Act One

chucky1

A few scenes worth your attention:

  • High-powered Bay Street bond traders talked to me this week about what the new year’s likely to bring. They figure the central bank will hold the trigger on a rate increase until mid-year, just so Mark Carkey’s creds are not further shredded, but then let ‘er rip. The first hike will be “at least a half, and probably a full load”. That could raise VRMs overnight by 1% – or a little more than 44%. Ouch.
  • But BMO disagrees, at least a little. Senior economist Michael Gregory says the first jump will be more like a third of a point – also coming in the summer – and that by this time a year from now BoC rate will be sitting at almost 1.6%, higher than today by 1.3%. That doesn’t sound like a lot, but it puts the lowest VRM at 3.55% – which increases the monthly on a $400,000 loan by $300. A five-year mortgage would like go for close to 7%. Barn door. Horse.

Rates

  • Well, that little David Rosenberg buddy of mine, now chief economist at Gluskin Sheff, has sure joined Bubble City here on the banks of the always-fragrant Don River. In a note to clients, and then repeated to the media, Rosy said, “we found that housing values are anywhere between 15% and 35% above levels we would label as being consistent with the fundamentals. If being 15% to 35% overvalued isn’t a bubble, then it’s the next closest thing.”

And just imagine, as I said last week, if the real estate market in Toronto or Vancouver declined by the amount Rosey has identified. That would take average home prices down by $68,000 to $158,000 in Toronto, and tank the value of a SFH in Van by $140,000 to $325,000.

  • So, is that what Carney was talking about in his GTA speech yesterday? You bet it was. It is now obvious that even a mild real estate correction – say 10% – would kick the slats out from under tens of thousands of recent buyers, putting them in tortuous negative equity and perhaps turning the thumbscrews on CMHC. Or, as he chose to phrase it: “A shock to economic conditions could be transmitted to the broader financial system through deterioration in the credit quality of loans to households. In such an event, increased loan-loss provisions and reduced quality of the remaining loans could lead to tighter credit conditions more broadly.”

The BoC will raise rates. The real estate market will be impacted. A ton of households will feel it bad. Consumer spending will take a hit, and just as the HST arrives. And meanwhile Obama readies both tax increases and spending cuts, which will rally the greenback, sink gold, drop oil prices and bring five years, at least, of range-bound markets and investor danger.

This is exactly why a thesis of my new book is that we are in but Act One.

There are two more to come.

144 comments ↓

#1 Cha-ching on 12.16.09 at 9:14 pm

What a concept….Canadian free enterprise where the family man with honestly earned, cold hard cash, trying to find a decent home for his family, can finally have the upper hand against cheap, borrowed play money…we can only dream.

#2 davers on 12.16.09 at 9:26 pm

It almost looks as if our RE market is going to tank worse than the US. Our homes are more expensive (relative to incomes), income to debt ratios are higher here and the interest rates are lower now than at the US peak.

Then again we have other factors like recourse loans, the CMHC is gov backed, and, of course “it’s different here”. So who knows what will happen.

#3 Gary T on 12.16.09 at 9:37 pm

Garth,
Haven’t you stated numerous times recently that the price of oil will rise? In your latest column you say the Obama policies will sink oil prices. So which is it?
Thanks as always for your input.
Gary T in Kelowna

#4 HouseBuster on 12.16.09 at 9:38 pm

“..drop oil prices..”

I thought you said oil was going up?

Ever heard of the difference between short and long term? — Garth

#5 BearClaw on 12.16.09 at 9:47 pm

Garth,

I don’t think 5 year mortgages will be close to 7% with only a 1.3% increase in rates. 5 year mortgages are about 4% right now. An increase of 1.3% will put them at 5.3%.

There is a large spread between variable and fixed because there is some anticipation of rate increases priced in. So fixed rates may be less than 5.3% in this scenario.

Posted rate is 5.49% now at all majors. We are on the way back to 8% money in a few years. Get used to it now. — Garth

#6 Boombust on 12.16.09 at 9:54 pm

Prudence and the pill.

#7 BearClaw on 12.16.09 at 9:54 pm

“The first hike will be “at least a half, and probably a full load”. That could raise VRMs overnight by 1% – or a little more than 44%. Ouch.”

Garth,

For a 25 year amortization it would raise the *total* payment by 12%. The interest portion would increase by 44%.

A 1% increase on a 2.25% rate is 44%. I did not mention payments. — Garth

#8 Guy named Bond on 12.16.09 at 9:58 pm

“…by this time a year from now BoC rate will be sitting at almost 1.6%, higher than today by 1.3%. That doesn’t sound like a lot, but it puts the lowest VRM at 3.55% – which increases the monthly on a $400,000 loan by $300. A five-year mortgage would like go for close to 7%.”

Now I’ll ask for some clarification on VRMs. What rate are they tied to? First line mortgage site says “Prime + X”.
Whose prime is that? If its the banks, whats stopping them from purposely jacking the rate in “anticipation” of
the new BOC rate, or just increasing the spread a little?
What does a VRM contract typically say? How is the
borrower protected?

Also from firstline, 5 yr fixed at just over 4%. Local broker still advertising sub 4%. Why would a five year rate jump to 7%? We’ve learned before the longer fixed
rates are not set by the BOC, but rather by the bond
market.

Yes, VRMs could rise if banks jack primes in anticipation of a BoC move, but that is unlikely. The prime will move the same hour the central bank rate does, and the borrower has no protection except to lock in, in advance. As for five-year closed, long rates will rise with short ones, as bond yields will also be going up for many reasons already discussed here. In any case, there is no reason to believe existing rates will survive July. — Garth

#9 Nestor on 12.16.09 at 10:02 pm

Interesting you quote Rosenberg when he agrees with your housing bubble theory, yet, you fail to mention he thinks gold will reach $2000-2600 in the next few years as China continues to buy more of the stuff.

You’re failing to understand today’s economic problems. The US gov’t will continue to spend money they don’t have, continue to leave rates at absurdly low historical levels, and continue to print all the money they need to get through this mess.

There is no chance in heck that the US gov’t wants a higher USD. They want a LOWER dollar. This is a FACT. They WANT it at least 20-30% LOWER.. all be it, over time.

And just like in 1971, John Connally told the Europeans worried about exchange rate fluctuations that the American dollar “is our currency, but your problem.”
Tim Geithner is going to tell the Chinese the same soon.

Just like in the 1970’s, when America inflated it’s way out of Vietnam, the US is going to inflate it’s way out of the banking crisis… print print print… governments love inflation.. it’s great for them.. horrible for everyone else.

Sure, piss off the guys holding your debt with a flood of cheap exports. Good strategy. You are dreaming. — Garth

#10 BearClaw on 12.16.09 at 10:03 pm

Posted rate is 5.49% now at all majors. We are on the way back to 8% money in a few years. Get used to it now. — Garth

I think you know the difference between discounted and posted rates. But who cares? That’s not entertaining.

Kiss discounts goodbye as the BoC moves. That’s not entertaining either. — Garth

#11 Siberta on 12.16.09 at 10:16 pm

You ain’t going to win on this site BearClaw, get used to it. You recently purchased to, if I remember correctly.

#12 lgre on 12.16.09 at 10:21 pm

Bearclaw is learning that GT has every angle covered, dont bother trying to come from the back.

The ‘we are different’ theory is getting boring, nothing is different but everything is and will be the same…just wait for it.

#13 Bulls eye on 12.16.09 at 10:30 pm

We should encourage the home renovation tax credit. This will make for nicer POS…

#14 Onemorething on 12.16.09 at 10:34 pm

Rates aside for now, which I would never downplay, unemployment and salary haircuts even ignored, the boomers will want to downsize.

Even for boomers who think RE is going to rise more, the hint of a rate hike and the new HST will be enough to get them into action right away in 2010.

There is so much negative ahead of us, it’s just a matter of which shoe drops first.

#15 goldenfox on 12.16.09 at 10:38 pm

Garth, you were the finance minister under Mulroney. Didn’t Mulroney sell all of the Bank of Canada’s gold reserves and replace them with those oh so safe and precious US treasuries.

I took it all home. Rev Min, not finance. — Garth

#16 Ben on 12.16.09 at 10:38 pm

Hey Garth

Did you get my email about starting a petition to raise CMHC minimum down payment and shorten maximum amortization period? Interested?

#17 T.O. Bubble Boy on 12.16.09 at 10:45 pm

To anyone who doubts that the banks will get rid of their discounts on Variable and Fixed Rate mortgages, check out what happened with people’s LOC this year. Every major bank raised the LOC rate to Bank Prime + 1% (from Bank Prime).

The more risk there is in an asset, the higher the premium the banks will bake into the cost to cover themselves. If you’re wondering why these discounted rates are so common today, look no further than CMHC. The banks have ZERO risk on any mortgage, so they do not need to charge a premium (but – LOC isn’t backed by CMHC, hence the risk premium going up).

On the general topic of rates — we should all be far more worried about the scenario where rates *don’t* rise. That means that:
A) the economy is completely in the crapper, and deflation is upon us.

and

B) All of those billions of dollars that Flaherty and Harper threw at re-paving roads in Conservative ridings and saving auto jobs at $1M per employee didn’t do anything to grow the economy at all. In fact, all they did was bury the country further under debt service costs.

#18 nonplused on 12.16.09 at 10:52 pm

Ah summer.

I don’t think Blarney Carney is going to raise rates until the dollar is at $0.80 USD, the unemployment rate is trending towards 5%, and we have a majority government. Could all 3 come true by summer? I guess if unemployment goes down because they hire a bunch of ballot counters in the spring, maybe.

But long term I agree with Garth’s call on interest rates. 8% money is the norm, and we should see it again before the wave of renewals on late edition mortgages comes.

Gold, on the other hand, might correct significantly, but the lower bound of the nearly 10 year old trend line will continue until the major economies can get their deficits in order. Even with rising bond yields. Rising bond yields at this point raise the deficit, because there is no way to pay the coupon rate but to issue even more bonds. It’s that “debt spiral” thing.

Gold is going to $2000 an ounce, no doubt about it. But at 2% per year it could take another 20 years so I wouldn’t hold my breath. Now if inflation gets out of hand….

