Garth, you’re a chickenshit! As if you wouldn’t post my response. You know full well that in a debate about active vs. passive management that I would kick your ass. — Ben
Being a free speech kinda guy with skin of naugahyde, it’s a rare thing when I trash a comment rather than publish it. Even posts of a quasi-obscene nature get a gentle clean-up from me, rather than being thrown into the digital woodstove here in the bunker.
But lately, a change. This day alone I have incinerated a number of comments because they traversed the one line I try to maintain: respect. Actually I don’t care what crazy financial or economic argument anybody wants to make. But if they do it by climbing down someone else’s throat (mine included), they end up smoke.
So why have the number of offensive comments, like, quadrupled in the past week?
Hmm. I think it’s decadial madness, a lesser form of millennial hysteria. The journey into the ‘tens has caused a lot of people to reflect on time, themselves and the decisions they’ve made.
No wonder. The last decade was a bitch. Two giant asset bubbles (tech and real estate), two giant stock market crashes, one global financial meltdown, Nine Eleven, American decline, oil climbing from $17 to $147 and a lost ten years for many investors. More importantly, we start this decade more indebted than ever before as families, individuals, a country and a planet.
We also start this new decade knowing full well the real estate party in Canada will end, emergency interest rates will rise, taxes will mushroom and too many people will stay unemployed. I think all of this is making folks twitchy. Defensive. Pissed. I can tell that many just don’t want to hear what I’ve been saying lately about the need to get ready for big change. It’s change they don’t want.
Hence, attacks from those who deify gold (because they hoard it), who say real estate will go up forever (because they own it), who decry the stock market as pure risk (because they fear it), defend a GIC (because they know it) or, in the case of the comment above, push one strategy on everyone (because they do it).
Well, like it or not, being labelled a mere chickenshit will not deter this rooster. (You should have heard what the prime minister called me…) The point of this blog is to engender debate among us all about the times we inhabit, with the goal of giving everybody something new to think about, and perhaps employ. Trying to shut down others simply because they disagree with your approach is the coward’s way. Being ad hominem only shows your dog won’t hunt. Being a tough guy guarantees you’re anything but.
So here we go:
This decade will be one of tepid growth, higher inflation, rising interest rates, rising taxes, more debt and greater anxiety. By the middle of it we won’t be in love with houses much any more. Commodity prices will do well for a while, but be very volatile. I’d take oil over gold in a heartbeat, but both have a place in a balanced portfolio. The people at greatest risk are those who believe the TV news, because there is no robust economic recovery or reason for growing consumer confidence.
Those who eschew risk, staying with cash or GICs are at the greatest risk. Those with more than 60% of their net worth in real estate will wish they didn’t. Those who invest in index funds will be even more bitter. Those who think do-it-yourself investing is smart will learn. Those who don’t avoid taxes deserve themselves. Those who don’t see great opportunity in great volatility aren’t trying hard enough.
And to those who want to take me on, did I mention I’m in a biker gang?
183 comments ↓
Garth, you are right, on all counts – without question.
Ben is a frucknut, imho. Ya Ben, that’s what I said numbnudz.
Garth, could Vancouver prices fall 20%plus in ’10?
Not exactly the tone I was striving for. — Garth
Did you just say that gold has a place in a balanced portfolio?
I have to go change my underwear now.
First-off, I would never insult a biker. I know better. Secondly, when you say do-it-yourself investing is extremely unintelligent (and I agree) I was just curious what you would recommend one to do instead, as a lot of your posts on here talk about the lost world and false promises most financial advisors live by these days. What are my options if I’m not a do-it-yourself investor?
Or what would you recommend? I need help!
As I’ve told others, you can always email me for a private chat about fee-based, no-commission advisors. garth@garth.ca. — Garth
Remember This Garth. The smarter that you are, the more out numbered that you are.
Hear Garth speak. Free events.
TORONTO ?????????
How soon?
It was only two weeks ago that we were wishing Garth and each other a merry Christmas….can everybody just calm the f— down?
What do driving, sex, poker, and investing have in common? We all think we are fantastic at these activities…are we really? (Well, I am).
A little humility, please !!!!!!!!!!!!!!!!!
Hey Garth,
I recently saw on your blog a “fee-based” advisor charging !% of the portfolio … how is this different?
Seems to me it is the same thing, and possibly the industry is pushing a “fee-based” advisor route so they don’t have to pay commissions and keep their greedy hands on it.
Sadly, non there is another Ponzi scheme criminal in Canada …
Why can’t people just offer the best product for people regardless of what commission or remuneration is provided by a company?
Perhaps, I am just too old school or polyanna.
Actually not enough of the industry has embraced fee-based planning, which I hope changes in the coming few years. Charging an hourly rate for planning or a flat fee based on the size of a portfolio is inherently more powerful for investors since it removes completely the temptation for advisors to place funds in products which return that advisor a commission. It also means the person guiding your investments profits from growth when the client does, instead of just collecting trailer fees no matter what happens to the assets under management. The elimination of conflicts is 100% in the client’s interest – even cynics like you. — Garth
The roar of the bike brought me back from the beach. You can only hold back on the throttle for so long. In your case Contrarian, not long at all.
It’s sold. Money’s in the bank. Toenails were covered with white sand. Arms were outstretched towards the sun.
I owned it for 8 years, longest I’ve owned anything. It made me hundreds and hundreds and hundreds of thousands of dollars. I LOVE Real Estate.
But I love money more. What to do, what to do. Timing is indeed everything. I’ll be emailing you for that fee-based advisor’s name Contrarian. Maybe I’ll just put it under my pillow on the next flight to somewhere…. maybe I’ll dial it, we’ll see.
Garth,
are you on comission base with some financial advisors? It looks like at least.
You get people scared by coming darkness, then you offer fee-based, no-commission advisors. Hmmm..
No commissions, ever. I get hired to speak. My words are my own. — Garth
@#2 Best Place on Meth: there have been probably hundreds of instances on this blog where Garth mentions Gold as 10-15% of a balanced portfolio as an inflation hedge.
maybe you can just turn those underwear inside out.
I agree that the stresses of the past decade may have made people generally nastier, but I’ll also cite a general degredation in public behavior led by politicians, corporations, celebrities and various media opinion leaders. This degradation centers on a “win at all costs” ethos, including using public disrespect as a weapon. I would love to see more “class acts” in the public eye, and for both political and opinion leaders to demonstrate a general appreciation of respectful behavior. I’d like to see a society where we look up to the civil and respectful among us, instead of idolizing “tough guys”. I’d also like a pony.
YOU NAILED IT GARTH! Traffic has gone up on the blog with various new LOVE RE hopefools!
We are definately on the down side of your graph toward Denial and Doubt in Canada.
With the lastest RE numbers in the US suggesting what we already know the reset to FEAR from PANIC over the last year due to stimulus and continued low rates are going to find us back to Nov 08 soon enough.
Read US home sales plummet, personal bankruptcies soar
By Tom Eley
6 January 2010
http://www.wsws.org/articles/2010/jan2010/hous-j06.shtml
Foreclosures continue to increase. In 2008, more than 1.7 million mortgages fell to foreclosure or similar actions. In 2009, the number swelled to 2 million, and in 2010, the figure is expected to increase to 2.4 million, according to Moody’s Economy.com.
The looming glut of new foreclosed homes will drive down home values by as much 10 percent next year, bringing to 40 percent the four-year drop-off, the New York Times reports. This will swell the ranks of “under water” homeowners—those who owe more on their mortgage than their home’s market worth. Moody’s estimates that one third of all US homeowners, 16 million in all, find themselves in this predicament. The abandonment of homes in negative equity is now a leading cause of foreclosures.
free proof read
b/c you’re the best garth
para 2 “But if they do it my” (should be “by”)
para 4 “the ‘tens ” (should be ‘tens’) (I think)
para 5 “nine eleven” (is often written “9-11″) (purely style – ignore if you wish)
no need to post
looking forward to the book !
Thanks mom. — Garth
Why not just post them all? If only for amusement purposes.
I still love you Garth.
Garth, the basic problem with your investment thinking is that it is based on the idea that all decisions are based on the notion that one is making choices about virtually all their money today, as if investing is not much more than a poker game. For example, I have GICs, gold, real estate, stocks, preferred shares, mutual funds (with a low MER), etc. but they are all laddered or made over a long time horizon. Most of my GICs are now paying about 5% and won’t mature for 2-3 years and when they do I can decide whether to reinvest in GICs or dividend paying equities, etc. Your advice should factor in that investment decisions about one’s capital should not be be made in an “all in” mentality. Otherwise, one risks, as they do in politics or business, of being shut out of important opportunities.
Yup….that’s my comment. I’ve posted comments on here numerous times, and they have always been respectful. What infuriates me is that I posted an excellent rebuttal to your notion that index funds are a sure-fire strategy for sub-par returns. I supported my position with research from some of the best minds in world, including the most recent research by Fama and French. But you chose not to post it, since it clearly debunked your ill-informed position.
As your entry notes, “Trying to shut down others simply because they disagree with your approach is the coward’s way”. I couldn’t have said it better myself.
Not that you’ll have the balls to post this coment…
Great post, Garth.
There’s no need to disrespect someone because you don’t agree with their views.
This is just a question between you and me and is not honestly not intended to goad you in any way. No need to post it if you don’t want to. I am just trying to reconcile the two positions here and get clarification, as I am sure that there is a distinction. But I was wondering how the discourse of these gents differs from what you had said about yourself when you said that you had told an MP to shut up in a Commons committee and that he was an idiot. I recall you also saying recently that you would have thrown yourself out of the Conservative Party too if the roles were reversed. Now, I speak extremely highly of your blog and tell my wife that you are a great guy but that you can also have this abrasive edge to you, to which my wife replies, “Then he can’t be a great guy.” What do I tell her?
Well, like it or not, being labelled a mere chickenshit will not deter this rooster.
hahaha, accusing Garth of being a pussy is just lunacy!
Is the guy Ben Bernanke, or what?
It’s his blog, he should maintain it as he does. After all we should be thankful to Garth for his work, not him to readers for not posting insults and bad attitudes. Comments are very important and they do provided tons of helpful information, please keep it going for as long as you can.
PS: Did I mention that bringing the gang into the situation is even more pussier?
ad hominem: is an argument which links the validity of a premise to an irrelevant characteristic or belief of the person advocating the premise.[1]
http://en.wikipedia.org/wiki/Ad_hominem
too bad about the Junior Championship last night in Saskatoon but team USA played very well
Hey Garth, They won’t love houses because they will need to sell just so they can eat at a time when prices will be falling. Outch!
As I have said b4 OIL is the new gold.
Garth, I would like to thank you for the time that u put into running this blog. I know you and I have been called worse than chickenshit so no big deal. But there are some crazy folks out there. Blog Dogs should take this thread to thank you Garth for what you do. People should show each other respect and a fun poke here and there is ok.
So now that I topped off my RRSP and TFSA today, I have some $$$ left to invest. Was thinking about adding more $$ to my margin account but I think I have enough in there. Any ideas Garth?
and blog dogs don’t say real estate, gold or GICS, they are for the dumb investors.
Its quite the opposite for me. I have never done this well in my life! During the so called real estate boom in Calgary, the headlines in the paper were “Prices going up $500 a day!” It was so very obvious to me. I stayed away and saved at least 40% of income and learned as much as I could about monetary, investing, et al.
There is so much great information free free free! There is absolutely no excuse to be broke nowadays. We live in the entitlement generation. Too lazy to get the answer themselves.
If there are any trapped in debt broke out there reading this blog my question is why? Are you dead asleep? The very best information is out there free. Hell, I work a simple job that pays less than the average household and I am in no debt, investing with a solid base in my 30′s still and probably going to retire in the next couple years. This was work for me to find the information grant it but its all there if you do due diligence and apply your lazy hockey watching butts to fiscal security matters.
