help us answer this question. Before the
main topic, we get warmed up with a behind-the-scenes look at
Dell’s growth path in Cameron’s review of Play Nice But
Win. From there we address Peter Lynch’s
recent warning against passive investing as well as reiterate our
position on the performance of small-cap value versus large-cap
growth. Heading into our discussion on housing in Canada, we
provide a working definition of a housing bubble and present the
model used to work out user cost, addressing each factor in some
detail. We discuss the risk premium for owning versus renting and
highlight an interesting point on high price sensitivity during
low-interest rates. The major takeaway after looking at Canada from
within this framework is that user costs are in line with what they
should be historically, and that saying we are in a housing bubble
would be a little drastic!
Key Points From This Episode:
- The effects of the plot of Sex and The City 2021on
Peloton stocks. [0:00:20.1]
- A book review on Play Nice But Win which tells the
story of Dell. [0:08:01.1]
- Mixed responses to the paper, ‘Want to Be Happy? Hire a
Financial Advisor’. [0:13:01.1]
- Active fund performance and thoughts on Peter Lynch’s recent
warning against passive investing.
- Responding to listener disagreement with our research on the
high returns of small-cap value ETFs.
- The huge delta between the performance of ARC versus AVUV.
- Using the concept of user cost to assess whether there is a
housing bubble in Canada.[0:33:52.1]
- The different inputs into the model used to work out user cost.
- The definition of a housing bubble and how the facts hold up.
- The risk premium for owning instead of renting; why owning
could be risky. [0:43:39.1]
- Perspectives on the chance that high prices could be driven by
real estate investors.[0:47:03.1]
- An offsetting factor in the form of a reason for why owning is
not risky. [0:49:06.1]
- If owning a home in Ontario is expensive from a user cost
- Whether homeowners are willing to pay inflated prices for
housing because they expect unrealistically high housing
appreciation in the future. [0:53:54.1]
- Prices are sensitive to interest rates when interest rates are
already low. [0:55:59.1]
- Tradeoffs, insurance, and taxes in this week’s iteration of
Talking Sense. [0:59:27.1]