The US dollar has been devalued twice by decree in the past, and since 1973 it continues to be devalued by about 2% per year as measured by CPI (or at least that’s the target). This will continue for as long as the financial system holds together.

Over in the psycho ward the paranoids have noticed the yield after commissions on 30 day t-bills (US) have gone negative. That means somebody is lending the US government billions of dollars for a negative return. If it isn’t the Fed, then somebody with a lot of money thinks something really big is going to happen soon and wants US cash as a safe haven. Either that or all the hedgies have cashed out for the holidays and just want to park the money.

On the Chinese question I don’t think Washington gives a rat’s ass what the Chinese think of the US dollar question. Because that isn’t the worry. The real worry is how do you pay the coupon on new debt when you are already broke, should bond yields rise? Especially when you are already borrowing 1.4 trillion dollars a year? It’s going to be entertaining.

#19 omg on 12.16.09 at 11:07 pm

Come on you guys you all should know better.

To think that anyone cannot forecast 1/3 or 1/2 point changes in interest rates 6 months out is just plain silly.

The only think you can be sure of is that you will be wrong or at best lucky.

Yes rates will go up and mortgages rates will go up, but whether it is in June 2010 or Feb 2011 NOBODY can know.

#20 Joseph on 12.16.09 at 11:09 pm

None of these BoC pronouncements will make any difference in deterring the average real estate buyer from purchasing a home. Until the rates actually do go up, and significantly, people will just go their merry way, and dismiss BoC’s pronouncements as bluff. The same holds true for dire warnings of “corrections” in the real estate market. They will surmise that these warnings have been taking place for the last 60 years, and nothing has changed – real estate prices have only gone up. If it means buying a house that they have always wanted or catering to the warnings of Mark Carney and David Rosenberg, Canadians will roll the dice and try and snag their dream home while rates are at historic lows, and hope that they will stay that way for a muh longer period than the “experts” are predicting. It is human nature.

#21 Hiker on 12.16.09 at 11:19 pm

I think eventually rates will go up, but not sure about timing. I would say that most of people are in general short sighted and will think only about immediate satisfaction, not caring too much about tomorrows pain.

I was thinking that this real estate hype would come to an end long time ago, but it is still going. How long more? I would be a very rich man, if I could see the future.

#22 Hiker on 12.16.09 at 11:21 pm

Garth, what are act 2 and 3?

#23 Iain on 12.16.09 at 11:35 pm

When Blog Posters Attack! Geez. Tough crowd.

Garth, the 90’s bust came about over 5 to 7 years (meaning the depths of the declines took about that long to materialize fully – longer still to revert back to their highs). Very different dynamics today specifically with respect to rates. Do you see this being an abrupt correction at this point or a long drawn out affair (like Japan). I know you’ve weighed in on this in the past but has your view changed with recent events?

And do you respond to pleasant questions or only those that insult your intelligence?

The nature of the decline will depend on the course of rates, as this post implies. We do not know that yet, but I suspect the initial market recoil will be abrupt, and then it will take several years before prices tough a support level. Want a hug? — Garth

#24 N on 12.16.09 at 11:52 pm

Sure, piss off the guys holding your debt with a flood of cheap exports. Good strategy. You are dreaming. — Garth
__________________________________________

who are you talking about Garth? what cheap exports ? the Chinese? the Yuan is pegged to the dollar.the Japanese? USD has been falling against the Yen for 40 years.

Cheap US dollar = cheap US exports. Figure it out. — Garth

#25 Dan on 12.16.09 at 11:56 pm

1………2 the bubble is coming for you. 3………..4 no need to lock your door. 5……………..6 can’t keep up with rates. 7……………..8 negative Equity awaits. 9………..10 you are going to rent again.

You can pretend to be financially ignorant or try to tell yourself “it’s different” but the housing crash will be even HARDER now then before. We would of crashed 25-30% if government didn’t back up the banks with taxpayer money and lend it to people with NO MONEY. The crash is coming and it’s going to punish the financial stupid once and for all. ENJOY THE HOUSING CRASH/DEPRESSION it’s coming for YOU!

#26 Dan on 12.17.09 at 12:00 am

What we need in Canada/US is Debters prison. We would NEVER has another bubble again. Those who WORK and SAVE should WIN and those who do not work or save lose and or suffer prison. We can not allow these free loaders to just go bankrupt and all is ok. NO we need a prison to punish the financial stupid sheep with years of prison labour to work off the debt.

#27 Rhino on 12.17.09 at 12:01 am

Seems like you can’t make up your mind on Oil. These are a few quotes from just the last few weeks…. sounds like short terms bullish calls to me:

Oil prices at triple digits? It’s the latest scandalizing buzz, just like the Canadian dollar at par. And you read that stuff here a-g-e-s ago.

Rising bond yields and the march to dollar parity were both forecast here some time ago. Yes, and hundred-dollar oil.

Of course oil is still going to triple digits, but not in a straight line. Is that so hard to understand? — Garth

#28 Tober on 12.17.09 at 12:07 am

I’m a dedicated lurker. Always like to hear your turn on what’s coming. These jokers who want to pull you down if you are not exactly right in the right timing are missing the point. They don’t have the courage to stand out by themselves on their own blog stating what they think will happen and take all comers. You do. Cheers to you. I’ll be buying your next book.

#29 kc on 12.17.09 at 12:56 am

Oh boy, canada is sooo screwed. If one stops and thinks about how small scale we are indebted to ____ place in your own debt structure, then read this informative piece about the last great bubble area to be popped. Look out below if you are going to be over your head in debt. this will place how easy it is to to feel rich on the UP swing. and how fast the slide to earth can be.

http://www.marketoracle.co.uk/Article15851.html

Rise and Fall in Dubai, An Austrian Economics Perspective

#30 Steve P on 12.17.09 at 1:00 am

How much have houses in Toronto and Vancouver gone up in the past couple of years?

I’d imagine there are lots of olks who didn’t jump into the market during that time so the big runup and drop won’t have much impact on them.

People who gamble in RE, versus seeing it as a place to live, may well get slapped but the vast majority of homeowners won’t.

Folks on the fringes who behave irresponsibly aren’t victims.

#31 Jake on 12.17.09 at 1:07 am

Higher interest rates may be the least of our worries if what the experts were saying just a few years ago comes true. Bundle up people!!

http://www.youtube.com/watch?v=sXc_X9CJn0Q

Ok, I’m more concerned about interest rates. I think I will probably list my home in the spring because I don’t think this bubble will last much longer than that.

#32 Nostradamus Le Mad Vlad on 12.17.09 at 1:35 am

#2 davers — “. . . the CMHC is gov backed, . . .”

Which means it’s taxpayer-backed except that a lot of taxpayers are out of work now, getting EI or welfare.

Wunnerfull system we’re working with, with plenty unemployed and it will be so easy for whomever is PM here to hand us over to the US carte blanche.
——
Don’t this couple (Chuckie and Regan) make an idyllic, captivating and enchanted couple? They’re almost as handsome as Harper and Bernanke!

Subprime Numero Deuxieme? / One more.

Sorry ’bout that — Right 2

Fairly easy to connect the dots between these; look at the headlines — One / Two
——
The sun is going to nap for a while now, which is why it is cooling off here. No sun spots, not much (if any) warming.

However, the REAL reason for Climategate — Guess! “United Nations Secretary General Ban Ki-moon has again publicly admitted that the agenda behind the Copenhagen summit and the climate change fraud is the imposition of a global government and the end of national sovereignty.”

This, in turn, leads to a Magnificent Grasp Of The Obvious.
——
Some of China’s US debt holdings are going here; and speaking of underground economies.

#33 Why its different here on 12.17.09 at 1:46 am

Only mfg jobs have been lost in volume. Service sector jobs in canada are still holding. As long as there isnt any mass layoffs in service jobs, wouldnt people buying houses in the past 2 yrs working these jobs be able to carry their mortgage even if prices decline now by 10-15%.

these are the great middle class that makes up canada. wont they ride it out for 10-12 yrs till they can make some profit. many people in this category i know say they have to live somewhere so why rent. And, these are 2 income earners.

with the stock mkt see-sawing, they are channeling their cash to RE rather than stocks. not only that, unless there’s a US style crash of 50%+ here, there wont be much pain here. so in the meantime if prices have risen by 100-200% since 1999 and crashes by 15-35% these people are still up.

only the speculators/flippers will be hurt and arent they are a minority.

#34 Rates Going Up in March on 12.17.09 at 2:29 am

In terms of rate increases, apparently Scotia headquarters has already informed branches to brace for increases in the new year. My banker told me in October that a 0.75% increase will take place in March 2010, and then another 0.50% a few months later, bringing it to a full 1.25% increase in the coming months.

I hope my banker is right, as I am looking forward to a rate increase before summer 2010. That is another year of waiting, and then how many more years before the market deflates back to “normal.”???

#35 Jojo on 12.17.09 at 2:42 am

Again WRONG Garth about the timing and housing Bust in Canada,
I told you in Jan/09, semi in Mississauga was 290,000 and today the same semi house is 380,000. REMANDER THAT INTEREST RATE FROM JAN/09 IS THE SAME.
Even if next year we have 10% decrease of the price again BUYER is big looser because the next December interest will be higher at least 2%.AND the new buyer should pay much more monthly mortgage than current buyer. IS IT TRUE?

Ha,”Sure, piss off the guys holding your debt with a flood of cheap exports. Good strategy. You are dreaming”. — Garth
AGAIN WRONG GARTH.

“You’re failing to understand today’s economic problems. The US gov’t will continue to spend money they don’t have, continue to leave rates at absurdly low historical levels, and continue to print all the money they need to get through this mess”. TRUE

There is no chance in heck that the US gov’t wants a higher USD. They want a LOWER dollar. This is a FACT. They WANT it at least 20-30% LOWER.. all be it, over time.
And just like in 1971, John Connally told the Europeans worried about exchange rate fluctuations that the American dollar “is our currency, but your problem.”
Tim Geithner is going to tell the Chinese the same soon.
Just like in the 1970’s, when America inflated it’s way out of Vietnam, the US is going to inflate it’s way out of the banking crisis… print print print… governments love inflation.. it’s great for them.. horrible for everyone else.
EXCELENT POST GUY!

