For the past five years Canadians have has a front-row seat to one of history’s greatest destructions of wealth. Trillions have been lost as the value of middle-class Americans’ homes plunged.
It’s not over year.
The most compelling part is that, almost completely, Canadians continue to follow the same path which led to so much heartache to the south. Over-valued homes average families cannot afford. Teaser interest rates. Relaxed mortgage standards. Zero down payments. Excessive leverage. Government backstopping risk for bank lenders. Greedy sellers. Panicked buyers. Irresponsible realtors. Exploding household debt. And the mantra of, ‘buy now or buy never.’
There’s little doubt a similar conclusion awaits us. It won’t be the same, but close enough. It will leave much remorse.
The article below appeared on New Year’s Day in a major newspaper I’ll name in a moment. I have changed a name or two, to preview what you’ll be reading in Canada in a few years. — Garth
- – -
It would seem the entire city had been slipped a drink laced with a financial hallucinogen — a powerful narcotic that combined Ecstasy’s feelings of well-being with methamphetamine’s urge to be busy.
Even the city’s most accomplished business and political elites could not resist its influence. They were spaced out, convinced that the laws of the economic universe had been suspended, that housing prices could expand into space, that borrowing money was as holy as prayer.
“We thought we had a recession-proof economy, we thought we would grow forever,” says Elliott Parker, an economist.
Parker describes an “illusion, that we could create wealth from nothing, that we could keep consuming beyond our income, that housing prices would keep rising, that investments could yield high returns without risk, since we were all so clever …”
If they weren’t addicted to the drug themselves, local denizens acted as street corner touts — marketing the magical drug for a living — and were always shouting its wonders.
We were, in Parker’s words, “selling high roller fantasies to gamblers and expensive houses to people who sold their homes elsewhere for even more insane amounts of money. We thought it would continue forever, and we made no contingency plans for the alternative.”
When skeptics pointed out that perhaps a dangerous real estate bubble was forming, the crowd responded with mockery:
“The only bubble you’ll see in this market is in a Champagne glass,” a well-known real estate player said.
But in fact, here’s what was happening in the Lower Mainland real estate market: After years of slow and steady growth, a mania took hold. Home values had increased more than 35 percent in 2009 alone.
It was a classic bubble, right up there with phony Silicon Valley technology companies 10 years ago, and phony Amsterdam tulip futures 375 years ago.
This wouldn’t — couldn’t — go on forever. At some point, Vancouverites would hit their limits and the growth of tourism would slow, and we wouldn’t need so many construction workers to build condos, and then we wouldn’t need so many construction workers to build those houses for the first construction workers.
Once we didn’t need those construction workers, they would be laid off and stop making mortgage payments on their homes. And the sell-off would begin. Throw in all the Mark Carney subprime loans that borrowers couldn’t pay to begin with and you’d get a fire sale.
It’s simple logic, really. Any college freshman who got suckered into a pyramid scheme could explain the illogical underpinnings of it all. It was an economic house built without a foundation on a rocky hillside. And there it goes, into the wash.
In the reality-based world, many people knew the intensifying speculative bubble in real estate wasn’t sustainable and tried to warn others. Bill Robinson, an economist, patiently explaining to neighbors the laws of economic reality and the coming crash.
“Everybody who was independent of all this saw it coming,” Robinson says. Meaning everybody sophisticated enough to understand economic data and not a paid representative of the resort or development industries.
Which brings us back to another kind of deception, perhaps most damaging of all — self-deception.
“It’s easy to delude yourself into believing something you want to be true. And here we are,” says Mike Sloan a former realtor.
We were deceived, we were narcotized, because we wanted to be deceived.
With thanks to the Las Vegas Sun.
66 comments ↓
How about a “housing BUBBLE” in China?? Impossible some would say… as they (China) is the *new* growth monster for the world…. Well take an advil and call your doctor for here it is on Global National. 13 minute mark …
http://www.globalnational.com/video/index.html?categoryID=1050253822
I see that link didn’t take me directly to the news… click on Jan 1
Good Article Garth…Manipulation leading to Self Deception…now it swings the other way and not one person will be spared…even us on the sidelines to some extent.
I’m sure your new book will enlighten us (the few) on how we can prepare ourselves from paying for the weak heard.
Boomers scaling down, interest rates on the rise, home values declining even more in Las Vegas and USA, Canada RE almost matched with AUS RE in the largerst bubbles known in history, export demand toasted, jobs lost not returning, taxes, banks not lending, consumers going on thrift spree, stimulus/debt and many other factors will find us in a decade of sideways markets and
THE GREAT GLOBAL RESET!
There is still no foundation so as Garth has mentioned, all it takes is a spark in 2010 to send markets into a tail spin once again.
The spark could be natural, terrorism, credit cards or commercial RE. It could be the release of millions of shadow Res RE, Alt A Option ARM’s, boomers scaling down or shadow home loan mods foreclosing.
I am not yet confident on my investement strategy. My only offence is a strong defence right now but like the article suggests above, those who are on the sidelines right now are at least there in a positive way and well positioned to invest in future opps.
May I suggest those with money to spend will rule the day with incentives they could only dream of.
Good Luck To Those in the Ready!
Garth, I agree with your predictions and appreciate your research/work.
