Hear Garth. Nanaimo Sat, Victoria Sun. Conf Ctrs.
Real estate’s a fundamental part of net worth. You should have some.
I have not been propertyless since I was twenty. Probably never will. But I made the decision long ago, having been through real estate booms and busts, the bulk of my net worth would always be elsewhere.
It’s this one tenet of personal finance which has saved me. Instead of buying high, I bought modest. Rather than pile on debt, I scrambled out of it. I sold routinely to take profits and never put them back into real estate. And I don’t have granite countertops in the bunker (pictured above).
But that’s me. I’m unconventional. Liquidity turns me on.
I mention this because most people are so screwed. And real estate has done it. Ever-higher prices have been trumped only by ever-higher expectations. Cheap money for some time has made modest people feel wealthy. Children buy first homes nicer than their parents’ final ones. Consumption replaces wisdom, and HGTV becomes the news.
Debt seems immaterial since so young buyers know they’ll never actually pay it back. All that matters is the carrying cost. The mortgage that was there upon purchase will still be there when it’s sold. You just pray the market keeps rising, and rates behave. But those times are ending.
I thought of this in light of a new survey – one of the many done this time of year by banks. On one hand they pimp us with bushels of near-free money, on the other they guilt us for owning much and possessing little.
This report is clear and stark. Twenty per cent of people are counting on an inheritance or a lottery win to retire. Over 90% are afraid of retirement. Over 50% of those working fear they have e saved too little. And 60% of those under 35 basically have nothing.
I could go on. Seventy per cent of us have no pension. Six in ten have enough in an RRSP to last two years. Millions will be spending a decade or two living on CPP. Max $17,000 a year.
At the same time, close to 70% of Canadian families own real estate, making us one of the most house-hugging nations on earth. We’ve made the collective decision to plow most of our net worth into bricks and dirt, having swallowed the Kool-Aid that values will always rise.
But nothing rises endlessly. All booms end badly, and every bubble bursts. Given the historic debt now gripping each nation, all levels of government and virtually every household, such a path is a dangerous one. Like I said, real estate’s an important asset and most of us should have some. But it is not a substitute for real wealth – the kind you can use for gas, food and your ISP bill.
What’s my point?
Simple. It’s time to take profits. Put them elsewhere.
Live beneath your means. And above fear.
146 comments ↓
“”Live beneath your means. And above fear.”"
…good common sense
Garth… this “Quantitive Easing on a global scale”.
…Being that it is in play for the first time in history, No one really knows how the end game will turn out.
Nostradamus jr.
“It’s time to take profits. Put them elsewhere.”
Like the stock market? Considering what happened to the little bit of savings Canadians had in the stock market over the past few years, convincing them will be tough. Especially when markets look like they could easily crater again any day now. Rightly or wrongly, real estate still feels/looks “safe”. I’d love to take profit and put it elsewhere, but elsewhere seems no less scary. A 20% haircut on my house in Calgary doesn’t seem so pad compared to a 50% haircut in the stock market.
That’s fear talking, not reason. There are many places to invest. Having it all in one asset defines risk. — Garth
And when all these characters decide they can’t or won’t pay it back, when these borrowings don’t produce the assumed rates of return, when credit becomes expensive and consumer spending flops, when deficits rise to even more mountainous heights…what is that going to do to the purchasing power of C$, US$, Euros, whatever?
Buy gold. And then, later, buy a house – ONE house.
Garth – I have to ask you about this one:
“I sold routinely to take profits and never put them back
into real estate.”
If you sold routinely, you must have bought similarly. So somehow the profits you made did make their way back, even if they went to another asset for a period of time and yielded even more profit, allowing you to buy back in
to RE cheap, then wait for…… Hey, that sounds like
an “investment”!
“take profits. Put them elsewhere”
So true Garth, problem is that most people here are so scared from all the depressing bloggers (lately) and some of your comments, that they feel there is no where to hide or invest. Sounds like some of them are ready to jump out the window. I think your next title should be a little more optimistic. Maybe let them know that the world is not ending, just correcting itself.
Geez! you guys keep this up and i’ll have to take a drive to the cabin and check on my ammo reserve and armageddon stash.
Lighten up a bit.
Wise words from someone that has lived through various bubbles right Garth?
In about 1.5-2 years, the old school brick wall (not brick veneer) war time bungalows will be in vogue again.
The point about kids buying nicer homes at 30 then their parents have at 60 really hits home. I hate to say it but some in my generation (X) smacks of entitlement issues.
Personally, I have a long term plan to have any house I buy paid off by the time I am 45, if that means buying a smaller home or a townhome, so be it.
Thats the problem with boomers and their retirement woes, they all upsized their homes and still have mortgages in their late 50’s and 60’s. The only real way to save money is to have your number 1 expense reduced or paid off (mortgage) and then you can really start to save for retirement.
So many 20 and 30’s and 40 year olds maxed out their RRSP to get a mortgage and over leverages themselves that they will never be ina posistion to retire.
FInally! The tide is turning in Greater Vancouver.
About time.
“Real estate’s a fundamental part of net worth. You should have some.
I have not been propertyless since I was twenty. Probably never will. ”
What do you advise someone in their early 40’s with 200K in investments, but is still renting because of being priced out of the market? Continue to max RSP or save in a cash account for a down payment?
US citizen that works in Canada. Just south of Abbotsford BC. I am amazed how much my Canadian co workers have to pay for housing,groceries etc. Their houses are nicer and bigger than mine. I still have the 15 year old laminate, while they boast about their granite countertops, 60 inch LCDs and full wall fireplaces.
Your latest article reminds me of the two words that scare me more than anything else inclusing terrorist attacks. The two words are “debt resolution”
Is that really the bunker? That really is beautiful!
Makes me want to break out a pipe or cigar…some scotch…and a rockin chair.
Live beneath your means. And above fear.
The Depression haunted my parents, both born in the early 1920’s. They saw what had happened to their parents, aunts, uncles, neighbours and friends and truly feared ever revisiting those days again. That cabin would have looked good to my grandfather, grandmother and their four children.
In the early1920’s, he had borrowed money and was doing very well with four rental houses. He was also a foreman in a construction company. When it all blew apart, he lost each house, one by one, until the family wound up living in a tent for one summer. The four children were sent to live with relatives who had farms until he could get the family back together. Thankfully, that happened by the next summer. Unfortunately, by the time this country had fought a war and recovered, my grandparents were in their late fifties. They never really had a chance.
Scrimping, saving and thrift were considered smart and admiral traits. They truly detested debt and always put a little aside for a “rainy day.” They had seen the worst and had been deeply imprinted by it.
I don’t see those attributes in the general population today. We are not the strong resilient people that we think we are. Canadians for the most part, live for the moment with gleeful abandon.
We can’t fear what we have never known.
This is one of the finest entries put together in quite some time. Just what I needed to read tonight. Dead on.
“Real estate’s a fundamental part of net worth. You should have some.
I have not been propertyless since I was twenty. Probably never will.”
What do you advise for someone in their early 40s who has close to 200K in investments but has been priced out of the Vancouver market? Continue to max out TSFA and RSP or save in cash for a down payment when the correction happens?
Here’s a great quote from Mark Carney:
“The Canadian mortgage market has functioned I think exceptionally well during the course of the last decade … we’ve seen the strength of the system of mortgage insurance and it’s provided an important funding avenue for the banks as well. It’s allowed our housing market to weather the storm.”
