The big dogs

Let’s take a moment as the week kicks off and see what the Big Dogs are saying.

First, what about crazy asset values? Gold, stocks, crypto? Is this stuff sustainable? What’s it telling us?

In case you just emerged from an unidentified anomalous phenomena or, possibly, Castlegar, you must know what the rush-into-risk has done. So far this year the Toronto stock market is up 21%, and at a historic high. Ditto bullion, jumping by more than half to a crazy $4,250 US an ounce. Bitcoin at $15,500 means the imaginary token has climbed 60% in twelve months. Nvidia stock is ahead 32%. The broad S&P has gained 13% this year. Silver at $54 an ounce has surpassed its 1980 and 2011 historic peaks.

So why are investors suddenly willing to jump onto assets that sit at record high levels? Does that not vastly increase the chance of losses? Is this simultaneous surge in traditional risk assets an indication people are seeking a refuge for wealth? Or has the greed gene kicked into high gear? Are they fleeing fiat currency and the Trump dollar?

What gives, Avery Shenfeld? As chief economist at the penguin bank, surely you know…

“The financial world isn’t sending us messages about US economic peril, or an American fiscal or monetary malaise,” he says. “But gold isn’t rallying in isolation. Indeed, it’s just one part of a larger story in which risky assets have moved up sharply. Is there a connection in the simultaneous surge in precious metals, bitcoin, meme stocks, and equities trading with elevated price-earnings multiples?”

Yes, he says. It is so.

“There appears to have been a shift from patient investing based on financial fundamentals, which rarely offer get rich quick opportunities, towards the rush of trading in assets, or placing bets, that can almost magically double, or soar tenfold. Social media was a factor in meme trading and interest in cryptos, and perhaps it’s that culture, and the way it highlights the rich and famous, that has others chasing a quick and easy route to that dream.”

So will it end badly?

“That’s not to say that all of this will come to naught. Risk taking lies behind many major economic innovations. But it does raise concerns that if we’re seeing an unsustainable excess in risk taking, the riskiest slices of the financial market could be vulnerable to a change in what Keynes called “animal spirits”, which could prompt investors to return to a more traditional asset mix.”

What are we to make of this? Do current valuations and the migration from patient investing to panic-buying foretell a big, hairy mess in the making? Are we getting closer to a crash in one, two or more of these asset classes? Or, at least, a correction?

Let’s ask BMO’s economist and analyst Robert Kavcic. Yo, Rob. Are we pooched?

“We’re very mindful of the near-term risk,” he admits, “but there’s a difference between a market that is extended, and one in the late stages of a full-scale asset bubble, as seems to be the narrative today. In fact, a key feature of a true bubble is that there is such widespread buy-in that few label it as such.”

In the real world, we call it FOMO. The fear of missing out on big gains that others have reaped. And because most people also suffer from recency bias – believing what’s happening now will happen next – they pile in, regardless of peak prices.

Speculation has arguably increased,” adds Kavcic. “The combination of stretched valuations and margin accumulation clearly leaves the market exposed to a near-term correction. However, with strong earnings, flush balance sheets and the Federal Reserve currently easing, we’re not seeing classic final-stage bubble conditions. In fact, one could argue here that there’s a real risk, not of a bubble bursting, but of continued Fed easing truly inflating one.”

Yep. More inflation. Then (maybe) a reckoning.

Finally what about our real estate fetish? When all these other assets are swelling, bloating and being humped by the masses, what’s the deal with a lousy housing market?

Royal Bank whiz Robert Hogue says potential buyers have a lot to worry about right now, including economic uncertainty, new Trump tariffs and rising unemployment at the same time new listings seem to be on the decline. Of course, it’s still a market that punishes the vendors. And price fades are not over yet.

“The Bank of Canada’s policy easing cycle should support affordability-constrained buyers, particularly first-time purchasers sidelined by elevated borrowing costs,” he says. “However, the process is unlikely to be smooth with persisting economic uncertainty, labour market softness and affordability issues poised to create waves.

“For now, supply-demand continue to favour buyers in Vancouver and Toronto, pointing to further price declines near term. The abundance of choice provides buyers with negotiating power, and reduces urgency to act quickly on purchasing decisions.”

There you have it. The big dogs bark. Trade your bitcoins for a bungalow. Win-win.

About the picture: “Pleeease? Pleading eyes are asking permission to jump up on the bed, soon granted – hard to resist those eyes!,” writes Dave. “MSU – I think our government would be well-served if they were at least aware of your common sense opinions (even if they might not agree with all).   This is particularly true on the housing file. Thanks for the time and effort you put into your blog – I’m a daily reader for a few years now.”

To be in touch or send a picture of your beast, email to ‘garth@garth’.

Source: https://www.greaterfool.ca/2025/10/19/the-big-dogs/