Joseph Barbuto: ‘Deleverage before the economy forces you to’

Added: 2026-05-30

[00:00:00]And we're back. And with us live, Joseph Barbudo, thank you for joining us again.

[00:00:06]We appreciate you. And uh it's got to be like third, fourth time now.

[00:00:12]>> Yeah.

[00:00:13]>> You look all fancy this time, eh?

[00:00:15]>> You're fancy like Applebees now.

[00:00:17]>> I Yeah, you know, I'm old school and um I used to wear a tie and >> you know um and my wife said, "You should wear a tie. You should wear a tie." Okay, next time. I promise.

[00:00:29]>> There you go. You look great. You look great. There you go. Three suits. Three suits. This >> Canada in a technical recession now.

[00:00:36]>> And of course, the media already apologizing for it and trying to make a make it sound like, well, it's not so bad, you know? Hey, >> well, you know, it's it's inevitable from from a long way perspective, right?

[00:00:50]I mean, really the the forces the bigger forces is this real estate bubble is unwinding. that's the dominant uh force.

[00:00:59]Um the higher interest rates and oil prices just exacerbate the the the economy. I mean we built an economy based on real estate asset inflation and that's reversing and this year there should be a global peaking and once we see global nominal prices peaking you know because Canada is not the only one I want to make the the audience aware that this is a global real estate bubble um and I'm putting together a piece since 1996 why it I mean we're going to see the charts for Canada, but uh it's not just Canada. United States bubble 2 and that's peaking, Australia, New Zealand, China. We all got caught up in this financialization um since uh 2000 and uh it's unfortunate. It's unfortunate. It's totally preventable, but um no, nobody wanted to hear the party, right? It was a party. It was a death party. It's illusion. And that illusion will be slowly revealed to uh most people around the world.

[00:02:09]>> Bigger the party, the bigger the hangover, right?

[00:02:11]>> Yes. Yes.

[00:02:13]>> And uh we're really starting to see a lot of that uh play out in, you know, the the GTA. Obviously, that was one of the the epicenters and and in Vancouver and then obviously that's trickling out into much of uh Canada. We had Ra Butler on the mortgage guy >> talking some of the pain that's going on like you know like another one Bmpton where people are seeing 40% drops in their real estate prices already in in that city 40% drops in real estate from the peak right so I mean that's huge for a lot of people that bought in that and um you know like they were renting out people are making money like crazy with these rooming houses having 18 people they all took advantage of this this runaway immigration, temporary foreign workers and and foreign students.

[00:03:01]>> Yeah, it's it's unfortunate and but none of it is is a surprise to historians um you know like myself. Um you know there's a great book every advisor should have uh mania panics and crashes and it's updated every couple years and I'm sure there you know there's going to be a section about Canada and Toronto in there without a doubt. Um it's it's this delusion. We get caught up and we think that we can um prevent it from happening. Uh like I said, the unwind. I mean, once you have a bubble, you know, I hear all the theories, you know, it's immigration.

[00:03:40]Um they'll print money. Um they they won't let it happen. They can't let it happen. And it's happening because the the long wave is a social cycle. It's just it's a reflection of humanity. And this is why I've um gravitated to it because I'm just I'm just an average Canadian really who just got hurt uh grew up uh with uh immigrants that worked in a factory, wanted to understand why they struggled, why they were successful and worked in the investment business and then just opened my eyes and when I was exposed to the contr cycle in the 90s I was like wow this is amazing but I can understand why it's not mainstream.

[00:04:24]Um because e even Kandra uh succumbed to an idea a good friend of mine we were talking about it the other night for suggesting that capitalism is an evolutionary system and it goes through seasons and it does have a collapse and then it regenerates goes higher. This is where Marxist and socialists uh misunderstand capitalism and I am a very a very aware of Marxist socialism because actually I was one in my 20s because of my parents. So I knew Marx, but if you hear a Marxist talking to you, they're missing twothirds of the story, which is well Shumptrav uh Krav was a communist working for Stalin. And he said, "Hey, look, uh the western economies are going to collapse.

[00:05:12]He loved it. But they're going to come back stronger, which he was right." And that's why all of us acknowledge it. And even my upcoming book, I acknowledge that too. He died for an idea, an unpopular idea to a authoritarian uh that there suggests that capitalism um will come back stronger.

[00:05:35]We did a story today on on the really big show um in Toronto right now in the GTA 10% of the population is is uh getting food from the food bank and a lot of those people are working are work have jobs. So I mean that that in a in a in a nation that is so rich in resources obviously that is the policies of the last you know 11 years have come home to roost and um it's it's shameful to see a nation with such wealth have have so many people um below the poverty line.

[00:06:11]It is and and the worst part is this um that we do have access to the resources.

[00:06:21]We have a system. It's a hybrid system.

[00:06:24]You know, it's a sorry capitalist uh socialist system where government does intervene. Um but as we've learned, they can't prevent the the purge and the reset that's required.

[00:06:38]Um, but we don't have the political cycle. And here's why. That each long wave has a a elite. They are the ones that benefited from it. So if you are a homeowner in up still recently up in in Toronto or BC or Ontario, you've done very well and or you're working for government, you're very happy. You know, we had this currency uh depreciation.

[00:07:04]But those are the two sectors that will get hurt in an economic winter. And they're trying to keep a system because once we came off the gold standard or Brenttonwood standard in 71, there was no limit. There was no financial discipline on politicians. So they understand the ignorance of the public and they basically say, "Oh, no, no problem. We can we can get this program.

[00:07:25]We can tax more. We can go into debt. Uh we can kick the can down the road." And now that road is kicking back. We're running out of economic growth to fund all the promises we made during a booming economy in the 60s in Canada.