Is he joking? The *strength* of CMHC? Doesn’t the sheer fact that CMHC must be there to drive the entire new buyer market show weakness?
Here’s my interpretation:
“Please keep buying houses with 5% down, because the rest of the economy is still tanking.”
or – stated differently:
“My friends at the banks tell me that they need Canadians to keep piling on mortgage debt, because no one can afford to buy their other products anymore.”
I have been following the housing market for years and finally decided to buy my first house when I found a good deal. I have recently bought a home in Winnipeg for a price that I think was below current market value. It needed a lot of work but was a good price. The house was a good size and in a great location. The only thing wrong with it was it needed cosmetic work, it was solid a home and only needed some minor renovations. I was able to buy it for under the city assessment price. With help from my dad some hard work the both of us completed the renos in three months without any help from contractors. I only spent about six thousand dollar to paint, refinish the hardwood floor, gut and refinished a bathroom, all new light fixtures, new baseboards. Bottom line is search for good deals and you may find one. You need to act fast though cause they don’t last on the market long. Do your research and don’t overpay.
I bought my place for $175,000 and I’m sure I could easily get over $200,000 for it now. It wasn’t easy to find a good deal but there are some out there. I put 20% cash down and have a conventional mortgage at 4.35% for seven years. I can easily make payments and still have enough money to live comfortably. I am still fearful and may decided to sell if the CMHC premium is raised to 10% or if the market is really hot this summer. For now I will live under my means and save and invest and live my life.
I am not a housing bull but to be honest it does feel good to own a home and be independent in my mid twenties. I am satisfied and feel good buying a place to live in. Now I just need to prepare for the worst and hope for the best.
Another interesting quote, from Ed Clark (CEO of TD):
“If we were now to raise our interest rates as well, to kind of slow down the growth in Canada, then I think we will wipe out, permanently, Canadian industry and I think that would be a mistake.”
http://www.businessweek.com/news/2010-02-04/higher-rates-threaten-canadian-industry-td-s-clark-says.html
So, again, industry is suffering, so long live 5% down (cashback) mortgages!
http://1.bp.blogspot.com/_0YOsyi5WbLY/S1cS25CkpLI/AAAAAAAAASY/Ro262SbzmGk/s1600-h/Personal+Lines+of+Credit+-+Canada+-+08-09.Bmp
With high unemployment, wage and salary cutbacks as well as higher RE prices, is this how people have been making their mortgage, credit card, and car loan payments ? Canadian LOC balances are up 39% in 21 months. Using debt to pay debt……..
“Live beneath your means”… What is my grandmother back from the grave? I suppose we should all buy an extra toaster when it’s on sale and stockpile it in the basement with all the other stuff “I’ll need one day” too!
I think I’ll write a book called “Spend Like a Drunken Sailor – Guilt and Consequence Free!” as I think it would sell more copies. The main point of the book will be you only live once, the aliens that might have heard are radio transmissions by now could show up and vaporize us any day, so live for today and don’t worry about tomorrow. There will also be a whole chapter dedicated to praising the government’s borrow and spend policies as well. Why should kids we haven’t even raised yet get all the fun??? And if the aliens vaporize the debts too, it’s win-win.
Maybe I shouldn’t watch so much sci-fi. “The Day the Earth Stood Still” might not happen I suppose. Still, I like what they did with Gort in the remake. Any 100 foot high robot that can turn into a swarm of reproducing killer micro bugs is cool in my book. And it looked really good on my new 52 inch plasma I got with 6 months no payments.
Ok, so I’ll leave the aliens out of the book. But the basic point will be that since we aren’t going to pay back the debt, because we can’t, it doesn’t matter. If someone will lend, we should spend. The joke is on them! Ha, ha, suckers. Besides, I think one would sell more books if one tells people what they want to hear.
This quote sums it up better than I can:
“The human race detests thrift as it detests intelligence. The man who accumulates more than he needs and saves the surplus is disliked by all who either can’t or won’t follow his example. He makes them ashamed of themselves and they resent it.”
- H.L. Mencken
So don’t be resented! Go out there and get that new Hummer, 0.9% financing for a (not so) limited time only! Oh ya and definitely go for the spinning hubcaps. They are so trick on an off road vehicle.
I’m a little disappointed with the bunker. I expected something with a laser beam defense system. Or at least a motion activated machine gun or something. And while log cabins offer excellent protection against bullets being fired by an angry mob, they are far too vulnerable to a simple molatov cocktail for my liking. 8 inches of reinforced concrete is the way to go.
The 6 pillars of investment wisdom are
a) real estate
b) cash (CDN and USD)
c) income
d) blue chip equities (national and international)
e) speculative equities(national and international)
f) gold related equities that equate to physical metal in the ground.
These six pillars held in equal measure will keep the vagaries of the marketplace from ever ‘blowing the house down’.
In Canada there is no substitute for maxing out your RRSP every year, if you aren’t then you’re just pissing money back to the government. If you think you can’t afford it then you either can’t do the basic math or need a smarter financial advisor. You can’t afford not to contribute.
Increase your monthly cash flow by setting up a ‘Tax witholding at source deduction arrangement’ with your banking institution. If they don’t understand this, go to a smarter bank. If you aren’t doing this you are just giving REV Can an intrest free loan for the year. Stupid right?
TFSA accounts are a must. Although capped at $5000 per year this vehicle blows the door off any tax advantaged product like ‘Universal Life’. Use it for capital gains free income and buy preferred shares. No need to speculate everything you own. One of the ‘pillars’ is income right?
The Universal Life route is not so great because of the ‘COI’, this aspect of the UL policy is hard to understand for many but it exceeds the potential value of your cash value and at approx 92% on a premium all your dough is taken away in fees rather than going into your pocket. Don’t forget that the UL policy ‘IS’ taxable on the growth element of your policy and as so is ‘deferred’ only not tax advantaged as are dividends, TFSA gains or segregated funds. Unfortuneatley SEG funds also carry a heavy MER that outweighs the benefit of ownership.
Best advice is
1) stay out of debt
2)live below your means
3) don’t think you have to speculate instead of saving.
4) Don’t believe anything the government tells you.
5)don’t be misled by the current gov policy that is trying to convince you that cash is trash and spend spend spend. Let them dig themselves out of the hole, you’re money belongs to you.
Garth your totally right.
Problem is, here in Vancouver, 90 may be 95% of the folks are STARK RAVING NUTS! It is very awkward right now to even say things like what you say. The people here think they are living Paradise Lost, anyone who dares to expose paradise as greedy out of touch with realty fools, gets an ear full and then some.
But it is worse than that. I would like to know your thoughts on this. This bubble is now turning into a super bubble, and when it blows, it is going to take big casualties. These walking financial disasters are not going to blame the government. First they will inflict their anger on those like us “who never believed”, “who with our negativity brought ruin to them”, “who took advantage of their plight”. Why the quotes? I have been through this before Garth and those of us who prepare and made well from the financial chaos, are made the scapegoats, this is what will be said. Then comes the next stage.
Those few us who with foresight and wisdom protect our families and financial grace, are then sought among those who have no courage, no stomach, no intestinal fortitude to fix this mess the way it should be, will look to use us as a solution to their incompetence. Of course I am referring to the politicians. And this is where I believe you are making a very very grave mistake. All those suggestions you made, like the TFSA are a great mistake. I suggest you do some research, in places like Australia (how the superannuation rules change), and Italy (where the government actually raided every single savings account – about 15 years this was – and took a slice from everyone, except of course only after all politicians in Rome moved their money to Switzerland the night before they did it – true story this), and other eastern european countries, you will see what governments do. Things like a TFSA are really traps. Once you have money in there, and then comes a crisis, governments over night, with you not looking change the rules and all of a sudden what was once a TFSA is now a golden egg, for the government.
