Mortgages Become Harder to Get & Reddit Goes Public

It's going to be tougher for some Canadians to get a mortgage because of new rules. OSFI has raised the bar for high ratio mortgages.

The Week in Review

One glance at our first chart tells you that something happened around 2:00 EST Wednesday. You have three guesses what is was, and the first two don’t count.

Week Ending March 22, 2024

Yes, of course it was the Federal Reserve announcing its interest rate decision, and following the news the S&P 500, Nasdaq and Down all moved up to hit record highs. In this case the news wasn’t so much that the Fed held rates steady, but more so that it signaled potential rate cuts later in 2024.

Despite mixed progress in controlling inflation, the Fed maintained its earlier projection of three interest-rate cuts by the end of the year, aiming for a gradual reduction in the fed funds rate to around 3.1% by 2026.

Internationally, the Bank of Japan (BoJ) raised interest rates for the first time since 2007, marking a significant policy shift away from negative interest rates. This decision also reflects broader global central bank trends towards normalization of monetary policy, with several developed-market central banks, including the European Central Bank (ECB), Bank of Canada (BoC), and the Bank of England (BoE), also expected to begin rate cuts later in the year.

Overall, the week's developments underscore a cautious but optimistic outlook for the economy, with central banks globally adjusting policies in response to changing economic indicators while markets react positively to signs of continued support and gradual adjustments.

Also during the week, Statistics Canada released our latest inflation rate, and it came in at 2.8%, beating the consensus estimate of 3.1%.

Canada Inflation Rate | February 2022

This lower-than-expected inflation rate might just be the confirmation the Bank of Canada needs to start monetary loosening in the second half of the year.

A few of the highlights from the report:

📱 Cellular Services, -26.5%
🌐 Internet Access Services, -13.2%
🍽️ Food Prices, up 3.3% vs 3.9% prior month
⛽ Gasoline, up 0.8% vs. -4%
🏠 Shelter Prices, up 6.5%

Last Week’s Poll Question: Wow, I wasn’t expecting that!

For the second straight week the poll results came in at 78% to 22%, with the majority of you who responded to last week’s poll question saying that investors today are more informed and cautious about their tech investments than when compared to those during the tech wreck of the 2000 era.

As I re-read the question, perhaps I shouldn’t have used both ‘more informed’ and ‘cautious’ together in the same question. No doubt investors are more informed today, for better or worse, but I’m not seeing that they are more cautious, per se.

Ironically, perhaps, one of the main things that came out of the 2000 crash was the maturing of the ‘information superhighway’, which we all benefit from today.

So, please bear with me. I’m going to rejig the question a bit and focus on the cautious aspect in order to see whether that affects the results. I’m very curious to hear the views of all of our readers. You can weigh in below.

In this Edition of The Pulse:

  • Canadian Housing Sales Dip

  • Reddit Goes Public

  • U.S. Justice Department Sues Apple for Being Too Successful

  • OSFI Raises the Mortgage Bar

  • BoC Confirms Quantitative Tightening Through 2025

  • “Idiot” Lawsuit Against Influencers is Dismissed

  • Market Movers | Winners & Losers

(Results in Next Week’s Newsletter)

With a slight reworking of last week’s poll question, this week I just want to focus on the cautious aspect of the question. Answer this week’s poll question:

Do you think investors today are more CAUTIOUS about their tech investments compared to the investors during the tech bubble of 2000?

Login or Subscribe to participate in polls.


S&P 500 Weekly Overview

Week ending 3/22/24 | Market Cap >$100B

S&P TSX Weekly Overview

Week ending 3/22/24 | Market Cap >$5B


The Relative Strength Indicator (RSI) can provide a signal that suggest a stock is either overbought or oversold. A stock that has an RSI over 70 is considered to be in “overbought” territory. This might suggest that the stock is due for a pullback, however it is not a recommendation to sell. Always perform your own due diligence.

Week ending 3/22/24 | Most Overbought Stocks, based on 14-Day RSI


A stock that is trading with an RSI below 30 is considered to be in “oversold” territory. This might suggest that the stock is due for a recovery, however it is not a recommendation to buy. Always perform your own due diligence.

Week ending 3/22/24 | Most Oversold Stocks, based on 14-Day RSI

CREA Reports Dip in Sales

Canada's housing market experienced a "relatively uneventful" February, according to the Canadian Real Estate Association (CREA), with a slight 3.1% dip in home sales from January. This small setback follows some positive momentum gained in the previous months.