FED from USA will Start to increase interest rates between Jun/10 to Sept/2010. And our banks will do the same. Period.

So, between March/2010 to March/2011 you can see TEROR, and start of the GLOBAL WAR. Also you can see Timed Pandemic Flu. And Oil will go again over $ 100 and Gold over $ 2000 for sure.
Even I think Oil price can go about $180 and gold over
$ 3,400/oz. Did you learn INFLATE OR DIE!
You are again Wrong like Nov/2008 when you predicted gold price $ 500, housing bust in Canada and Deflation?
We have to see global war in Iran,Israel,India,Pakistan or even Venecuela, because the big guys need excuse for transfer to GREEN ENERGY.
And next bubble should be Green Energy and Gold . After that from 2011 Collapse of all bubbles and start of Depression to 2018. Stock market will going in Toilet.
Learn from ZION Guys THE BILDERBERG GROUP and THE KING’S ROTHCHILDS and Rockefelers how to play in the Market. $ US will collapse between 2011 and 2013 and you can see different world pegging currency.
New World Order, New World Goverment, New Green Energy,One World Bank (IMF),and the last stage is one “new religion” and WORLD without borders.
Classic Communism, the KINGS and the peasants.
And do you know who had created communism?

#36 Jojo on 12.17.09 at 3:12 am

Bad Coincidence from NY Times:

http://www.time.com/time/specials/packages/article/0,28804,1946375_1947251,00.html

http://www.jesus-is-savior.com/Disturbing%20Truths/hitler-man_of_the_year.htm

http://www.time.com/time/covers/0,16641,19430104,00.html

http://www.time.com/time/personoftheyear/2004/story.html

#37 Mike (Authentic) on 12.17.09 at 4:43 am

“And meanwhile Obama readies both tax increases and spending cuts, which will rally the greenback, sink gold, drop oil prices and bring five years, at least, of range-bound markets and investor danger.”

Argh, does it really have to be so bad all around? Garth, I’ll have to buy this book as well when it’s out as I’m getting more lost on what to do as everything is getting to be quite unstable out there.

Mike

#38 Nostradamus jr. on 12.17.09 at 4:53 am

Three saline points.

1/
The U.S. follows Canada’s lead… by supporting it’s Residential Real Estate, as lender of last resort,…. times have changed from just five years ago.

2/
Canadian Mortgage interest rates will not skyrocket, but edge up in small increments…times have changed from just five years ago.

3/
Armagedon is coming soon…but elsewhere…to emerging economies, to the U.K, Spain and France, to India, to Pakistan and to Iran.

4/
Hongcouver is insulated from a drop in Real Estate $$$, the city has international residential support.

5/
Toronto is prone to a major correction as it’s manufacturing base is dying a slow death.
Also look for Ontario to see General Strikes by its masses as the Province cannot afford to provide its current services.

Nostradamus jr.

#39 Fred on 12.17.09 at 7:06 am

Debt-laden B.C. homeowners warned of interest-rates squeeze

Canadians ‘potentially leaving themselves wide open’

http://www.vancouversun.com/life/Debt+laden+homeowners+warned+interest+rates+squeeze/2349202/story.html

Vanguards they are NOT…..

Gees too bad someone hadn’t spoke up earlier about this….hahahahahahaha

#40 mikey on 12.17.09 at 7:36 am

Garth, If i was to buy a house and still lock in a say a resonable 5yr rate what would be a good time frame the end of 2010?

Mikey

Ask me in May. — Garth

#41 cj on 12.17.09 at 7:44 am

…but then again there is TD, Desjardins and CIBC who don’t see any rate increase in 2010.

Oh…now its crude going up…but later (left undefined).

Revisionists are never wrong.

#42 David Bakody on 12.17.09 at 8:00 am

It is time to pay the piper plain and simple … and history has taught us one valuable lesson … those that can least afford to pay always do … the rich get richer and poor get poorer and more of them ever round. The middle class world wide will soon take the brunt of this storm ….

STOP & THINK! We had $15 Billion in the bank. we had $3 Billion in an emergency fund and were living well with a 7% GST ….. Then bing bang boom 35% of the voting people fell for on their hands and knees for a few pennies ( one cent off a cup of Tim’s) (now up over a nickle) and Harper & Co spent the whole kit and ca-puddle in a heartbeat on big business. to the tune of a $75 Billion + Deficit ( Hello he started at PLUS $18 Billion get it MSM)

I fully understand all who throw numbers around and try to attack Garth plain and simple percentages …. but give me a break …. Interest Rates UP, Taxes UP, HST UP, GST UP, Consumer prices UP, Living Expenses UP, Transportation UP, and Service Costs UP …… AND WAGES/JOBS AND JOB SATISFACTION ALL WRAPPED IN THE STANDARD OF LIVING FOR THE MIDDLE CLASS WORLD WIDE …….DOWN, DOWN DOWN.

Sorry for the loud words …. so do tell Maxwell who do you think is going pay for Harper’s/Flaherty’s/Carney financial incompetence …. Obama? Bush? Blair? Howard? or the working class?

Garth Turner has mentioned it several times ” Senior Boomer” CNN has reported that as soon as 2011 the whole of US of A budget will be going to pay for Seniors health care and OAS! The whole! Is Canada different?

Postscript:

I heard something I have not heard of before. A few in US congress said it seemed only fair that interest rates should rise because it was more than fair for all those Americans especially “Seniors” who have plain interest savings accounts. They deserve a good safe return on their hard earned money and I could not agree more! (TFSA)

#43 mikey on 12.17.09 at 8:22 am

Garth, I will ask you again in May looking foward to your answer. thanks

Mikey

#44 dd on 12.17.09 at 8:38 am

“five years, at least, of range-bound markets”

Sound like this is a great time to invest in income producing assets (AKA … not real estate).

As long as they are not interest-bearing. — Garth

#45 Max Sarte on 12.17.09 at 8:41 am

“And meanwhile Obama readies both tax increases and spending cuts, which will rally the greenback, sink gold, drop oil prices ”

Sorry, I don’t see it.
Tax UP and Spending Cuts mean economy down.
Economy down means lower USD.
Lower USD means higher Gold (in USD)
Lower USD means higher Gas but this may be counteracted by a lower economic activity (i.e. demand).
Not to say anything about interest rates at the Fed. Will they rise them? If they do, then yes, USD may just go up, but then they will be stopping the Carry Trade which will bring yet another financial debacle.
Sorry, nope. I don’t see it.

The US Fed will eventually raise rates and embark on a deficit-taming course, which will have exactly the effects I mentioned. Yes, the American economy will be in slow-growth mode for a long time, but the greenback will remain the reserve currency. Obama will not leave an economic wasteland as his legacy. And you are not smarter than Ben Bernanke. — Garth

#46 dd on 12.17.09 at 8:43 am

#37 Nostradamus jr.

“Hongcouver is insulated from a drop in Real Estate $$$, the city has international residential support” … but Nostradamus arch nemesis “Garth Turner” is plotting to douse any chance of this prediction coming to fruition.

#47 AM on 12.17.09 at 8:45 am

#33 Rates Going Up
“In terms of rate increases, apparently Scotia headquarters has already informed branches to brace for increases in the new year. My banker told me in October that a 0.75% increase will take place in March 2010, and then another 0.50% a few months later, bringing it to a full 1.25% increase in the coming months. ”

I think I agree with what you are saying. The banks see what’s coming all the while loading you up with debt. (I’ve been getting a lot of offers from my bank lately to increase my HELOC ).

The banks will raise their (long term) lending rates in advance of the BOC rate increase. They’re in business to make money, not to do you any favours by keeping their rates low for an extended period of time.

Of course, the timing may vary depending on the state of the economy in the early spring, but once the BOC announces a rate increase, it will be too late to lock in that lower long term rate.

#48 Danforth on 12.17.09 at 8:49 am

=========
Posted rate is 5.49% now at all majors. We are on the way back to 8% money in a few years. Get used to it now. — Garth
=========

http://www.ingdirect.ca

5 Year Variable 2.15%
1 Year Fixed 2.65%
2 Year Fixed 3.15%
3 Year Fixed 3.49%
4 Year Fixed 3.99%
5 Year Fixed 3.99%
7 Year Fixed 5.25%
10 Year Fixed 5.35%

ING direct is not a major. Good luck. — Garth

#49 Toronto C9 Renter on 12.17.09 at 9:02 am

Garth, can’t recall — when & where can I pick up your new book?

Chapters/Indigo after Feb 1. Or here, from Jan 15. — Garth

#50 Kash is King on 12.17.09 at 9:07 am

Ha. Some people are “on” today, Garth included.
Thanks for the chuckles.

#34 JoJo, not to worry. It’s oil/coal/nuke power that’s going bye-bye.
There have been many suppressed technologies that the “new PTB” wish to have dragged out into the light of day, and used for the benefit of all of mankind.
These have been suppressed by every means necessary by the oil/pharma/military corporations for over a hundred years. Started with Nikola Tesla.
Even when they were re-discovered, the scientists and inventors would wind up dead, if they didn’t shut-up after bribes/warnings.

Here’s some for example. Maybe research for Garth and his Xurbia shop?

“Welcome to Bedini Technology”

http://www.icehouse.net/john1/index11.html

“20 Bedini-Bearden Years, Free Energy Generation”

http://johnbedini.net/john34/bedinibearden.html

and another:

http://www.steorn.com/orbo/

#51 anyone on 12.17.09 at 9:33 am

#25
We already have that, it is called “HOUSE”.
When you can pay for your house and have extra to enjoy, to save, to invest, is good, other than that, is a trap or prison.
Too many people think that buying a House allow them to have a Home, far from reality. Happiness is not when you get something; it is when you fight for it. Live the life.