The problem is Garth, you can’t guarantee what these accounts will have as far as taxes are concerned in the future. Today they look like good investments, but in a crisis, the governments do not play fair, they cheat by changing the laws.
If you have so much suspicion about our economy and falseness that it runs on, how can you have a shred of faith in the government to do right by you in the future?
My recommendation is this. NO RRSPs, NO TFSA, absolutely nothing where the government can hold your hard earned savings hostage.
Like the US, the Canadian government can resort to emergency powers. If you really want to know what you are facing, check these out.
I bet you’ll change your mind, once you see what the canadian government can do in a financial collapse with its emergency powers. There is only one solution and it isn’t based on trusting the government!
I have lived under communism, I have lived in the west. To me there is no difference between these governments, communism steals from you directly, western governments indirectly. You will learn this very soon.
I see the writing on the wall too. But with all due respect sir, you have no idea how bad, bad really can be. Don’t make the mistake that because this is Canada, that the governments here can be as bad as what happened to countries like Communist Russia, and Communist Jugoslavia. Governments do only one thing, protect themselves, the people always come last.
God help us all, the dark days will soon be upon us.
TSX:
HSE
ADN
HA! We’ll see. I’d rather have $ in stocks than housing…
My house is not an investment, it is where I live. It is paid for. Take a mortgage out and invest in paper, no way. I sleep well at nite knowing I have no debt. Not paying for a mortgage or for rent is enough of a investment for me.
More seriously, back to the housing market:
Something weird is going down in Cow Town right now. There seems to be literally a mad rush to buy houses out there. My realtor buddy just sold a rental unit and the purchaser never even went inside. A property I was interested in seeing just went over list with 5 offers within a week of hitting MLS. My sister has 2 viewings on her house tomorrow, after nearly a year of trying to sell the place on and off. Nobody knows why. I wonder if it’s because of the possibility of the down payment rising to 10% minimum. Maybe the banking industry is scaring everyone into buying now due to the leverage effect that raising the minimum would have.
(In the example I plagiarized on an earlier post, in the case of a $50,000 down payment, a borrower can bid on $1,000,000 of house if they can afford the monthly payment, which while substantial might be doable for some people at 2%. But at 10% down they are restricted to $500,000, which hardly buys a shack right now, even if they can afford the payments. So if you haven’t got 10% you need to buy now or save a lot more. Even though it turned out raising the minimum was only a ruse to panic buyers and will never happen.)
The 5% down policy was not overly distortive of the market when CMHC would not lend more than the average price of a house and stayed out of the high end market. As recently as 2000, their limit was $170,000. So although they may have been pushing up the price of low end homes, McMansions had to be paid for with real money, or real solid credit scores. Now of course I don’t think there is even a limit, they will insure any amount, once again proving that government programs designed to make things affordable actually make them vastly more expensive.
Same thing happens with student loans. Do you think the banks would lend money for tuition and beer to a fine arts major if it wasn’t government guaranteed? Not a chance. Do you think the universities could charge as much for tuition and pay the Chancellor $250,000 per year if the fine arts students couldn’t get student loans? No way. A fine arts degree would cost what its worth (about how much dad is willing to pay to get junior out of the house for a few hours a day) and instructors would be paid accordingly. Throw in government guarantees and the whole system goes crazy.
“It’s time to take profits. Put them elsewhere.”
My husband and I have worked hard to pay off our mortgage. We could sell and walk away with 400K. But where do we live? With two small boys and two government jobs, we are wanting to stay in BC. Rent is significantly more than our mortgage. How long until housing prices in Vancouver come down to realistic prices? We can absorb interest rate and tax increases in our current situation. Is it better to stay put with minimal debt, or sell and watch our profits go in to rent?
From yesterday’s comments Rory. Rory, I agree with you. Time to cut public servant salaries and benefits across the board (20-30% for starters) OR cut 20-30% of public servants. It’s simple as that. We can’t sustain this elite class of Canadian citizens.
Johnathon, “http://www.ofina.on.ca/borrowing_debt/debt.htm”
Unflippin’ believable: Ontario owes $193.3 billion. That’s it. I’m converting half my savings into precious metals — period.
And great video Vlad:
http://eclipptv.com/viewVideo.php?video_id=9852”
Super Bowl ain’t so important when New World Order is breathing down our necks
Wakey, wakey: http://www.infowars.com
What about owning commercial real estate to house your business?
Isn’t that the cabin from Sam Raimi’s Evil Dead? Creepy.
Live beneath your means is right.
When I was a child in the 1960’s, my family lived in a very old two-storey house in a small town. The house leaked heat like a sieve in winter. Whenever it rained really hard, the basement would flood with several inches deep of water because of the shoddy foundation.
We shared this house with a small population of those little brown bats, and they, and the rival gang of mice partied regularily. They were bad tenants and never paid their rent.
My parents never paid much for this house, so they didn’t really care about its short-comings because it was just a place to live, not an investment or an ATM, the way some people view houses today. We lived frugally so that there was money for other things.
Fast forward to 1993 when I bought my first house, an 1165 sq. ft. bi-level built in 1980. (No critters!) It was priced about 3x my yearly wages. I put 42% down and paid the remainder off in only 5 years, and was mortgage-free. I figured either I was serious about owning the place, or I wasn’t. I sure as hell didn’t want my house to own me.
I blame my frugal upbringing for paying it off so fast. The only good debt is no debt, and if you have to borrow, make it as short a term as possible.
I will never understand people dickering around with tiny down payments of 10% or less. Zero to 10% down. What the hell is that? That is the beginnings of long term debt slavery, especially if interest rates start to rise and/or RE prices fall.
With a larger % down payment, you give yourself a wider margin of safety to work with, incase things go wrong. And things will go wrong, count on it.
If you have any doubts about your margin of safety, then just keep on renting a cheap place like I did for many years. Home ownership isn’t all that it’s hyped-up to be anyways, and it isn’t worth the risk of becoming financially ruined, so err on the side of caution.
Some people who buy and operate with zero safety margin, might complain that it’s too difficult to save up a big down payment. That may, or may not be true.
But all I can tell you is, over the past several decades, I have witnessed way too many people spend far too much of their hard earned cash on useless crap they didn’t need. Some call it their ‘disposable income’.
I say, try disposing of that income into your ‘House Down Payment Savings Fund’, or, if you already own a home, dispose of that disposable income on the principle of your mortgage loan.
Some people say that money spent on rent, is money thrown away and wasted. I say, money spent on loan interest, is money thrown away too.
Pay down your principle and stop throwing away cash, save up, stop buying junk you don’t need, stop assuming your house is like an ATM that will FOR SURE increase in value year over year, and don’t use a credit card for anything (except as a tool to scrape your windshield).
If you refuse to save and spend responsibly, you might just find yourself in a negative equity situation someday, thumbing through recipe cards for ‘brown bat soup’.
I don’t imagine they’re all that tasty.
#1 nostradamus jr.
“No one really knows how the end game will turn out.”
The end chapter has already been written. Pop goes Vancouver RE prices.