Let this be a lesson, its not how much you make, its how much you…keep! You have to keep that money no matter what. Then learn investing against the crowd, simple! Garth, I make < 40K / year, lived in my car 5 years ago at my lowest point, and am now only a year or two from being done with work altogether! Why? because I may not be a biker but I put my street wits into my investing and I read read read, did I say that enough times? ~J
i felt that something had changed lately
there’s a general unease or nervousness out there
its a tad eary its somewhat scary and its also exhilarating its different somehow
no sense anymore in stating that a housing crash lays ahead as its all to obvious
goldbugs will always be goldbugs and people fearful of the stock market have good reason to be
where to put ones money perplexes me to no end
have we become overly preoccupied with money ?
the US is fighting a trillion dollar war that cant be won
governments are re inflating bank balance sheets that cant be re-balanced, families are buying homes that they will never pay for
it maybe madness it may be desperation
but somethings going on
Great article Garth…
Way to go, Big Kahuna!
So why have the number of offensive comments, like, quadrupled in the past week?
_____________________________________
It all seems to have started after you made this post.
http://www.greaterfool.ca/2010/01/03/why-stuff-happens-1/
On January 3rd, it appeared as if Vancouver’s real estate bulls suddenly lost it and decided to raid your blog even though the day’s topic didn’t criticize their city. I won’t be surprised if they’ve also generated a large chunk of your inflammatory email.
Some of the extreme bull anger could also be attributed to the media’s increasing interest in Canadian consumer debt and interest rates. The Canadian $1.40+ of debt to $1 of income ratio has been stated repeatedly by the mainstream media (including Global BC) since the year started.
My guess is that the central banks will keep printing and that the ability to produce stuff will continue to far outweigh our ability/desire to consume stuff. Plus that oil is going to go through the roof. Happy new year.
Garth,
How much money must someone have available to invest before it makes sense to use a fee-based investment advisor?
I have about $30k in a company RSP plan. I only have indexes, bond funds, and seg funds to choose from., but my company pays most of the fees. Do you think it’s worth starting to see an advisor or waiting until I have more cash to work with?
It’s about where you are going, not where you are. — Garth
Have to keep posting this one. It has been posted by myself and others before. If anyone thinks that Canada’s Real Estate market over the last few years grew on it’s own merits, you are out of touch. It is possibly the largest government manipulation of the Real Estate industry on record. Basically, the government poured Jet Fuel on the housing market through the CMHC to make the economy appear stronger than it was and to make themselves look good. Nothing but a tax payer (CMHC) fueled housing SCAM!
Not only did it push prices and demand up by giving mortgages to those that should never have qualified, it kept prices artificially high so those that already owned began to feel like they were rich. They went on their home equity buying binges further fueling the economy making the government look even better.
The mortgage debt that the government (The Tax Payers) will be holding is beyond dangerous. It will be as large or larger than our national debt. This is a scandal, reckless, you name it but as pointed out in the article below, the opposition politicians do not want to rock the “Golden Goose” housing market for fear of being blamed for it’s inevitable crash.
“But what few Canadians realize is that the housing market has avoided collapse (prices are down 32 per cent in the U.S.) because the Harper Conservatives directed the CMHC to change the mortgage rules to effectively make the Canadian government the biggest sub-prime lender in the world. What’s almost as alarming as this reckless policy is that no one in the financial media is talking about it…”
“The facts are that over 90 per cent of existing mortgages in Canada are “securitized”
“By the end of 2007 there were $138 billion in NHA securitized pools outstanding and guaranteed by CMHC — 17.8 per cent of all outstanding mortgages. By June 30, 2009, that figure was $290 billion, a figure Lepoidevin says “…exceeds the total value of mortgages offered by CMHC in its 57 years of existence!” CMHC’s stated goal was to guarantee $340 billion by the end of this year and is on track to reach $500 billion by the end of 2010.”
http://www.rabble.ca/news/2009/10/canadas-sub-prime-mortgage-time-bomb
Coming from the wet coast where I bike all year round, I’d be happy to take you out for a spin when you’re out this way. I’m guessing my gang is just as tough as yours (not).
On the subject of “madness”, I would put it down to country wide frustration at having a PM who tells his electorate to xxxx off while he goes on holiday to avoid the Afghan discussion. Oddly enough my job never let me take off like that, but I guess I took it more seriously than our PM.
On the subject of real estate I have been following a number of properties outside of my town (beyond commuting distance to Victoria) and I’ve noticed that nothing is selling and in fact the asking prices are dropping. I expect that is the beginning of a trend that will work back towards the core areas. Anyone else with thoughts about the areas that surround the larger centres?
can we pre-order “Money Road”?
The book is going on the press now and shipping will begin in two weeks. You can order an advance copy here starting on Friday the 15th. I will sign your copy as soon as I receive it, and it will be send off asap. Thank you. — Garth
Garth, Harper actually called you worse. Not squeaky clean Harper. Shame on him.
@Best Place on Meth
“Did you just say that gold has a place in a balanced portfolio?”
Actually Garth has been saying this all along.
“Those who eschew risk, staying with cash or GICs are at the greatest risk.”
Indeed, we’re at the greatest risk of not losing our money. However shall I sleep at night?
So Garth… was that really you as the Construction Worker back in the day? There IS a resemblance…
January – Kelowna, March – Kelowna.
Where’s your grow-op?
Nice to hear that the talks are free. Unfortunately if there are pressure sales involved that will kind of kill the fun.
I will be going anyway (and might even buy a book) but I’ll be ticked if I have to say no more than once…
I don’t think do it yourself investing is that bad really. I just use bankroll management plan with my investing money. I do not do it myself with over 10% of my worth at one time. When my investments grow to be equal to 25% of my net worth, then I take out the 15% and send it to my RRSP which is looked after by my finiancial planner. I have been outpreforming her for 3 years now. DIY is a good idea so long as one is not having their whole bankroll going by themselves. Must have a plan or risk losing it all. BTW, I have my TFSA invested in only 2 stocks atm. Both coal companies, hows that for diversification! Yes I sleep well at night
I don’t know whether do-it-yourself investing is considered smart, but it should not be dismissed. Perhaps other posters here had more positive experiences than I but I can tell you this: in a decade and a half prior to taking on the task of handling my own investments I had “opportunities” (notice the quotation marks) to work with several professional investment advisors. I can recall dozens of calls reminding me that it was time to buy but not one single time did any of these “highly trained individuals” called me to suggest it was time to sell. Not through the dot com fiasco and not before the 2007 crash. When I decided to sell my stocks before the 2007 debacle my so called advisor tried hard as hell to convince me otherwise. I stuck to my guns and did not look back since. How this industry works has been covered at length in Danielle Park’s “Juggling Dynamite”. Sure, if one feels that someone else can look after one’s money better then go ahead and hire out. But look long and hard. Just like much here maligned realtors financial advisors tend to look after themselves first.
For a country of debters – many can see very good returns by just paying off all of their debts as fast as they can. At least anything that is not tax deductible, and carrying an after-tax interest rate that is higher than the best GIC you can find, as it’s a guaranteed return that sees more money remaining in your pocket. No advisor needed – pay highest interest stuff first then get to work on the next highest. Better returns than a GIC.
“Well, like it or not, being labelled a mere chickenshit will not deter this rooster. (You should have heard what the prime minister called me…)”
Harper is the worst PM in history of Canada in my opinion, especially after putting body scanner (i.e., virtual strip search) in airports. We’re losing our freedom and dignity — all because of fear. My family and I vow to never travel by plane again.
“He who sacrifices freedom for security deserves neither.” Ben Franklin.
Anyway, Garth I am looking forward to buying your book.
#3 Gordo…I’m more sure than ever that being a DIY investor now is an absolute MUST. The alternative is beggarization. Albeit probably slowly. Jim Kunstler has it right: the long view is dimishment of living standards.
“Investment professionals” will either nickel-and-dime, commission or fee you to death, or they’ll base YOUR portfolio on rigid technical analysis at a time when shrewd stock-picking will be an essential. They won’t sell when they should, won’t buy when the analysis fails to spot opportunity. Should YOU suddenly decide to sell something in a mutual fund, every imaginable obstacle will be placed in your way. Snail mail, anyone?
Markets do not even exist anymore. Casinos do. Very little real investment is going on, but a whole boatload of speculation IS. Nimbleness will be at a premium for some time to come.
Buy-and-hold? Waiting for the stock price to come back again after a dip…or PLUNGE? That’s my wife’s strategy; she says “everything goes up and down all the time.” Didn’t work too well if you bought in the late nineties and HELD, did it? You’re still way underwater today. We’re now embarking on a multi-year bear market. Unless you plan to need the money in about 2025, my inclination is to not hold anything – except gold, maybe – longer than a few weeks or months. Trade in and out; lock in profits. Why not sell losers now and buy back in lower? ~ not easy in a mutual fund.
I myself have WDO, GAS, ATN, SCP on the TSX; DBA, SRS, ABX, WPRT, EGO, & ECA on NYSE. A nice mix of agriculture, precious metals, tech and commodities you couldn’t replicate in a fund.
…balanced portfolio…Those who don’t see great opportunity in great volatility aren’t trying hard enough…
So true. This will be the decade of volitile investing, no matter what you are invested in. Deversification is the only true capital protector.
CHMC is the largest subprme lender in the world now. And, who insure CHMC? You, yes you. The Canadian citizens will ultimately suffer the consequences of
the govt.’s ineptness; just like Americans are suffering now. 0/40 is a joke, so is 5/35
What ever started in U.S., always end up in Canada. There are plenty of lands in Canada. Canada is not HK
or Singapore. Keep your eyes on China.
hey Garth, where are you going to “take” your Oil? Last I checked Oil doesn’t fit in your pocket, doesn’t cross borders, and cannot be converted into currency anywhere on the Planet, at a moments notice. Gold IS Money Garth – Oil is a commodity … “take” the money.
Garth, can you tell us what will happen to commodities when the pin is pulled on the global economy and we enter a deflationary spiral? History tells us the only asset to hold its value during this scenario is your nemesis , gold. Please inform the people on here that governments around the world are working in unison to establish a world government run by the U.N . That is why the western world has been dragged into such indebtedness , to bring us to our knees to accept world government.
Part of the mechanism that brought the various global markets to differing degrees of dislocation in the past 2+ years is the fact that many of the major players (institutional, sovereign, etc) were “on the same side of the same trade at the same time”. What this means in plain English is that the correlation between approaches is much higher than people would believe, even between asset classes that people would normally consider to be unrelated.
The fundamental point is that everyone is in this pot together, whether we like it or not. Each investment approach has some risk frontier, whether people believe it exists or not. The idea that one approach is superior over another is highly dependent on situation. Few readers have disclosed the make-up of their “portfolios” and their personal circumstances, so everyone else really needs to take a chill pill and ease off on the vitriol. Until you’ve walked a mile in someone else’s shoes, you shoudn’t have a full basis to comment, and even then, discretion is still the better part of valour. Every once here, save the principal, is essentially anonymous. Take the peanut gallery comments with a healthy dose of salt. And try to refrain from grinding the remaining salt into other’s wounds.
If someone wants to go all-in on GICs, gold, residential real estate or Auchentoshan, what does it matter to you? Are their bills coming to your house? Probably not. Sure, there can be points made that, down the line, some subset might be subsidizing others due to some future possibility of a market collapse. Guess what? We’re already up to our eyeballs in this “mess”. We’re all going to be “paying” in some form or another – asset prices, taxation, physical or mental health, what-have-you. Nobody is going to get a free ride, but some lucky contestants may be able to reduce their fare.
The world isn’t friction-free, nor is it black or white. It seems to me that there is a general societal fear about being in “no man’s land” where everything is a varying shade of grey. More than that, people who are willing to stand in the middle of the greyness and are up to the task of dealing with ambiguity should ideally be viewed with higher regard. There’s a lot going on between many competing interests and a lot of confused people in the middle whose natural inclination is to rush toward a definitive black-or-white edge.
Thank you Garth for providing this forum and being willing to wade through the pools of grey.
For the rest of the regular posters (we all know the names…), please try to act with more civility when responding to others about your cognitive dissonance with others’ views. It really does bring down the quality of the blog, especially for those (and there are arguably many more in the silent majority who are only readers and have never commented) who are trying to amalgamate as much information as possible. Devolving the “conversation” into name-calling and shouting matches hurts everyone.