I still; however, have an ugly feeling that Carney and his boys will cater to overextended real estate buyers as they don’t want to lose the baby boomer (want high prices – retirement $) and ethnic (Vancouver/Toronto Asian speculators) votes.
FYI – Michael Levy, again, while on Global BC said that Canada doesn’t have a real estate bubble and that housing prices are now based on demand; hence, they’re right.
Go here and scroll to 0:29 (near the end):
http://www.globaltvbc.com/video/index.html?releasePID=VNJZjwp41YAcJHi4kVAX_E5OYztd0Bgf
Yes, but beware! TIMING is everything!
“Markets can remain irrational longer than you can remain solvent.”
Steve Keen in Australia, Robert Prechter, Mish Shedlock (albeit cautiously) and perhaps Hugh Hendry have been predicting an environment of widespread asset deflation for several YEARS now. Keen, for example, famously advised Aussies to “sell your house now, at the top!” 3 years ago…whereupon house prices continued to rise, almost doubling since then.
Two things seem to have been missed. ONE is the willingness of central bankers to open the money spigots ENDLESSLY, and their ability to pay for this largesse through either outright monetization or through inter-central bank legerdemain, even extending to perhaps buying one anothers’ bond issuance. WARNING: This can almost go on forever.
The second trend which has been missed is the divorcing of market behaviour from underlying economic fundamentals. Traders are not economists; they pay little attention to valuations, considering each asset class or stock, or house as a counter in the “markets-as-only-casino-in-town” environment in which we are all forced to operate now.
SPECULATION has now become all-pervasive in the absence of real opportunities for investment.
This, too, can go on far, far longer than anyone expects.
What should you housing buffs do? Avoid leverage, sell now if you have a large profit and put the money into select stock areas, into corporate bonds, into gold, into bought-outright smaller properties. Etc., etc.
Speculation? You haven’t seen anything yet. 2009 will continue well into 2010.
The New Marketing Mantra for Vancouver Real Estate….
What Happens in Vegas,
Stays in Vegas!
Gord in Vancouver
Politicians/central banks wanted those same tings in:
Spain
Ireland
England
USA
Dubai
Japan
Didn’t stop things from unravelling. MSM volume on this is rising. China is acting to cool things – when the Premier of China comments on the need to cool the RE bubble, count on action. Vancouver – where are the jobs? Why is rental vacancy screaming higher? Do the math – there aint much room left.
I think TaxHaven says it best: “SPECULATION has now become all-pervasive in the absence of real opportunities for investment.”
Monetary and Fiscal stimulus severely undermines capitalism and it’s greatest characteristic: Failure.
The great economist Schumpeter referred to this process as ‘creative destruction’. It was the facet of capitalism that brought wealth and innovation and a middle class. Without it, economies would grow weak and the separation between wealth would widen.
And that’s all we’ll get. Speculation will lead our economy into another collapse. We did nothing to solve the problems in 2008. We only made matters worse.
I disagree with Garth that the stock market will be where it is at in December 2010. The S&P is trading at over 20 times normalized earnings (normalized earnings dramatically lessens the impact of 2008-9 financials) compared to a historical average of 13. That’s higher than before the 1987 stock market crash. Given the huge risks in the economy right now, the current level of stimulus which will have to subside, looming tax increases and a boomer retirement to look forward to, the stock market should be trading at a discount to its historical average. Perhaps about 10 times P/E ratio makes more sense.
Dividend yields are below 2% of earnings, far below 1929 (2.96%) and 1987 (2.65%) stock market crashes and the 1972 peak (2.65%). Everyone knows how the stock market performed in the years after those dates. In December of 2009 was the first time ever that the dividend yield was below 2%. Even after normalizing the dividend and reinstating the 20% dividend cuts of 2008-9, the dividend yield would only be at 2.5% (still a record).
All in the stock market is almost 50% over valued at today’s levels. In the absence of huge economic growth or high inflation, it will crash. Of course high inflation would send interest rates soaring, causing much of the free world to default on their debt. I’m sure the economic consequences of high inflation would severely impact corporate fundamentals.
Furthermore property bubbles surround the world.
Can our economy survive the impact of a stock market correction and property correction unscathed? I think not. We’re absolutely guaranteed a recession. And what then, when the central banks around the world elect themselves to fix the problems, using the same old keynesian economic principles that cause all this speculation.
When will we learn that an investment is taking inputs and turning them into something more valuable. In the process we leverage the savings of others, providing them with a fair return, and create workflow processes within our investment that increases the productivity and innovation of business. That’s real economic growth. Everything that Bernanke, Carney and every other self elected chief economist does, merely damages this legitimate and democratic process.
Tarp 2 is in the works btw,
…$4 trillion is coming down the Pipe slotted for Freddie, Fannie and $$$ for those States who are deeper than doodoo in their deficits.
(Freddie & Fannie will soon own the remaining, not yet marked down investments held by the big banks)
Then we watch the flight back into the U.S. Dollar.
Nostradamus jr.
#5 Taxhaven,
In general I agree that this could go on forever and in many respects it has gone on but there is also plenty of reasons to believe the end is near in 2010 – although it would not surprise me if it doesn’t hit until later in the year.