Garth, I concur with your conclusions, but I think one of the big factors which form the base of this “debt mania” is “generational amnesia”… I’m in my early 40s and remember paying 12% interest on my student loans in the early 90s… It doesn’t seem that far ago… But the 5/35 generation (Early 30 somethings who have feasted on 5% down, 35 year amortizations) treat this phenomena as akin to seeing aliens stepping out of a UFO.
I’ve stopped talking to one of my “30 something” friends about this because she accuses me of “insensitivity” every time I mention rates could go back up to these previously crazy levels. Then again, she and her husband are up to their eyeballs in debt having bought the “perfect” home in North Van.
I too, am sick of all the public sector bashing…RORY.
Worked 14 years at a cancer hospital and took my 7% rollback in the”Klein” years. Part timer and no pention.
Hubby works/worked 20 years welding/mechanic for the municipality. He took a 5% rollback. He works flippin HARD and comes home beat. He does have a pension and every time he gets his MEAGER cost of living allowance, it’s clawed back with his pension premium increases.
He has over $300 deducted every check. His wage is very AVERAGE. No wheres close to what they’re paying at Enbridge. Not ALL public employees have “gold plated pensions” and make 6 figures.
Quit painting everyone with the same brush. It only solidifies your lack of knowledge on this subject.
#2: “A 20% haircut on my house in Calgary doesn’t seem so pad compared to a 50% haircut in the stock market.”
I hear you, and I’m not very confident about the stock market these days, but what if there’s a correction and those percentages are reversed?
It’s so great to see that common sense still exists in the world. I started preserving and freezing food in season a few years ago and my friends thought I was nuts. Thanks Garth….I don’t feel as crazy anymore
Interesting, the more things change the more they remain the same …. The housing lotto Canadian Style.
Indeed less is more. Well for me anyway.
Great words of wisdom Garth….those “granite counter top mcmansions” will be come less impressive as they eat up every nickel of so many’s disposable income. Canada is facing an epidemic of “buyers remorse” with no possibility of a cure.
There is really only one thing in nature that grows endlessly.
Cancer.
Of course, it can only grow until it kills the host.
I’ve been enjoying your book Garth. It’s the first of yours I’ve read and although I’m only 30% in, I think it’s very well done.
As a general comment, one of the things I’ve noticed while reading this blog for the past year and a half is that you often get called out for the timing of some of your predictions. It occurred to me one day that even if the timing is wrong, or ultimately the predictions themselves are inaccurate, well, ultimately that doesn’t matter.
Essentially, what you’re trying to do is teach critical thinking. How to remove oneself from a comfortable perch and analyze a situation from a different perspective. That is the thread of commonality that runs through much of what you write.
Many are unwilling to learn, and a few are perhaps incapable. I commend your ability to stay motivated though, and your willingness to share your knowledge.
I think what I’m trying to say is “thanks”.
How to get Garths latest book Money Road for 25% off.
(1) Go to the chapters web site and print off the 25% off coupon.
(2) Run to Chapters and buy it before Valentines day.
The Chapters I went to in Woodbridge only had 2 copies. Now they only have 1.
I promptly gave it to my spouse to read. After all the ideas have to be blessed by the “boss” in the house, or it won’t fly.
(3) Send Garth the 25%. — Garth
ANGRY ERNIE
(RUBBER DUCKY YOU’RE THE ONE, MAKING BATH TIME SO MUCH FUN)
Big Six Banks Urge Ottawa to Tighten Mortgage Rules
(The Globe and Mail – Saturday, February 6, 2010)
“Canada’s top bankers are pushing the government to clamp down on the mortgage market to cool off the rise in home prices.”
“The heads of the country’s six largest banks have privately told policy makers that they fear the wide-ranging economic fallout of a U.S. style binge-and-collapse in housing. To head off any chance of that happening, they are willing to accept tighter rules on mortgages that would slow the real estate market, even though it would mean forgoing some short-term profits from giving out ever bigger mortgages as home prices jump.”
“The chief executives of the Big Six made their point last November, when they met with Bank of Canada Governor Mark Carney. The country’s top commercial bankers, who between them control more than three-quarters of the country’s $940-billion mortgage market, said then that they wanted the government to look at far-reaching options, such as raising the minimum down payment to as much as 10 per cent and shortening the maximum amortization period to 30 years.”
“However, the real key is convincing Finance Minister Jim Flaherty.”
—————————————————-
Link:
http://www.theglobeandmail.com/news/national/big-six-banks-urge-ottawa-to-tighten-mortgage-rules/article1458585/
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Like I have stated before….time to vote out Jim Flaherty, Stephen Harper and the rest of the conservatives. If we must have a minority Conservative government, then please, for the love of God, remove both of these guys. May I humbly suggest that Ernie and Bert would make a good substitute.
Thanks to Jim Flaherty and his “Gotta look good to the home buying electorate and Canadian homeowners(keeps my job you know, heh, heh!), home prices are at insane and asinine valuations. If you have a son or daughter buying into this….please stop them for they know not what they are taking on. Lifetime debt, possible divorce, lifetime stress, possible depression, anxiety, materialistic servitude, empty life style, hopelessness and never ending external control and many sleepless nights.
I PROMISE YOU, once the “newness effect” of the granite counter tops, steel appliances, hardware floors wears off, reality will come into play and you will realize how much you have been ripped off and deceived. You have been forewarned. A home is a commodity. Nothing more, nothing less. You live there, Okay. Got it???? Try to get a lawnmower between two feet between your house and the neighbours!!
Stephen Harper substitute with Bert (looks like him)
Jim Flaherty substitute with Ernie. (looks like him)
Peas porridge hot,
Peas porridge cold.
Peas porridge in the pot nine days old.
Jim Flaherty (Angry Ernie) Take your porridge and the advice of the Canadian bankers….tighten mortgage lending protocols NOW. Many of the learned Canadian electorate are not fooled by your “so obvious” stay in power at any cost policies that are wreaking apparent havoc on current real estate valuations and Canadians debt levels.
Nice house. Where can one find a place like that? Buy existing or DIY?
After Ed Clark says “don’t stop the mortgage train” in that other article, this article shows up in the Globe & Mail today:
>Big Six banks urge Ottawa to tighten mortgage rules
apparently double-speak is getting popular
Garth…typo on third paragraph…”buying buy”
You been listening to Cramer too much? Buy, buy, buy.
bye
kitchener1 wrote: “Thats the problem with boomers and their retirement woes, they all upsized their homes and still have mortgages in their late 50’s and 60’s.”
Not all of us did. I paid off my house in 1997 on a 15-year mortgage with 10% down. I lived in the basement suite and rented out the main floor, which not only gave me rental income but I could deduct half the mortgage payments, utilities, and maintenance. The tax refund each year was usually bigger than the rental income. After I paid off the house, I took it over completely.
When I mentioned to my friends and co-workers that I had paid off my house, many of them asked what kind of a bigger house I would now be upgrading to. I couldn’t make them understand that once you pay off a mortgage you don’t trade up to a bigger house and go back into debt. Yet it seems to be a standard belief, pushed along by realtors, no doubt.
1/
… Canadian Real Estate ownership is guaranteed by the Canadian Govt thru CMHC, so it “Will never crash, because its too big to fail”.
CMHC is like Tarp 1….”Save the system”.
…Minor corrections are possible but a R E crash, never.
Nostradamus jr.
#25 Ghost of Tom Joad on 02.06.10 at 2:13 am …
yup …
If you think Ontario’s $194 Billion is bad take a look at Quebec’s $216 Billion. Add to that their roughly half share of Canada’s over $500 Billion and you’re starting to talk real money. Then there’s the personal and business debt … oops … municipal too?