Regards from Calgary…
Hello Mr. Turner,
May I embarrass you by saying you’re one of the very best. Also I believe my girlfriend is in love with you. All I hear every night is have you read the latest Garthy-poo. May I also give some criticism? Even with your doom and gloom I see you as an optimist. I believe you don’t want to scare us sheep away. Also you are better than this. I wish you would go into more depth. Lay it on us man, we are not that dumb. I have prepared my top 10 reasons for why I feel you are way to optimistic. Hope you like it.
10 REASONS WHY HOUSING MAY FALL
By PrinceGuy
1. CMHC – when buying a home the bank asks you to get insurance on the mortgage so if you can no longer pay, the bank is protected. For est. $7000 insurance (stimulus), the bank will offer you twice the mortgage. So people take it. The banks are covered and the CMHC is covered by the tax dollars and people can always declare bankruptcy. If stimulus dries up – Possible 50% Loss.
2. Historically a good time to buy a house is at 2.25 average house prices to family earnings. A 2.25:1 ratio. When it’s at 3:1 ratio it is considered a bad investment. Currently it is at a 6:1 ratio. Incomes are also dropping. – Possible 50% to 65% Loss.
3. Historically a good time to buy a house is at 15 times average house price to average rent home price. A 15:1 ratio. Currently it is at 60:1 ratio. Rents are also dropping. – Possible 75% Loss.
4. Interest Rates – banks are offering a 3.75 rate. You may get one even much lower. The historic norm is 8%. In the 1980s we experienced 18%. The Federal Reserve does not control interest rates (misconception), the bond market does. You may see news articles soon like big financial bodies (banks, companies, countries) offering debt (bonds, treasuries) to raise capital. This is to be noticed as a huge rise in SUPPLY. Also watch for these huge bodies to not be able to pay their debt. This is to be noticed as a huge drop in DEMAND. When demand does not meet supply, debt will need to become more attractive to people purchasing the debt. So prices on treasuries and bonds will drop and interest rate yields will go up. And so will mortgage rates. – Possible 50% Loss or More.
5. Boomers – born between 1945 and 1960. The first of the lot turning 64 this year. They double the generation X’s and own a whack of property. They have stop buying, started selling to raise money for retirement and will soon be dying. This will create a huge supply and cause a large slide over the course of the next decade. This demographic fundamental is the first thing I noticed and still remains the most important. – Possible 50% Loss.
6. Subprime Loans – stupid interest rates and no background check. A subprime person to lend to. Everyone has heard of these guys. Supposedly we are still feeling this mistake. Also Prime Mortgages (a reasonable interest rate and good background check) supposedly even these people are foreclosing. It may have to do with income. I heard there have been some lay-offs lately. – More Loss.
7. Option Arm and Alt A. Loans – there are mortgages out there that offered no payment on the principal and not all the interest. What ever interest you don’t want to pay will be added to the principal. Therefore when you refinance your mortgage you will owe even more. Yes, but don’t worry in 5 years your house will be worth more so you will have more equity. However it is also possible that prices will drop and interest prices will rise forcing you to pay even more on an even larger debt. These loans are estimated to have an estimated 50% or higher foreclosure rate in coming years. This, by the way is larger than the Subprime market. – Massive Loss.
8. Foreclosure Rate – is at all time highs and the banks are putting these houses on the market very slowly. The reason is not raise supply which will drop prices. This is a devastating tsunami when it unleashes. – Massive Loss.
9. Delinquency Rate – (people late on their payments and are highly probable to foreclose) Also at all-time highs. This is a massive tsunami behind another devastating tsunami. – Massive Loss.
10. Commercial Real Estate – These guys are in big trouble. I read that there are loop holes that allow these guys to slowly show these huge losses over the next decade. This one is said to be an absolute monster that will kick us down for many years.
Note: These observations were made before 2010 when we had a recovery or thriving economy. If things get better or worse it may alter these numbers. Please feel free to verify the information over time for any changes.
Indeed. Things have got nasty.
In general I think we have collectively lost faith in our leadership and do not know where to find truth.
Our politicians are controlled by special interests, our media is heavily concentrated in a few hands and our corporations are in it for the short term.
There are no talk shows on television only “shout” shows where people talk over each other. Dialogue has been replaced by professional hackers. If you are left wing you watch MSNBC to confirm your views, right wing you watch Fox News to confirm yours.
It is all so depressing.
Garth,
You are wise to moderate. I have seen the degradation in comments going on over at some of the Alberta bubble blogs and it’s so noisy that it isn’t worth the bother to get to the real posts anymore. Yikes! I wonder if parental controls on the computer are keeping our kids away from all this real estate inspired profanity.
And ad-hominem attacks are always to be dismissed. If the counter-argument is an attack on the person’s character, chances are the argument won. It’s right in Carl Sagan’s “Bullshit Detection Kit”.
To sum up with an example,
If the argument is “interest rates have no where to go but up”, and the counter-argument is “Garth is an idiot”, then I will put my money on Garth’s argument. The counter-argument is irrelevant. Who cares if he’s an idiot? Idiots make good points now and again and they have to be addresses at the level they are made. And the fact is we are all just idiots trying to get a little perspective and improve our understanding. The fact of the matter is, most of what we know just ain’t so. But we can get closer to the light with reasonable, tasteful, respectful debate than with insults. And that is what Garth is trying to provide with this site, and I respect him for that.
I don’t agree with everything Garth or the other posters say, but I’m here to challenge my thought process. I fire off some big posts sometimes. I always check to see if there is a good counter argument. Usually nobody replies but sometimes they do, about 50/50 either liking the post or thinking I’m full of it.
On “Do it yourself investing”;
It can work, but expect it to take 4 hours a day and you had better approach it with the idea you have a lot to learn, the whole time you are doing it. Unless you have a lot of money to manage and the gains are larger than your regular income, it probably isn’t worth it. But it can be done. I had a few years where it worked well for me, but holy heck did it require a huge investment of time, education, and creativity! If your regular job pays better than your investments, Garth is right, get a good pro.
from the smartest guy in the room, Eric Sprott:
Sprott said gold is the only asset about which he remains positive in the short term. His C$1.42 billion Sprott Canadian Equity Fund — which is up 23 percent in five months — has 34 percent of its portfolio in mining stocks and another 39 percent in bullion as of Nov 30. He said though he has no target price for the metal he doesn’t think it has reached a ceiling after quadrupling over the past eight years.
“If you get into this thing where you’ve got to keep printing more and more and more, who knows about the price of Gold?” he said. “It will be the new currency in due course.”
Static: a state of stability.
Chaos: a state of disorder and confusion.
OR…..
That was then…..This is now.
OR…..
Let go of the past…..embrace the present….watch the future.
Plan your way out of the Chaos.
“. . . it’s decadial madness, . . .” — More to it than that, but overall that’s a fairly good assessment.
When all these US-subprime and / or Alt-A’s (whatever they’re called) and the Cdn. equivalents come up for reset, that’s when it’s gonna turn ugly, especially if one or both partners have lost their jobs and can’t sell their homes.
But whadda I know? We have never been in that shape (I was laid off once back in late ’78 for a few months, but that’s all). The adage “Judge not, lest ye be judged” comes to mind.
——
#147 Steve Adore — Good post. See links I posted yesterday afternoon.
——
Pack your bags, ‘coz it’s check-out time, baby! / Drum roll, breakfast roll or cloud roll? / There was an incident in the Antarctic today. Japan claims the other boat tried to hit it. Judge for yourselves.
4:08 clip on current hyperinflation. / 2:42 clip on empty mall in Florida. / Twelve to choose from. Choose one wisely! / Still bondaged after all these years?!
Headline is actually a very good question. / Derivatives. Do they exist? / Us boomers are screwed!
It appears the entire northern hemisphere is having a frozen banana milkshake. Chances are this weather will have a major effect on future crops; hence there have been some links here about impending world food and water shortages. Here’s another one. Mix well with the above, and one sees this year and beyond sucks big time.
Never mind that almost all of Pakistan’s oil and gas companies are either broke or headed in that direction; what of other countries?
It’s almost like being a space cowboy!
Unable to process how money in the bank or in a GIC puts me at the top of the risk list. If I am debt free and have some cash how can I be at the greatest risk???
Garth we mustn’t fault on those humans that have emotions and use them in their language in lieu of logic and thought. At least that’s what I have to remind myself every time someone tries to win arguments with errors in reasoning. Maybe we should compile a list of these errors such that others don’t make them. This blog is just one place where logic actually has a chance at swaying a thought. I’m still awaiting a time in history where integrity matters but could it just be around the corner? I can only hope. I’ve been told that a generation ago people actually cared about the well being of others over themselves so I suppose their might be hope.
Excepting your posts, which are always awesome, your very high tolerance of conflicting opinions and debate is my second favourite thing about this blog.
My favourite thing is that you have collected a plethora of like minded individuals from all over the country that see what I see and think what I think – many of us come here to gather strength and ammunition.
The naysayers can post what they will, it only brings the rest of us closer together and we learn more each day from it. But they can also go to dozens and dozens of other blogs where people think like they think so I don’t really understand why they come to this one.
The tone of the comments has noticeably changed (god knows what’s in the wastebasket). But of course, as the writing on the wall gets clearer they’re either going to get more riled and go into attack mode or realize that you were right all along and bugger off.
When it really starts hitting the fan, you’re probably even gonna get some idiots that blame you (like Roubini) for spreading ‘self fulfilling prophecies’. Yours will be ‘the blog that wished it so!’ Ha! I hope you let some of those through the gate just to see what the dogs do!
“Those who think do-it-yourself investing is smart will learn.”
I am not advocating do-it-yourself investing. I was making a point that the performance of many financial advisers leaves a lot to be desired. My last financial adviser tried to get me to buy Nortel about a year before it started to tank! Fortunately I read up on the stock and thinking it was too risky, did not buy it. This guy was with a major brokerage firm. I have had two advisers and I’ve done better following the advice of an investment newsletter. My portfolio was only down about 25% during the crisis and I have more than recovered my money. Mark Hulbert, probably the most respected reviewer of newsletters has recommended only a few in Canada. I still believe in getting advice from a planner for retirement and tax planning, but to buy individual securities, is another matter. The only thing that is “extremely unintelligent”- hmmm, as opposed to unintelligent? is not becoming financially literate and trusting your life savings to someone else without understanding what is going on. My portfolio is close to $200,000 and I spent less than five hundred on newsletter and transaction costs. Had I invested in actively managed funds, it would have cost me much more.
You don’t think index funds will do well. Warren Buffet has recommended that people who don’t want to spend a lot of time researching investments are better off buying them. Do you want to tell us how many actively managed funds beat the index over the last 10 years Garth?
thanks garth… for keeping it real. i do invest on my own after reading a lot of reading . my gains aren’t great but it’s better than GIC’s and I alway max on my RRSP
Cautious Canada
The country has avoided the financial pitfalls of the U.S.–for now.
http://canadabubble.com/bubble-articles/295-cautious-canada.html
Snicker.
Nice post.
Likely a decade of no growth as the currencies appreciate vis-a-vis the US dollar in the third world countries like China and India. The cost of goods for Americans will rise causing stagflation for the next decade. Probably the place to invest some money is the venture exchange in Canada. I think the major stock indexes in America will still be about the same in ten year’s time from now. Looking for the venture exchange to crack 15,000 in ten years’ time.
Happy new year Garth. I have always been a gold bug and i believe you are being overly optimistic about our economy. Have you really taken a good look at the morons we have at the helm in ottawa or glanced south at the criminals behind the cash register?
Well put Garth and as for the Ben’s of false and self-serving importance please continue to leave them out and unless you feel it nessasary you need not mention them. Off to Tim’s and run about town perhaps to check the pulse of 20-10.
Please consider posting the audio of at least one of your future speaking engagments — even if the sound quality is poor.
Thanks
Garth, I really resepct what you write about in your blog and to have a person like Ben rigt a commit like that unbelievable.
Mikey
“Hence, attacks from those who deify gold (because they hoard it), who say real estate will go up forever (because they own it), who decry the stock market as pure risk (because they fear it), defend a GIC (because they know it) or, in the case of the comment above, push one strategy on everyone (because they do it).”