Interest rates simply cannot go lower and the current 5/35 CMHC regime simply cannot be made any better for buyers. In the meantime wages are not rising whereas taxes and other costs are so affordability will get worse. Add in the Baby Boomers slowing down and selling and all factors point to a dip.
The only issue that remains is the timing and the magnitude of the problem. Prices must fall at least 10% just on those factors alone. However the numbers could get much worse once we see how over leveraged our markets are.
I had a friend who left Vancouver a few years ago to be a developer in Vegas. I was looking at his website today and noticing he was launching a commercial development in 2007. No updates or other info. I don’t know what happened but can pretty much guess. Hope he is alright.
“. . . borrowing money was as holy as prayer.
. . . could create wealth from nothing, that we could keep consuming . . .” — First here. Then this. Finally Lollapalooza!
Well, the US Fed and BofC are now pure diarrhea entities — worshiping at the great kama sutra of money by keeping printing presses running with great regularity. Ex-Lax is not a requirement to work in the mint!
Just as the universe is always expanding and moving ahead, so economies must contract at the same speed to balance. But wait — a monetary conspiracy theory to trump all previous theories!
Two films from the mid-90s — “Fear and Loathing in Las Vegas” and “Leaving Las Vegas” stand out. What cities will these titles be applied to in a couple of years or so?
——
As per the previous post. Comment by wrh.com: “CAST LEAD II: WE CAN’T BEAT LEBANON, SO LET’S BOMB THE HELPLESS GAZANS TO PROVE HOW BUTCH WE ARE!!” Note the planes are F-16s, US-built. The US is complicit as well. Out of curiosity, if the tables were turned. Plus, he blew the whistle on Dimona.
——
#74 kc (from prev. post) — “Social Unrest and Global States of Combustibility 2010″ — Would this have anything to do with it? The US is doing a first-class job at disrupting the rest of the world, which is probably why Brzezinski and Kissinger both called for a singular world govt. just prior to Copenhagen.
——
1:47 clip on differences between Banks and Credit Unions.
——
Psychotic rabbits could be trouble for Canada.
——
Getting colder, and Sun going by 2012.
Very good post Mr. Turner,
Every place is special and different whiel the money rolls in. My wife and I lived in Denver in the mid to late 90′s when the tech bubble had extended to Denver and real estate prices were exploding. Everyone in Denver was convinced the world wanted to live there, the tech company growth would go for at least 20 years, and the droves moving in would keep prices rising indefinitely. We did not see it that way and moved in the late 1990′s, sold a couple of condos we owned at a moderate profit – although not at the absolute peak – and were happy for it, being a landlord is one of my least favorite things. One of those had been owned by my wife since the big real estate crash of 1985 and had only recently re-emerged “above water”, 13 years later.
The last decade in Denver was stagnant, the telecoms fueling most of the tech boom went bust or went elsewhere, and the 2007-on RE crash that took whatever gains were eked out in the naughts with it.
I think that the Denver slide into mediocrity is a “best-case” blueprint for Canada’s current RE hot spots, with the Las Veges scenario you paraphrased so well being maybe a more likely, but far more depressing, scenario.
Good luck in the coming decade!
From today’s Vancouver Sun…explaining Vancouver’s
RE market:
http://www.vancouversun.com/business/Real+estate+claws+itself+hole/2396745/story.html
Perpetual Debt: Bank of Canada & why we should use it instead of wall st.
http://canadabubble.com/bubble-articles/281-perpetual-debt-bank-of-canada-a-why-we-should-use-it-instead-of-wall-st.html
Well you won’t see me contributing to the continuing speculation. I’m already priced out.
I’m highly doubtful that Bill Robinson would recognize a bubble even after it had burst.
Some players are calling for a crash.
Imminently.
Home prices are over-valued 15 to 35%
35% in the west and 15% in the east…
The following projections are using figures from: http://www.crea.ca/public/news_stats/statistics.htm
Vancouver average resale price: $622K.
After a 35% crash: same house is: $410K.
Calgary average resale price: $401K.
After a 35% crash: same house is: $270K.
GTA average resale price: $418K.
After a 15% crash: same house is: $355K.
Halifax average resale price: $240K.
After a 15% crash: same house is: $205K.
The trouble with this is:
When will prices collapse?
Will 10000′s of owners accept negative equity?
Will they massively default?
Will the government intervene?
Will a massive surge in listings bring prices down even further?
Where will rates be at?
Was does it all mean?
It can, and probably WILL, go on for a lot longer yet. Rangebound, perhaps throughout 2010.
This is not “investment”. It is speculation, because speculation now provides the greater risk-reward ratio.
Why are doomed REITS, deadbeat financials, propped-up banks, government-supported insurers and suffering retailers all doing well? Chasing returns! The fundamentals behind those sectors and companies and indeed, behind the entire macro-economic picture matter very little.
In addition, the entities holding those stocks are not retail investors. They are mutual funds, pension funds, insurers and banks themselves, governments and hedge funds. They are FLUSH with cash. They have no need to sell stock. In the absence of a truly worsening employment picture, further deleveraging, the end of government stimulus or a currency event, they will face little demand for redemptions and payouts.
We all await the end of government stimulus eagerly. But, because fiat currency monetization, in all its multiplicity of forms hidden and overt is virtually limitless, it may not come anytime soon.