#52 TorontoBull on 12.17.09 at 9:48 am

@26
don’t forget that Garth used to be a politician, hence the double speak…
It was not so long ago that he talked about 100 oil, dollar on par. Eventually it may happen, just as house prices may fall at some point. But expect appreciation in the US dollar (even Goldman Sachs are long on the US dollar) in the next year or so. it has already started actually. If the US is up commodities,stock markets will be down. Remember there has been a 90% inverse correlation between Dow and the US dollar. The easiest way to short the stock market is to buy US dollars right now.
just my 2cents

And worth every penny. Oil will be far in excess of $100 a barrel, but when depends on the next Fed move. Nonetheless, it will happen in due course and energy remains a great place to put money. As for the dollar at par, duh, that effectively took place in recent weeks, and will again as the BoC moves. Finally, you might be worth listening to if you could make an argument without denigrating others. A lesson worth learning, boy. — Garth

#53 PeckedToDeathByDucks on 12.17.09 at 10:00 am

Bernanke’s mortgage refinanced a few months ago…
Thirty years fixed rate at a little over 5%.

He had a VRM. What does this tell you? — Garth

#54 ALBERTAGUY on 12.17.09 at 10:00 am

#49 Garth, can’t recall — when & where can I pick up your new book? Chapters/Indigo after Feb 1. Or here, from Jan 15. — Garth

Garth, so when does the book tour start and what date do you have for Calgary?

I’ll publish some dates shortly. — Garth

#55 Nostradamus jr. on 12.17.09 at 10:03 am

Hot of the Presses!

“””Foreigners buy Canadian in October

Thursday, December 17, 2009

Ottawa — Canadian securities continued to draw significant foreign investment in October as non-residents acquired $5.8-billion worth, mainly in federal government bonds.

Statistics Canada reports non-residents have added $86.4-billion of Canadian securities to their portfolios so far this year, already exceeding any previous annual foreign investment.

The agency says Canadians removed $4.2-billion from their holdings of foreign securities in October, divesting both debt and equity instruments.

This comes after a $4.7-billion divestment in September.

Foreign investors continued to adjust their holdings of Canadian debt securities to longer-term instruments in October.

They added $6-billion of Canadian bonds to their portfolios, the largest inflow since May, 2009, and disposed of $1.6-billion of Canadian money market instruments.

© Copyright The Globe and Mail””

…So Foreigners are buying Canadian Bonds?

…and the Bonds back Canadian Residential Real Estate?

How can that be?

Nostradamus jr.

There are no real estate assets backed by those bonds. — Garth

#56 Mr. D - Ottawa on 12.17.09 at 10:05 am

Reply to #16 T.O. Bubble Boy

“To anyone who doubts that the banks will get rid of their discounts on Variable and Fixed Rate mortgages, check out what happened with people’s LOC this year. Every major bank raised the LOC rate to Bank Prime + 1% (from Bank Prime).”

That happened to me a few years ago with an unsecured line of credit. Before the rate increase could take effect, I closed the LOC account, closed my savings account and canceled my Visa card with the bank. TD bank probably wished they left the rate alone. I did not give them the opportunity to change their mind (did not want to). I had been with the bank over 15 years and was never late with a payment ever.

Now with a secured line (different bank), I have never had a problem. My rate is still 2.25% for the LOC. My mortgage is NOT insured with CMHC either. I figure that by buying the house with a 50% down payment about 3 years ago there is very little risk for the bank and no need to raise my rate. If they did, they would hear from me and would risk losing all of my business at renewal time. I find it helps to keep some kind of relationship with more than one major bank. If one bank screws up really badly it makes it a lot easier to switch because they already ‘know you’ as a client.

#57 Weston on 12.17.09 at 10:21 am

HA!
LOL!
HAHAHAHA!

Garth is already preparing the greater fools to buy 2 more of his books.

“This is exactly why a thesis of my new book is that we are in but Act One.

There are two more to come”.

Actually all the scenarios until 2015 are in the new book, plus the tools and strategies for dealing with them. Now try to be civil. — Garth

#58 Michael on 12.17.09 at 10:22 am

Act 1: Sovereign debt (UK, USA, Spain, Greece) crisis.

Act 2: Currency crisis

Act 3: Inflation – end of story.

There will be no currency crisis, nor hyper-inflation, at least not in the next five years. — Garth

#59 Sluggo on 12.17.09 at 10:27 am

Jim Rogers likes the barbarous relic, for good reason.

http://www.youtube.com/watch?v=4HkbS4aDCU0

#60 Calgary_Rip_Off on 12.17.09 at 10:28 am

http://www.cbc.ca/canada/calgary/story/2009/12/16/calgary-rent-average-housing-cmhc.html

Garth idiots continue to believe that housing is UNDERVALUED in Calgary. What a bunch of complete morons.

Carney has said stay tuned for jacked interest rates. Im hoping 20%. At least. If that happens Calgary will implode.

Ah, the ignorance in Calgary.

#61 Bill on 12.17.09 at 10:30 am

Peter Schiff = gold will go up

Turner = gold will go down

Bill = confused. — Garth

#62 Oakville Owner on 12.17.09 at 10:31 am

And just imagine, as I said last week, if the real estate market in Toronto or Vancouver declined by the amount Rosey has identified. That would take average home prices down by $68,000 to $158,000 in Toronto,

Garth- The average home price in T.O. is well above $320 000, is it not? The #’s above only add up to $226 000. Did these #’s come from 2001?? Also

5 Year Variable 2.15%
1 Year Fixed 2.65%
2 Year Fixed 3.15%
3 Year Fixed 3.49%
4 Year Fixed 3.99%
5 Year Fixed 3.99%
7 Year Fixed 5.25%
10 Year Fixed 5.35%

ING direct is not a major. Good luck. — Garth

Anyone not looking at the posted rates of a ” non major bank” ( ING or PC ) is a GREATER FOOL them self. I used PC Financial rates to negotiate with RBC and managed to get prime -0.50%, fully open about a year ago (currently 1.75%). I could have got prime -1% on a closed but decided to go with the open in case we wanted to lock in or sell etc. I hope you added this method in your new book to educate your readers.

#63 Oakville Owner on 12.17.09 at 10:40 am

#53- Pecked to death.

Bernanke’s mortgage refinanced a few months ago…
Thirty years fixed rate at a little over 5%.

He had a VRM. What does this tell you? — Garth

Where did you obtain this info on Bernanke? Link please, if it is from a good sourse.

Time magazine. Here. — Garth

#64 truthseeker on 12.17.09 at 10:42 am

Garth,

You are becoming flippant. You’re like a drooling mutt salivating at

DELETED

Notice to gold adherents: If you have cogent arguments why precious metals will rise endlessly, then make them and support them with fact. Simply attacking others underscores the paucity and weakness of your position. This benefit of this blog to everyone will be commensurate with the quality and thoughtfulness of the posts we all make. As a group, those who come here to denigrate others for not sharing their views on metals simply reinforce a widely-held view that you are driven by the kind of emotion that almost always precedes an asset collapse. Convince us otherwise, or buzz off. — Garth

#65 BDG YYC - Darwin Award Nominations Suspended on 12.17.09 at 10:50 am

Hey Josh … sorry but you were only Darwin Award King for one piddly day. And I thought for sure you’d not be outdone … no way. But then …. who should show up but good ol’ Dan … with well … an amazing flush of consceousness …

#26 Dan … You not only get a Darwin Award Nomination … you get Nomination of the YEAR.
Congratulations you actually filled the bowl with this one – so I have no choice but to put the “Out of Order” sign on the door and call a plumber.

And the winner … Dan #26 for “Debtors Prison” !!!

:-(

#66 Ian on 12.17.09 at 10:56 am

Bravo #9 Nestor and #35 Jojo !

#67 Larry on 12.17.09 at 11:02 am

Garth most people i talk with say so what if interest rates rise, everyone is buying a house anyway and it will be a RE frenzy next year before the big rate increase. When the VMR goes up they will just lock in to the 5 yr fixed rate. Carney is screwed anyway as he knows damn well that if rates go up to much the economy will suffer. If anyone had any balls in govt they should not allow CMHC to insure 5/35 mortages and the banks should be accountable for their toxic loans. I know lot’s of people in Calgary who have lost, are about too or are seeing their hours being reduced. The end is nigh but Carney’s comments are a classic bolting the stable door after the horse has gone.
Thanks for the blog Garth even if do i find you a real whacko sometimes.

#68 worst to come on 12.17.09 at 11:02 am

“F” word should go to the realtor, CHMC and CREA..the ones who blow the optimism and keep pushing new home buyer to take action while they have little knowledge about RE. Thay make this country in big trouble

#69 My_View on 12.17.09 at 11:14 am

Believe half your predictions, so it will be half as bad. Plus how about the Canuck buck? The major and minor lending institutions have been lowing the rates these last couple of weeks. Nevertheless this whole rate argument is weak at best. What were the rates in 2005-2007? How was R/E doing back then? Come-on already!

#70 Eduardo on 12.17.09 at 11:16 am

Just dropped by to say that my call of NG at 6 by year end has come true much to the despair of the “Gas-is-going-to-1” callers from the summer.

Thank you.

#71 PeckedToDeathByDucks on 12.17.09 at 11:27 am

Jingle Mail on a massive scale – mailing in the keys when your mortgage is under water

Morgan Stanley Gives Back 5 San Francisco Towers to Lenders

#72 Jim on 12.17.09 at 11:34 am

Vancouver house prices have more than doubled in 7 years. A correction of even 20 percent would not make the market affordable and would probably only push out the dipsticks that bought in the last few years. If a house was $400,000 seven years ago and it went to $800,000, then with a 20% correction it would still be $640,000, still way out of the range of people who make an honest living.

#73 miketheengineer on 12.17.09 at 11:34 am

Garth et al:

All the “crap” that I have read on the internet, indicates that the US is going for hard times soon. (Worse than current conditions) This may start directly after xmas. I truly hope that I am wrong. I have tons of friends and relatives there, and I pray for their safety daily.