The fixation on the price of RE is amazing really. Bull or Bear … matters little as in black sheep or white sheep … same distraction.
Garth should have added “ITS ABOUT THE DEBT STUPID !!!!”
DEADLY DEBT TRAP, TILL DEATH AND DEBT DO US APART
(The Revenge of Angry Ernie – Redux)
Nighttime reading for Jim Flaherty (Angry Ernie)….Pay attention…there is a quiz coming up in March. Put up ye reading spectacles and turn on the nite lite mate.
“We bit o’ magic in me cuppa o’ joy…shhhh….if you give me $50,000.00 I will give you $1,000,000.00!” “No, I am not making this up, it used to be if you signed here….shhhhh….I would give you $1,000,000.00 just for asking.” How so mate?? “Luck of the Irish me friend…Blimey Stone kissing….pass the rye then pass out.” “I will git me o’ pound of flesh and a bottle o’ rye for me banker lovey dears.” “Wee bit more magic from me cuppa o’ tea…If you can’t pay me bit o’ money back me lovey dear, your naïve, stupid neighbors will thanks to the CHMC! Luck O’ The Irish I say…Trust me okay? Hello….G’day the pipers are calling (Me hears Mark Carney blows a mean bag). I blow a mean bag as well…Trying to get me mate Stevie off of the keys and onto the bag o’ magic as well.
“A man can only be tempted to borrow, he cannot be forced to do so. There are many psychological factors involved in a decision to go into debt… the easy availability of money and a low interest rate. We are living in an age of fiat money, and it is sobering to realize that every previous nation in history that has adopted such money eventually was economically destroyed by it.”(Source: The Creature From Jekyll Island by G. Edward Griffin)
You would be surprised at what you can learn when you do a little wee bit o’ reading…..Lucky Shamrocks Jimmy Boy.
Oh JIMMY BOY, the pipes, AND the PEOPLE OF CANADA are calling
From glen to glen, and down the VANCOUVER mountain side
The summer’s gone, and all WISH HOME PRICES WERE falling
‘Tis you, ’tis you must go and WE must HIDE (PROROGUE).
But come ye back when summer’s in the meadow (AND AN ELECTION IN THE AIR)
Or when the valley’s hushed and white WITHNEW MORTGAGE DEBT
‘Tis I’ll be here in sunshine or in shadow GOVERNMENT
Oh JIMMY BOY boy, oh JIMMY BOY, raise mortgage requirements now!
But when ye come, and all the HOME OWNERS are dying
If I am dead, as dead I well may be FROM FEE MONEY YOU SEE
You’ll come and find the place where I am BUYING WITH NO MONEY DOWN
And kneel and say an “Ave” there for FREE.
And I shall hear, tho’ soft you tread above me
And all my grave will warmer, sweeter HOME FOR FREE!
For ye shall bend and tell me that you love me
And I shall sleep in peace until you come to YOUR HOUSE FOR FREE COURTESY OF THE CHMC…
#20 Ecco Vancouver on 02.06.10 at 12:42 am
*********************************************
I agree with much of your post–
I too,think governments will try to chase savings out of peoples RRSP’s and MZM accounts–
When velocity collapses–and it will–
Governments will start playing the tax/penalty games you talk of–
Trying to chase money into whatever sector,is the flavor of the day,but always,with a piece of your capital savings,shaved off–all for da cauz
Money that’s safe and doesn’t move,is deflationary–
The US/UK have been engaging in those games already–
The UK and their raid on safety deposit boxes, a few years ago–all in the name of protecting the citizens from those nasty terrorists,that live amongst us–
How many here–buy into this terrorist sh*t anyway?
What’s happening–is not a failure of the free market system–
What’s happening–is a total failure of successive governments,that are totally clueless,in the world of economics, blindly led around by Carney and his ilk–
The Gold Men–
Harper and Flaherity–what a friggen joke–
Economists ex-tror-din-air–
#44 BDG YYC
…agreed, Ontario & Quebec’s total of Provincial and their share of Federal debt loads, added to their inability to compete on the World Manufacturing field is a scary thought to Western Canadian citizens.
Hongcouver article…
…”"a recent UBC study concludes that the hosting of an Olympic Games does not prompt an increase in local house prices, and that prices do not crash after the event is over.”"
I predict …Vancouver/Whistler becomes a permanent self sustaining, green, indoor/outdoor, sports, lifestyle destination.
Current springtime climate conditions is a bonus that will only showcase Vancouver to the world…especially the uniqeness of the North Shore…North & West Vancouver.
Nostradamus jr.
I’m not the first to mention this but upon reading my daily news in the morning…
http://www.theglobeandmail.com/report-on-business/big-six-banks-urge-ottawa-to-tighten-mortgage-rules/article1458585/
So let me get this straight… even the banks are telling Jim-bo F to tighten mortgage rules to avoid a US style housing bubble… but it only seems like Jim-bo and CMHC want the bubble to continue…
#43 nostradamus jr
“Minor corrections are possible but a R E crash, never.”
NEVER in Canada eh. But in Spain, Japan, and the US. But never here.
Possibly a voice of reason in all this madness of collapsing real estate prices….
First, it’s good to see so many naysayers and dire warnings of imminent RE crashes, especially in Vancouver. It’s a good sign that there’s no bubble.
Most importantly, it would be great to see someone write about what’s really happening and why so many people are bothered about being priced out of the market. This pheonomenon is in it’s most basic form, part of global re-organization of peoples and their ability to walk with their money to any country they wish to live. Vancouver when I was growing up in the 60’s to 80’s was still a small town. The only people that moved here in any great numbers to speak of, were Torontonians and a number of Brits and some of our dear friends from the Atlantic coast to work in our once flourishing lumber industry and other remnants of our past economy.
Vancouver had it’s real estate cycles then as we do now but those cycles were locally driven. Today, we see people from not only China and India in great numbers, but new people from the former Soviet Union, eastern block countries, middle eastern populations and believe it or not, US citizens running from the US-Bush led debaucle of the last ten years. Money has been streaming into Vancouver and it’s not being driven by our local economy. Here is the problem that Garth and others cannot come to terms with; the RE market while it appears to defy gravity is being driven by money being moved from one country to another, namely Canada and Vancouver in particular. This has not just happened overnight, its been happening since 2000 in a significant manner. That’s why no one can understand who is buying at these prices and why the average Vancouverite cannot afford the high prices.
Plain and simple, Vancouverites are being displaced by those that have the wherewithall to pack up their families and move to Canada. All this whining is about the global competition we have when it comes to buying an affordable home in our own home town. This is not about a real estate bubble gone to the stratosphere, let’s just admit that were all pissed off because people are landing in Vancouver and buying up our land and because our wages are not going up to make these homes affordable, we’ve now taken on the role of being whiners and naysayers, when really we should all be just moving out to the far distant corners of land afffordabilty. This is what none of you want to admit is happening. Instead it’s about a housing bubble about to burst. I say wake up to the global revolution! It’s happening right here and now.
You mean it’s different this time? — Garth
#46 Nostradamis Jr.
Um …
Vancouver …
Population 600.000 = about 200,000 households
About 140,000 residential homeowners.
Growth = 1% plus = less than 2000 new homeowners per year – being generous. Split between new and resale market.
Prices 9x income.
Yup should be able to find 2000 Idiots a year willing to hawk themselves 20:1 to buy the Price to Income say up to 12x or 15x over the next few years. Any idea who’ll be doing the selling?