“Meaning everybody sophisticated enough to understand economic data and not a paid representative of the resort or development industries”
Couldn’t have said it better myself…….let’s see, who does that actualy encompass anyways ????
You’ve got bankers, RE lawyers, politicians, realtors, journalists, media companies, advertising sales people, home builders, construction workers, mortgage brokers, construction supply firms, engineers architects, freshly minted home debtors, municipal trade organizations (chambers of commerce, economic development authorities, etc)…….
I’d say that you don’t have to be “sophisticated” to see the reality of the situation, just ethical and honest about it.
These are interesting times. Bubbles that refuse to break and the governments that feed them based on path of least resistance to popularity. It was interesting that we are losing a lot of structural professional career jobs and we have my banker friend who is in small business loans choking all those businesses off due to the higher ups at “a major bank” being risk adverse!!!! He is moving into mid size business at $5MM minimum loan range as his small business expertise is not being utilized. This bank is more interested in taking massive risks in different divisions and domestic divisions pay for mistakes of international and investment banking. But, for our poor Canadians small business people trying to employ and grow, they are shutting the door. O the other hand, if your small business is real estate, they will give you $500,000 if you have $75,000 proven corporate job income (which could go away anytime). What a mess….
>>Global Imbalances Mount
•Global imbalances are cropping up like weeds in places like Greece, Spain, Vietnam, Iceland, Vietnam, Latvia, and Lithuania.
•There are massive property bubbles in China, Canada, the UK, and Australia.
•Japan is in a foolish fight against deflation and sinking further in debt
•Commercial real estate in the US is on the verge of bringing down hundreds of regional banks.
•Cities in the US are under massive pressure because of unsustainable pension plan promises.
•Global terrorism is on the rise
How long this mess hangs together without a huge crisis in a major currency is the question everyone should be asking. Sadly, most are oblivious to the widening structural cracks.<<
…Mish almost gets it right…
Nostradamus jr.
We have a friend who bought in Las Vegas back in early 2005. Why she did this, I don’t really know for sure – if she had asked me, I would have told her not to because even then I was aware of the housing bubble.
But we suspect that someone else she knew convinced her that she could buy and then flip it a few years later and make a bunch of money. You cannot underestimate how strong this pull is – it is reminds me of a cat that has gone into heat. People will go out and buy anything in the hopes of making a quick profit. And as long as there are people pouring in hoping to turn a profit, the prices will continue to climb. But eventually the bubble grows to the point where the supply of buyers cannot keep up and that’s when it pops.
In some cases the buyers are aware of the bubble, and yet they are drawn in – their thinking is that if they get out before the bubble pops that they still make money. But they never really get out – they might sell one property, but then they turn around and buy another.
I looked on Zillow the other day (an imperfect metric, to be sure). Zillow says that her house in Las Vegas is now worth about half what she paid for it.
well, it looks as though I will be price out of residential real estate forever.
Instead i am now looking at commercial real estate as an investment (a small investment). Commercial real estate has plunged so i am wondering if it is a good time to buy a small retail store and rent it out?
Does anyone know of links to stats/graphs and charts on commercial real estate for research purposes?
thanks
When is your visit to Toronto?
#8 Jonathan on 01.01.10 at 11:32 pm
And overnight the Dow/TSX can drop 1000 pts or more followed by yet another night ….. case closed!
Yesterday in Tim’s a young lady mentioned she makes 3-4 business trips to Vancouver a year and this past month she made a trip and notices many of the CONDO projects appeared to be have been stalled or have been abandoned. It was just a comment from a outside observer with no iron in the fire. Speaks volumes …… case closed again.
Here many homes have not sold and there are more reduced price signs. case closed again, again.
Garth is correct on smart investments ….. but I suspect if many become smart then the share of profits will fall … just like your favourite fishing hole, tell one person and gonzo!
Happy New Year.
Current Hongcouver Homeowners do not trust Wall Street, Bay Street of Fiat Currency(paper money)
…Hongcouver homeowners compare their homes w/ money stuffed under a mattress, only its stuffed between four walls and a roof.
…It is a statistical fact Hongcouver’s Home Owner Debt Ratio has averaged 60% for the last twenty years.
Toronto is a different story…TO is part of the Bay St/Wall St Cartel….and Wall St is losing its power grip to Asia.
…California is in much doodoo, it is broke and has millions of Illegal Immigrants…Hongcouver is North America’s Gateway to Asia…
Nostradamus jr.
#22 – You CANNOT sell a house in Vegas for zillow valuation. Vultures are the only ones buying, for cash, and will only LOOK at houses 30% of peak valuation.
And there are untold numbers of those. Most of which trashed beyond repair from the slab up, yes, but many that are not.
THIS BUDS FOR TWO
To Jim (Jimmy Boy) Flaherty and Mark Carney:
I didn’t get my Christmas gift this year from you boys. I am deeply disappointed. Baa Humbug scrooges! Here is my gift to you, boys. Pay attention. You will now be schooled.