The rapid increase in rates, may happen sooner, than June. All depends on what happens to our good buddies south of the border. Sorry Garth no references or data to support my point, but Nostra the mad guy, has posted lots of stuff to support this (ie negative stuff in the US)

After reading this, the decline in our RE, will definitely drop, across the board, starting in June/July. But if may start even earlier, depending on how events unfold in the US. You may even see a sudden fall off the cliff for RE as the “speculators” see what is happening, and choose to bail quickly, while taking looses, at a minimum.

Just my opinion. I hope I am wrong.

#74 Tony on 12.17.09 at 11:42 am

Garth,

Maybe you can give a sneak preview of your book by dropping a few good spots to sit our money for these next five years. Any advice is welcome! Thanks a lot for writing this blog…you don’t have to.

#75 Mike (Authentic) on 12.17.09 at 11:58 am

#61 Oakville Owner “Anyone not looking at the posted rates of a ” non major bank” ( ING or PC ) is a GREATER FOOL them self.”

Well well. Don’t forget that those “non major banks” carry a risk on their own vs the majors. If one of those non-major’s go belly up or get bought you, your mortgage goes to X bank, where X bank will galdly either:

A. Recall your mortgage immediately to be repaid.
B. Increase your rates immediately.

The non-bank owns your home till you pay it off, your a renter to the bank who cares little for your life.

Mike

#76 Mike (Authentic) on 12.17.09 at 12:00 pm

#60 Bill “Peter Schiff = gold will go up, Turner = gold will go down Bill = confused”

I think gold will go down, it’s just above $1100 now, fell almost $200 an once in 2 weeks, that is enough risk for me to say… no way hozay to get into that roller coaster.

I heard on CNBC, if you bought above the current value your an “investor” if you bought below the current value you a “speculator”.

Mike

#77 Dave on 12.17.09 at 12:09 pm

Peter Schiff = gold will go up

Turner = gold will go down

Bill = confused. — Garth
———————————————-

Garth = hilarious

#78 MC on 12.17.09 at 12:14 pm

WIth a few posts about the ‘simple’ solution of inflating their way out of debt.

I’d say take a look here. The only thing I can see happening if they ‘print print print’ money in the states is making more and more assets cheaper for those with a nice pocket of reserves. This decade is a lot different then the 70’s globally.

http://en.wikipedia.org/wiki/List_of_countries_by_foreign_exchange_reserves

#79 Reasonfirst on 12.17.09 at 12:45 pm

Is it possible that, as borrowers start to fear rising VRM rates and move towards fixed mortgages, the increase in demand for fixed mortgages will push rates higher regardless of what the bond market does?

#80 mattvic on 12.17.09 at 12:54 pm

#61 Oakville Owner:
I think Garth meant prices could drop by as much as $158,000 in TO. i.e. a 35% ($158,000) drop from $451,429 to $293,429…..MATT

#81 tony w. on 12.17.09 at 12:55 pm

your average prices for To and Van after “Rosenberg’s decline” need to be revised.
where do those average numbers come from? – too low.

TREB and GVREB. — Garth

#82 jess on 12.17.09 at 12:58 pm

canadian /ontario assets to be sold …wouldn’t Mr. Carney keep rates low to finance the carrots?

#83 jess on 12.17.09 at 1:02 pm

In Canada Garth how does this differ?
U.S. forfeiting billions in future taxes to let Citi repay TARP?

#84 Tim TodlleHeimer on 12.17.09 at 1:02 pm

Unemployment to drop to 7.2 by next year?

http://ca.news.finance.yahoo.com/s/17122009/2/biz-finance-economy-ready-start-creating-jobs-td-bank-says.html

#85 Emma on 12.17.09 at 1:19 pm

#61 Oakville Owner

$68K represents 15% of Toronto’s (City, not GTA)average price and $158K represents 35% of the average.

That’s the range of the drop, not the price!

Here’s a link…TREB’s Mid Decembers numbers are out and are even a bit higher than the number Garth used (almost $461K for the City).
http://tinyurl.com/yfxjnny

And I should hope that parasitic (sorry, ‘virtual’) banks like ING would be able to provide lower rates since they don’t need to actually run brick and mortar institutions or support the economy through job creation – I am sure plenty of Dutch people are happy to profit from it, though!

#86 Emma on 12.17.09 at 1:29 pm

We have discussed some recession proof businesses on this blog a few times…

Liquor and lotteries being two of the best ones, what the hell is wrong with Ontario???

The LCBO with an income of $1B was estimated to be up for sale for $10B …I’m new to the P/E ratio concept but that seems like a steal, no?

Why oh why would we burn the furniture?

#87 Kash is King on 12.17.09 at 1:33 pm

Since folks are talking about gold… here’s something really significant.

Effective Jan 01 2010, The State of Georgia USA, is enacting House Bill 430 , the “Constitutional Tender Act”.

Looks like gold and silver are officially “money” again, at least in GA.

Link:

http://www.legis.state.ga.us/legis/2009_10/versions/hb430_LC_21_0297_a_2.htm

#88 Dima on 12.17.09 at 1:45 pm

Hi all,

anyone has any suggestions when it is a good idea to start doing **long** term investments ?

Currently I’m sitting out all cash in my RRSP / TFSA. However, it is kind of silly.

Some have suggested to park in some sort of fixed income – i.e. GIC’s/Bonds for short term (for less then a year) and then, after the market correctes, go into equities.

Anyone ?

#89 N on 12.17.09 at 1:45 pm

#77 MC on 12.17.09 at 12:14 pm

The only thing I can see happening if they ‘print print print’ money in the states is making more and more assets cheaper for those with a nice pocket of reserves.
_________________________________________

MC… what do you call this?? if it’s not print print print??

http://research.stlouisfed.org/fred2/series/BASE?cid=124

the Fed over the last year bought $2 Trillion worth of mortgages and government debt.. this money was “printed” out of thin air..

#90 robert on 12.17.09 at 1:46 pm

Garth,

Somewhat OT from today’s offering but would you care to comment on the Ontario Government retaining Goldman Sachs as consultant (along with CIBC World Markets) regarding the possible sale of Crown assets? Now Mr. McGuinty claims this is all in the interest of the people of Ontario getting the best deal however from what I have read about GS, altruism is not a quality they are in the least bit acquainted with. I refer you to the following as Exhibit A:

http://www.bloomberg.com/apps/news?pid=20601109&sid=aWuY7slLZtoI&pos=10

Mike Shedlock, Reggie Middleton and Matt Taibbi have taken care of a few other “letters” from this particular exhibit “alphabet.” Also the Teamsters Union appears to be none to happy with the vampire squid of late.

#91 when is it finally going to happen? on 12.17.09 at 1:48 pm

TREB mid December numbers are in; price not down but is up!!

#92 Jojo on 12.17.09 at 2:13 pm

For the Gold Bugs, I think that gold price can go down to $1050 and worst scenario down to $980 to Jan/4th/2010.

#93 Dan in Victoria on 12.17.09 at 2:24 pm

Sorry to be a little off topic Garth. Just drove down to the local food bank, was pulling into the parking lot and parking, when I noticed a familar car pulling in behind me. Yep, one of my neighbours from a block over. I decided to wait till they had gone in and got their hamper and left. No use making anyone feel awkward.
For the half hour I sat there it was amazing, Well dressed people in newer cars, people that had obviously walked aways to get there, taxi’s, bikes etc.
So at last I went in, stood in the line got to the desk, the lady asked can I help you ? (i’m pretty scruffy with my work clothes on) no, I said maybe I can help you. She kinda looked at me ……………..
I went back out to my truck and spent another 15 minutes watching. There is some real need.
I challange all you people who have been bragging on here for the past 20 months about how much you made and are worth, to go help out. Put your money where your mouth is.

#94 kc on 12.17.09 at 2:30 pm

64 BDG YYC – Darwin Award Nominations Suspended

And the winner … Dan #26 for “Debtors Prison” !!!

Either someone read this (from earlier post) or someone is dreaming in Dubai colour. Don’t kid yourself about debtors prison… Dubai has it, and even with it thousands of people on the short end “didn’t read the fine print”, Did this stop them from taking HUGE risks? Nope…. Just park the BMW at the airport and have a good flight… PS don’t think about coming back…

“Only savings can allow for sustainable economic growth.”
“When someone borrows and doesn’t fulfill his commitment in his own country, he might get into trouble. However, in Dubai, expatriates can just leave and never repay their debt: banks in the UAE have very few ways of attempting to recover such bad loans. The abandoned cars in Dubai’s airport illustrate this point. In fact, local laws end up encouraging flight from the country since one faces incarceration if one fails to honor issued checks on debt.”

http://www.marketoracle.co.uk/Article15851.html

#95 PeckedToDeathByDucks on 12.17.09 at 2:37 pm

U.S. forfeiting billions in future taxes to let Citi repay TARP….despite all the fine talk, all the feigned outrage, the “having learned from our mistakes”….it just goes on and on doesn’t it?

#96 Davinci on 12.17.09 at 2:40 pm

Nov/2008 when you predicted gold price $ 500.

All of 2008 I purchased gold at an average CANADIAN price of $900 Today it’s down and 3.3% and the CANADIAN dollar price is $1178.29.

I will be back only when gold makes a new low to see how badly I am doing. :)

Or when it collapses from a new all time high….

“I think gold will go down, it’s just above $1100 now, fell almost $200 an once in 2 weeks, that is enough risk for me to say… no way hozay to get into that roller coaster.” – Mike

Hey mike I’m a tight dude and I like Kraft dinner, 10 years ago it was average price of $.25 to $.50 today at Price Chopper it’s at $1.42 and it may go on sale for $1.10.

Remind me where gold was in 1999? Good luck with your account entries on a computer somewhere. :)

http://www.youtube.com/user/davincij15

#97 $fromA$ia ( o Y o ) on 12.17.09 at 2:42 pm

There will be no currency crisis, nor hyper-inflation, at least not in the next five years. — Garth
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Why Garth, why wont there be a currency crisis or hyper inflation?

Explain why your so sure, damn it.