Wow, your so right on the button Garth there! I’m guilty as well as I won’t go into the stock market big as I don’t understand it and unlike those who were burned with ABCP (assest backed commercial paper) I won’t invest in what I don’t understand. So I stay cash.
I think what is happening in the world is people are putting money, wealth and possessions ahead of the real values family, friends, community, honesty and charity.
Garth I will buy your new book too and learn ask use your advice too. I believe you can always learn something new each day.
Mike
Well said.
It’s funny how people will listen and act on strong willed opinions and not what is factual. I guess the facts are harder to swallow for most.
People who are hanging on to their comfort zones like security blankets I think are in for a rough decade. Changes are coming whether we like it or not.
Cheers.
#1
“Garth, you are right, on all counts – without question.
Ben is a frucknut, imho. Ya Ben, that’s what I said numbnudz.”
That’s cute…and so well articulated.
04 January 2010
Why Was There No Canadian Housing Bust? The US Fed Says That They Were Probably Just Lucky Except…
Old news. Bad report. — Garth
#18
(( to which my wife replies, “Then he can’t be a great guy.” What do I tell her?))
I’m fond of civility myself but I have learned that it is not the best metric whereby to judge human character. Con artists, for one example, can be as smarmy as they are dishonest. Blunt honesty can sting but sometimes it is exactly what the patient needs.
More “unbiased journalism”… here’s today’s “news” of the day (i.e. spam written by a RE association and released to national media):
http://ca.news.yahoo.com/s/capress/100107/national/housing_lepage
To summarize, Real Estate will be HOT for the first half of 2010 (shocking). The reasons listed:
- confidence in the economic recovery
- considerable momentum from an unusually strong finish to the previous year
- stimulus effect of low borrowing costs has contributed to a sharp rise in demand that has driven activity to new highs
- Canadians have shown a lingering reluctance to acquire depreciating assets such as consumer durables, but have embraced the opportunity to invest in real property
Wow – funny how none of the real reasons for a Q1-Q2 boom get mentioned:
- rush to beat rising interest rates coming in July
- rush to beat HST coming in July
- rush to beat new restrictions on 5%/35-yr coming soon
- comparison to sales stats from early 2009, when the entire market was frozen- rush to dump condos before 30,000-40,000 new units hit the market in 2010-2011
- Flaherty/Harper still encouraging banks to approve higher number of unqualified applicants and dump mortgages to the government
I’ve been thinking more about index funds.
Yes I think people might be bitter with the performance in standard ETF’s. One item to consider is the following
Dividend Paying ETF’s
WisdomTree DEA Ticker DWM
2009 Dividend Yield 4.45
(0.48 % Mngment expense ratio, 11 % turnover)
WisdomTree International Div Top 100 Ticker DOO
2009 Div Yielld 3.57
(8% turnover, .58 % Mgtment expense ratio)
These are two examples of about a dozen different half decent ETF’s that pay.
That’s not that bad versus the plan to buy div stocks.
Sure beats using a Financial Planner with mutual funds with expense ratios between 2 and 3.5 %.
I’m sure these will have a place in some peoples hearts.
Not in my portfolio at this time, however I think ETF’s such as these will make people less bitter.
#44 Another Albertan, very well put.
#51 Rob, the answer to your question is inflation. If one is sitting in cash with these low rates then you are losing purchasing power. Factoring in taxes for non registered increases the lose. Consider “real” vs. “nominal” returns.
General….Garth has also referred to a balanced portfolio of which gold has a place. A balanced portfolio through diversification would never hold only gold or only oil or any other single investment. I believe he has stated that his preference for oil over gold is based on supply and demand, declining reserves, increasing population, developing nations, and the fact that oil is needed in a greater range of uses.
Perhaps those who write personal attacks feel threatened in their own beliefs. It could be that they’re reading “YOU’RE WRONG” when others, myself included, read “balance”.
I think we are all trying to figure out the what, where and when to invest to maximize returns and minimize the risk we are each comfortable with accepting. I know that is what I’m doing. The future is clouded and our psyches (sp?) are coloured by the recession, market meltdown and unprecidented government intervention. Good luck to all in maintaining lifestyle and future prosperity.
I don’t know if your observation of a deterioration in the tone of comments is a trend, but I do posit that over at least my lifetime there has been a trend of deterioration in society. One of my favorite quotations, apparently via Barry Goldwater of all people, is that we can’t legislate morality. My hope is that when the Bernanke et al circus has had its day, we will rediscover the basics.
Garth,
What do you mean with this?
“Those who eschew risk, staying with cash or GICs are at the greatest risk.”
The greatest risk we face with an average life expectancy of over 80 years is running out of money. Most people will discover too late that being ‘safe’ was a big mistake. — Garth
“And to those who want to take me on, did I mention I’m in a biker gang?”
You fight me? you fight my whole gang!
Blog dogs ATTACK !
The next decade could be a bitch, mostly due to a lot of market unbalances, depts, irresponsible (or stupid) politicians and population aging. This could be true except for two things:
1) Human productivity, creativity and resourcefullness.
2) Emerging markets (where there happens to be a lot of humans).
From where I stand the last decade was not a bitch (even for stocks where prices don’t tell the whole story, valuation is now much cheaper ence growth potential that much better). It is also during that decade that I was able to put all my 500 records on a small device I can hold in my hand…
If you want to make interesting predictions I think you’d do better by looking at both sides of the coin…
1) kudos to Garth for not posting disrespectful comments
2) the great Canadian housing bubble will not pop (we have the most fresh water in the world, safe cities, universal health care, great education system, 4 seasons, centre of multiculturalism, resource/commodity-rich, a dollar that is the envy of the world, great values including equality etc.)
3) Buy Garth’s book, you may just get a can of squirrel stew shipped with it!
Remember, you heard it hear first.
#54 Tom
((Mark Hulbert, probably the most respected reviewer of newsletters has recommended only a few in Canada))
Thanks for the information. I am searching for a newsletter or 2 to subscribe to, so I will check out Hulbert’s recommendations. The one thing I do wonder about newsletters is … if they are so good at picking stocks why do they need to garner profits from newsletters?
Indexing —- this book is calling the financial services industry a bunch of hardened criminals.
http://network.nationalpost.com/np/blogs/wealthyboomer/archive/2010/01/06/the-investor-s-manifesto-from-armageddon-to-prosperity.aspx
Such a generalization is meaningless. — Garth
Hi Garth,
Thanks for the ongoing advice in your blog I have recently forwarded your link to friends out west who are still disillusioned . I just wanted your opinion as to whether you feel communities surrounding the GTA (specifically Ancaster, Hamilton) will experience a significant market correction like Toronto.
My personal feeling is that areas in Southern Ontario which have had modest gains over the past 7 years (6.2 on average) would not be subject to any major corrections. Also, the REIN has named Kitchener & Hamilton the #1 & #2 overall best communities to invest in the upcoming years. Your Thoughts?
As always Garth keep up the good work and I look foward to reading your new book.
SP
While I think the REIN is run by kooks, I agree that Kitchener is a far more stable community in which to invest, but it will still be very hard for speculators to clear much money. Hamilton is a bucket, years from recovery. — Garth
Ok, enough squabbling! If oil is the play lets talk about it: should it be in the form of futures or stock? If stock, which one(s)? Suncor?
I would always choose stock, an integrated oil company with both upstream and downstream operations. Futures are fun, especially using leverage, but just for entertainment. — Garth
#53 – Do you realize that “The smartest guys in the room” is the title of a documentary on the Eron fraud?
Since I got rid of my financial advisor 12 years ago, i have been doing my own investing and have made a small fortune. The gold and silver index HUI is up over 1000% in the last decade. I expect more to come as the claim that they are in a bubble is laughable. Gold is only half way to its all time inflation adjusted high of $2200 and silver is not even close to its nominal high of $50. You cant print gold, even though the bankers try. It is estimated that for every ounce of gold sold, there is 50 ounces of paper gold sold. Just like the mortgage backed security derivatives that blew up in the bankers faces this one is set to go off too. You think gold is risky, try that paper in your wallet. That paper is a derivative backed by nothing, but debt, and the banks of the world have their printing presses on overdrive.
I’m happy for you, but hope you’re diversified. One-trick ponies often end up as glue. — Garth
Gold–
Some see it as a commodity–
Some see it as money–
I see it as a political metal–
A metal that reacts positively to political insanity,of which we have a bubble in–
And now–a passage from my Goldbug bible–
“Every-time you buy a piece of gold”
“A little angel whispers FU–in a politicians ear-
You have a problem. — Garth
#80
((Also, the REIN has named Kitchener & Hamilton the #1 & #2 overall best communities to invest in the upcoming years. Your Thoughts?))
A ‘financial advisor’ from Fredericton, N.B., told me that in Fredericton real estate has always been stable, always outside the boom-bust syndrome … but he is expecting huge increases in the prices of Fredericton housing in the coming years.
I have been wondering if Kitchener (one of the two places I have been thinking of relocating to) might be the same. I wonder if in places where real estate still seems relatively undervalued, the prices will skyrocket, as the overvalued markets tank.
Regional centres such as these only benefit from a jump in employment opportunities. K-W has some, Fredericton does not. — Garth
I have seen the Canadian family debt/income ratio mentioned here(and also in the media) a number of times. Apparently it is about 1.4. I don’t understand what is included in the “debt” part of this calculation.
If it’s monthly debt obligations divided by montly disposable income then about 30% of monthly debt obligations aren’t being made. Wouldn’t that mean imminent foreclosures and/or repossessions? What am I missing here?
All I can say is “well said”.
no bubble in calgary
calgarys average house price went from $204,000 early in 2005 to $442,000 in july 2007..what bubble
You will continue to collect more fans Garth. Your housing and investing dialect is going to continue to break the hearts and stomp on the dreams of “the many”. As long as I’ve been slumming around here, the message has been more about dealing with financial risk in general, versus just slamming real estate speculation or another “investment” vehicle. Of course as soon as someone mentions any possibility of RE not being the road to riches, look out, nasty little critters those housing pumpers can be.
Advice and discussions have been for the most part excellent after some “weeding” of the blog. There is some great info from not only you but the semi-regulars which has only helped my own personal position. It seems the only argument for RE to go up is the same asinine immigration or low bank rates (or ass you’ve stated numerous times, EMERGENCY RATES) forever view from the RE fear mongers. Real estate appreciation is a dead horse in Canada for the next 5 years. There are no more gimmicks left in Mr. Flaherty or Mr. Carney’s tickle truck to prop it up any further.
If the central bankers can enact emergency rates at extremely low levels to give the economy a push, why can’t they enact rates at extremely high levels to slow it down?
Oh that’s right, they can and they have in the past…
Anyone still dreaming, thinking Harper, Flaherty or Carney has any real control over maintaining rates are dreaming a big wet dream. We’re part of the “G”, and USA and Europe will dictate the direction of money…
The good news for the housing pumpers is the USA market is still in the shit and that might give you a couple of years of interest rates at 2007 – 2008 levels. It could possibly allow those that purchased with a 5 year fixed and 35 to 40 year mortgage in 2006 – 2007 to lock in(2011 – 2012?) before the ascent of interest rates. Those utilizing subprime mortgage vehicles in Canada in 2008 and beyond, well, there is a very good chance you will be a casualty of negative equity.
Things are quiet now but beware the ghost of Paul Volker…
The latest about the 2010 housing boom: http://www.calgaryherald.com/business/Canada+housing+market+continue+through+2010/2415582/story.html
Right. Hopeful thinking.
#26 Gord in Vancouver,
I think you are correct. That post really got the Vancouver Bulls along with a number of others upset and triggered a lot of back and forth name calling.
I don’t think many people understand how deeply a housing dip or burst in prices would be for Vancouver’s culture. When the dip happened last year I can’t tell you how perplexing and upsetting it was for many people here as their entire investment strategy was tied to house prices rising forever. It is very much considered a birth right in this city.
I think it is now clear to most people that the most optimistic future is a stable market with modest ups and downs. Even more agree with me that there will probably be a correction of 15-35% (depending on the area) followed by an overall flattening for a number of years.
