Figures Never Lie

Well, we all know about todays rate cut. First and foremost, I will acknowledge that I got it wrong. I really thought Tiff and Co. would hold. I guess my coin flipping guesses are not that good. I always said there were reasons both for and against cutting rates, but it seems that the reasons to cut outweighed the reasons to hold in the minds of the BOC.

But, I think it is super important now to look at where we go from here, and remind people of a few things. Now, I have been in finance since I was a teenager, and have seen enough different cycles to know a few things. There are a million people who are smarter than me, but there are just as many dicks who always claim to be right – even though they get it wrong from time to time. However, I want to share a few things with you that may actually help you.

The main ‘ thing ‘ that everyone needs to realize is that today’s announcement was not good news!!! Never in history have rate cuts come at a time when things get better. The reason we cut rates is because the shit is about to hit the fan, or is in the process of splattering all around. Now, this is the point where most reporters, bloggers, writers etc post a bunch of pretty graphs and charts. I am not going to do that. I very seldom use charts and graphs in my posts, and I do it on purpose. Firstly, charts and graphs can be heavily manipulated to show you a desired outcome. I can shorten a timeline, leave out data that doesn’t support my theory, make the chart smaller than it should be so a move looks bigger, etc. The second reason I don’t use a lot charts and graphs is because charts and graphs usually compare things to each other. For example, I could use a chart to show you how house prices usually move inversely to interest rates. I could also show you a chart of how umbrella sales go up on rainy days, and down on sunny days, but we already knew that. Charts and graphs have a very large bias built into them. People use charts and graphs to confirm something that they already think they know.

So, I could post a bunch of charts and pretty graphs showing you that everytime the BOC, the FED, or any central bank cuts the overnight rate, shit actually hits the fan. But the point of what I write was never to give you the answers. The point of what I write was to get you to think a little different, and rather than giving you answers, getting you to walk away asking different questions. Group think and dogma is one of the worst diseases – especially in our business, and the entire reason I jot down my points in a public form is so that maybe you ask yourself different questions, or maybe you want to go and look something up, and you learn something.

Today was a classic ‘ rate cut ‘ day. Twitter, FB, Tik Tok, Insta – all of them. Every single person in finance had to mention the 25 bps of cut, every person had to post what it does for a payment, and every person seemed to be happy about it. Some people thanked Baby Jesus for the rate cut, as if a divine power was responsible for saving 15% of the population enough to buy a tank of gas every month. Today was so predictable it was almost funny. Why was everyone singing from the same hymn book? Why was everyone saying the same thing over and over and over? If I was a person with no financial experience, I would think that the entire world changed today. Of course we know it didn’t, but the appearance from the outside looking in is that something big and magical happened today.

Today for me was a sad day for our industry. Somehow we all had only 1 thing to talk about, as if the entire reason we exist is to report on some random arbitrary number that is easily attainable from every financial publication out there. What value did we add to our clients today? How did we show our clients that we are their trusted advisors, and source of sound advice? How did we help our clients and customers get to a better place? We did none of that, we simply parroted news. We may as well share the news on December 25th that it is Christmas day. Everyone already knew that as well, and it certainly wouldn’t help our clients any.

Now, I know a lot of people are gonna be super pissed off with my comments, and I am fine with that. Just because you don’t like the statement doesn’t mean it isn’t true. You getting offended makes no difference to my daily life. But I am going to share with you why today was so important, and how you can actually be relevant to your client.

When I was speaking with a lot of people today, I asked everyone the same exact question: Why does it matter? Why does today’s interest rate cut matter? It isn’t like the price of anything dropped. Yes, for 15% of the population they saw a payment reduction of a tank of gas. Big deal. I mean C’mon, the average homeowner ( assuming they were shopping on the variable rate at rate + 200 bps qualifying ) would now qualify to buy about $12,0000.00 more in house. How many of you have clients that just can’t buy a house because it is priced $12,000.00 outside their budget? I mean, really, let’s get serious here.

However, no one could tell me why it was a big deal. I will tell you why. Today was not a credit event, or even an interest rate event, or really even a financial event. Today’s cut was all about sentiment. That’s it, and that’s all. Today’s rate cut made everyone feel good. Today gave people hope for once. As they saying goes ‘hope floats’. In the sea of shit that has been the last 24 months, people finally have a piece of news that isn’t bad. People seem to think they can see light at the end of the tunnel. I hate to be the guy that tells them the light they see is the train coming down the tracks to run them over. Let’s give it a day or two.

Nothing changed in your life today, except maybe you think things will start to turn around. Every single financial metric and piece of financial history suggests otherwise, but you THINK after today things could get better. Rates went down, okay cool, but rate cuts happen because the economy is shitting the bed which leads to job losses. I don’t care where rates are – you ain’t buying a house without an income. The economy is in trouble, and that is why rates were cut today. Most people only remember the last rate cut – during COVID, when things got better quickly, and money was handed out like handy at the end of October. This time we will not see this.

For those that made it this far, I am going to give you the best piece of advice I will ever give you. What I am about to tell you, if done correctly will change your entire business. I am certainly going to offend a few people with this, and there will certainly be a lot of pissed off people, but I always promised I would give you the facts:

If you want to be better at being a mortgage agent or mortgage broker, go and enroll in a behavioral finance class. It will not be cheap, and it will take some time. Attending industry events will not be as good as this degree. Going to the MPC Conference will not be as good as this degree. If you are in anyways a reasonably successful broker, industry events will not do near as much for you as getting a degree in behavioral finance. Your entire perception of the industry and how you can help clients will change. Your business will change. You will have a far better understanding of why today was a big deal, and what it actually means going forward. There will be a lot more days like today in the coming weeks, months and years. Better to get prepared so you can talk people through it, and be the trusted person they can talk to.

After watching the events unfold on social media today, I learned a few things. Every mortgage broker that went to social media and hailed today’s announcement as ‘good’ ‘great’ or a ‘positive’ showed that they really do not have a clue how finance or interest rates work. They proved to everyone that they are simply repeating things without doing their diligence and research. Brokers and realtors that spewed commentary today about this actually did our industry a dis service. If we want to be taken seriously, then we best learn to have a fucking clue. Today we as an industry showed we don’t really have a clue.

It has always bothered me that mortgage agents and brokers get little to no training on finance, interest rates, bond yields, bond markets, and how they all interact, yet we are licensed to sell people the largest debt of their lives. Today really reinforced that we are probably as an industry not equipped to be helping people as much as we think we are. Where the economy goes from here is pretty well known. Cycles always work the same. Boom and bust, boom and bust. Rates getting cut tells us the bust part of the cycle is on its way. I am still in disbelief that we are out in the real world selling that as a positive to our clients. History always has a way of repeating itself, and the figures never lie.