I think the Fed, Geithner, Bernanke and Obama are smarter than you (or me). This will not happen. — Garth

#98 Toronto C9 Renter on 12.17.09 at 2:58 pm

#88 Dima on 12.17.09 at 1:45 pm, said…

“anyone has any suggestions when it is a good idea to start doing **long** term investments ? ”

Dima, one long term strategy is to start (immediately) dollar cost averaging into defensive stocks with solid yields, plus some energy. For example:

Defensives / Utilities like BCE, T.A, RCI.B, EMA, CPX, TRP, ENB. These companies will be here in the future, and offer solid yields TODAY. They will drop in a correction (hence the dollar cost averaging), but not as much as typical growth stocks

One solid energy plays is CPG. Bloggers may have other names to suggest

#99 Robert1 on 12.17.09 at 3:00 pm

Dan In Victoria:

” I went back out to my truck and spent another 15 minutes watching. There is some real need.
I challange all you people who have been bragging on here for the past 20 months about how much you made and are worth, to go help out. Put your money where your mouth is.”

*************************************

You are two days later than me my friend. I went down and made my contribution to the local Christmas Cheer Fund on Tuesday evening. The nice old gal said that she really liked ” the brown ones” ……and I told her if she needed anymore just ask, as I had a printing machine as good as Harper and Flahertys, but had a much better idea of where the economic stimulus was really required, than those two buffoons.

I now second Dan in Victorias challenge … please get out there and help those less fortunate.

#100 O'Really on 12.17.09 at 3:07 pm

How long will this go on?? I just got off the phone with the secretary from the company I work for in Victoria. She’s shifting jobs to N.Van to be closer to home and so is putting her 2 bdrm 1930’s box cottage (modest is understating things) sitting on a corner lot bordering 2 busy streets on the market for a cool .5 Mil$$. She earns maybe 2 K$$ a month tops and the local credit union has gifted her a locked-in 3.5% 5 year mortgage (5/35) for almost .45M$$$. She’s absolutely thrilled, I’m appalled because I/we know that we’ll (CMHC) be covering the loss in 5 years when interest rates jack and she can’t make the 7%. It’s just too easy for all these under-financed players to gamble with other people’s money in this “house”. I just want to take my cash off the table until this whole fool’s game comes to an end…

#101 goldenfox on 12.17.09 at 3:10 pm

When is Canada going to get its own governor of the Bank of Canada. Carney comes from Goldman Sacks, as does Paulson, Summers and other bigwigs in the US and British government. And you wonder why Goldman Sucks made huge profits, while everybody else was losing thier shirts in 2008. When oil was $147, Goldman called for oil to go to $200, and then when it collapsed to $35, guess who was short. Just recently, when gold hit $1200, Goldman called for $2000 gold. When the suckers rushed in, guess who was short. Wash, rinse, and repeat. Nobody else would get away with this conflict of interest. Who do you think Carney is looking out for, the taxpayers or the banks?

#102 soju on 12.17.09 at 3:16 pm

Skip… Skip… Skip. If you took on a variable rate 2% and didn’t have the smarts to save money while enjoying economical payments then you’re the fool. If you could only qualify on that variable rate than you’re an even bigger fool. I laugh at you…

#103 wondering on 12.17.09 at 3:41 pm

Thank you #65. That “debtor’s prison” comment had me fuming. Thanks for bringing my blood pressure back down.

#104 wondering on 12.17.09 at 3:56 pm

Dan in Victoria – This time of year, a lot of the people you’re seeing at the Mustard Seed are dropping off donations.

I was one of them. Recently finished raising $14,000 and 500 lbs of food for the MS at my workplace as part of the VIATeC food drive. Pretty good for a 70 person office.

If you run a drive or choose to donate, I recommend monetary donations rather than non-perishable food or goods. A few years back we didn’t accept money for our drive and suggested canned food. Problem is that they don’t have the space to store 8 tons of stuff – especially since at this time of year everyone is running little canned food drives. They had to rent a warehouse to store it all, which means they had to spend money to accept our donations.

By giving money you help to support them over the entire year. They buy goods from the Thrifty’s warehouse and Island Farms at cost, so they can make their dollar go further than yours.

Also, you can donate by credit card right on their web site: Victoria Mustard Seed Food Bank (click the “Donate Now” button).

Elsewhere in Canada, you can donate to your local food bank through the CanadaHelps website.

#105 Oakville Owner on 12.17.09 at 4:06 pm

#75-Mike

Well well. Don’t forget that those “non major banks” carry a risk on their own vs the majors. If one of those non-major’s go belly up or get bought you, your mortgage goes to X bank, where X bank will galdly either:

A. Recall your mortgage immediately to be repaid.
B. Increase your rates immediately.

The non-bank owns your home till you pay it off, your a renter to the bank who cares little for your life.

Mike

Well, well……well. Mike this could happen at any bank, regardless if its a major or not. My point was to search out the best rate and use it as leverage when you negotiate with your “bank of choice” I ended up going with RBC and still got a better deal then what the “non major” bank was posting.

P.S If anyone wants some good insider tips on where rates are going in the future, attend a major sporting event where there are alot of “Fat Cat” bankers and listen to what they have to say to each other while they are enjoying a few “pops”. Listening in on the RBC brass at the Canadian Open in 2008 has saved my family $1000’s over the last year. The truth does come out at these events.

#106 Rural Rick on 12.17.09 at 4:07 pm

Right on! Dan in Victoria
If any these so called investors knew what they were doing they would invest in people not things. That is the road to true wealth and happiness. What most are doing is just speculation (gambling) in real estate. Fools. Gambling with IOU’s. We know how this turns out. First you start getting visits from the “arm and leg men”, then they find you floating around the marina.
Oh well, those who don’t know their history are going to have to repeat it.

#107 Oakville Owner on 12.17.09 at 4:14 pm

#85 Emma

Thanks for the info on TREB.

#108 kitchener 1 on 12.17.09 at 4:20 pm

All this talk about Bernake being a smart guy etc… I don;t doubt it for a minute BUT, what you have to keep in mind is who/what the FED, Bernake etc.. are protecting: Its not the general public as should a currency crisis happen, the loss that the average public person would take is miniscule to what corporations like Goldmans/Wall Street would take.

In some cases, for those who are in way over their head in debt, it might be a good thing.

#109 jr on 12.17.09 at 4:24 pm

Why Garth, why wont there be a currency crisis or hyper inflation?

Explain why your so sure, damn it.

I think the Fed, Geithner, Bernanke and Obama are smarter than you (or me). This will not happen. — Garth

There has to be something–a peg–to hyper-inflate against–
Currency’s float and compete–
Devaluation is the name of this game–
The race to the bottom–
Bugger thy neighbor–

#110 Solitario on 12.17.09 at 4:26 pm

By that time, the US economy will be running red-hot. Canada’ economy will follow. Unemployment will be much lower. Trillions of dollars currently held in cash, gold and short term bonds will find their way into real estate and stocks. Mark my words…
BTW, oil will not go higher than $90/bbl next year.

#111 kitchener 1 on 12.17.09 at 4:39 pm

Looks like everyone is betting that the RE market will turn south in the next 6 months. That is the consensus on this blog from many well educated/connected posters.

I happen to agree with it, I called the top in Toronto RE last month when I started seeing holdback on offers in Malvern/Scarborough/ Rexdale etc… funny thing is that many of those are still on the market at reduced prices and still no offers.

From what I have seen the last 2 weeks, its already started, at a very, very marginal level, just the tip of what is too come, same as it started last year around this time.
Watch banks POS are doing price reducations in 2 weeks time and many still sit there. I am seeing some competive priced properties sit for 3-4 weeks without offers at all. Where in Aug/Sept they would have been sold in 3 days at 10% over list.

I am starting to see people that priced their homes low for bidding wars raise their price to their original asking price in a week, drop them again and still no offers. Thats greed for you, the rule is that for every dollar a home is overpriced at listing, it will sell for that much less eventually. not always true but always in that ballpark.

Look at the gold market, 2 weeks ago that bad boy was going to the moon, now its run out of steam, it will break new highs within the next 6 months but all that is happening is the seperation of $ from the weak to the strong.

Garth, how is the line up for gold now???

The moral is market sentiment, its turning against gold and it happened fast. RE is all about emotion and market sentiment, when people fear prices will drop, they wait. So much future demand has been brought forward in 09 that with all things staying equal, it would have been a stagnant market in 2010 anyway. Now with the HST/interest rate hikes etc.. its a guarantee that prices will correct to some degree.

Remember that article a few days ago about subprime lenders calling in their mortgages, well, hope that nobody here lives around to many of those in the same neighbourhood or kiss your property value goodbye.

Carney is really out there telegraphing and jawboning the RE market, can;t remeber when was the last time we had a public figure jawbone the same topic so much in such a short period of time. He is a political appointee, trying to shift blame when the next rate hike is going to be 75-100 basis points to protect his job.

15% is where I predict the correction to be by the time 2010 is over, RE always corrects the most in the first 1-2 year of a decline, after that it just goes sideways.

Forgot market dynamics, all of those kids buying with 5/35 year mortgages in 09 who overbid by 15% are going to be sorry very soon. How many 450Kish houses sold for 500K or 510K etc…? a lot, thats 10% over price right there just because of an emotional attachment, without low interest rates and demand(as it has been brought forward) that 450K house will sell for 430K in Sept of 2010, 70K haircut in 10 months, NICE

2010, the year of the VULTURE. LOL

#112 kc on 12.17.09 at 4:45 pm

As much as I dislike Harper’s political stance on Canada’s internal wranglings, I have to say that he is scoring a point with me on the Copenhagen BS.

Follow along here for a minute… We in this country have GUTTED our manufacturing work force and shipped every good job overseas. The world leaders are in these talks about how “we” are going to “save” the planet from this “global warming” myth, and how are we going to “save” ourselves from total obliteration; simple… GIVE our tax dollars to these other countries for there usage to “STOP” global warming. This BS is the biggest FARCE …

We give away our workforce in the face of corporate greed, tax the maxed out consumers, then give the monies to the same countries who have our old jobs…

Stand TALL Harper and tell the others that Canada has had enough of the “MYTHS”… My tax dollars are Canadian, and should stay here in Canada.

#113 ManfredSteyn on 12.17.09 at 4:54 pm

Re: #52 TorontoBull on 12.17.09 at 9:48 am

I’d be very interested in hearing more about shorting the stock market by buying USD. If anyone could share insight on this, much appreciated.