[00:07:41]Pretty much the world too, but Canada uh debt were at reasonable levels.

[00:07:46]Governments were fiscally responsible.

[00:07:49]So the the public's not interested in austerity and uh hard times. and any politician that comes along and blames uh another party, another group of people um usually gets elected and we can fix it. There's no easy fix now. And what worries me and I've said this repeatedly as a student of history that we have an unprecedented credit bubble and uh Richard Vague who wrote the next economic disaster. It's a classic book everybody should read about. was only 14 years old and he saw what was coming. we just kept inflating.

[00:08:28]And when these private debt bubbles burst, as we know, also in the long wave, they create the hardest landings because it's it's it's all this debt, the $3 trillion in debt. Most of it is in real estate and it doesn't create productivity. It actually extracts wealth from the economy. And so what my worry is right now is that we don't have the interest rates. We've already leveraged from the zero bound which has never happened in history and that's global. It's not just Canada. Um and also governments are running deficits. Where's the Keynesian multiplier and and and the system is designed around inflation? Now you and I um have grown up with inflation. We don't know what deflation is. Now here's something that's fascinating for the audience.

[00:09:19]When I was studying Markx, Markx lived under the first long wave and he had price deflation throughout his whole life and real wages were rising.

[00:09:32]So it's it's it's fascinating. He grew he grew where I mean he his whole life he was writing about the crisis. Listen, I mean Markx had a legitimate reasons to criticize capitalism, but he didn't see what shown to Peter and Krat saw that it would renew itself. And this will be the fifth time we'll be renewing itself.

[00:09:53]That's that's the optism. My book, my f book should be out soon and it's going to cover that, right? Because we're still innovating like crazy. But we have to go through this difficult season to unwind all the debt, restructure the economy and the political economy toward the real economy again. And unfortunately, we have to go through a difficult time where the incumbents no longer can generate the GDP. That will call it cause a a popular uprising. I love Bob Ray's way of saying it. Uh which will force the change. And unfortunately, it gets worse before it gets better.

[00:10:31]That's just the reality of human history. Uh there's there's no surprise uh uh from what's coming. So we have this enormous private debt bubble and it really hasn't started to to to deflate.

[00:10:46]Yes, Canada has a technical recession.

[00:10:49]Um I have, as I mentioned on the last show, I have markers. There's a sequence, right, for economic winter.

[00:10:58]We're only halfway through it. Um, we still have positive credit growth and the banking stocks are pretty close to their all-time highs.

[00:11:10]Now, caveat CIBC is up 7% in two days.

[00:11:13]So, is that the top? We wouldn't know.

[00:11:15]We we will find out. But the underlying economy is so the the bank there's no stress yet in the system. U I still believe that's in a year to two years away. But once the rest of Canada real estate uh peaks, then we're going to see the loan losses increase. And this is what worries me. And I I'll just let me finish this part. It's important because it feeds on itself.

[00:11:38]And the the solutions are different from what we did in 2008. We have to restructure the debt. Um we can't kick uh Canadians out of their homes, a million plus. Uh we have to look at restructuring the debt. That's what we do in in a in a in democracy, right? We work what's the best thing for the economy? Restructure the debt. And if we don't, I guarantee we're going to get debt deflation that's worse than 1930s.

[00:12:04]That's easy. And I've uploaded um into my models um this whole book. And anybody who doubts anything at all, this time is different. Eight centuries of financial falls. And it's always the same thing. It's debt. too much unproductive debt. We think we're special. We think it's different. We get into trouble and the these will cause the crisis. What's great is that you can build a model on historical p uh systems which I've done and I'm just document checking this off, checking this off, checking this off. Here's what's next.

[00:12:40]And and this starts started in the 80s when we deregulated the financial sector and then its product which credit started to fall in price. while at the same time I think you have the charts.

[00:12:52]Real incomes in Canada start to stagnate and that's that's what changed our economy.

[00:13:00]>> Before I kick you over to Ian there, you were on the show a couple times and uh you mentioned that there's likely going to be unrest as this economic long wave plays out and then you know like there'll be new political parties that likely uprise. What what are your thoughts on what happened? Well, you know, with yesterday with with Mark Carney and you know, him saying MAGA and there his party's kind of in disarray right now, too, because you know, we have Stephen Steven Gabau resigned and then you can see there's a little bit of infighting that letter with 14 people.

[00:13:30]Is this the kind of the beginning of the end for them?

[00:13:34]>> Yeah, if you if you think about it, right, it's it's the the stress of the system is showing up. It's not working anymore for Canadians and we have vested interests are trying to keep it going.

[00:13:49]The strain will start to show up more so and I've said I want to be wrong. That's that's why I've I've come out and I'm writing this book and saying look this this has happened before. Maybe we can help a small group of Canadians because the majority will ignore what's coming.

[00:14:07]that when the system is not sustainable, the incumbents will be thrown out and we'll look at new politicians. It could be radical politicians. We we can see the pressures as you you've pointed out with Alberta. You know, this whole climate agenda uh they they could have done it a medium. I've I'm still waiting. I mean, I'm old enough to remember global cooling. I'm still waiting for that to happen. And I bought into it like everybody else until I started to do the research. I said, "Joseph, look at the data. There's a lot of Canadians, respected Canadians, said that this this is a for a better word, a scam." I so I said, "Why don't they just let renewable energy support it?" I mean, who wouldn't want to have access to a genome, I'm sorry, to solar or um home type of system where we can generate decentralized uh nuclear power. Who doesn't want that? But but it has to compete at price and you have to let the system uh compete for what is best. I don't think maybe gas will be great for people living in Africa. I think solar is a game changer for them, but not in Canada in southern parts. So we we have this political um uh clash and then people will won't care about climate change when they're trying to put food on the table. So that whole agenda will collapse. And it's nothing against the renewable energy solar revolution which I've documented which is going to be a a game changer. I mean I have a a light watch on me. I have solar batteries. They're great, right? But the thing is, we're not there. And energy should be the most important thing for an economy to make it as cheap as possible.