Whistler … nice litte niche tourist/resort trap?
Now Nos … you might be proved right. But here’s the thing.
You are talking about a little green planet that’s barely 10% of BC’s population … and yes we all know about how “special” some of its neighbourhoods are.
But Frankly … and I’ll speak for myself here … I don’t give a sweet damn about it … it barely matters to most but you and a few buddies that overpost the same nauseating repetitive – broken record crap …
Nobody cares ….. they are tired of the song.
#23 Nonplused:
We’re having a different experience here in Cowtown.
The house we rent went in NW Tuscany went up for sale last November (four months into a year long fixed term lease). Ugh, if we had known she was going to sell we wouldn’t have re-signed.
27 showings and two open houses, not one offer. Obviously the owner priced it for 2006 rather than 2010. She offered it to us first for $440k and I said no way — I’ll give you $350k for it. She said, “I owe more than that on it — at that price I’ll move back in” She’s owned it for 8 years (bought for $200k or so), but used HELOC to buy another place. It’s assessed at $350k and she listed it for $449k — and it’s only 1350 sq feet.
Now she’s dropped the price to $429k and still nothing. A showing last night — they didn’t even go downstairs. I think it’s because the Agent has the house listed as being 1850 sq ft, but that’s TOTAL and quite evident when you walk in.
We approached him with an offer of $380k but he refused to even take it to her.
Funny thing is, another house on our street went up for sale last week — same size, same finishings, priced at $394k. Tuscany has had some price reducations, definitely.
I’m done with showings every other day, so we’re going to rent in the same neighborhood from someone not looking to sell right now and wants responsible people in his place. We love the new place, and it’s only two streets from our current one. Our greedy landlord can go rot.
#48 The Great Gazoo on 02.06.10 at 10:56 am
So let me get this straight… even the banks are telling Jim-bo F to tighten mortgage rules to avoid a US style housing bubble… but it only seems like Jim-bo and CMHC want the bubble to continue
*****************************************
There’s the grab–
What was it–80 Billion taxpayer $ went into CMHC–
Wonder what % has been lent out?
3-5-10–
Lets give it 20%
That leaves 64 billion in the slush fund–
Now banks want to tighten/lock down lending–which is what they should do–but–
They also have 64 billion of “our” $ to handle the massive defaults,they “know” are coming–so–
They wont lend–People who could borrow-wont–those who would borrow-can’t–and so it goes–
#20..you sir are a man (or woman?) after my heart…..
You can always tell the “wise investor” types who have never really seen the underbelly of the beast. They have done well in their venues and honestly believe that RRSPs and TSFAs and their cousins can protect them from governments greedy hands.
Forgive them because they were born into a world of privilege and softness. They simply cannot see that wealth is ultimately preserved by the muzzle of a gun or with a steel blade. Wealth lies in herds, waving fields of grain, close family connections, and the willingness to die to protect those things.
Most “investors” cannot possibly see that something evil comes this way……they will still be in shock as their “wealth” is confiscated and they find themselves on the streets…….
I wish so much that I could meet more folks like yourself out in the real world as it is in alliances with your sort of people, that folks like me can remain safe.
I have been preaching to the choir for 20 years now trying to get a few to see…but they will not…and now time is very very short.
It has been hard resisting the siren song of the crowd, to truly believe in tangible wealth and not some invented paper assets has been viewed as quaint and unsophisticated….and maybe I am….
That house you show Garth at the top of the page looks almost exactly like the house that I was raised in at least until I was in my early teens (hard to believe that I am only 44yrs eh….and Canadian born and bred?)
It is back to that we are going…like it or not…and the journey is going to be devastating.
#17 Keith in Calgary
“With high unemployment, wage and salary cutbacks as well as higher RE prices, is this how people have been making their mortgage, credit card, and car loan payments ? Canadian LOC balances are up 39% in 21 months. Using debt to pay debt……”
That is exactly what is happening and the BoC and bankers know it. They know that if they allowed the free markets to run free the house of “credit” cards would crash this fake manipualted debt economy in one hour. It will crash and when it does it will be bad but the only question is how long do they hold up the fake debt economy from becoming a free market?
Maybe we should all think about how we can join the party and then walk away when this all crashes? Trying to come up with a plan to borrow borrow borrow until the game ends and then go bankrupt. Is it hard to go bankrupt? My credit is realy good with alot of availible credit. Plan is to puthouse in my name only (not wife) and live on credit and debt for as long as I can or sell(house) for a profit or worse comes to worse go bankrupt. Why should I work hard and save when the BoC wants me to work a little and spend(debt) alot. It seems the lazy broke on debt are rewarded while the hard worker who saves loses. I am sick of losing and I do not care to go bankrupt. Before I do I will run up a credit cards and then go bankrupt (while I save money through my wife). Any thoughts anyone?
Gazoo/Bubble/Vulture
The banks blaming BOC/MOF? That’s funny. But its basically postering.
Last I checked the banks were under no obligation to loan money to anybody. They can “just say no”. Likewise the interest rate. They can charge what they want.
Big Six banks urge Ottawa to tighten mortgage rules
http://www.globeinvestor.com/servlet/story/GAM.20100206.RCMHC06ART22022/GIStory/
Cool interactive chart: BoC Prime Business and Average Residential Mortgage Lending 5 Year Rate History for 75 Years
http://canadabubble.com/charts/bank-of-canada-interest-rate-history.html
Big Six banks urge Ottawa to tighten mortgage rules
http://www.theglobeandmail.com/report-on-business/big-six-banks-urge-ottawa-to-tighten-mortgage-rules/article1458585/
Whats this all about Garth?
#14 and #16 T.O. Bubble Boy
You get the Bingo! today. You nailed it.
#10 TomOfMilton
TOM, by my dead reckon’ that ther’ is sur no scotch cabin … that be a moonshine cabin …position that rockin’ chair so you can check your six for those good ole “Deliverance” boyz.
#31 meggie
We have had this conversation before …we have a .gov we cannot afford and something needs to be done …would love to hear your ideas… mine is at least fair to all the .gov employee’s… and this is not personal …it is math.
I would also advocate an end to all government subsidies … there that picks on crown corps and private business… so not all one sided.
The Real Estate bubble is not creating and exploding in vacuum;
The Real Estate bubble will be busted by “butterfly effect”.
Some interesting facts:
1) 20 000 USA jobs disappeared in January
2) Unemployment rate (adjusted) failed 0.3% in January (from 10% to 9.7%)
How it is possible?
Where disappeared those hundred of thousands of unemployed people?
Do they were eaten by alien monsters or died from hunger?
Where is the logic?
The logic is that Obama’s administration is fraudulently manipulating numbers.
The number for January was “adjusted”, but the real number for January was 10.6%.
Washington is now under the huge snow cover:
Epic Snowstorm Batters Washington
Of course it is “global warming” or may be divine sign?
The blind Bulgarian Predictor Vanga in 1980this foreseen:
“The 44th President of USA will be black and the final”
#22 goldenegg um, goldenfox (sorry about that LOL)
no mortgage, no rent, hmm.
heat, hydro, property tax, repairs, maintenance, etc, etc, etc, hmmmmm….
respectfully,
Ina H. Andbasket
Hey all …
Came across this little gem – The 2010 index of economic freedom. Canada is 7th in the world overall …that part is very good but expected …if you look at the link you will see we are above average in everything except for gov’t spending …hmmm.
http://www.heritage.org/Index/Country/canada
In regard to G&M’s Big Six asking for tightening mortgage rules…..