“One of the most dangerous scourges of wealth and well-being is hyperinflation. This horribly debilitating economic disease occurs when, for whatever reason, a country prints money, which leads to inflation and then, because of lack of political courage, continues to run the printing press, and the addictive process spirals out of control.” (Barton Biggs – Wealth, Wisdom and War)
By the way, I still can not figure out who you guys REALLY work for? Call me dumb and silly…I am still confused? I am a stupid guy I guess. I can’t for the life of me understand what is going on nowadays. Some really strange economic sightings going on for sure…Must be the financial narcotics you boys are giving everyone a “I feel rich yet don’t work for my free money” high. Pure Jamaican strain. Pure, unadulterated Financial “Ganga”. Can’t get this stuff anywhere else.
• Record low interest rates.
• High Unemployment.
• Record home prices.
• Massive layoffs.
• High gas prices.
• Shopping malls packed with Christmas shoppers.
• Major stores closing via bankruptcy.
• Record debt levels by individual Canadians. 140%
• Record mortgage debt levels.
• Young couples buying overpriced homes with 5% down over 35 years!!!?!?!? Huh?!?!?
• The banks securitizing and off loading their mortgage portfolios to CHMC which leaves the liability to the banks on the backs of Canadian Taxpayers. NICE…With friends like this, who needs enemies.
• GM and Chrysler bankrupt and now government backed. Government Motors anyone??
• Many un-wed, un-committed young couples buying homes together with no money down and no pre-nuptial / post-nuptial contracts signed!?!?!?!!?!?!?!?!?
• Huh, I guess I am just plain stupid. I give up why I can not see the logic in all of this. Pure fantasy land. No reality. Fake fiat currency.
• Adult lifetime mortgages.
• BC, Toronto real estate prices….Too bubbly for moi. Too cramped to live.
• There is too much debt relative to income and/or wealth.
• High Canadian dollar.
• Gold bugs gloating.
• US dollar trampled under foot.
• HST during a depression.
• Bank bailouts with taxpayers money.
• 2 minutes to midnight………….
Pass the dutchie by the left hand side….Pure Carney magic. Inhale this stuff…I heard it won’t last much longer. Thanks boys…don’t burn your fingers on this stuff. I’ll pay you later…OK…just like you boys do…
“Nuff Said” (Stan Lee – Marvel Comics Inc.)
#17 Nobody,
The system is far too complex for anyone to forecast accurately. I always use historical averages as the best guide. The 15-30% number comes from a return to historical averages as well as looking at the affordability index. Assuming that we return to average values at 3-4 times average earnings we have a long way down to go in some markets.
Consider as well that taxes are going to rise to pay back all this debt and most other costs will rise as well – except for wages. This could also have a negative impact on housing over the next decade. Add in the change of demographics with the boomers retiring and looking to cash out.
Traditional interest rates run between 6-8%. Some are predicting that we will see a return to these numbers in 2010 although I think it unlikely. However if you were buying a house with a renewal in 5 years you should be looking at what an 8% rate does to your mortagage.
I am still somewhat confused by Garth’s assertion that we will not see a depression (I think we are in fact several years into one). Is it based on some magic metric that I do not understand?
The real unemployment rate stateside is now between 22-27% (shadowstats.com) Canada is lagging but we are now north of 15% (wild guess above official BS figures). The natural resource sector is getting hammered. If oil prices do not get well above 100 per barrel long term, Alberta is toast….lets not even discuss NG.
If one watches BNN you would think all was well worldwide….what a complete load of BS. We are heading for an unprecedented economic collapse (there I said it). I am stupified be the shoddy analysis that I see everywhere…..a grade schooler could understand a lot of the dynamics at work.
The “Market” is incapable of dealing with the shortage of energy that it is now faced with……the result is inevitable and it is manifesting far far faster than even a lot of the peak oil pundits thought that it would.
#9 Nostradamus jr.
…Then we watch the flight back into the U.S. Dollar….
Sure, short term. Long term the printing machines need to be replaced because they are worked too much.
Garth: “Narcotized”
Erm ya, drinking fluoridated water and watching 5 hrs of TV per day will do that to a person.
Maybe this has a role in the loopy behaviour?
http://www.naturalnews.com/027448_cell_phone_health_phones.html
Maybe even the “Silent Sound Spread Spectrum” or
“S-Quad” has a subliminal role? I’m too afraid to provide a link, so look it up yourselves. There is an interesting article out there that ties this to Paul Simon’s cryptic song
” The Sound of Silence” from 1963, and offers a chilling explanation to the lyrics. It’s also alleged that his father worked for the military-industrial complex.
Then down another rabbithole, there’s this youtube video of NBC doing a piece on “chemtrails”. Probably the only msm work of it’s kind.
http://www.youtube.com/watch?v=ywr3vBJtzh0&feature=player_embedded
In it, they acknowledge that there are barium salts in them, and aluminum oxides.
Barium is an immune system T3 receptor inhibitor.
Huffing in aluminum oxide micro particles will give us Alzheimers.
I remember in one of Garth’s books from looong ago, wherein he cautioned us against using anti-perspirants because the aluminum in them may lead to Alzheimers. I took his advise.
Now here we are huffing in aluminum, and I’ve seen articles that state that everyone in the world has mild to medium Alzheimers… if you can believe it, from the global chemtrails spraying.
Sorry Garth, but maybe every angle needs to be looked at to explain this abnormal, dopey behaviour.