[00:16:00]So, their downfall will be their own undoing. And as you said on the show, and I've heard other people say, you know, why are we fighting with uh the US? I mean, it wasn't for their army or their military who protects Canada.

[00:16:17]uh a lot of people just don't understand the connections and and I understand the ignorance and it's frustrating but our problems of our our own doing and political forces and vested interest who are not doing what's in the best interest of Canada plain and simple they're not doing what's best for Canadians and a lot of change will come but unfortunately it gets worse before it gets better because once enough people are suffering then the infighting will start to occur. And one other point, I understand politics very well.

[00:16:54]I'm a classical liberal. I have no idea what this Liberal party is or the NDP or conservative. They're all running fiscal deficits. Um where where did Keane say to run per uh ongoing uh perpetual deficits?

[00:17:10]So what is this system? We have this hybrid fiat credit system, governments involved, and it's more debt, unproductive debt to keep an unproductive economy from collapsing.

[00:17:24]And and it's not going to work. It's not hard. But mainstream economists, I get it because they're I'm not an economist classically trained. I taught myself from managing capital how to make money for clients.

[00:17:38]And when you discover a satellite view of the world, you want to bring it forward and say, "Hey, this is what's coming. Pay attention." And most aren't because I believe if Carney really knew how bad it's going to be, he never would have run for election. I don't care what you would pay me. I would never want to be a leader because you can't satis satisfy everybody. So him shifting, I think this is going to occur. We'll see infighting within all the political parties um until a rational mind comes along and we'll do what's best for Canadians. And I don't see it anywhere yet. I don't unfortunately.

[00:18:17]Ian, I can uh I can guess what your response is going to be to this, but I have to ask you what what do you think of the Ontario GST cut? It's federal and Ontario um tag team, isn't it? on on new homes. You think that's just they're just trying to desperately pour gaps on a dying fire or something at this point?

[00:18:39]>> I I think we're going to see everything to keep it from contracting and uh there's no uptake on it though. I mean, it's it's basically been a failure so far.

[00:18:50]>> Yes. I don't know if you're aware, but Japan four uh four or five years into their bare real estate bare market came out with a 100red-year amortization and it didn't stop the uh contraction, right? Because it's what what people don't understand and you learn this when you manage capital is that psychology takes over uh from the the populace. um from a person who was ignorant in '89 who was aware in 2000. I I I fought with clients to get out of the market and they were they thought it was I even had complaints to compliance that I was too riskaverse and it was right at the top in March of 2000. I wish you would have wrote she never did. Um but this is the psychology. Then at the bottom, you're trying to get people in the markets and they're not interested because fear takes over. And that's why markets are a big psychological game and nobody um uh believe that it's going to end. I mean, we're hardwired, if you understand things of why predictions fail. We're hardwired to think linear. We we don't see cycles or waves or the exponential growth in debt or the scurve of technologies. We we just can't we can't understand them. I think AI will uh but we we can't see what's coming. And this is why we have these cycles throughout history that repeat over and over and over. It's a collective thought that brings us to an extreme in one direction and then we'll go in the other direction and then the next upwave will start again on new technologies that totally transform. And at the bottom we'll be uh reeregulating the bank act. um will central banks survive some kind of monetary discipline you know will demand that at the bottom right and this is why gold and bitcoin um are are doing well right I know the pullback in bitcoin you know will it survive the will be the digital revolution with uh a disciplined monetary system um a lot of people are hoping so but those um will come to fruition at the bottom with politics and so forth, but pretty much everything will be to slow down the rate of change because this bubble is so large. I mean, we have to drop 50% in beautiful Toronto to get to the previous peak when I bought in ' 89. And and one of my mentors, one of the greatest investors, Peter Kundle, you know, he said valuations are measurement of risk, not timing. And I believe that in 2017 it was finally over. And then we had this unbelievable bl uh blowoff in 2022 and and now it's transferred which is which is kind of funny. It's transferred to the rest of Canada. Now how do you how do you convince those Canadians look the market's going up because of multiples that is you're going into debt so it's becoming more expensive. It's not because that part of Canada incomes are rising faster. So anytime a price rises because of multiples, it's not sustainable.

[00:21:56]All that means it's for the average Canadian, it means that you're paying more for a home because more people are going into debt. So because multiples were pretty much stagnant for almost a hundred years, it it followed uh wages and that all changed in 96 globally.

[00:22:19]you're talking about when you talk about psychology. I just want to just on that one point you made there. Sorry. I is this that it's just that the the fear and greed cycle, right? I mean, right now there's a there's a lot of fear out there as opposed to this like in the stock market, right? Like there's way too much fear for a small inducement to kind of get people to kind of jump back into the market.

[00:22:39]>> Yes, of course. I mean and you know central authorities and central banks try to uh thwart that but it's impossible because the the an an asset bubble especially on credit um it's it it did so well because what people don't understand is because interest rates fell and they had equity line of credit on their home, they can refinance a higher rate. As that reverses, all of a sudden, the reality is exposed to people and then their neighbors get worried. And then the problem when you've got these defaults, then you reset the values of those homes on the street. So, somebody was thinking they're going to sell their home for a million. Now, the one down the street sold for 600,000. And that scares them even though they're not impacted because their home values dropped to 600,000.