What a piece of crap.
Don’t be fooled. It is one more “trick” to scare the naive buyer to buy before it’s too late. Don’t you see it ?
In Dec. 2007 …… Land Transfer tax (…we will have to pay more)
In Oct. 2008 ……..5/35 (…we will have to save more…)
In 2009 … Low interest rate + CMHC out of its mind (…price will increase for ever…)
Now, 2010…… Who knows…!!!
The real thing is, they can’t do anything by now. If they do, there will be less and less buyers of debt. There will be no more debt to sell on the market. The sole purpose to generate more and more mortgages is to make more and more packages. Or, do you realy think the banks hold all the debt in their books ?
Same history of the States. Deja Vu…
Wait and see!
#48 The Great Gazoo
They want the bubble to continue because it is the only functioning part of the economy left.
Look south for confirmation. The bailout of the GSE’s in 2008 plus the guarantee’s sneaked in on December 24th are all to prop up the home prices. Add to this the refusal to foreclose (if they do they have to recognize the losses), and the shadow inventory of homes not yet on the market and you can see where this is heading.
Had they not done so, housing prices would have been down 50 % to 75 % by now. Too bad they will get there anyway…..
Pulling forward demand only kicks the can down the road so far as we saw with the cash for clunkers stunt…..
That G&M article is getting a lot of great comments. It’s actually nice to see that the majority of posters are all saying the same thing. Enough already.
Yet I found myself reading them thinking, isn’t it a sad state that people need/want the Government and Banks to set up regulations to prevent them from taking on too big of a mortgage.
As in, they couldn’t use their own common sense to say “I can’t afford this house” and not take on a mortgage that’s bigger than necessary.
Entitlement indeed.
Okay last post today …
Today’s topic is ‘beneath your means’ read the link and see if public pensions are indeed beneath your means … of the 34% contribution required to fund a public pension only 10% of it is actually paid by the employee …the .gov pays the other 10% (employee matching as in DC plans run by private side) and the poor smuck taxpayer pays the other 10+% …if any civil servant has better stats let us see them.
What is still missing is that the taxpayer is still on the hook for more if the investment gurus or market takes the portfolio down. How is this not creating 2 classes of society? A same plan for all citizens, fairness for all is what is needed.
http://fairpensionsforall.blogspot.com/2010/02/getting-message.html
Some good stuff in this post. I think a book could be written on the concept of living below ones means. I’m living the lifestyle, but not going to write the book on it.
taxpayer ” like everyone else”
‘aggressive multilateralism’ google that. Remember our guys are showing that the people of the north are in charge of their destinies …;^)
The original 1 January 2005 deadline was missed. After that, members unofficially aimed to finish the negotiations by the end of 2006, again unsuccessfully. Further progress in narrowing members’ differences was made at the Hong Kong Ministerial Conference in December 2005, but some gaps remained unbridgeable and Director-General Pascal Lamy suspended the negotiations in July 2006. Efforts then focused on trying to achieve a breakthrough in early 2007.
======================
robert hudec enforcing international trade law
http://www.wto.org/english/docs_e/legal_e/legal_e.htm#annex3
http://search.barnesandnoble.com/Reciprocity-and-Retaliation-in-US-Trade-Policy/Pearson-Education-Australia-Staff/e/9780881320848
GATT/WTO disputes
http://docs.google.com/viewer?a=v&q=cache:vLhHb6mS3DAJ:www.carleton.ca/ctpl/pdf/conferences/REINHARDT-BUSCH!95.pdf+%27aggressive+multilateralism%27&hl=en&gl=ca&sig=AHIEtbQISKUSXSFIISv88F-9VDBi_Fk9xAhttp://www.btlbooks.com/New_Titles/wealthbystealth.htm
http://www.btlbooks.com/Links/glasbeek__interview.htm
http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact5_e.htm
I’m a bit with #20 Ecco Vancouver on this. Saving assets in registered vehicles presents a significant risk of some type of confiscation scheme. This would materialize in CPP and OAS benefit claw backs where ones entitlement would be based on his personal holdings, regardless of the fact that the individual may have contributed into the system on par with others. RRSP is worth pursuing just for the tax break. TFSA appears to be nothing more than an enticement to voluntarily disclose one’s after tax holdings. Canada, whose citizens are not known for a revolutionary mindset, would be a good experimental ground for this new reality all governments are facing now.
#2 Hazzard “A 20% haircut on my house in Calgary doesn’t seem so pad compared to a 50% haircut in the stock market.”
But remember your real estate investment is highly levered.
For example $100K invested broadly at the market highs in 2007 would be down about 27% now.
Put that same $100K down on a $600K Cowtown starter and have a 20% correction and you have not only lost the full $100K equity but owe the bank $40K more than the house is worth.
64 weeks of E.I and no pressure to get a job! The G.O.C realy knows how to help out(silence the truth)buying time……..
Flaherty in Iqaluit
http://www.windsorstar.com/Flaherty+wrecks+igloo/2532319/story.html
IQALUIT, Canada, Feb 6 (Reuters) – Iqaluit locals spent the morning building two igloos outside the Nunavut legislature building in this Canadian Arctic town on Saturday while world financial leaders were gathering inside.
In a clumsy moment as he left the smaller of the two igloos, it took Canada’s finance minister about two seconds to destroy the snow-brick entrance arch on one of them.
“I’m deconstructing here,” Jim Flaherty said sheepishly as he emerged from the snow structure.
The sealskin-clad builders, including local resident Pitseolak Alainga, said they built the igloos to welcome delegates to the weekend meeting of finance chiefs from the Group of Seven industrialized nations.
“I don’t have anything against these G7 people or anything. We want to welcome them,” he said.
Iqaluit, capital of Canada’s Arctic territory of Nunavut, is an unlikely venue for an international meeting of this kind. Located on the edge of an iced-over inlet of the Arctic Ocean, it is home to some 6,000 people. Every hotel room in town is full.
(Writing by Janet Guttsman, Editing by Peter Galloway)
© Copyright (c) Reuters
#s 38, 40, 48 “Big Six banks urge Ottawa to tighten mortgage rules”
‘Had to laugh upon reading that article; the parts that kill me are the statements, “we’re talking about being PRE-EMPTIVE here” and the banks’ associated urgings that, “changing the (mortgage) rules would be a relatively simple, sensible, PROACTIVE thing to do” (as opined by “a top executive at a second major bank”).
The hysterical aspect is the suggestion that politicians could ever do, or have every done, anything at all that is genuinely “proactive/pre-emptive”. Politicians have not and will not ever do anything at all that derives from accurately FORECASTING currently non-existent future potentialities. The simple fact that they’re discussing a “potential” housing bubble and its “potential” consequences is confirmatory of its current existence.
Politicians are universally REACTIVE . . . to the whims of their constituents, to the pleadings of special interest groups, to their own selfish desires for job security/acclaim . . . whatever. They reflect the times, and they have never/will never do anything at all to “proactively” ward off future potentialities. The populace elects and supports the individual who most accurately exemplifies the current zeitgeist. People get the leader(s) they deserve.
And the politicians’ enablers, the vast majority of modern-day government/bank economists, are “trend analyzers”, not genuine forecasters. They extrapolate from the recent past into the near future and tweak the numbers to reflect the biases/assumptions they happen to hold at that time regarding whatever events “should” occur (of course, with considerable adjustment for whatever future events they desire to occur – e.g., as with wishful future home price “forecasting”). I’m genuinely shocked when economic statistics are reported without the preface, “economists were surprised today by . . . (job numbers, GDP figures, housing statistics, consumer spending . . . whatever)”.