The significance of a market that does not throw off automatic gains cannot be underestimated. The number of people in this community that have 2 or 3 investment properties, who require a “mortagage helper” to pay the mortgage or are leveraged to the hilt cannot be underestimated. It will be a significant blow that will be felt for years.
#90 Calgary__RIP__OFF,
Correct. Even us Bears thing the outlook for the next few months is bright for SELLERS. The low interest rates and the remaining “it is different here/housing prices always go up” culture remains dominant. The second half of 2010 is when it will get interesting as affordability gets cut down.
I really think this goes straight to the nastiness. The RE industry pumps these articles out weekly across the press. I bet an article like this will appear in pretty much every CanWest paper in the country. The intent and effect is to put Canadians back to sleep on the fundamentals.
This is why we are so angry. We have no confidence in our institutions.
“A little angel whispers FU–in a politicians ear”-Jr.
Thats pretty scary dude, so what does the angel say to you when you deliver your whatchtower?
Garth
Recently looking on the mls “international properties”,cities all over the U.S., (North and South), but especially Florida,…so many relatively new houses $25000 – $50000! Seemingly decent areas, for now…
I’v been getting very disillusioned about property $$$ in G.T.A, $275000 – $350000!!! and those are cheap ones!
Comparable houses all over U.S. are 1/10th the price of G.T.A and in the back of my mind….Something is a miss!
That divide can NOT be possible between two similar countries sharing generally the same GDP as well as border and trade…Can it? The economists/media are all saying it’s normal and so far they are proven right…
Your points and logic make so much sense, and yet…the houses keep going up here, while news in the States says they will drop another 10-15%!
Are we missing something here? When will this pattern break? Some of us can’t wait forever.
Any opinions on the Ottawa housing market. We moved here 3 years ago and find most folks here believe that the housing market is insulated from any down turn with the Feds as the largest employer. Housing prices have risen tremendously in the 3 years that we have been here and other than cheap money, I don’t understand the price increases. With a leaner federal public service expected in the next several years, do you see housing prices declining in Ottawa?
#81 Tony
These other two equities on the TSX are also involved in exploration, retail and refining process. I have retirement income in both but the TSFA would be a great vehicle as well.
Imperial Oil $40.75 (IMO) – Yearly div per, $0.40 (1%)
Husky Oil $30.30 (HSE) – Yearly div per, $1.20 (3.9%)
Both are about 10% above their 52 week lows(February 2009) and 20% below their 52 week highs, and minimal debt.
Anytime I can get (HSE) under $29 or (IMO) under $39, I’m a hoarder shopping at Walmart…
I prefer HSE because of the dividend but IMO has more “up” value. Either way I’m hedging my bets paying myself when I gas up at the pump, getting a dividend equal that that of the best GIC and playing the long term inflation game.
Both are near all time lows over the past 5 years. HSE has been in the $30 – $50 area and IMO in the $40 – $60 area during that period and we know $100 oil is on the horizon, again.
#86 whiterock on 01.07.10 at 11:01 am
——————————————–
I think it means that if you make $50,000 per year, but have $15,000 in disposable income, your debt load would be $21,000.
I can`t find much commentary on the Canadian REIT sector. There is a lot of talk about the imminent collapse of the commercial real estate sector in the US.
XRE is clawing it`s way back from a 60% rout during the crisis. Do we buy, hold or abandon ship ? Current yield 5.58%, according to Yahoo finance.
Thats pretty scary dude, so what does the angel say to you when you deliver your whatchtower?
$fromA$ia ( o Y o ) on 01.06.10 at 11:43 pm
Great article Garth…
Way to go, Big Kahuna!
I’m sure you would know Garth has a big Kahuna,by the way you always crawl to his rescue–
I’ve noticed Garth is a quite capable of defending himself–
So please A$ia–get off you knees–
your embarrassing yourself–
in front of the whole board (:
#95 Colin on 01.07.10 at 11:59 am
——————————————–
get a gander from this chart, keeping in mind layoffs occurred in the early 1990′s (look at price action between 1994 to 1996). That’s the drop you can expect due to government job loss. Not sure what impact rising interest rates will have:
http://orebweb1.oreb.ca/avg_oreb_sale.shtml
#94 Confused in T.O on 01.07.10 at 11:58 am
————————————————
Have you stopped to consider that the US real estate market may be severely underpriced?
albertas economy is falling hard
there’s 10,000 layoffs coming at the shell scotford upgrader expansion that is now 95% complete and there’s another 6,000 layoffs coming at the the epcor power generating facility at keephills
combine those 16,000 lost jobs with all the service jobs dependant upon them and its easy to see where albertas heading
house prices maybe staying above water but rents are plummeting fast
wanna see what a real crash looks like, just look back at history as its about to repeat
its gonna get really nasty here in boring ed stelmachs alberta real quick
The Best Post of 2010
“Every-time you buy a piece of gold”
“A little angel whispers FU–in a politicians ear-
#84 Jr. That was pure brilliance.
I guess it’s just a case of ‘inconvenient truths’ for people with a ‘herd mentality’ – - haven’t they ever heard of “don’t shoot the messenger”?
#96 smw on 01.07.10 at 11:59 am
I just bought 500 HSE based on your comment. (I had been thinking about it, but procrastinating)
thx
I note that alot of the analysts are lukewarm on it — but agree its a decent long term investment, plus yield is decent.
I’ve been meaning to pick up some CPG also, but at $39 Its too rich IMO
Garth,
I fear stories like this:
http://www.zerohedge.com/article/aig-has-become-figurehead-all-broken-america
Don’t know where you get your faith in the equities markets when the markets seem full of crime, criminals and corruption.
Garth, take no prisoners. If they can’t explain their point without being abusive, who cares what it is. ‘Free speech’ doesn’t give you a permit to say any insulting thing you want – start your own website if you have to do that.
Index Funds? Would that be the ones that just had a negative return for the last decade? Like, say the S&P 500, that returned -24.1%, and of course, that was for the Index itself, if you were in some sort of Fund or whatever that ‘tracked’ it, well, you tracked that loss plus the MER/fees etc. You investing genius, you.
I suppose you meant the TSX, which went from around 8,300 in Jan 2000 to 11,746 at the end of the decade -not so bad, a +41.5% or so. Go Canada!
My point is past returns are not guaranteed to be repeated. In anything. If it were that easy, everyone would do it.
Incidentally, the goldbugs can take a bow, gold was +280.1%, silver +209.4% for the decade. No wonder your Broker told you not to buy them years ago. I wish I was smart enough to buy them back then.
While running our of money before one passes on is a misfortune, the real tragedy is that the elderly actually have to worry about that. Where are the families in all this? This may not be a popular view but morality would dictate that we take care of our elderly as they took care of us in our childhood. That used to be the point of becoming a parent…
As for the pros and cons of owning gold vs oil good arguments can be made for either point of view. It’s all been covered here before. I do know this: paper currencies are becoming unstable and in historical sense not one has lasted very long as a medium of exchange. I’d get more oil but I’m running out of space in my basement. So gold it is. If it crashes I’ll leave it to my children. Should be way up by the time they’ll be retiring. (If there is one lesson I learned during the last decade it is to at least partially invest in things I can actually take possession of. Those pieces of paper they send me each time I make a security purchase don’t add up to much once the big boys decide to bail.)
The Real Estate Party and the Bungalow Landlords?
“It is a ghetto, it is really ugly in here,” Easson says.
She can’t walk her dog because of broken glass. Easson and her husband heard a woman screaming one night, so they jumped out of bed and ran to the front window only to see a couple having sex on the sidewalk.
Another night, they watched as five young men urinated on their front lawn. A 78-year-old woman just home from surgery had five beer bottles smashed against her house. Another senior had the covering from a cable box thrown through a window. Large backyards provide the perfect habitat for rowdy outdoor parties.
“We had one young family move after a rock was thrown through the window of their three-year-old daughter’s bedroom,” Easson says. “It is a really dire situation.”
About five years ago, the city completed a study on student accommodation and adopted what was called The Neighbourhood Preservation Model. Under that model, more student housing was allowed while city bylaw officers and the Waterloo Regional Police were supposed to take a zero-tolerance approach to rowdy and illegal behaviour.
kw record
I’ve managed investing my own money over the past twenty plus years. I’ve paid my tuition in the tech bubble, but managed to miss the bullet in 2008 and I’ve done well enough.
Early years spent with a mutual fund salesman disguised as a financial advisor was not a great experience and I swore to never use another guy for what I could do myself.
But these days, investing is a whole different ball game. Buy and hold is risky, GIC’s are risky, even sitting on the proceeds from a house sales is risky. And no-one can seem to agree on anything. Inflation/deflation/stagflation or evidence of all three at the same time.
I met with a fee-based a financial advisor yesterday for the first time in about 15 years. What drove me there is that I couldn’t bring myself to buy a single equity last year, and now I’m woefully undiversified. If for nothing else I’m willing to pay the guy to look over my shoulder once in a while. I think of it as portfolio insurance, no guarantees but better than being delusional on my own.
The guy had some good ideas similar to Pope such as using the TFSA for capital gains, RRSP for fixed income, and a trading account for dividends.
But Garth always seems to take things an intelligent step further, so I’m looking forward to reading his book.
Does anyone have a call on the future of agriculture to semi-agricultural land prices?
I know in Alberta,a lot of people bought 1/4 sections,and built McMansions on,which unless intensively farmed/over i think- $10K/yr income,are not eligible for farm status.
Have to believe a lot of borrowed money involved in that silly game–
Jane Randall’s luxury North York condo is being occupied by a tenant who refuses to move out, pleading illness and money troubles to explain why she owes $9,000 in back rent.
All while a silver $200,000-plus Bentley sits in her underground parking space.
Welcome to Randall’s nightmare — where small landlords just trying to make their mortgage payments are treated by the system as if they can endlessly wait while their tenants squat for free.
http://cnews.canoe.ca/CNEWS/Canada/2010/01/07/12375051-sun.html
.
#102
((albertas economy is falling hard
there’s 10,000 layoffs coming at the shell scotford upgrader expansion that is now 95% complete and there’s another 6,000 layoffs coming at the the epcor power generating facility at keephills
combine those 16,000 lost jobs with all the service jobs dependant upon them and its easy to see where albertas heading ))
but with oil going to $100 all that should soon turnaround, no? if not, why not?
#143 Onemorething
This is a blog were people are free to express themselves. This is why I give credit to the success of this site and why people enjoy making contributions every day. If people wish to spend time to share their own experiences to support their comments or advice then more power to them for personalizing their posts. I think Garth spends a good amount of time already educating us that we don’t need others to repeat the same things as if they’re teaching us anything new.
Garth’s blog today speaks loads about comments like yours. I think today was probably one of Garth’s best posts. I guess it’s because he’s talking about what I’ve been thinking of lately.
I myself must admit that I’ve been cocky in the past with my posts due to my success.
I only wish that garth would share more of his personal experiences so that we can appreciate his comments with more depth. Maybe that’s in the books.
Garth,
Just a little anecdote about your reach.
Went skiing yesterday and on comming home I stopped into the local ski repair shop to get mine tuned up.
An aquaintence of the real estate kind was there so I asked him if he ever went to the “greater fool” web site.
He visably winced and said ya.
Then the ski teck surprised me by saying he never missed it.
I think the word is getting out.
#101 Nostradamus jr.
Have you stopped to consider that the CDN real estate market may be severely overpriced?
#26 Gord in Vancouver
Sorry, but I think you’re wrong. All started when Garth posted details about people lining up at the bank for gold. Your comment seems to be reminiscent of your attitude towards real estate. I thought for someone who has been around for so long that your memory would serve you better.
Just an observation. Have a great day though!
#94 Confused: “Comparable houses all over U.S. are 1/10th the price of G.T.A ”
Since there is 1/10th of the population in Canada, then logic dictates that the price there should be 1/10th as much as here.
Rudeness and bellicosity are caused by a thinning of the oxygen layer .
It is like trying to breathe at the top of Mt.Everest .
Hence people are suffering from delusions and act out .
#43 Tran
0/40 and 5/35 isn’t a joke. The real joke is the people getting those terms without knowing how to take advantage of it.