There are far less risky ways of doing so. — Garth

#114 nonplused on 12.17.09 at 4:55 pm

#26 Dan

A debtor’s prison? How about a bankster’s prison. I think that’s more like it. If the bankers want to lend money to people who can’t afford to pay it back, then I think those people are doing “God’s work” when they don’t pay it back, to quote a famous bankster.

#33 Why its different here

As goes manufacturing, so goes service. Who do you think all these service sector employees are busy servicing? Each other? Oh great, I do your laundry, you clean my toilet, and we’ll call that economic productivity?

And as goes manufacturing, followed by service, so goes government eventually, as there are less taxes with which to pay the government employees.

93 Dan in Victoria

A good thing for those who stockpile food for emergencies is to rotate that stock once a year and give what they can’t use to the food bank. Or to their elderly parents living on social security. They always appreciate it too.

Garth on 97 said “I think the Fed, Geithner, Bernanke and Obama are smarter than you (or me). This will not happen.”
Have you heard them testify before congress? They are either blathering idiots or they are scared $hitless about something and trying to hide it.

#115 Habs 76-79 on 12.17.09 at 5:09 pm

Bernanke being smart tells not all.

Men and women that many others may consider as smart often make grievous decisions, poor choices so to speak and often based on flawed or myopic logic. Add in a good dose of GREED and POWER LUST, well many times in history has a smart guy come off as completely fouling up in things that they try to do.

Being smart does not automatically preclude one from acting stupid.

#116 Rob in busted bubbleland on 12.17.09 at 5:12 pm

OMG Never missed a mortgage payment and still facing foreclosure

seems that us Canadians are out Americianing the Americans

https://secure.globeadvisor.com/servlet/ArticleNews/story/gam/20091207/RMORTGAGE07ART1940

#117 jr on 12.17.09 at 5:13 pm

Look at the gold market, 2 weeks ago that bad boy was going to the moon, now its run out of steam, it will break new highs within the next 6 months but all that is happening is the seperation of $ from the weak to the strong.

I agree–gold is overbought–it will correct lower–
Possibly go back to 900 or so–
That seems to be where all the wrong sided hyper-inflationists and death of the USD thinkers,started jumping on the band wagon–
Once they’re flushed,gold will continue its bull-market trend higher–
Eventually–1/4 oz will buy the DOW at 1000
Gold does best in deflation–not Inflation–
Hyper-Inflation is mad-max stuff–

#118 Jeff Smith on 12.17.09 at 5:55 pm

>#2 davers on 12.16.09 at 9:26 pm
>It almost looks as if our RE market is going to tank
>worse than the US. Our homes are more expensive
>(relative to incomes), income to debt ratios are
>higher here and the interest rates are lower now than
>at the US peak.
>Then again we have other factors like recourse loans,
>the CMHC is gov backed, and, of course “it’s different
>here”. So who knows what will happen.

I agree, we really don’t know for sure the outcome. These people who are taking advantage of the low interest rates might end being the winner for all we know. Maybe low interest rates will stay low forever (ala Japanese style). I mean we could be here on this blog in 2020 complaining how come interest rates are so low. Why is everyone buying $600000 dollar houses, oh wait, it might be $1600000 (average price) house by that time.

#119 $fromA$ia ( o Y o ) on 12.17.09 at 5:55 pm

Hyper-Inflation is mad-max stuff–JR.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Shot gun shells, steel boomerangs, gas, water, motorbikes, manwhores and toilet paper. Oh and I almost forgot vaseline.

Silly Jr. :p

#120 C on 12.17.09 at 5:59 pm

Hi Garth,

As a regular supporter of yours, I wanted to share a quick story for the positive.

Things did not turn out at my previous employer and after 10 years was bought out.

On my kids, I had 4 offers for a new job in less than 24 hours. All of which was for MORE money and more opportunity. (final package just under 200K)

Not one of these employers were looking for a person or advertising as they simply gave up trying. While this is a more specialized field, many companies are not publicaly reporting there hiring intentions.

At the end of the day, if you are aggressive and want something, you will get it. In addition, if the right person walks in the door of a company, there are many companies who will step up regardless.

On to the next topic. For many years, there has been forecast after forecast for rates to rise. I have pesronally heard this since 2001. Everytime this happened, 6 months later the opposite occured.

In fact, if you recall, Dodge jacked up the rates in 2004 by 0.75% I believe, then quickly reversed course a few months later in desperation.

The point I am trying to make here is the accuracy of the forecasts going back to 2001 have been pathetic.

The bottom line is the economy is on the mend, companies are starting to hire again, and there is not a huge surpluss of homes on the market.

The last time I checked the Bank of Canadas job is to control inflation with interest rate policy. PERIOD.

With little to no sign of inflation rising substantially I really think this topic is simply an endless “next week” prediction that could go on a decade.

Just my 2 sense, but there simply is not any concrete evidence of increasing rates besides banter.

and to the person who mentioned the credit lines increasing-check your fact. That is for UNSECURED credit lines. Not secured.

#121 soju on 12.17.09 at 6:03 pm

Even with the “Majors” you can still get 5 year mortgages between 3.95 and 4.5 percent at this moment. It’s just a matter of who you speak to. Never approach a bank directly, let a broker do it for you. discounts can go as deep as 1.75% no matter what the market is like. Mentioning posted rates is like calling yourself an amature.

Yes, true professionals borrow at the grocery store. — Garth

#122 Dan on 12.17.09 at 6:05 pm

KC “Either someone read this (from earlier post) or someone is dreaming in Dubai colour. Don’t kid yourself about debtors prison… Dubai has it, and even with it thousands of people on the short end “didn’t read the fine print”, Did this stop them from taking HUGE risks? Nope…. Just park the BMW at the airport and have a good flight… PS don’t think about coming back…”

Yes I know about Dubai and the WHOLE WORLD should follow their lead. Debtors who borrow and do not pay back are nothing more hten financial terrorist and when you add them all up you have the situation where we are today where the financial system is about to be put down by the debtor financial terrorists. I do not support terror which is why I am in favour of debtors prison. Are you a financial terrorist?

#123 TheBigLebowsky on 12.17.09 at 6:06 pm

#9 Nestor YOU ARE 100% correct. This is an “engineerd” devaluation in the USD to implement a new world reserve currency that the U.N will issue and control, hence ushering in the U.N as the new world Government. You can’t make an accurate call on economics unless you can see, and accept the full picture.What do you think the carbon tax is? Its a world tax paid directly to the U.N.
A 1% rise in rates would add 200 billion to the interest payments on the U.S national debt. As it is ,the Fed is printing money out of thin air and going into the short and mid term bond auctions and buying over half because nobody else want them. This is extreamly inflationary.

#124 Dan on 12.17.09 at 6:09 pm

nonplused
“A debtor’s prison? How about a bankster’s prison. I think that’s more like it. If the bankers want to lend money to people who can’t afford to pay it back, then I think those people are doing “God’s work” when they don’t pay it back, to quote a famous bankster.”

Yes there should be both. The bankers should be charged with financial crimes against humanity. The finacial terrorists / debtor who wishes to go bankrupt needs to suffer as well. We would NEVER have another bubble.

#125 TheBigLebowsky on 12.17.09 at 6:12 pm

The U.S will experience 14% inflation next year and China will have 25% inflation since their dollar peg garentees that. Why is the Chinese government encouraging its citezens to buy gold ? Put the pieces together and you will see what is coming.

Can I help you find you meds? — Garth

#126 jr on 12.17.09 at 6:35 pm

Hyper-Inflation is mad-max stuff–JR.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Shot gun shells, steel boomerangs, gas, water, motorbikes, manwhores and toilet paper. Oh and I almost forgot vaseline.

Silly Jr. :p

Unmmm–care to have a debate about the likelihood of hyper-inflation??

#127 john m on 12.17.09 at 6:49 pm

2009 an interesting year! Well Garth if anyone could say”i told you so” you have been bang-on right! The repercussions have yet to follow.Probably the most accurate statement ever made by our prime minister “Harper” was in the context that we won’t recognize Canada when he is done–curiously he was right also…..we are following every mistake made by the US before their real estate crash,we truly have become a country with a vote buying Government,watchdog positions are being eliminated at an alarming scale to allow the Government a free rein on our futures,freedom of information has practically become non-existant,taxpayer owned assets are being sold sometimes for pennies on the dollar,propaganda funded by our tax dollars constantly is telling us what a good job they are doing,blue chip investments (owned by the taxpayers)have been traded for high risk mortgages and mortgage guarantees to create a no-lose scenario for the banking industry–who have rewarded themselves with 8 billion in bonuses.Hmmmmmmmmm ……….welcome to the future……….things sure are going to be different…IMO

#128 john m on 12.17.09 at 7:00 pm

By Talbot Boggs, cp.org, Updated: December 15, 2009
Canadians living on a financial precipice

(Special) – Most Canadians live on a financial precipice, going from paycheque to paycheque.

That’s the scary news from a recent poll by the Canadian Payroll Association (CPA), which found that nearly 60 per cent of Canadians would have trouble paying the bills if their paycheque was delayed by only one week.

Of those surveyed, the younger workforce felt the greatest pinch. The survey found that 45 per cent of people aged 18-to-34 would find it difficult or very difficult to make ends meet if a paycheque were delayed. Another 21 per cent in that age group said it would be somewhat difficult.

Not surprisingly, 72 per cent of single parents said missing a paycheque would cause a problem for meeting financial obligations.

“We were surprised that people were that close to the line,” said Patrick Culhane, President and CEO of the not-for-profit association, which has more than 14,000 member and 1.5 million professionals in organizations across Canada.

Culhane said Canadians are living close to the line despite the common advice from financial planners that they should set aside three months of expenses for such items as rent, groceries and monthly bills in case of an emergency.

Not only are the majority of Canadians living paycheque-to-paycheque, they’re having trouble putting away money for their retirement.<<<<<<<<<< wonder what percentage of this populace are holding mortgages guaranteed by our tax dollars………hmmmmm……shocking i'd bet!