[00:23:37]and they can't believe it. That's why it took a decade for real estate to bottom in Canada in the '9s. When I was in investment business during that decade, real estate wasn't even competition. Oh, that's just a place to live. And then it took on a life on its own in about 20201 after NASDAQ. And that's why a lot of long waiverss were I say early. They were never wrong. nobody would have seen we would have had two demographic cycles uh extend to 2026 globally. And that's the most important thing because the other thing Canadians aren't aware of it is most of it it's our own uh doing uh with the political will to keep the the real estate bubble going but it was also this climate change agenda um and okay um what where's the transition for Canadians? Where's the economic growth for all this? I mean, we're barely growing technical recession.

[00:24:33]So, yes, unfortunately, there is psychology and if you read what happened during the early 30s, it was rapid and was done in three four years, but it just feeds on and and there's a great uh thesis, the debt deflation theory of great depressions and debt is a precursor, right? So, we have all the check marks for economic winter and it just feeds on itself and that's why how do they stop it and this is the thing that I'm concerned uh we we can see the insolvenies are hitting new highs who and they're going to continue to hit new highs for the next two years as the resets come. There's not just extra cash flow uh on the consumer uh with higher interest rates. So if you're they're paying more for energy cost, taxes, uh currency depreciation, and higher interest rates, where's the extra cash flow? So they re in their spending naturally, but the problem is your spending affects somebody else's income. And that's why these bubbles are always dangerous. And uh now we're going to experience what the US and Europe went through from 2006 to 2012.

[00:25:41]Unfortunately.

[00:25:45]>> So is it correct you also anticipate um a stock market crash I I would assume to to follow from from this >> interesting um when I built this model um one of the weaknesses I had in 1998 to 2000 was I didn't have a longwave uh model. I mean I was just new to it and I because I was a value advisor. I always looked at value because of my experience, right? And I learned from the best Templeton, uh, Buffett, Peter Condo, all the great value guys. Never overpaid for an asset. Buy low, sell high. Very simple. I learned I came across technical analysis and I uh came across uh these all season investor by Martin Pring who's the guru still working for a firm and he had a longwave model and I said, "This is great. Wonder if I put everything together and I'd learned for um what to look for at market peaks because one of the things I was surprised is you think 1929 I'm going to use the extreme example but you see there was an underlying weakness before the market crashed. So there are things that you can watch uh for a secular market peak.

[00:27:09]Interesting enough, even though the Canadian economy um technically has gone into a recession, we don't have those technical things, indicators saying that we're rolling over yet because the stock market would reflect that in Canada and it's not yet. Uh banking stocks are just off the new high except for CIBC off 7% in two days. What does that mean? Uh that's you know I I watch the banking sector and look for 5% moves in in a day because somebody knows something in the inside. So right now I and I think the capital because real estate is not competition anymore.

[00:27:50]Um why there was a mutual fund mania in the '9s because capital was leaving real estate and uh GIC's at the time which were very popular. So I believe that what's happening even though the Canadian market is expensive that a lot of capital is going into the uh uh the stock markets and so they are overvalued um and certain assets are extremely overvalued but there's no sign of a peak yet and you get signs of that right um this is one of the things that you know I help inform people because when I built a longwave model three years ago uh which the public has had access to.

[00:28:31]One of the things that it's just told me to avoid which we can see are bonds and um a real estate because they are built on a model that had falling interest rates. So when you hit the zero bound of 20121, it wasn't hard to forecast that the bond uh bull market is over. it it now it doesn't mean it's bad for real estate but remember from the in from a long way perspective from 46 to 81 we had rising interest rates yet real estate kept rising every year so anybody believes that in you need lower interest rates but the reason was real incomes were rising I think we're going to see that in in the charts I think you guys have access to the charts but that's that was the key the the problem Canada has a lot of the west real income started to stagnate and we went into debt to make up the difference to sustain our lifestyle.

[00:29:27]>> And I don't want to jump in again, but I I just need to on the market thing.

[00:29:31]Sorry. It's it's throughout history though when there's been major catalysts though and major catalysts plastics energy like you know the oil and then also the industrial age and that stuff like that and even the internet we had that you know like that the the whatever the dot bomb bubble but out of that came Amazon and a bunch of other stuff but right now >> I mean you could argue that we are we are at the cusp of the biggest transformational technology that the world has ever seen and that's AI and and what it can do so and some of those stocks are related to AI and some of them can be like we're going to watch right now in the next two weeks the largest IPO in history is going to be SpaceX. So would not those that that catalyst for that industry not boy the stock market especially in the short term?

[00:30:21]>> Well AI um let me backtrack here. One of the things when you are as uh as an advisor, a value advisor, you understand these uh themes are bubbles. So AI, let's let's let's be honest here. AI is in a bubble, but it doesn't mean it can't go higher.

[00:30:42]And for most people, it's best that they avoid them. But uh bubbles in these sectors actually transformed the economy. And in the 20s, it was radio and automobiles. And I don't know if you know RCA collapsed like 98% later, but it transformed communications, right?

[00:31:01]>> And so the the the same thing in in the 2000s and also in 20121 with the clean tech revolution, right? That was a bubble and it collapsed. Uh Arc Investments uh I mean that whole thing collapsed. But you need this capital to because you can spot a bubble and you can say, "Hey, this is going to transform our world." But you just don't know which company is going to win, right? Who's like, you know, who who could have picked Amazon? Uh but but the thing is that this is the part that's exciting because the long wave uh thesis is based on capitalism renewing itself.