#102 I suspect that at an oil price north of 85.00 per barrel the world economy stagnates at best and more probably declines….depression stuff. I moved to Alberta in 2007 escaping the real estate and subsequent economic crash in Florida. I believed that high oil prices were coming and Alberta would be the place to be business wise. I have come to moderate that view, as I feel that the demand destruction inherent in high prices (and no, the BRIC nations cannot swallow those prices either) make the tar sands a relative stagnant entity. If Toe heel injection and such technologies can prove a higher long term EROEI then I will alter my viewpoint.
For those who see no risk in holding cash.
Garth sees inflation on the horizon from the excessive money printing that most governments in the world are now engaged in. If he is right and we do get a wave of inflation thenyour money will still be there but it will buy less goods each year. That is the risk. At a 10% inflation rate it takes less than 6 years to half your purchasing power.
On the other hand what we are currently in is a deflationary credit collapse and without the current government intervention we would get a massive wave of deflation. In this case if your bank survives your money will buy more.
In my opinion it will depend on the governments will to continue fighting the problem of too much debt with even more government debt. Although I lean toward inflation it could go either way. One way or another the debt must be re-payed. It can be done either through default (deflation) or repudiation (inflation – paying it back with dollars that are worth less than the ones they borrowed).
This comment isn’t orginal with me but it bears repeating
For too many years, Americans have been suckered into buying homes because we’re brainwashed into believing that’s what you do if you’re in the middle class. Buying a home made sense in the 1950′s — when a man married the girl next door, settled down in the same town in which he grew up, got a job at the factory or the small business down the street (while the wife stayed home with the kids), worked there for 40 years then retired with a gold watch and a nice pension. By that time, the mortgage was paid off and the couple would enjoy their golden years with no housing payment. That America has disappeared.
As times change, so must we. Now we are a global, mobile society in which half of the new marriages end in divorce. Very few people stay in a house long enough to pay off the mortgage. Manufacturing has practically disappeared from America, and with it, millions of jobs. Now, people need to have the flexibility to GO WHERE THE JOBS ARE, or where their third and current husband’s job is, or where their sickly parents live. Buying a house makes it VERY DIFFICULT IF NOT IMPOSSIBLE to do that. Sometimes families get split apart as one spouse must move to take for a job and the other spouse is left behind to try to sell the house. The family gets stuck making two housing payments as they try to sell their home in a glutted market. Renting avoids all this. You are free to pick up and leave when you want. Landlords are often understanding and let you break a lease if you must move out of town. Sometimes they will let you off the hook by paying just one month’s rent; at most you might have to pay off the entire lease. But even then you can usually sublet. Regardless of what you have to pay to get out of the lease, it will be much cheaper than having to pay a mortgage while your house is on the market at the same time you’re renting an apartment or home closer to your new job.
Another expense of homeownership that people rarely consider is not just initial renovations but improvements (especially to the kitchen and bathrooms) that must be done throughout the years to keep the house marketable. Although these expenses are tax-deductible when you sell your house, you still have to put out the money for them. And many people forget to factor in these costs when calculating their profit after a home sale.
I’m so sick of people saying that renting is “throwing your money away.” It’s not! You’re writing a check to your landlord IN EXCHANGE for a roof over your head. And for free repairs (no worrying about replacing a costly appliance that suddenly breaks down), lawn mowing and snow removal, and in some cases free utilities. (We all work 50-80 hours a week now; who wants to come home from work at 8:30 pm and start doing repairs?)If you live in an apartment complex you also get other amenities as well in exchange for your rent check: a gym (in some instances with 24-hour access); a pool (without the costs, inconveniences or possible liability of ownership); concierge services including acceptance of packages; 24-hour security, and the freedom of being able to lock your door up and leave town without worrying about someone breaking in, or coming home a week later to find that a pipe burst and left 3 inches of water in your living room. Peace of mind is worth a lot; in fact, some would argue that it’s priceless.
I have rented and owned homes, and I don’t think I would ever buy again. Home ownership just doesn’t make sense in the 21st century. And don’t let the real estate industry bamboozle you into buying: We haven’t hit bottom yet. Why lock yourself into a price that you’ll be paying for years to come, when the home’s value could drop by tens of thousands of dollars, even ($100,000 in some markets) even before the closing? Such speculating (which is what every home purchase is these days) goes against the basic principles of basic personal finance. Don’t be a sheep; hold on to your money and rent.
Men Jumpin the picket fence
http://www.nytimes.com/2010/01/07/garden/07men.html
26
91
I trust you are not referring to my “alternative” opinion as inflammatory. This is a bear den – thats fine – but sometimes its good to polish up on the reasons why you support your position via dialogue with those with opposing views.
I sold a house in 2000 (realtor for 26 years now) I put every cent of it in Silver ($4.50) Gold ($450). Things go in cycles. Real Estate lasted for some 20 years of going up. Commodities do the same, we are in year 10. I have witnessed idiotic plays on the .com bubble, dotcom craze, Silver in the 80′s play, travelled for 25 years visited all states, all provinces, cities, lived in 10 cities. Talked to numerous people claiming they are in the know, many on high end cruises (15). Met some serious players out there. The serious players (millionaires and Billionaires) all state one thing…. Fiat money is done, get your money into GOLD and SILVER.
Say, how’s that depression working out for you? — Garth
oil at 100/barrel costs americans 2b/day
image the push and pull factors at 200/day!
======================metal bugs might enjoy this paper
“llegal opium trade was denominated in silver until China ran short of silver after two decades, after which the legalized but immoral opium trade was denominated in porcelain that steadily fell in price because China could produce porcelain easier than it could produce silver, albeit Chinese export porcelain was increasingly produced at inferior quality compared to that produced for the more discriminating domestic market. Monetary defacement occurred even in porcelain when it became a unit of account.”
A Trojan Horse in 19th century China?
The global consequences of the breakdown of the Spanish
Silver Peso standard”
Maria Alejandra Irigoin
http://www.lse.ac.uk/collections/economicHistory/seminars/Irigoin.pdf
#78 Evangeline
The one thing I do wonder about newsletters is … if they are so good at picking stocks why do they need to garner profits from newsletters?
Because as a news letter writer you can hopefully get a bunch of people to artificially increase or decrease a stock price. Then again as a news letter writer you can either buy or sell it for a profit before your subscribers do. It amazing what high short term volume changes can do to a stock price.
#105 Got a Watch
“Index Funds? Would that be the ones that just had a negative return for the last decade? Like, say the S&P 500, that returned -24.1%, and of course, that was for the Index itself, if you were in some sort of Fund or whatever that ‘tracked’ it, well, you tracked that loss plus the MER/fees etc. You investing genius, you.
I suppose you meant the TSX, which went from around 8,300 in Jan 2000 to 11,746 at the end of the decade -not so bad, a +41.5% or so. Go Canada!”
Before you stick your foot further in your mouth, go read some of the work by Fama and French. Find out how many of the funds managed by the professionals managed to beat the index. Then consider the implications of trading expenses, tax liabilities on those results. If beating the index is so easy, why can less than 5% of the professionals do it over any 10 year period?
Perhaps you are smarter than the professionals. Perhaps you have access to better research than the teams of researchers who work for them. Maybe. But I doubt it. Research has consistently shown that individual investors lag the market by 3% points or more. But I’m sure that the average blog dog is way above average.
For anyone who actually wants to get educated on the subject, rather than listening to Garth and myself hash it out over a difference in investing methodology, read the following books:
A Random Walk Down Wall Street- Burton Malkiel
Fooled by Randomness- Nassim Taleb
The Little Book of Common Sense Investing- John Bogle
118 Kash is King
“Since there is 1/10th of the population in Canada,
then logic dictates that the price there
should be 1/10th as much as here.”
what????
Maybe I don’t understand your answer…
By that logic, a $50000.00 new Cadillac here,
should cost only 1/10th ($5000.00) there!
Emagine the kind of trade deficite there would be if everything was 1/10th the cost in the US.
That sounds like my local realtors type of logic.
#101
Nostradamus jr. East
“Have you stopped to consider that the US real estate market may be severely underpriced?”
Now that logic makes more sence that Kash is King’s comment….I’m guessing maybe America home prices will rise a bit in the next few years (3) yrs from where they are now to say the $100000 mark (best case senerio), but that is still way below Canada (GTA) existing prices of $300000+.
The divide is unmistakably huge, somethings out of wak!
A well-written article that seems to reinforce Garth’s views about investing in the 2010′s:
“The stock market’s performance over the next decade will be very similar to the one since 2000: the WSJ appropriately named it “the lost decade.” Stocks will go up and down (setting all-time highs and multiyear lows), stagnate, and trade in a tight range. At the end of this wild ride, when the excitement subsides and the dust settles, index investors and buy-and-hold stock collectors will find themselves not far from where they started in 2000.”
http://www.zerohedge.com/article/welcome-another-lost-decade
Fasten your seatbelts, home buyers
You now have roughly six to nine months to get a personal plan together for dealing with higher interest rates. After that, the ride begins. Where it ends depends on how smartly the economy and inflation snap back, but we could be looking at a prime rate of more than double the current 2.25 per cent by the end of 2011. Let’s look at four ways you can prepare:
Globe and Mail Tue Jan 05 2010
Garth,
. They feel the area of Lawrence to Wilson – Bayview to Bathurst is too in-demand to go down by anymore than 5% in a mortgage rate correction which everyone knows is coming. With a lot of wealth concentrated in that area, the herds wanting to be there and the proximity to downtown, its hard to argue with them. Maybe some advice from your side of the table aimed at our demo would prove valuable and insightful to my peeps who know-it-all. A snapshot of my demo…5 to 1 mortgages, 25 down/35yr amort, ok cash flow but tight, 2 cars, great rrsp’s but no savings, blah, blah….im sure you know it well.
why do you never speak in Toronto, aiming your guns at us 30-somethings with kids, heavily in-demand North Toronto homes and 6 figure salaries? The financial dudes who control this area were supposed to get slaughtered a year ago….wow have things changed…money is flowing again, sheep are bahhing (play on buying..get it!). Being one of those “financial dudes” I don’t want to let this opportunity pass. I want to cash out, take a profit of (original investment in house $300K, now it is worth $410k in 3 yrs) sit on the sidelines and buy back in when mortgage rates are at 6.5% and my friends are choking on their home debt. Of course, the well educated Lululemon set are vilifying me (including my wife
Garth, it isn’t a new decade until 1 January 2011. We have only completed 9 years of this current decade so far (unless decades, like houses, have become devalued). Perhaps all the recent abuse has confused you? Or is this a new method of knocking years off your age?
#123 you say it best! I have waited years to have someone spell it out so truthfully for I feel the same way 100%thanks
#106 t
“Don’t know where you get your faith in the equities markets when the markets seem full of crime, criminals and corruption.”
Garth is a fearless market bull and in a biker gang . I think he also knows that most of these ( insider) guys will never do any serious time.
I just don`t want to end up like the 70 something guy ,with a walker, pan handling on Bloor St. The look in that old guys eyes really shook me up. Like the Blog Dog said the other day “The game is rigged. Better know how to play.
Breaking News about AIG and Geithner –
http://www.bloomberg.com/apps/news?pid=20601087&sid=agWH9TNvdUCg&pos=1
Your predictions are getting a little broader aren’t they Garth? Now you’re predicting for the next decade?
Well (respectfully) even a broken clock is right twice a day, so almost any prediction will likely come true over a decade.
But the riskiest thing will be cash? I don’t think so Garth.
The biggest risk to Babyboomers and most others will be illiquid assets.
Hi Garth! You MUST see today’s Toronto Star and the comments on the Royal Lepage story. I cannot believe how many people are saying “It’s different in Toronto”. The ONLY thing that @#$%@es me off is that we’re going to bail out those idiots. I am hoping that thru tax avoidance I will contribute as little as possible to bailing out those twits.
#127
((If beating the index is so easy, why can less than 5% of the professionals do it over any 10 year period?))
I thought the poster you were replying to had made perfect sense.
isn’t it the goal of an index fund to reflect an index, not ‘beat’ an index?
and Hongcouver will
STILL DELETED.