#129 goldilocks economy on 12.17.09 at 7:03 pm

What a riot!!!

The interesting thing was that even though he hadn’t paid any credit cards in 60-90 days they are all reporting “as agreed” They have cut the lines to the outstanding balance but will not report a 30 day late. I can only assume that the banks C,BAC,Cap1,Wach) are doing this in the hope that a different bag holder will bail them out with either a balance transfer or a cashout refi. I suppose if I was the lender I would do the same thing and hope that a greater fool than I existed.

Now this is a new one…. but it wouldn’t surprise me!

What, honor among thieves? Naw, who’d be honorable in this circumstance?

If you report it as late nobody will take him on a balance transfer. But if you don’t, perhaps someone will and they are the bagholder!

What a riot!

I expected FICOs would become irrelevant as this mess progressed but that’s a twist I had not counted on….. yet among the viper pit it certainly makes sense.

If there is any sort of pattern to this at all the FICO score and indeed the integrity of the entire credit bureau system has just gone straight in the trash can.

#130 Nostradamus Le Mad Vlad on 12.17.09 at 7:36 pm

#112 kc — Agreed, and great post.

As usual, by not looking at the much bigger picture, people miss the main reason (singular, no ‘s’ on reason) why all this is happening at the same time.

A-H1N1, the global warming / cooling hoax (climate change is always happening, no matter if we smug, pathetic earthlings make a nuisance of ourselves), Monsanto’s big push to have GM crops spread all over (none of which work), depopulation, big pharma and big oil, etc., etc.

When all of the preceding is put in place, it leads to a one-world govt. (NWO with support from the UN, NATO, WTO etc.). TPTB will move heaven to hell and back again to bring this to reality, and as usual, they will be outsmarted by something no one has ever thought of, or taken into account. Even Hal, the super computer in the film 2001 – A Space Graveyard (sumtin’ like that) lost.

If every person on this planet were given a small plot of land — an acre or less — to till the land and reap the rewards from their crops, CANAMEX could absorb seven billion of us, as long as we were spread out evenly.

But that will never happen, because a few have become so greedy and arrogant they can’t be bothered to look out for someone who needs help — they would rather us ‘small folk’ died and left them alone.

We reap what we sow, and the wheel always turns, albeit exceedingly slowly. Maybe not during this lifecycle, but the next one all will be called to account for the ways we are taking now, by swopping places with the one(s) we harmed in a prior lifecycle.

Each proves the reality of reincarnation to themselves, as it should be.
——
Does anyone remember Big Bad Bombay? Comment from wrh.com (follows) is good — BBB “What makes anyone think he went “rogue” as opposed to following his orders?”

#131 The Coming Depression on 12.17.09 at 7:45 pm

Garth you can eat your words about GOLD/SILVER being used as a currency:
http://www.legis.state.ga.us/legis/2009_10/versions/hb430_LC_21_0297_a_2.htm

Does that mean you can buy bait or ammo in Georgia with gold? No. Say, how’s that depression working out for ya? — Garth

#132 kc on 12.17.09 at 7:46 pm

122 Dan on 12.17.09 at 6:05 pm

I do not support terror which is why I am in favour of debtors prison. Are you a financial terrorist?

I am over 40, and have never held a credit card that (is in my name) in my life. I owe not a red cent to any company (excluding my monthly bills) I have 50K in cash in the bank, and hold no mrgt. I rent. terrorist? me nope. I also happen to agree to some extent about holding your ass to your bills and not being allowed to walk away from your debts. My point was/is even with debtors prisons, the system doesn’t work.

cheers

#133 Confused on 12.17.09 at 7:47 pm

Garth,
From someone who is looking to buy a house soon but is scared of all the talk from this website. I have a question. We are currently renting in Victoria and would like to get into the market although I am well aware that it is over priced. Since rates are sure to go up, should we look to buy close to summer and lock in, or wait 5 years, keep renting and wait for prices to go waaaayy down although there will be higher rates to contend with? I know you always say that you’d be a fool to buy now since house prices have never been higher, but I’m also concerned I can spend the next half decade waiting for the perfect time to jump in. What if rates are 20% by then?
Fingers crossed I don’t get my head bit off for this comment.

Rates are not going to 10%, less 20%. If it were me, I’d rent. You’ll know when. — Garth

#134 JO on 12.17.09 at 7:52 pm

Just a quick one on the perception that deflation/hyperinflation cannot/will not happen because Bernanke/Geithner are too smart. Yes, they surely have a higher IQ than I and most, but economic history and psychology and behavioural economics shows that groups of people with high IQ / advanced degrees tend to make poor investment and economic decisions.

These same type of people are the ones who lowered rates to below inflation from 2001-2009, did everything possible to encourage financial “innovation” by creating complex financial instruments, setup mechanisms such as account sweeps, lowering capital requirements, and ecnouraging off balance sheet structures to enable the system to operate at absurd leverage ratios of amount of debt relative to the amount of real money/capital in the system.

So i have to disagree. It will be because of these “smart” people that we will have deflation and eventually high inflation – this period from 07 through about 2015 or so will be known as our Great Depression..most of what these overconfident people are doing will end up ensuring our fate.

JO

#135 Wondering on 12.17.09 at 7:55 pm

Garth,

I just hope your predictions don’t let me down. I’m holding off on buying in Ottawa until the spring (maybe)because of your blogs and the bubble burst. Sure, I can understand Vancouver crashing, but will it also happen across the rest of Canada? What are your thoughts on this?

Not your mom, dude. Make your own choices. — Garth

#136 jr on 12.17.09 at 8:12 pm

JO on 12.17.09 at 7:52 pm

Just a quick one on the perception that deflation/hyperinflation cannot/will not happen because Bernanke/Geithner are too smart. Yes, they surely have a higher IQ than I and most, but economic history and psychology and behavioural economics shows that groups of people with high IQ / advanced degrees tend to make poor investment and economic decisions
*******************************************

I agree they might have high IQ’s–
But they’re educated in Keynesian economics,where its only possible when inflating works–
Guess what?
It’s stopped working–
Credit expansion has found its ceiling-
We’ve run out of a pool-of greater fools–
Sentiment has shifted–
From borrow and spend to save and wait–
Values are falling–net worth is contracting–
Real deflation is happening–
Money and credit velocity is collapsing–
Unemployment is just getting started–
It will get much worse-
Why?
Because we have no economic driver-no more bubbles-
Nothing short of some technological break through or war,will reverse this–
The market wants to reprice–and remove excesses–
The market never loses–

#137 Dave on 12.17.09 at 8:19 pm

Hi all,

anyone has any suggestions when it is a good idea to start doing **long** term investments ?

Currently I’m sitting out all cash in my RRSP / TFSA. However, it is kind of silly.

Some have suggested to park in some sort of fixed income – i.e. GIC’s/Bonds for short term (for less then a year) and then, after the market correctes, go into equities.

Anyone ?
———————————————————

why don’t you start dollar cost averaging? Say you $60,000 in an rrsp, start putting $400 a month into a mix of funds. Try an agriculture fund, energy fund, china fund, or a fund that buys all of the tsx. In the long run, these will all be higher than they are right now, so you’re not going all in by dumping all $60,000, but you’re averaging in. If perhaps the sky falls and we test the market lows of March 2009, take $5,000 from your cash holding and dump that into your funds and still continue with your $400 a month.

That’s what I would do if a was a little less agressive.

#138 omg on 12.17.09 at 8:33 pm

#132 – Confused

Hey confused, check out the front page of the Victoria Times Colonist today. Vacancy rates in Victoria are up to 1.4% from 0.5% last November.

So do not assume that rents will increase.

Plus do a detailed analysis of renting versus owning. Unless you believe we will have pretty healthy price appreciation on housing over the next decade renting is still way cheaper in Victoria.

I rent a 1400 sq ft house in Fairfield with a full basement for $2000/m. If I bought it for $650,000 my mortgage at 4% would be over $3000/m then throw in $250/taxes and $200/m minimum for upkeep.

Sure you may end up waiting until 2016 to buy but you will have saved yourself hundreds of thousands.

#139 Dan in Victoria on 12.17.09 at 9:03 pm

Was doing some reading and came across this, sounds familar doesn’t it ? Quarter point to 1.75% in one day interesting. http://www.norges-bank.no/templates/article____75905.aspx?source=patrick.net

#140 The Coming Depression on 12.17.09 at 9:34 pm

Tough be wrong on many occasions isn’t it. Your words: “GOLD WILL NEVER BE USED AS CURRENCY”. I hope your following The Coming Depression as it seems my site is coming more true then this one..I know you won’t publish this…

So move to Georgia. Get a coonhound and a hat with a tail. — Garth

#141 $fromA$ia ( o Y o ) on 12.17.09 at 10:17 pm

Hyper-Inflation is mad-max stuff–JR.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Shot gun shells, steel boomerangs, gas, water, motorbikes, manwhores and toilet paper. Oh and I almost forgot vaseline.

Silly Jr. :p

Unmmm–care to have a debate about the likelihood of hyper-inflation??~
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

The joke was about MAd Max… Gas was almost more precious than water and ammo. Where does gold fit in to that senario…

I agree with hyper or just high inflation. Unlike Garth, I do not have faith in Timothy, Ben, and Obamma.

Peter Schiff gives great arguement on this subject and the stupidity of not paying our dues now.

Think about it… why would you want to punish the savers when they’ve been responcible with their spending habits…

#142 Future Expatriate on 12.17.09 at 11:38 pm

#131: “Say, how’s that depression working out for ya? “— Garth

—-

It’s not over until it’s over.

And it’s not over yet. Not by a long shot.

#143 Confused on 12.18.09 at 2:48 am

#138
Thanks for the insight, another piece of the puzzle to try to sift through. If I wait until 2016 at least I’ll have a huge Dwn Pmnt, thus sheltering me from short term losses?

#144 Popeye on 12.18.09 at 12:52 pm

#135 Wondering on 12.17.09 at 7:55 pm
————————————————-
Use this to help decide on the Ottawa market:

http://orebweb1.oreb.ca/avg_oreb_sale.shtml