[00:31:37]You go through these cycles of boom and bust and new technologies drive the next upwave. And I believe renewable energy will be a part of it, but doesn't mean it transforms it in 10 years. It's going to take two or three generations probably if it becomes viable. But in the interim, we need cheap energy for the public. So AI, yes, I mean, uh, for a user, it's one of those things that it's still going through the learning curve because, um, I can see where it's a mistake. A lot of people are saying, "Hey, Grock," you know, they're saying, "Grock, what does this guy say?" And I'm saying, "Well, this is it goes and makes a lot of mistakes. It's strength, what I've learned, um, is prompts and also its memory." And so, when I've figured that out about a year and a half ago, I've uploaded everything into Emmery.

[00:32:28]So, it thinks like uh, from a long wave and all these great books and information. So it it says I give me markers and give me history of what happens because human nature doesn't change and this is how powerful it is.

[00:32:42]So it is a gamecher and I think um I presented at the second or third show about innovation is still growing exponentially um and that's an exciting thing. So humanity is still inventing and uh as Shan Peter said causing creative destruction.

[00:33:03]um to transform society in the future.

[00:33:05]It's exciting robotics, AI, 3D printing.

[00:33:09]I mean, I I I I agree with Musk. I think uh the the future uh will be from robotics because the good news bad news is the workforce is shrinking. So where where would we get the productivity and it'll come from the health care um improving the productivity of humans making us healthier and also robotics to manufacture all the goods uh the society needs because we just don't have enough people. That's why these immigration uh thesis has happened around the world and it's going to backfire. It's not the solution. If anything as unemployment goes higher there'll be a backlash against that and so governments are making a mistake regarding using immigration it will come from technology China and Japan and Korea have already doing this which is leading edge of adoption of robotics that's the solution and and health care uh converting our sick care to health care where we become healthier as human beings but again there's there's vested interest in every industry And it's hard to move that needle faster. So that's that's why you've get this creative destruction booms and bust and collapse. It forces the change because the public will say enough pain.

[00:34:25]Okay, who's going to who's going to change uh and make our standard of living better? And that though hopefully it's not some radical leftwing or right-wing person, but it will be an authoritarian in some way because he or she will have to force the change um to get us productive and it will be innovation and much lower taxes and rel and you have to cut all the taxes on energy. You just can't watch your society. You're asking for a revolution.

[00:34:55]You're asking for a revolution if you do not free the people and start putting them first because I don't see politicians doing anything but trying to keep the status quo, keeping the system uh going and it won't it won't survive.

[00:35:10]1% GDP with all this debt.

[00:35:14]What does that say? It suggests clearly that debt is not productive to pay for these assets that are inflated and that's what is missing in the arguments.

[00:35:31]Can can we um can we talk about the older folks and what what what you recommend they do in this predicament because you talk about inflated assets.

[00:35:43]A lot of them are sitting mortgage free on a very inflated asset which is like in some cases 80 or 90% of their net worth or something like that. I'm wondering what should do you think they should just sell now and buy gold or something like that? What what realistically are their options and then attached to that what's the what's the effect going to be on pensions? Because usually when there's a big crisis financial crisis like this it quite often infects the the pension world doesn't it? Are some people potentially going to lose their pensions?

[00:36:17]>> Well, here's here's the thing that's really clear, right? Because I'm not an advisor. It's more of a macro analyst.

[00:36:24]So, I could give the satellite view and what you do, right? So, uh I'm the baby boomer, right? And um I see the world differently because of my experience and trying to understand things.

[00:36:38]And so what would I tell myself?

[00:36:41]Um well one thing I know from studying history and you can ask now chatbt is going to be very powerful. These AIs will be very powerful in the next two or three years and it's going to give you the answer that I'm going to suggest.

[00:36:56]The these are uh these values are artificial and come to your own conclusion. Um if you look at throughout history since the uh the Italian Renaissance that basically asset prices hover above and below inflation.

[00:37:16]If you believe uh deflation's coming like I do um and a severe contraction those assets will be revalued lower.

[00:37:27]Now you don't have to believe it.

[00:37:28]Nobody's forcing you to believe any of this. It's just history. It's like this book I've mentioned, right? It talks about the uh all the time. There's eight centuries of data and all I've done is study the precursors to a credit crisis and what adjust asset prices lower and it's always debt.

[00:37:48]So saying that historically and I've said this and people get mad at me because you want to shoot the messenger which I get Toronto crisis. Listen, I grew up. I spent 66 years in this city. Love it. I love the city. I hate what's happened to it. And everybody got caught up in the bubble and you just shake your head and you can't argue with anybody on the way up. And I tell them 50 to 70% lower.

[00:38:14]They think I'm off my rocker.

[00:38:16]I said that. I'm not saying that.

[00:38:18]History is suggesting that clearly. And when I uploaded every bubble in history into AI, it's it came out with the same solution.

[00:38:29]But the only push back I get, by the way, on Twitter or X is Canadians who haven't experienced 2006 to 12 to know how bad things can get, which I understand. And I said, it's just history. Every bubble deflates and overshoots to the downside. And that that suggests that home prices in time over the coming decade will fall back to two to four times income without a doubt.

[00:38:56]Um, that's information. This is what are the satellites telling you. If you don't believe it, you have free will to say Joseph is crazy. It won't happen. They let won't let it happen. Can't happen.

[00:39:09]All those reasons. History says it will happen. And that's the best advice I could give somebody.

[00:39:16]Fair enough. Yeah. I mean, I I respect obviously that you you've got to be careful about about how you speak about.

