Canadian households devote an astronomical amount of income just to carry their debt payments. Data from the Bank of International Settlements (BIS) shows Canadian households have a very high debt service ratio (DSR). The ratio dropped in Q4 2020 slightly, but it’s still much higher than any other G7 country. Not even the US housing bubble reached this level in 2008.

Canadians Spend 12.4% Of Their Income On Debt Payments
Canadians spend an astronomical share of their income on debt payments. The household DSR reached 12.4% in Q4 2020, down from 13.5% in 2019. It dropped, but this was entirely due to the fact interest costs have fallen. Household credit growth is still booming, and at a much faster rate than income.

Canadian Debt Payments Dwarf The US… Even In 2008
Contrasting with our neighbors to the South, we can see their DSR isn’t even close to Canada. US households had a DSR of 7.6% in Q4 2020, down from 7.9% in the same quarter a year before. They spend a third less of their income on servicing debt…read more.

By now it’s clear to all that Robinhood will take from the rich … what happens after that remains unclear, but retail investors will now have a chance to decide on their own as the disruptive zero-fee trading app prepares to go public.

Robinhood, the most popular trading app, especially among novice and young traders, said it will trade on the Nasdaq under the symbol HOOD.

With an initial offering price ranging between $38 and $42 per share, Robinhood is expected to reach up to a $32 billion valuation, which would make it worth more than two-thirds of companies on the S&P 500.

According to its amended prospectus, the company plans to sell 52.4 million shares in the IPO, with founders Vladimir Tenev and Baiju Bhatt selling another 2.6 million shares in the deal. After the IPO closes, they will still own 7.9% each.

Robinhood has been targeting an IPO since at least last year, but it’s been a bumpy road pot-holed with regulatory inquiries, including a hearing convened by the House Financial Services Committee.

Robinhood was last valued at $11.7 billion in its private fundraising round in September. In February, the company announced that it had raised a further $3.4 billion in a funding round… Read more.

Canadians have an epic pile of savings accumulating, but it’s not as big as most economists think. Oxford Economics‘ Tony Stillo took a deep dive into the household savings rate this week. The firm found the gross numbers exaggerate the total that can actually be used. Further, wealthier households represent more than half of the savings accumulation. In the end, only 13% of the epic pile is forecast to actually be used in the near future. Talk about a letdown.

Canadian Household Accumulated $184 Billion
Canadian households accumulated a big pile of savings since the pandemic started. The firm estimates $184 billion in gross excess savings from Q1 2020 to Q1 2021. The second quarter of this year should add even more, due to the third-wave lockdowns. It may sound like a lot, and you may have heard the “revenge spending” narrative. However, it may not be so impressive.

Only $100 Billion Of Those Savings Are Liquid
First off, the liquid excess savings are much smaller than the gross excess savings. Only $100 billion are actually liquid, by the firm’s estimate. Their analysis shows households used $22 billion in capital to reduce their debt. Another $62 billion has already gone to housing and equities.

Wealthier Households Represent More Than Half Of The Savings
Wealthier households represent most of the savings, which means less will be spent. Stillo’s team estimates over half of the savings are from the top two income quintiles. It’s a big detail since wealthier households have a lower marginal propensity to consume. In plain English, the households with savings already have few buying restraints. Additional cash only provides a minimal influence to increase consumption…read more.