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TXPR closed at 606.31, up 0.98% on the day. Volume was 1.72-million, relatively light in the context of the past thirty days.

CPD closed at 12.10, up 0.83% on the day. Volume of 46,515 was quite low, but not record-setting, in the context of the past thirty days.

ZPR closed at 9.72, up 1.14% on the day. Volume of 111,451 was the third-lowest of the past thirty days, exceeding only June 25 and June 14.

Five-year Canada yields were up 2bp to 1.40% today.

There was a boat-load of MOC buy orders today, which certainly had an effect on the reported closing level; we’ll see how much of it sticks next week!

PerpetualDiscounts now yield 5.60%, equivalent to 7.28% interest at the standard equivalency factor of 1.3x. Long corporates now yield 3.42%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now 385bp, a slight (and perhaps spurious) narrowing from the 390bp reported June 19.

The federal NDP released its platform:

NDP leader Jagmeet Singh said his party would raise corporate taxes to 18% (from 15%) and tax capital gains at a [inclusion] rate of 75%.
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The party would maintain the current small business tax rate of 9%.

The NDP would also increase the top marginal tax rate for those making more than $210,000 to 35% from 33%, and implement a 1% wealth tax on “super-rich multi-millionaires with wealth over $20 million.”
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Other tax components of the NDP platform include:

A 15% foreign buyers tax on purchases of residential property by foreign corporations or people who are not citizens or permanent residents.
Doubling the Home Buyer’s Tax Credit to a maximum credit of $1,500 from $750.
Allowing income tax averaging for artists and cultural workers.
Ending the stock option deduction.
Ending “the unfair tax treatment of family farm transfers.”
Making the Canada Caregiver Tax Credit refundable.
Expanding the Volunteer Firefighters Tax Credit.

Changing the capital gains inclusion rate is a silly idea; it will simply provide even more encouragement for investors to retain their holdings forever and pay taxes only after death. I have long advocated a change whereby the capital gains and dividends are taxed the same way they are now, but with a cap: allocations into this bucket capped at some high figure, non-cumulative, annually. Say, $1-million a year. This won’t affect Joe Lunchbucket in the slightest, but – in addition to being a more effective tax on the super-rich than a wealth tax – will have the salutary effect of encouraging the super-rich to realize capital gains, in order to fill up their bucket every year of their lives, rather than grossly exceeding the cap upon death.

However, I was pleased to see that they are afraid to propose fiddling with the Dividend Tax credit and Gross-Up!

Two articles I saw in succession have triggered a urge to rant about low interest rates.

The first was about the effect of AirBNB on Canada’s rental market:

More than 31,000 homes across the country were rented out so often on Airbnb in 2018 that they were likely removed from the long-term rental supply, according to a groundbreaking study by McGill University researchers.
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Those 31,000 homes are equal to about 1.5 per cent of residences across the country that have been built for the rental market.
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In New York, for instance, Airbnb directly accounted for a US$380 increase in median annual rent costs, according to a separate report from Prof. Wachsmuth last year that was funded, in part, by a hotel-industry organization. “The more Airbnb activity you see in a city, the higher housing prices and the higher rents are going to get,” he said. “There’s no question that [Canadian] cities are now past that point.”

Within Canada, short-term rental activity is highly concentrated in a few cities. The Montreal, Toronto and Vancouver areas accounted for close to half of Canada’s average daily listings in 2018, and hosts there brought in $710-million, up 27 per cent from 2017. They’re also where the most rental supply is under threat: Forty per cent of the roughly 31,000 homes that were frequently rented last year were found in those cities, amounting to more than 12,000 “lost” housing units. Hosts of those units brought in $374-million, up 30 per cent from 2017.
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Nearly half of all Canadian Airbnb revenue in 2018 was generated by commercial operators, or those who manage multiple listings, the McGill report said. Their share of sales increased from 2017 in nearly all metro areas. Among this group, there are some hosts that vastly eclipse the competition: Fifteen managed at least 100 active listings apiece in the past year, the report said, and nearly 60 hosts earned more than $1-million in 2018.

And a NYT article about the US housing market:

A confluence of factors — rising construction costs, restrictive zoning rules and shifting consumer preferences, among others — has already led to a scarcity of affordably priced housing in many big cities. Investors, fueled by Wall Street capital, are snapping up much of what remains.
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For decades, single-family homes were an investment primarily for people who wanted to live in them. Real estate investors were around, but they were mostly individuals or small partnerships. That changed with the Great Recession and its aftermath, when investors bought at least two million homes, and almost certainly far more than that, with prices depressed. Large-scale institutional investors bought tens of thousands of homes for less than they cost to build.

At first, the flood of capital seemed like a one-time opportunity arising from the collapse of the residential real estate market. Once the bargains dried up, the investors were expected to stop buying.

Except they didn’t stop. Last year, investors bought about one in five starter homes in the United States (defined as priced in the bottom third of the local market), according to CoreLogic. That was even higher than in the early years after the Great Recession and about double the level of two decades ago. In the most frenzied markets, investors bought close to half of the most affordable homes sold last year, and as much as a quarter of all single-family homes.
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What is happening in Atlanta is partly a familiar story of gentrification pushing up prices and driving out longtime residents. But those trends are being spurred by a fast-growing industry that promotes investment in single-family homes: lenders who provide the capital, brokers who handle transactions, wholesalers who buy homes by the dozens and sell them before they even take possession.
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Ms. Caban is a real estate agent. But she avoids working with the big investors who she says are tearing neighborhoods apart — like the ones who evict existing tenants so they can raise rents, or who leave homes vacant, sometimes for years, while waiting for values to appreciate. Driving through one neighborhood recently, she pointed to a number of boarded-up homes — all, she said, with corporate owners.

All these problems with housing prices may be attributed to low interest rates; the current low rate environment is causing a lot of distortion in asset prices and the reckoning will be paid eventually – the only question is whether this will happen quickly or slowly.

Low interest rates are supposed to stimulate investment in productive assets and the fact that so many people are instead taking advantage of the low cost of carry to invest in non-productive assets such as enormous houses and empty apartments is causing policy-makers a lot of headaches, which they are attempting to resolve via special taxes and intrusive regulations; this represents another distortion of the free market and is also accumulating a reckoning that will be paid eventually.

It would make a lot more sense to hike property taxes across the board.