[00:39:22]don't mean to um try and get get you to give financial advice. I'm definitely talking uh big picture, but um talk about back to history.

[00:39:33]All these bubbles that you've that you've studied, I'm sure you know them very well. Tulips and South Sea bubble and all that. Is there any bubble that you've studied that was handled well or as well as could it could be handled and actually the country or wherever it was they they came out of it okay because it was managed well.

[00:39:56]>> No the uh the stock what's interesting is stock market bubbles are actually healthy for the economy and they don't devastate the economy.

[00:40:04]The real estate bubbles are which hurt the economy. Um, and 2006 to 2012, Europe, the United States, and as our audience knows, we kept we kept going higher. Uh, the 1990s, 1930s, 1870s, 1830s, I mean, they were all devastating because it was tied to private debt. And Richard Vague in his book, the e the next economic disaster points out to watching the private debt.

[00:40:38]And no, there isn't. And I've asked I've studied this. I've actually had a discussion with the with the AI bubble model and he it was interesting its response because they said what's the better outcome the 1930s or Japan?

[00:40:56]Because those are two extremes. and it said, "Don't you want to just get it over with?" And then in 1929, 322, it was over. We hit the bottom and then we just went up. Japan dragged it out for two and a half decades. And now the governments um they tried everything possible. So the best answer, which nobody will like, uh is the 30s. You get it over and done with. I mean, here we are four years into a bare market in real estate and we've just started. In the 30s, it was over pretty much by this point after four years. So but society will never accept it. Uh it's too painful. Uh but it also but what it did it adjusted the psychology and it forced change to the new banking rule uh rules and the Chinese wall again the investment firms and lending firms and we had in interesting enough we had the bank of Canada created 1935.

[00:41:51]What one thing was I shocking I sorry I just thought of something because I like to bring things that I've learned throughout history. What was shocking?

[00:41:58]No Canadian banks failed. And so I asked myself, what was the need for the Bank of Canada, not one Canadian bank failed in the 1930s and uh there was thousands in the US.

[00:42:12]And what I found out was that they were spreading the losses amongst them. So there was no failure, there was no bankrupt, but you still had a collapse in borrowing and lending because a fear took over.

[00:42:24]So, it's just interesting. Um, you know, I hear people have an argument for the uh Bank of Canada, but we did fine and that it's a whole book why, but it's kind of fascinating. No Canadian banks failed during the Great Depression.

[00:42:41]That is very interesting. Um, you mentioned Japan and you know, other countries that have experienced this.

[00:42:49]Some would say that this is this is also happening to China or already has happened to China. Some would say that um a housing crash. What's your read on their approach? And cuz I mean it doesn't seem to have collapsed China just yet. Is it do they have some advantages by being authoritarian or or is it going to bite them down the line?

[00:43:14]>> Um yeah, it is it is biting them, right?

[00:43:17]Because you know when you look at bubbles you just see it doesn't make a difference what the cultural background is. If it if it's based on credit and manufactured growth uh it's never sustainable. And you know as China made its market reforms uh and people aren't aware it was a massive stimulus in in China and Australia, New Zealand and Canada were tied to that commodity cycle. That's why we kept going. I mean we had a nine-month pullback and we just kept going higher. So chap sorry China has to go through its own restructuring and it's got a massive problem where uh or challenge which is its demographics is collapsing and its population is shrinking um but it's growing be it's so large so you have negative forces um and it's aging demographics and population shrinking and a bubble but in the same term now it's a leader in innovation it surpassed the United States uh Um, and so I think it recognizes that for it to grow, it has to depend totally on innovation. But history's clear they're it's going to take a decade or so um and then China can get on a different growth path um back to innovation. But but by that point it'll be global. Uh we we'll all have woken up from this this party, right? the hangover I should say the hang the two thou from now to 2030s there's going to be a hangover it's going to be a realization this was all false economy and let's build a real economy and commodities and oil and gas are part of that and I believe what Carney is doing and I wouldn't wish that job on anybody because you to be a leader you just know what's coming and that's why it gets worse right and it becomes more authoritarian as the economy gets worse they're trying to keep control where they're because they're losing control But underneath it from a long wave is the the decentralized renaissance is being built. All these new technologies that are transforming us, right? My only fear when I was exposed to the long wave was well what about Canada and its health care system and then genomics has come along and uh uh stem cell revolution and they're going to be cost effective next decade where maybe $5,000 per year and you can rejuvenate yourself. I mean this is exciting for the future but so there are solutions but understand that it gets worse because there's the elite as Marx would used to say um are trying to hang on to power and a lot of people are believing that socialism is a counter to that but what happens realize there's a new elite emerges from the next upwave so this elite collapses because their vested interest and their wealth is tied to the old economy the new economy uh that's being built will be to these new millionaires, billionaires of the future, right? And and Musk is if Sean Peter was alive today, he would say he's probably the most disruptive entrepreneur in history. Um just uh forcing change. He's absolutely brilliant uh in terms of uh understanding productivity, innovation is going to be the key for humanity to go to the next level.

[00:46:44]Uh, I'll ask you ask you one more because I've been monopolizing you and then I'll chuck you back.

[00:46:48]>> Sure.

[00:46:49]>> To Jim. Um, you mentioned demographics though and then uh the context of China.

[00:46:54]I'm wondering again if we can um tap into your knowledge of real estate bubbles in in history. Has there ever been anything like what you what you say we're in now, this bubble and uh the crash that's coming? Has there ever been anything like this with the demographics that we have now with like sort of dying populations, subreplacement fertility, um outsized older population and a and a small younger population? Um and if not, what does what does that mean for for this one? Does it mean it'll be worse or or better or what what effects will it have?