#7 taco
Thanks
#13 Lorne
Considering that it was written by the Vancouver Sun, that article wasn’t as bullish as I expected it to be.
What is so frustrating about all these predictions which could be right, partially wrong, or totally wrong, is that the results of these predictions may happen in a couple of years. Thats great for ppl who were already renting, no kids etc. but I have to find a place and and already waiting a year, and having to wait a few more seems like a long time and a lot of patience. I should have just kept my original house and kept my old mortgage.
Buying a house has to be the worst experience someone can have…unless your a first time buyer, it always sucks because your forced to buy by a certain date.
bahumbug
A Vancouver real estate developers perspective on today’s market
Don’t get coffee up your nose : )
http://www.vancouversun.com/sports/Supply+demand+real+estate+rebound/2398562/story.html
IF we look at someone who bought 3-5 years ago or more in Vancouver, say they paid $300,000 and it is now worth $450,000. Even with a 30% correction and higher interest rates, many of these people could probably still make the mortgage payments, so they would probably grumble and hang on to their place, as they have to live somewhere and there are not many decent rental options outside of 1-2 bedroom apartments and depressing basement suites. This makes me question whether or not we will see a large correction in Vancouver even though costs here are ridiculous.
@35
The article/advertisement seems to miss that if the demand for housing is as strong as stated then the price of rent would reflect that. Narcotized is right.
#35 Gord,
Too late! Coffee is up the nose!!!! This is the traditional developer view. This is from a very young developer who has never seen a recession never mind a depression.
Certainly there is enough antedotal evidence in Vancouver about foreign investors continuing to drive up prices forever. The continual influx of people to the Province is also the leading argument – they are coming so prices cannot go down. Supply and demand trumps all.
However right now affordability is a bigger issue for most people. Everyone who comes to Vancouver from inside Canada is coming from a less expensive market. They may buy but not the top end places.
The only people who can bring that much money here are coming from Asia. Are they still going to come? And how many?
Eventually construction costs and labour costs will have to adjust. My friends in the industry have already told me labour costs are down. One of the key features of the post Olympic era will be much lower construction costs which will eventually lead to lower prices on new inventory.
#35 Gord – I read that article in the paper this morning and nearly fell out of bed.
Did you also enjoy the interview with Flaherty, and BC Business front article about the real estate market?
I’ve saved copies of all those nuggets — they’re just too good.
HOW NOT TO PROTECT YOUR WEALTH DURING TIMES OF WIDESPREAD FINANCIAL CRISIS, DECEPTION AND FEAR
Rule #1 – Memorize the Four Horsemen of the Apocalypse. Don’t worry if you know nothing about the bible or even care to know. All investors must be aware of the constant threat of these menaces. They come in waves and will be seen in totality during the coming Apocalypse.
Four Horsemen of the Apocalypse are as follows:
1.) Pestilence. (The first horseman to appear is Pestilence, who rides upon a white horse. Sometimes referred to as conquest.)
2.) War. (Red Horse – To take peace from the earth, and make men kill each other. To kill with the sword. Red symbolizes the blood of the fallen soldiers. Its rider was given power to take peace from the earth and to make men slay each other.)
3.) Famine. ( Black – Widespread Economic chaos (subprime collapse). To bring famine. To kill with hunger. Famine is portly, and rides upon a black, sickly horse; this represents gluttony and hunger, respectively. And in the wake of Famine comes Death.)
4.) Death. (Stark Pale Green – Death by disease and war. Followed by Hades. Kills with the scythe, with famine, disease, and the beasts of the earth. Aids for example. Plagues etc.)
I remember reading in “After the Crash” (Garth Turner) about the protection of your money and assets in times of calamity. The book was and still is my favourite book of all time and it was very frightening to read at the time. I still go back to it from time to time to keep me on course, to remind myself of how tough things can get and above all give me hope and courage.
At a recent Christmas party, an obnoxious and obviously wealthy guest decided to challenge me that all of his assets are safe and that nothing would ever happen to them and that the stock market would recover and that our Canadian banks are safe. I challenged him by stating: “Will you guarantee that?” His stammered and looked perturbed by my challenge. Obviously his ego is bigger than his common sense and his knowledge of history (which is very important for investors) is tragically flawed. Caveat emptor.
A little history lesson in how not to protect your wealth when the four horsemen are out riding about.
In the winter of 1945 (during World War 2) when the Red Army entered East Prussia and then East Germany, they were obsessed with blood and revenge. German soldiers trying to surrender were ruthlessly shot on sight. That January five million German civilians, to escape the wrath of the Russians, fled west toward the British and American armies. Long caravans of people carrying their valuable possessions with art folded in pipes and their life savings in gold and jewelry stuffed into knapsacks. When the advancing Russians caught up with these fleeing German civilians they indiscriminately used their heavy tanks as bulldozers smashing through the columns and crushing people and carts like huge steam rollers. Those that fled into the fields in knee deep snow were machine gunned to their deaths. Their possession of value looted. Teeth ripped out from the dying for gold fillings, ears torn off for gold jewelry, etc. Children were herded into ditches and then grenades were thrown at them. All living and dead were stripped of watches, rings, boots and fur gloves. The women were brutally raped and the left naked in -40 degree weather to eventually freeze to death and/or die of starvation. When the Russians entered a town they would go house to house looking for valuable assets like gold, jewelry, paintings and sculptures. They would often then set the houses on fire burning the inhabitants alive. Every man under 60 years was murdered. Younger women were brutally gang raped and sometimes nailed naked to the doors of their houses afterwards after being stripped of their wealth. Interesting enough, the wealth of the Rothschild’s in France was left untouched! Some of their very expensive pieces of art were left hidden in secret panic rooms and secret, hidden rooms that were open from behind hanging picture frames. (Source: Wealth, War & Wisdom)
History has a way of repeating itself……unfortunately.