Despite the decrease in sales, the national average home price climbed to $685,809, a 3.5% year-over-year increase. There was a modest 1.6% rise in newly listed properties, hinting at an upcoming active spring market.

"After two years of mostly quiet resale housing activity there’s a feeling that things are about to pick up."

Canadian Real Estate Association (CREA)

The market appears set for a dynamic spring, possibly influenced by adjustments in interest rates or a boost in property listings. The sales-to-new-listings ratio which stands at 55.6%, slightly above the long-term average, suggests a balanced market may soon be in sight.

"With so much demand having piled up on the sidelines, the story will likely be less about the exact timing of interest rate cuts and more about how many homes come up for sale this year."

Shaun Cathcart, CREA senior economist

Economic indicators, such as rising bond yields that push up fixed mortgage rates, hint at the challenges and pressures the housing market faces. But when you factor in rapid population growth and accumulated demand, we may be seeing a solid foundation for recovery and growth. The potential for interest rate reductions later in the year could further energize the market, drawing sidelined buyers back into the fray and contributing to the market's vibrancy and stability.

While the current state of the housing market suggests some level of resilience, the Bank of Canada will need to consider a wide range of economic indicators, including but not limited to the housing sector, in its rate decision process.


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Reddit Grows Up

Social media company Reddit went public this week, marking a pivotal moment in its 19-year history. The company's initial public offering (IPO) on the New York Stock Exchange saw its shares surge by up to 60% before stabilizing, once again highlighting the volatile nature of stock debuts. Reddit's IPO, which valued the company at nearly $6.5 billion—down from a $10 billion valuation in 2021—reflects the challenges and expectations it now faces as a public entity.

Steve Huffman, Reddit's CEO, captured the essence of this transition:

"It was time for Reddit to grow up and behave like an adult company."

Steve Huffman

This sentiment underscores the pressure on Reddit to consistently meet growth and revenue targets. Susannah Streeter, a market analyst, highlighted the potential for volatility but said the strong investor interest that could stabilize the company's stock.

As Reddit looks to the future, it aims to diversify its revenue through advertising, user transactions, and selling data to AI companies. Jen Wong, Reddit’s COO, emphasized the value of Reddit’s data:

"Reddit's corpus of information is incredibly important to the training of large language models."

Jen Wong, Reddit's COO

Not everyone is happy though. This move towards monetizing its massive data bank has sparked concerns among users and employees about the potential shift towards a more corporate culture, threatening to dilute Reddit's community-driven essence.

Reddit's IPO is a classic example of a balancing act between pursuing growth and maintaining the vibrant community culture that has defined it.

The company's journey into the public market introduces new challenges and opportunities as it navigates the complexities of being a publicly traded entity.

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Apple’s “Walled Garden”

The U.S. Justice Department has launched a major antitrust lawsuit against Apple, alleging that the tech giant has unfairly monopolized the smartphone market, stifling competition and innovation.

The government claims Apple's "walled garden" - its integrated ecosystem of devices and software - is a tactic to maintain its market dominance, thereby limiting consumer choice and driving up prices. This lawsuit is part of a broader push under the Biden administration to scrutinize tech giants for anticompetitive practices.

"If left unchallenged, Apple will only continue to strengthen its smartphone monopoly."

U.S. Attorney General Merrick Garland

Apple counters the lawsuit, arguing that its integrated approach is foundational to its brand identity and consumer privacy, claiming the case is "wrong on the facts and the law."

"This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets."

Apple Statement

This legal challenge is another example of the growing governmental efforts to regulate big tech's influence on the economy and ensure a fair playing field for innovation and market competition.

For as long as I can remember, this conflict between a company becoming ‘too’ successful has troubled me. I do get the concept that we don’t want one company have too much influence on us overall, but the idea flies in the face of encouraging growth, innovation, etc., and then when a company does this and succeeds, we reign them back in and tell them to slow down. At what point does success cross the line? The answer is subjective, I suppose, but it sure would be nice to come up with a better solution that what we have today.

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OSFI Raises the Mortgage Bar

In a bold stride towards financial stability, Canada's banking regulator, the Office of the Superintendent of Financial Institutions (OSFI), is setting a new course to address the rising tide of homeowner debt.