[00:47:33]>> Yeah, that's a great question. That's you know when I went through this journey trying to understand real estate um it was in the 70s and inflation a lot of people want to uh blame the central banks but it was this massive baby were wanting homes and jobs and so forth that's what caused the great inflation and they're going to cause the great deflation.

[00:47:56]No le let's let's different this time in 2026.

[00:48:03]one, these are the largest private debt bubbles in history.

[00:48:08]Um, Canada presently, I'm just focused on Canada. There are some other countries and people say that, you know, you're, you know, criticizing Canada.

[00:48:16]Well, it's my country and and and I'm just telling you the facts. Our private debt bubble is larger than Japan in ' 91, the US in 2007, and the US in 1929, in 1873, in 1834.

[00:48:34]Now, it's all it is. It's a precursor to a crisis. It doesn't tell you when.

[00:48:42]Two, we've never had uh shrinking demographics. Uh if you look at Canada since um confederation, we've always had this exponential growth and a young population and as we know um the replacement level changed in 1971.

[00:49:01]Interesting. The same year when we came off the Brentwood uh system and we we started aging.

[00:49:09]That's different. Uh, by the way, the baby boomers, which I'm want going to are going to put a huge supply onto the market in the future, that's different.

[00:49:17]We leverage from the zero bound. Now, just now this is not just Canada, US, Canada, New Zealand, Australia, Europe, there is no historical precedent for a society leveraging from zero. So there's no interest rate cushion.

[00:49:33]Um and fifth, governments in 29 and 2007 here in Canada were running fiscal surpluses.

[00:49:41]So they could the the reason Kees talked about that when you get severe uh downturns is the governments can step in to mitigate the downturn not stop it mitigate to slow the collapse because it it's it's you want to elongate this because you don't want the banking system to shut down. Well, we don't have that. And those are factual uh differences.

[00:50:09]And it we could have another baby boom.

[00:50:14]Historically, that would be in economic spring that that 2040s. That's the only way you solve the problem. Immigrants do not fix a structural aging problem because they are older, right? You need another baby boom. Historically, that will happen if it happens again would be in 2040 or beyond.

[00:50:33]So, and the other thing by the way is the birth death model in Canada does turn negative in 2032.

[00:50:41]So, I believe based on the data we have now and oh, I should add because I know people are going to criticize this. Oh, what about immigration? What?

[00:50:50]Immigration collapses during economic winter for obvious reasons because unemployment spikes and that happened in the 30s and 1870s, 1880s and and um immigration is cyclical relative to the economy. When it needs people, we open up the borders. When the unemployment moves above 10%, forget about that. Uh the public will just be so upset. Look, you got to put Canadians first. So, that's where it's different.

[00:51:16]And it what it's suggesting is that for the future of real estate, it'll be seen as utility once again.

[00:51:23]It'll be a place to live, not a place to extrapolate wealth, to create wealth. Um because all real estate historically has preserved wealth and has stayed with the rate of inflation. But that rate of inflation is 50 to 75% lower from here.

[00:51:41]So draw your own conclusions. It's over in a good way. Real estate should be a utility, a place to live. And how we created a wealth, how society, humanity has moved forward and dominated the earth is through innovation, right? I mean, oil was this thing in the in in the ground and what was this until we understood what to do with it. And how we are going to free society is and to accelerate and evolve is with technology and innovation. Thankfully this is still growing exponentially and exponentially per person. So this attacks the Malthusian thinking is that the more people the more creation and that only is going to accelerate because not everybody has access to the internet or AI that's still new and then we have quantum computers coming on. So this information revolution, who knows where it will bring humanity and that's the good news. That's the good news, a realistic news because there's always naysayers on both sides and I get that thinking. U but I want to address that's those are facts that you cannot deny and people can verify this.

[00:52:57]Okay, I got one last question before we wrap up here because we've been about almost close to an hour and and mine ties a few things together and it's about the markets. It's the bank stocks and I look at the bank stocks as well.

[00:53:08]Um, and they're they're at a high.

[00:53:10]They're at a high. I mean, they've been making nothing but profits. They're making profits off interest rate spreads and stuff like that. But but it and they also make up the bulk of the wealth in the TSX, but they also comprise a lot of that that the bank stock wealth has come from or the runup has come from the real estate market in Canada as well. And if the real estate market is due for a correction, is are the bank stocks not like basically like, you know, like at a at a blowoff top here? This is this when you should be looking at your bank stocks and saying, "Well, you know what?

[00:53:42]This is this is likely the best they're going to do because again we've seen a trillion dollars flow out of Canada and and the bank stocks have not been investing in our energy right now because of you know like ESG and all that other stuff they've been kind of like stopping that. So a lot of that wealth is also tied to Canadian real estate and if Canadian real estate's at risk are the bank stocks not at risk.

[00:54:05]>> Yes. I mean, that book that I alluded to, Mania, Panics, and Crashes, uh, uh, it's the same thing. Uh, it's that's part of the sequence. And this is one of the reasons why I follow, um, uh, a model is to look for the precursors.

[00:54:25]And if you're wrong, what what is occurring? And what's occurring is that there's still growth and new highs in real estate prices outside of BC and Ontario. Um Alberta looks like it's rolled over, but I'm not going to rule over rule out Alberta moving higher if energy prices stay higher, right?

[00:54:46]Because in real incomes will rise.