It is too bad the sun is printed on such awful paper. I would have loved to emulate dr johnsons reply . Changed slightly: I am in the smallest room in the house. I have your article before me. Soon it will be behind me.
But its really rough and inky so I didnt.
Good article from today’s Washington Post on the lost decade that has just been.
http://www.washingtonpost.com/wp-dyn/content/article/2010/01/01/AR2010010101196.html?hpid=topnews
# 40 vulture And happy new year to you and yours . Have you read “The black swan” by Nassem Nicholas Taleb .. I bet Garth has .
I cant help but laugh, but then I cry because I know our politicians will try something similiar and waste our tax money once RE bubble up here bursts … http://www.cnbc.com/id/34664997
Well put…..our modern north american culture has no knowledge of what BAD can mean.
Please do continue to put your faith in intangible paper assets….stock markets, RRSPs, urban real estate…
Pray that the horseman do not ride….although eventually they always always do.
Incredible post over on The Big Picture blog showing the number of jobs that have disappeared in the U.S. over the past few years. Run the timeline in order to see the total effect. Chilling.
http://www.ritholtz.com/blog/
Good thing we in Vancouver are now “world class” and therefore immune from all of these events. It is nice to be living in such an isolated area that doesn’t have to worry about the unemployed people in our largest trading partner. We can all just stay in the RE industry or speculation business and ride out the storm!
[...] Vancouver real estate: a market on narcotics [...]
A little late, but then I thought NY’s eve was last night.
We were away and totally lost track of the days. Happy New Year and best wishes to Garth, Dorothy & Bandit and all blog posters.
Look forward to reading your book Garth.
Very pretty here, but definitely not a day to be driving.
http://www.nytimes.com/2010/01/02/business/global/02capsule.html
#44 MrC
Such a sad article – and there’s a prediction we don’t need a crystal ball for eh?
The only difference between a bank student loan and a government student loan is that in the latter case, the government pays the interest on the loan until 6 months after graduation. I am hoping that Canada will use this line of thinking when we run into our own foreclosure crisis.
I am positive it would be cheaper to split the principle in two, make the homeowner responsible for paying the first half and have the government cover the interest on the second half for a 5 or 7 year period before adding the second half onto the homeowners mortgage, which would be reduced by then – especially if they maintained their current payments.
As it stands, America has thrown craploads of money at the brokers and banks while not reducing the overall amount owing for homeowners. It is understandable that principle reduction would be a slap in the face for those who saw the risks and chose not to get in over their heads but covering half the interest would have been a lot cheaper while aiding the homeowner rather than the broker and they could have avoided the ‘system glitches’ that were highlighted in the article.
Anyone involved in accelerated payments knows that ‘decelerated payments’ would be a shot to the head even if your mortgage was small.
Alas, it would seem we are doomed to follow American policy since our decision makers never actually pick up a calculator to figure things out. Why don’t economists ever run the country – oh yeah, because they get kicked out of caucus for stating the obvious!!
#40 The VULTURE on 01.02.10 at 2:08 pm
The entire last long paragraph in your post is an exact re writing of the description that was writen by the russians who suffered under the Germans for the previous 4 years of that war.
Sort of a “what comes around goes around.”
Thanks for your feed back #43 Debtfree:
“# 40 vulture And happy new year to you and yours . Have you read “The black swan” by Nassem Nicholas Taleb .. I bet Garth has .”
I have heard of the infamous “Black Swan”. I think one was found in Australia first. Thanks for the insight. I will pick the book up.
Thanks for your feedback #45 Knucklewalker. I tell youger people (teens) some of these historical facts and their eyes glaze over. They all think it is bull. Too bad for them because it is the truth and the truth shall set you free. Deception will ultimately lead you to death.
No wealth has been “lost” on the whole – it has merely been transferred from many accounts to a few. It’s concentration of weath. That’s why a wealth tax is needed, including punitive taxes on non-primary residences…
“Huffing in aluminum oxide micro particles will give us Alzheimers.”
The Al/Alzheimer’s link was always tenuous at best and over the past fifteen years not one (not one) reputable peer-reviewed study has supported any link between the two.
Garthy Baby, I am enamoured by your mind. I won’t waste time giving my current status but suffice it to say I sold my house in 2008 and am happily renting.
My question…if the boomers retire will it not lead to some leveling out of the employment rates? My parents are boomers (in non-real-estate-fabulous-financial-shape) and they will retire in the next couple years. My boys (Larry, Moe and Curly) are just finishing/in post secondary so my concerns are for them.