#116 dd on 01.07.10 at 2:08 pm
—————————————-
Some local markets (i.e. Vancouver, Edmonton) are definitely over-priced.
But answer me this: how much would it cost to buy a little bit of land in the city, erect an average house, and tie in the water/gas/electricity? I would guestimate ~$300,000, no?
123 Rob in Busted Bubbleland
Thank you for this post. I copied and sent it to my husband. Renters do not = losers!
Garth,
Any info is greatly appreciated. I am thinking of buying a place just south of Mesa Az. Do you think the time is right or does this US market have more room to slide. I am Totally liquid in the Real Estate Dept. Having sold in BC this fall.
Thanks and keep up the good work grasshopper.
Wait. This is milk-a-Canuck season. — Garth
“#130 Two-thirds on 01.07.10 at 3:56 pm
A well-written article that seems to reinforce Garth’s views about investing in the 2010’s:
“The stock market’s performance over the next decade will be very similar to the one since 2000: the WSJ appropriately named it “the lost decade.” Stocks will go up and down (setting all-time highs and multiyear lows), stagnate, and trade in a tight range. At the end of this wild ride, when the excitement subsides and the dust settles, index investors and buy-and-hold stock collectors will find themselves not far from where they started in 2000.”
”
That’s why you buy bad ass companies with ever incerasnig dividends, re-inevst them via DRIP’s, sit back and have fun. 5 % of Div’s re-invested over time is super sweet.
Re#78 Evangeline
I think it is a question of trying to get the best advice you can and minimizing your risks. No one can consistently predict how all stocks will do, or where gold will be in 6 months , and no one can consistently predict the best stocks or mutual funds. If they did they could amass a great portion of the worlds capital. If someone tells you they can, run awåy quickly. I think it comes down to following strategies advocated by people or newsletters with a good track record and those who are respected in their industry. They won’t get it right 100% of the time, but hopefully in the aggregate they will be right more than they are wrong. As for why they need money by selling newsletters, I’m not sure, but then why do Warren Buffet and George Sorros still invest? The other thing to keep in mind about newsletters is that other than selling you their letter, they have no agenda, whereas these highly paid financial advisors- I don’t doubt that all of them are mediocre, have to make their commissions somewhere.
# 80 Right on Garth! Real estate in Hamilton, forget it!
This is a decaying, hardas–d union town relying on its hospitals and a university to make it all better again.
The area for blocks around McMaster is basically a student ghetto. Illegal student rooms and basement firetraps in well over 50% of the homes around McMaster and Mohawk College. Lots of garbage, shopping carts, illegal building. Forget about by-law or fire code enforcement anywhere in the city. It is a slumlord’s paradise for REIN believers so maybe that is how we snagged #2 in the spot as a Top Ontario Town to invest in.
The city prides itself on its “official” welcoming center that is run for new immigrants. Unfortunately, those with skills and money soon leave. Those with neither, often stay.
Taxes are $4200 for 1580 sf, 1945 1.5 story home in West Hamilton. My daughter’s car insurance is $1300 a year in London Ontario and $2000 in West Hamilton, one of the supposedly, better areas. House insurance costs a bundle too and is difficult to get without full inspections in older parts of the city. Infrastructure is also a major problem. Hundreds of homes filled with raw sewage last year during a storm and flood insurance may be unavailable. Buyer beware.
Lots of crime in the lower city that is spreading to the “Mountain” communities.
Hookers and crack heads have taken over the area to the east and north of the downtown. Lots of luck collecting the rent from these folks. The core is a mixture of newer government buildings and derelict rotting old buildings either on taxpayer life support or owned by developers waiting to get to the trough.
Council is dysfunctional and delusional. City Hall has been torn apart for renovations so long that citizens have forgotten what it looked like. Lots of luck getting any of the proposed facilities ready for the upcoming 2015 Pan-Am games that Hamilton will be hosting.
I hate to be so hard on the place, but after 45 years here, the wife and I are going to look at Burlington or Oakville RE for a “nice” place to live (and invest.)
‘isn’t it the goal of an index fund to reflect an index, not ‘beat’ an index?’
That’s right. By simply matching the index, you will significantly outperform the average equity mutual fund over time.
in the usa, people are offering 5%, 30 year term mortgages. logic would indicate: we will not see high mortgage rates within that time frame. the term ‘emergency’ rates is very logical and a conventional way of seeing. but i think we are in a new reality. let’s call it a semi permanent state of emergency. in the future i see- inflation, inflation, inflation
And to those who want to take me on, did I mention I’m in a biker gang?
Oh,saints preserve us . Wild Hogs part two .
Hey Garth,
Thanks for the desktop background. (It’s hard to find tough guys like you on the internet…you the cowboy)? Looking forward to your new book *Don’t be Roadkill on the* Money Road.
Evangeline on 01.07.10 at 11:00 am
If you are researching K-W you might find this link interesting. Lots of information on community and stats as well.
http://www.wrvitalsigns.ca
Well Garthy boy… you’re still a pussy in my books.
Now let’s see you post THAT, biker-boy!
Adios, loser. — Garth
Re: GIC’s
So with three kids 11,13 and 15 and 45K in an RESP are GIC’s still a bad idea?
Brew
Absolutely. — Garth
#141 Nostradamus jr. E
…But answer me this: how much would it cost to buy a little bit of land in the city, erect an average house, and tie in the water/gas/electricity? I would guestimate ~$300,000, no?…
Appartently not in any major centre in Canada.
Sorry – new to this country – what’s a GIC?
#129 Confused, I was just funnin’ you …with a straight face.
#124 Vancouver Rocks,
I am always looking for a contrarian opinion. My favourite saying is “the only thing I am certain of is that I am not certain of anything.”
However the delivery of the opinion does make a difference in how it is received and I did find your tone condescending at times. On the other hand, written dialogue on blogs can very easily be construed more harshly than it was intended.
A great book I think everyone should read is William Isaacs, “Dialogue”. It really gets to the heart of these issues.
#148 my two cents,
I beg to differ. People are offering these mortgages cheap rates but there is no reason to believe those rates will stay at that level for 5 years at the first renewal never mind 30 years. Logic would dictate they would average traditional levels which are closer to 7 or 8% over the term.
This is the fundamental problem. If rates go up to these levels they seriously erode affordability. The buyer either needs to be making more money or the value of the home needs to have appreciated substantially – or both. The problem is that if wages are relatively flat for the next decade after inflation – like the last decade then there is a problem. Add in the probability of higher taxes to pay for all these deficits and the baby boomers and things don’t look so rosy.
Post #77 Nostradamus Jr East 3) Buy Garths book you just may get a can of squirrel stew with it.
We just catch our own out west. http://www.youtube.com/watch?v=c8wwceaN4n8
Worst possible investment in the next decade: holding cash in Candian dollars whether in TFSA, GIC, etc. renters accumulating down payments are going to be the losers in all this…STILL AGAIN. These people simply do not understand our system and never will.
Best possible investment: foreign assets, currencies.
Stable to good investment: Real estate. There is a reason why it is going up. If you are bewildered at the reasons, then u just don’t get it. Reread the relevant posts. Also, our stock market will go up as our dollar deflates as there are real assets behind the companies on the TSX.
There is no reason the Canadian dollar will deflate, since it’s a petro-currency and oil prices and other commodities have a long upward trajectory ahead of them, while the US dollar continues to struggle. Your theory is based on what? Your investments? — Garth
the people vs. the bond investors.
“The U.K. and the Dutch have been pushing too hard and they have been using the I.M.F. to pressure Iceland,” said Ogmundur Jonasson, once a health minister in the current government who resigned recently over the Icesave bill. “I am hoping now that they will respect democracy and understand that one has to listen to what the people say.”
…
“By pushing so hard, the British and the Dutch might push Iceland into bankruptcy and get no money back at all,” said Jon Danielsson, an expert on the Icelandic economy at the London School of Economics. “Without the deal, the government is facing a debt burden of 140 percent of G.D.P. With the deal, it goes to 200 percent, giving Iceland one of the highest debt burdens in the world.”
Amendments added to the bill as it made its way through Parliament — including one that said repayments would not be made if Iceland’s gross domestic product fell below a certain level —angered officials in London and Amsterdam.
The bill passed by the Icelandic Parliament on Dec. 30 removed some of those conditions, but the president said the matter was not for politicians to decide, as “the nation is the highest judge for the validity of law.”
Well, I don’t know whats making everyone else bitchy, but down hear in SW Ontario, the damn sun hasn’t shone for weeks …. or has it been months. All I know is it’s been a long time.
And I am bitchy about the HST coming – in fact I’m steamed about it. I suppose TO will suck all that money into Queens park and the party will carry on in HOG Town. You know, like competitive bidding on housing. Obviously the wealth isn’t dispersed evenly in this province. And I don’t believe the HST will be tax neutral, I’m too old to fall for that. I can’t wait to get my protest vote in the next election.
Seeds of dissent are growing.
Sorry for the rant.
I was out with a friend today who said his investments look this this: (he has $1.4 Million in assets.)
5% in stock market (Silver & Oil 80%)
75% in rental properties, includes his home that is paid
20% in cash (280K) he says holding on sidelines
He makes about $180K family income per year.
(has his own business)
As you can see he is doing very well. But my question is, do you think 5% (70K) in the stock market is enough and having $280K in cash silly?
I forgot to mention his age = Early 40s
#149 Men With Hats on 01.07.10 at 5:57 pm
And to those who want to take me on, did I mention I’m in a biker gang?
Oh,saints preserve us . Wild Hogs part two .
Hubby is too – but he has old beemers which he has totally redone. He did own a Harley in his younger days. Did anyone see the movie ‘ The Fastest Indian with Anthony Hopkins’? Fab movie.
@ 128 The Ben
Absolutely correct- on all fronts. Unfortunately it seems to be falling on deaf ears. Anyone who has any background in finance (not those who simply read the opinions of others and become cheerleaders) could not disagree with you.
Garth: No disrespect, but I’d like to see you address posts like this one from “The Ben”, as oppose to picking out the one that portrays him as raging blogger in an effort to marginalize him.
I said indexers will be unhappy people in the years going forward, for reasons already laid out. But go ahead, see what happens. Good luck. –Garth
#107 Got A Watch
45% over 10 years is actually 3.7% yearly and that makes any GIC a more lucrative investment, not even considering the safety. It is of course better then a loss but not something to be very excited about.
GIC income is 100% taxed. Stock gains are 50% taxed. Apples and Buicks. — Garth
Hey Garth,
Here’s a question I hope you can answer. I’m in the market for an RRSP loan. Credit is A, no ‘flags’. I have about 45K unused room. Where would you suggest I go. I went to my bank today, and they won’t loan the money unless I put it in their mutuals, and let them manage it. My plan was to pay off my debt in order of credit card, student loans, and then rrsp loan with the refund I’ll get, which should be about 36% of that 45K, give or take. That would eliminate my credit card and what little remains on my car loan (11% and 8% interest rates respectively). My only remaining debt is student loan debt (roughly 15K). Can you suggest any better alternatives, or offer any advice? I should be able to handle the payments easily. they were offering 1% over prime on a variable 5 year amortization.
Thanks,
Schroadie.
Why be so truthful? You be get the money based on your ability to repay, not on what you do with it. — Garth
#146 Ret
Can’t say I disagree with your assessment of Hamilton but expect bylaw enforcement to start kicking some butt and handing out a lot more fines in Hamilton in 2010. City Hall has finally realized how much revenue they’re missing out on because of the bunch of slackers they have working in the bylaw enforcement office.
As Garth states the REIN is run by a bunch of kooks who spout that Hamilton is prime for real estate investment. What REIN doesn’t tell you is that a good percentage of “potential investment opportunity” real estate is in the north and east ends where property is cheap (compartively) but good renters, you know, the kind that don’t spend the rent on crack or convert your rental to a grow house, are hard to find. I have pics of the ceiling & roof vent holes in my aunt’s rental property to prove it. Not to mention that none of this run-down real estate will appreciate in value over the next 20 years, unless good paying manufacturing and steel jobs return to Hamilton, which at this point looks unlikely.