[00:54:49]>> But once that does roll over and the global economy, real estate peaks in not real terms, it's already rolled over uh in in nominal terms. Once we see the peak, it should be this year, next year, the latest, then Canada is not going to succumb to a credit contraction in Canada, but it'll be global. And this is one of the things people aren't looking at. So, I'm watching the nominal price of global real estate. And the US is just rolling over. Australia is another country exactly like Canada. Uh, its household debt is even larger than Canada. I posted that today and again it's all in real estate. So imagine China, I mean I called it the three amigos. Should be four amigos, but China, Australia, Canada, and New Zealand just kept ripping higher, you know, 2008. What what was that? Uh, you know, like nothing happened. And that's why I think there's such a push back from Canadians, but u my American followers, European followers, um, uh, you know, they they understand it. Oh, and I did a a post on Australia's real estate bubble. I had a huge following from Australia and it was the same thing denial and I get it right. Nobody wants to believe that it was u it was a it was a debt party and uh it's coming to an end and that delusion will expose a lot of people financially. I I I get the fear. Um, but I only ask them to study history and read great books and and I think I've mentioned to both you Ian and Jim that uh a lot of books came out after the crisis because everybody believed including myself that it was it we were going to transform. No, we had the second bubble and this thing was extended and in the late two 201s I we and many other people like myself. What does this end? How much further can governments um uh you know kick the can down the road? And it was going to be a point where interest rates they could leave it from zero and they can run up structural deficits until the point the bond market says no more. How are you going to pay us back?

[00:57:07]And I think we're starting to see that with a global rise in yields, right? Um that's that's the push back. That's the endgame. There's that's another great book. Uh how does this how does this end? And uh and the two confir confirmations is the rise in gold and a digital currency in Bitcoin. I mean these are rising because they're a a reaction to our current fiat credit system and Richard Duncan beautifully named accredititism. Right?

[00:57:39]It's not capitalism. It's credit. It's based on credit and and perpetual inflation.

[00:57:45]And that's running to a head because uh demographics is deflationary, a credit bubble is deflationary, and technology is deflationary. And so central banks are going to lose that game. Governments are going to lose that game. It's just when now and we're one, two business cycles away from that this downturn, 2028 or 2030s.

[00:58:08]And that's all I track. Um, and next time we'll we'll talk about solutions, what Canadians can do, because one of the things I wanted to do um, which I finished is um, I've said it repeatedly for Canadians, deleverags you to because it will force the banks and governments to delever. And I put together a piece, something I wish I had in the early 90s. And for the financial sector, I'm putting together pieces of look, your industry is going to shrink.

[00:58:36]um get used to it and uh you know mortgage brokers, real estate brokers, that's going to be an industry is going to shrink by 50% or greater in Toronto.

[00:58:47]It's just a reality because u there isn't the demand for that and they're not going to have the numbers as asset prices fall. The leverage that Canadians will be taking on will be shrinking every year. So that's just, you know, what you used to make on a million- dollar mortgage, that might be 300,000 in 10 years. And so that industry and some people follow me and are aware of it and they're they're okay. But what general information I can say to people is to leverage before the economy forces you to. And that message unfortunately for a lot of people in Ontario um has gotten too late. And that's why you're seeing the, you know, the losses and the bankruptcies rise.

[00:59:31]>> Well, thank you, Joseph, as usual. Um, I don't know if it's four or five times you've been on already, but you'll be on again. And, uh, it's always great. It's always lots of knowledge and, uh, some, you know, sometimes the the the news, even though we don't like it. I mean, it's it's like taking your medicine, right? Sometimes you just have to take your medicine.

[00:59:48]>> Well, the key the key is just to survive and prosper. I mean, Harry Dent said that, right? I mean, uh, Joseph Kennedy, if people aren't aware, their wealth wasn't created in the 20s. It was created in the 1930s when he preserved the wealth and his net worth tripled.

[01:00:04]Um, so it is an opportunity, you know, and we'll be discussing that. Okay, what are the opportunities here? You and I are not responsible for what happened.

[01:00:15]It's it's just a collective amnesia that society goes through throughout history.

[01:00:20]And I'm I'm putting together a piece that we're going to be blaming everybody. The baby boomers, Generation X, the politicians, the banks, um, United States, Europe, you know, fine somebody to blame. But during the party, nobody can really complain, right? Um, and collectively it's just us um just not wanting to hear the truth. And they were the bears were attacked.

[01:00:45]So saying all that there are great opportunities and it will be in which I'm trying to be a part of in a small way is how do we get out of this?

[01:00:56]Where's the solutions? How do we help as many Canadians? Um like restructuring the debt has to be a conversation we have to start talking about now not bankruptcies because this will accelerate. It'll feed on itself if you seen what happened. So, you know, it's nice to to acknowledge what the problems are, but I've I've actually brought what I discovered and learned from myself as a solution. And because you you can only um the wave can be amplified or shrunken a little bit, but you you can't stop the wave. And we're just trying to uh make the amplitude to the downside smaller. Put simply, um, winter's coming. Where's the jacket?

[01:01:44]>> Jacket, right? Um, we're gonna let you go though, Joseph, again. Um, it's been great having you. So, we'll let you go and I and I will wrap up after that. So, uh, thank you, Joseph, uh, for joining the really big show as usual, and we'll see you again. We'll book you in again, and then we'll talk about, you know, like what a winter jacket looks like.

[01:02:04]>> Yeah, that'd be great. Thanks for having me on and I hope it's been informative to the audience.

[01:02:09]>> Thank you, Joseph. Thank you for watching this clip of The Really Big Show. If you want to watch the full show, you can head over to our YouTube channel and you'll find it under our lives. And if you really want to find out more information of everywhere you can find us, go to the really big show.ca and there you can find links to all our channels. Thank you.