BTW if I ever get a chance to see you in person, I will bring a Sharpie, you can sign my chest anytime!
Nestled in Napanee
I am not worthy. — Garth
#54 EB. I’d just rather not breathe it in thanks, but I don’t seem to have a choice.
How about Smart Dust?
http://www.youtube.com/watch?v=-v5_TdZ4f7Q&fmt=18
I love to hear people trash talk Vancouver RE prices on this board. The sound of people licking their wounds sounds good to me.
@Emma: So you want me to pick up the tab for over-indebted homeowners, is that it?
@KremlinPete: how does higher taxes solve anything other than to satisfy your socialist fantasy? Anybody who wields tax as a punitive measure is a dangerous, leftist eco-nincomp00p.
#28 The VULTURE on 01.02.10 at 10:39 am
To add more bad news to your wifflepost for Dim Jim O’Flairity and Art Carney’s son Mark, the U.S., through its treasuries and unemployment is about to hit the debt wall … near term very bad … long term even wors-er!
U. S. “u-6″ unemployment rate , end of Nov. ’09 17.2%
http://portalseven.com/employment/unemployment_rate_u6.jsp
Lotsa good information on bank failures, layoffs by state, etc.
U.S. indebtedness … projected to become 1.4 of GDP
Look for a cascade effect on other economies
http://watch.bnn.ca/squeezeplay/december-2009/squeezeplay-december-31-2009/#clip251146
How does all this affect me? Well, I’m waiting for our new casino and gas pipeline royalties … and one of our folks plans to run for president in 2012. ( hopefully, before December 21, 2012 )
http://www.youtube.com/watch?v=yP7JHo-pX28&feature=related
#40 the vulture
That war story was very depressing. I have hoped we haave all evloved beyond the point of murder and mayhem but in my heart I know a % of people will always justify such actions. But do you( bloggers) notice material wealth transfer from one party to another changing forms either gold, cash, art…whatever . but it’s still here as opposed to the suitors of wealth they are gone ( past away) but their actions has lingered to cause grief/ help others.
that goes to show u …you can’t take it with you
#37 JT, #38 Junius, #39 bubbleboombust
The insanity continues.
#57 Soju
The bears are licking their wounds? Looks like they’re acting like kids before Christmas.
Post# 60 confused and a little crazed, We’ll devolve pretty quickly, had to wait on the four mile hill here a couple of weeks ago while they were doing some repair work to the road. It was a little longer than normal wait, after about 5 minutes this guy behind “tips” and starts driving up the boulevard to pass everyone trying to go around the machinery too.
Another example was in the timmies drive thru to get a coffee this am was taking awhile and a guy a few cars back starts to lose it.
Think what will happen if society breaks down. These people were freaking out over nothing.
Be prepared.
COVER YOUR ASS-ETS
#51 Roial1 – Thanks for your input! War is useless. War is wasteful. War makes you money if your are despicable.
#60 confused and a little crazed – you are so true, so wise as well! As a business owner and investor and a student of life, economics and investing (real estate, business, some precious metals, derivatives, private placements, intermediary lending, wee bit of currency trading and a little bit of paper – stocks – for dividends primarily not so big on capital gains, bonds – strips in RRSP, term deposits, options, small amount of broad sector ETF’s etc. ). I am still learning and making the odd mistake here and there. Nothing too drastic. One learns the best from the mistakes that cost money. I know that nothing is guaranteed except your sense of humour! Tell that to your better half whether they like it or not! As the famous blues musicians always said, “they can take everything you own but you have not truly lost a thing unless they take your sense of humour.”
# 59 ally ally oxycontin free – thanks, you just made my heart sink! Thanks for your comments. Interesting info for sure…Please be careful of mainstream media…to wit; an investor needs pure, clean info and they need it yesterday!
Keep studying Garth’s writings. He is a brilliant business professional. I just hope he does not “invoice” me for all of the great insight that I have gained from studying his articles!! LOL.
One bit of advice. Respect your adversaries in business as they could one day drive you out of business and never, never stop studying economics or business. It is a great deal of fun as well.
Remember to COVER YOUR ASS-ETS
#4 Gord In Vancouver said: “I still; however, have an ugly feeling that Carney and his boys will cater to overextended real estate buyers…”
The post below from July 29th, 2009 by Hal Smith, speaks to what you just mentioned. The writing on the wall perhaps?
“…I’m not really supposed to be talking about this but the federal government in Ottawa is set to unveil a new program to keep the bubble inflated…”
http://www.greaterfool.ca/2009/07/29/the-inevitable/#comment-37119
#8 Jonathan: Hear, hear! Now that’s the kind of refreshing prospective I come here to read! I am in total agreeance with you. There are some here who are advocating buying into certain segments of the market right now, but I think it more prudent to remain on the side lines… Second correction seems imminent to me.
Thanks for the awesome Post Jonathan!
#40 The VULTURE: “History has a way of repeating itself……unfortunately.”
People haven’t changed much in 5000 years – or longer even. In fact I still believe that if we where to hold public hangings and/or gladiatorial arena events, that the arenas would be full…
Failure of the human condition to change I believe is also why we have endless boom and bust cycles. These cycles are more about greed and fear, traits amongst our most basic instincts, than anything else. That is why the system will not change.