Still, the Hamilton area has some nice places to live if you’re willing to overpay for decent real estate. Clearly, the decent areas of Hamilton and Ancaster have not escaped the real estate bubble, and how could they? I’ve spoken to enough real estate agents and property developers who eschew the “great investment” and “Hamilton is different” mentality. One guy actually told me that real estate in east Hamilton will rise in value because there are so many new wineries opening up across the Niagara region. What he didn’t mention was that a number of those wineries are flaming out, having burned through initial investor cash on oak & glass tasting rooms while the grapes were rotting on the vine from oversupply. That mentality has worked its way through to the builders and developers and the boomers hoping to cash out, so that affordability based on the true value of a house in Hamilton has gone out the window. Case in point, I’ve been keeping my eye on one new property development on the southwest Mountain. Two years ago they wanted $450K for the 4-bdrm model I liked and $60K lot fee for the lot I wanted. So that’s $510K for a 4 bdrm house IN HAMILTON!!! Are these guys are on drugs? Two years later, the majority of prime lots sit undeveloped and only a handful of houses have been built. Delusional as they are of course, the agent and developer continue to list and delist the lots and unsold homes on MLS to make it look like its new housing that’s just come on the market. Prices have dropped $10K-$20K depending on the model or they’re advertising free upgrades “worth $30K”. Yeah right, more like $10K. The prices have a long way to drop to match affordability in Hamilton based on the economics here.
And the Hamilton – Ancaster resale market is no better. Decent resales in good areas are overpriced, point blank. In 2007, a boomer on my Ancaster street put his 25 year old 4 bdrm house up for sale privately for $514K. It sat for a year with no offers, at which point he finally listed with an agent. It finally sold last month, nearly two full years later for $435K. He was lucky to get it in my opinion. The house needed a lot of work and he got lucky finding repatriated Cdn buyers who made their fortune in the US and were looking to retire back in Canada.
Hamilton is city of copers and hopers, but what do you expect given the economics here.
Ha Ha.
I cannot beleive that I am saying this, but I agree completely.
Garth, listings piling up here in Vancouver.
The market has turned.
I agree with the post about your being too optimistic. Can you give me three good reasons why Vancouver prices will not fall 40% over the next 24 months? I dare you.
#159 Thetruth on 01.07.10 at 7:20 pm
Don’t ever expect a rising stock market during a housing bubble gone bust, Thetruth.
Otherwise, I can think of one good reason why our loonie is destined for hard times Garth and keep in mind that I’m thinking of the loonie over a 10 year timeframe, not 1 or 2. The one good reason why is Stephen Harper and if Canadians are dumb enough to hand him a majority, we’ll see 4 to 5 years of more record deficits. You’ve said it yourself that you don’t believe we will see a Canadian economy like 2007 for 10 years or more. Harpers plan is to wait for the tax base to catch up to his tax cuts to erase the deficit, meaning his plan is one of abysmal failure, a plan to run up debt all through the rest of his time in power. The only question that really remains is how much governmental debt that will be. 2009′s deficit will be in the 50′s. This year, our deficit is likely to be in the 40′s. It shouldn’t come as a surprise however, should interest rates rise in the latter half of the year popping the housing bubble thats been propping up our economy, that the deficits in 2011, 2012 and 2013 have the serious potential to be larger than last years record even without factoring in later large losses from CMHC. I say this quite simply because just as artificially inflated RE valuations create a wealth effect booming financials, retail, wholesale, services, realtors and construction, so too does a housing bust tank these same sectors. In our Canadian economy, these same sectors are now the only ones doing well. Later this year, even with a rise in energy commodities, it won’t be enough to offset a long, steady, collapse in real estate and all the misery it brings if the U.S. is any example.
Lets keep in mind that while its only been 4 years of wreckless mortgage regs mirroring U.S. subprime, it took GWB roughly the same timeframe to wreck an economy that 5 years later, after bailouts and stimulus spending that could potentially crash their currency in the future, still hasn’t worked. While 1 in 8 american homeowners end up facing bankrupcy over GWB’s failed policies, our bankrupcy laws and economic starting point before Harper took power should only see 1 in 12 Canadians declaring bankrupcy over the next 5 years in Canada, beginning in the latter half of next year. The consequences of saddling 1 in 8 Canadians with debtloads they can’t afford is to price these consumers out of the market from debtloads they either can’t sustain or will live cheque to cheque in an attempt to try and I simply cannot see how this won’t breed a Candian recession as it happens.
Lets keep in mind what the Conservatives have actually done in terms of credit expansion in Canada. Through CMHC alone, CMHC risk to credit has gone from a starting point of $376 billion in combined insured mortgages in force and mortgage backed securities as of January of 2006 to what is projected to be $600 billion worth of insured mortages in force and more than $400 Billion worth of mortage backed securities by the end of this year. CMHC credit risk has a chance of tripling in just 5 short years of Conservative rule. Such expansions of credit are unprecidented other than by Banana Republics that have already gone bankrupt. Such expansion of credit towards those who need to buy insurance to borrow more than 80% of cost of their home will carry with it a hefty price as home valuations tumble and mortages get refinanced with higher interest rates, also causing disaster for the 30% of mortgage holders with VRM’s. Once negative equity appears, the true sufferage begins.
I’m predicting a Canadian recession that begins in the 4th quarter of this year and its unescapable due to the severity of the housing bubble that has been engineered by failed Conservative CMHC policies (among others). This recession will last long and erase any hope of an expanding revenue tax base the Conservatives are banking on. The reality that they cut taxes in the face of double digit tax revenue declines should indicate to everyone that this government doesn’t know what its doing, other than the brass ring pursuit of power before their failed policies blow up in their faces. Proroguation is merely a guise for Harper to bring Canadians to the polls for the majority he seeks and he has the media behind him (CTV/Can West) to succeed.
What are Canadians to expect from a government that breeds recessions by purposely forming asset bubbles in an effort to buy our votes? How can anyone consider a government that doesn’t try to inflate asset valuations through earnings alone as responsible? Why should there be a Canadian on the planet that doesn’t expect a currency crisis to come out of a 5 year majority Conservative term of federal governance? Why should we realistically not expect $300 billion worth of federal debt from Harper over the next 5 years considering what we already know? And finally to all, what makes anyone think that $300 billion worth of fresh federal debt over 5 years won’t cause a currency crisis in Canada as a result regardless of what happens to the U.S. dollar/economy? Unsustainable deficits are what they are and later do what they do. The loonie will be a casualty of the Harper government if they get a majority this year, Garth. The only question is when and I would think that 2015, 2016… this is when the loonie begins a serious fall due to wreckless government policies coming home to roost.
I’m sorry, but I have zero faith in Canada’s ability to do well economically now. The tarsands can’t double its production to offset the economic downturns it faces in all its other sectors, the technology and water simply isn’t there to do so. I say this because I have lost faith in the electorate to make the right decisions in this nation concerning its own political/economic future. They simply haven’t done so, so far. What I expect from Conservative policies is for everyone to become poorer. Its just a question of time and its already begun with record federal deficits, fresh trade deficits and a made in USA housing bubble from the american that calls himself a PM. At first, it will begin with a housing bubble bust. The falling markets and rising unemployment will follow. From there, governmental deficits will lead to a devalued currency that will make every Canadian poorer in the long run when compared to the rest of the worlds currencies, never mind the U.S. dollar. I hate to sound so pessimistic, but I see no reason for optimism and so much economical damage has been done by Harper already. Such a serious credit expansion for any government to deal with now… its a shame, such a wasted opportunity for Canada to lead in so many areas from human rights to foreign policies aiming for peace, the environment and charity… we have a weakened economy that will take several years at least, to get back to where we were before Harper took over power. Such lost potential… what a shame.
#158 Junius
A 5% fixed 30 year mortgage in the US is known as a conventional mortgage and the 5% rate is for the entire 30 years. There are no renewals.
Garth, why did the Canadian government outlaw this practice several years ago?
Garth, can you tell us what will happen to commodities when the pin is pulled on the global economy and we enter a deflationary spiral? History tells us the only asset to hold its value during this scenario is your nemesis , gold. Please inform the people on here that governments around the world are working in unison to establish a world government run by the U.N . That is why the western world has been dragged into such indebtedness , to bring us to our knees to accept world government.
——————————
Gold holds relatively well during deflationary depressions, but it still declines – just not as much as other commodities. This is why gold mining stocks are the biggest winners during this type of economy.
With that being said, there’s still quality out there outside of gold. I’m sure there will be great purchases in many sectors in the next few years.
Still love reading your posts but the blog and some fo the posters scared me away a long time ago.
Hey, Air Canada just made a nut-free zone:
http://www.globeinvestor.com/servlet/story/GI.20100107.escenic_1422747/GIStory/
Maybe you could do the same for your blog?
Cheers
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“Those who eschew risk, staying with cash or GICs are at the greatest risk. Those with more than 60% of their net worth in real estate will wish they didn’t. Those who invest in index funds will be even more bitter. Those who think do-it-yourself investing is smart will learn. Those who don’t avoid taxes deserve themselves. Those who don’t see great opportunity in great volatility aren’t trying hard enough.”
Garth, is there any hope on this planet?
Suddenly everything is coming up roses? On a clear day I can see forever…? Real estate a long-term winner?
Seems like a few David Lereah-ites and some fellow lurkers from the industry are with us on this blog…
@ #148 my 2 cents :
Fixed Rate mortgages are driven by Bonds.
30-year Bond is 4.68%.
This is why you could get a 30-year / 5% mortgage in the US.
The 30-year Bond yield does not in any way represent some kind of maximum mortgage rate for the next 30 years… it is simply the current rate for this type of Bond, and it changes every second of the day as Bonds are traded on the global markets.
#158, the Canadian government did not outlaw 30-year fixed term mortgages. They are available from a number of banks.
What the government doesn’t do though, is that they don’t provide insurance, through the NHA, or through the CDIC, for either the mortgages, nor the deposits needed in order to fund such mortgages.
Hence, 30-year mortgages in Canada are not subsidized, either explicitly, or implictly, by the Government, and the rates charged (currently 300-400bp over Canada 30-year bond rates) reflect the private sector’s assessment of the true risk involved.
The subsidy system in Canada for banks is pretty simple:
CDIC — subsidizes the borrowing function of banks by ‘insuring’ deposits at a cost less than the long-term cost of that risk (ie: in statistics terms, they don’t charge for long-tail risk).
NHA/CMHC — subsidizes the lending function of banks by insuring loans.
Canadian banks have performed spectacularly over the past decade in the rising RE market because of the 1-2 punch. CDIC to cover one side of the balance sheet. NHA/CMHC to cover the other side. Government bailouts under the guise of ‘saving the economy’ should they ever be caught with their pants down in any other aspects of their businesses.
As you can see from my above post, Canadian banks = ultimate recipients of government welfare.
Nice article,
I have to say
Agree with the post
Thank you
Hi Garth,
I agree with most of what you say and do respect your opinion. I noticed from your blog above you have this synopsis as:
Those who eschew risk, staying with cash or GICs are at the greatest risk. Those with more than 60% of their net worth in real estate will wish they didn’t. Those who invest in index funds will be even more bitter. Those who think do-it-yourself investing is smart will learn. Those who don’t avoid taxes deserve themselves. Those who don’t see great opportunity in great volatility aren’t trying hard enough.
For me I’ve tried in the past to follow your advice and let a financial advisor guide my investing. I’ve had 4 financial advisors all charging a considerable amount in fees. Each one of them has lost me hundreds of thousands of dollars, approx $700,000 in the last 10 years; it truly was a lost decade for me. And these people all had the accreditations associated with qualified financial advisors (CFP, CFA, MBA) along with years in the industry, they are seasoned professionals. Because of their ineptness I have been forced for my own financial survival to become a do-it-yourself investor, but as you say it’s not what I do for a living, I’m retired now at 53. I use index funds and they have proven to me to be rewarding so far. I am always looking for a financial advisor who can make me money. So you seem to have a good line on a financial advisor, because you’re very convinced they work, so how about sharing the name of your advisor, how long you’ve had him, his qualification(s) and how much as percentage profit he has made for you in the last 10 years. Any advice you can give me I would be grateful for.
Contact me offline, at garth@garth.ca. — Garth