As the cost of housing skyrockets, Canadian borrowers find themselves navigating through some of the highest debt levels globally. In response, OSFI is implementing a cap on the number of mortgages that can exceed 4.5 times a borrower's annual income. This move aims to strengthen the financial security of Canadian households by reducing the risk of loan defaults during economic storms.

Unlike the federal mortgage stress test applied directly to borrowers, this rule targets the banks' lending portfolios, limiting the percentage of high loan-to-income (LTI) mortgages.

"The LTI measure we are implementing is a portfolio test that is designed to prevent the buildup of highly leveraged loans during low interest rate periods."

Shane Diaczuk | OSFI spokesperson

The launch of this policy is a significant change for Canadians struggling to secure mortgages amidst the choppy waters of strict qualification criteria and higher interest rates. Despite these challenges, the proportion of highly leveraged borrowers is down, which is a sign that regulatory interventions are working.

Maggie Cheung from the Canadian Bankers Association highlighted the banking sector's adaptability:

"Banks in Canada have a long history of working with their customers to keep their mortgages in good standing. Understanding their customers and adapting to their changing circumstances is a top priority."

Maggie Cheung | CBA

As the banking community assesses the impact of this upcoming policy, the shared goal remains clear: ensuring the financial wellbeing of Canadian households and safeguarding them against the uncertainties of an ever-changing economic landscape.

QT Confirmed Through 2025

During a speech in Toronto Thursday, Deputy Governor Toni Gravelle said that the Bank of Canada is firmly on the path of quantitative tightening (QT) through to 2025.

The QT approach entails allowing the bank's increased holdings of Government of Canada bonds from the pandemic period to mature without being replaced, a clear strategy designed to manage the bank's balance sheet normalization.

Despite market speculation and recent overnight interest rate fluctuations hinting at potential liquidity issues, the bank remains committed to its course, equipped with tools to address any temporary funding pressures.

“The bottom line is the balance sheet normalization process is continuing as we laid out last year, and we have tools to manage any temporary funding pressures that might come up along the way.”

Toni Gravelle, Deputy Governor of the Bank of Canada

Quantitative tightening, which began back in the spring of 2022, reverses the bank's pandemic-era quantitative easing. The goal is to reduce the bank's bond holdings until its settlement balances fall to a target range of $20 billion to $40 billion from the current $100 billion.

“Our assessment is that the surge in demand for repo funding in Canada came from growing market expectations that interest rates are going to fall.”

Toni Gravelle, Deputy Governor of the Bank of Canada

As the Bank of Canada moves towards ending QT around 2025, it plans to resume asset purchases more cautiously, focusing on a balanced asset mix, including shorter-term options.

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Influencer “Idiots” Lawsuit Dismissed

A federal judge has dismissed charges against seven Twitter users and a podcaster who were implicated in an alleged $100 million stock manipulation scheme. The accusation centered around a "pump-and-dump" strategy, wherein these social media influencers allegedly used Discord to inflate stock prices before selling off their own stakes for profit.

However, District Judge Andrew Hanen of the US District Court for the Southern District of Texas highlighted a critical shortfall in the Securities and Exchange Commission's (SEC) case: a failure to sufficiently prove that the activities constituted a "scheme to defraud."

The intrigue of the case deepened when it was disclosed that at least one defendant had promoted so-called "meme stocks" like Gamestop and AMC, which captured immense public and trading interest in 2021. Despite the SEC's allegations of fraudulent intent, Judge Hanen pointed out that evidence of actual securities fraud or conspiracy was lacking.

"The key question is whether one statement by one of the co-defendants that ‘we’re robbing … idiots of their money,’ which is alleged in the Indictment, is sufficient. This statement sufficiently alleges ‘intent to defraud’ … but does not on its own sufficiently allege that Defendants executed, or conspired to execute, a ‘scheme to defraud’ investors of money or property."

District Judge Andrew Hanen | US District Court for the Southern District of Texas

Hanen also said that the case didn't follow the typical narrative of direct financial theft from investors but rather suggested that they were misled by being deprived of essential market information.

With the indictment dismissed without prejudice, the door remains open for the SEC to amend and refile charges. As of now, the SEC has not commented on the judge's ruling, leaving the financial and legal communities watching closely for the next developments.

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Market Movers

Top 10 Weekly Gainers

TSX, NYSE & Nasdaq Exchanges | Market Cap >$10B | Week ending 3/22/24

Top 10 Weekly Losers

TSX, NYSE & Nasdaq Exchanges | Market Cap >$10B | Week ending 3/22/24

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