Genuine forecasting and associated proactive policy enactment would require a level of analysis of the human (cultural/psychological) condition that (most) politicians and (most) economists either do not possess. . . or cannot, or will not, perform.
#50 Alan.
I don’t really think you know what you are talking about.
If you are so right, why is our gov having CMHC to insure all the mortgage that our banks are giving at 2%?
Why can’t we say: 10 or 15% downpayment and 25 years ?
Wait and see!
#20 Ecco Vancouver,
Great post!
I’d just like to add that I notice people believing that changing PM’s, Presidents, etc will make a difference. Although more people are starting to see through the facade, too many still can’t or simply do not want to believe that governments are instruments of the hidden ruling elite.
And what is truly best for the people is way down the list. Our job is to remain ignorant and programmed to continue to vote parties (the front men) in and out time and again thinking that the “new guys” will serve us better.
Governments of the people are good and necessary, but are there any left in the world today that are “allowed” to truly serve their people?
It seems most people would rather block out this fact rather than face it and make some realizations about what kind of world we live in and where we see ourselves in it, as painful as some of these realizations may be, at first.
Vancouver info-
I’ve been following the Kitsilano listings in Van since 2007. They normally hover between 95-120 units on the market on any given month. Today= 156.
2 SFHs went up for sale before XMAS on my street in the NW. This morning I see they both sold.
Older homes, very well situated (transport, schools, shops etc), priced in the mid to upper 300s about 1300sq + finished basements, huge lots /w view.
Your NE property is most likely worth in the 350s as you said, not mid 450s since you can buy brand new in that price range (although further from DT)
CoB
Kits listings – what are you seeing? Do you think sellers will start to rush to hit any bid they can find?
Listings are surging in Vancouver, sales soft – are we setting up for the big drop?
CoB
Have you taken note of the surge of listings in E Van as well? Just piling on.
There are two factors for blowing the Real Estate bubble:
a) economical
and
b) psychological
To put psychological pressure for creating RE bubble, you have to have huge deposit of brain washed, easy programmed idiots and ignorant people with no ability of independent thinking – herd of zombies or so called “great fools”.
Why do we have so many brains washed zombies or “great fools”?
Where are they coming from?
They are coming from nowhere – they are creating on site, by Canadian education system for many years, because for corrupted governing elites is much easier to manipulate the herd of “politically corrected” zombies, than independently thinking, self respected individuals.
#50 Alan,
Just too many things to say about your post to bother. Check back in 12 months and we will see if Vancouver continues to defy gravity.
Loved this. Canadians as the Greater Fools than our U.S. cousins. Thank god it can’t happen here.
http://catharticranter.blogspot.com/2010/02/canadian-moral-superiority-prudent.html?source=patrick.net
#78 CoB,
I see lot of strange signs in Vancouver as well. However I think watching the listings is a bit like watching for a kettle to boil – never seems to change until all of a sudden it does.
I still believe there needs to be a tipping point event that signals that prices are headed down as a result. Until such an event it will see-saw like the stock market.
#28 db – Totally agree. When we purchased our current home we put 25% down (so we didn’t have to take out CMHC insurance) and bought it on the basis that if one of us lost our job, we could still make the mtg. payments and live relatively comfortably. Sure enough, my husband did loose his job a year +after. He was a hydraulics tech. As he loved computers, programming, CADCAM, etc., I convinced him to take a one year IT program. It cost us $10K but at least EI extended his benefits while he took the training. The best move he ever made. We paid our house off in 7 years. We had a mtg. that allowed us to pay 10% of the original mtg. on each anniversary. And, rather than having our house taxes included with our mo. mtg we chose to save and pay them on our own so the bank could not use our money during that time. Unfortunately, we have not been as wise in the last several years. We stopped investing in 2002 as we lost faith in our so called FA, who was really only a MF sales guy. We’ve got far too much in CASH. We’re hoping to correct that very soon, thanks to Garth.
I spent my pre-teen years (in the 50’s) in a war time house, 6 children and only 1 bathroom. Times were tough and, some of us, learned the value of a dollar.
#50..wha ha ha ha you are funny, yep it is definitely different this time in Vancouver….
Hi everyone,
I’m going to take the risk of having a brilliant rejoinder appear at the bottom of my comment, and disagree with Garth.
If you don’t own real estate now, there is no way in hell you should be buying any. The first principle of investing is to get value. I think nearly everyone on this site has come to the conclusion that real estate is overvalued and likely to fall in the not too distant future. Why invest in an asset class you know will collapse?
Main reasons to avoid real estate for the moment:
don’t cost much. An e-broker charges me 0.16% on large transactions. Although this does rise with small sales, it beats realtors by a large margin.
1. It’s not divisible. You can buy shares or gold or bullets, or whatever floats your boat, in small quantities. If you run into a financial disaster or you want to take profits, you just sell a bit. Real estate is a giant purchase, and a binary decision, sell or hold.
2. It requires leverage/debt. If you buy an asset with your own money, and it then collapses, you have lost money. If you buy with someone else’s money, you still have to pay back the same principle, plus the same interest. If you lose your job/have a health problem/for any reason your income goes down and you can’t make payments, you need to sell that asset in a hurry. Buying at the top by definition will give you an asset that you can’t sell for the same price. To pay back the loan principle and get out of debt, you will either need to throw in a large amount of your own money, or failing that declare bankruptcy.
3. Holding costs are significant, and trading costs are huge. Shares cost you nothing to hold, gold/cans of tuna/squirrel traps
Everyone should aim to hold some real estate…. …eventually. For those who don’t own any right now, we can’t all live in a cabin 500 miles away from our jobs, so renting is the next best thing. Now here I agree with Garth – there are better opportunities coming.
An aside: #56 Dan
http://www.theglobeandmail.com/report-on-business/big-six-banks-urge-ottawa-to-tighten-mortgage-rules/article1458585/
A change in loan to valuation ratio is the most destructive thing a bank can do to the real estate market. The theoretical maximum effect of decreasing LVR from 95% to 90% is to decrease house prices by 50%. Say for instance you’re a first home buyer with $20,000. This week the bank requires 5% deposit (95% LVR), and they will lend you $400,000. You don’t make up your mind, and next week they require 10% deposit. You still have the same amount of money, but can only borrow $200,000. Obviously this is a bit simplistic – not everyone borrows 95%, and banks won’t lend you 95% if you clearly can’t afford the repayments, but for purposes of illustration, you can see this is pretty important.
What happens to the housing market? Nearly everyone buys with borrowed money these days. Despite rumours, overseas cash buyers are a tiny fragment of the market. It’s terribly sad to see kids thinking they have to buy because credit is being tightened. If credit is tightened, prices fall, because they have to.
Stage 1: collapse in turnover.
Stage 2: forced sales (lost job/divorced/had to move to another city/died with a mortgage etc etc etc). Prices collapse, not because people don’t want to pay more but because they can’t
Stage 3: more widespread panic, as leveraged speculators rush for the exits to beat falling prices
Housing must increase in value for most of these people, because it is a cash flow negative investment. How many of your friends have “investment properties” with positive cash flow, after deducting interest, property tax and maintenance costs? Zero if they purchased in the last decade is my experience. If you still have a significant mortgage the only reason for holding on is a capital gain. Take away the source of the capital gain (credit expansion), and the frantic rush to pay back mortgages by selling will be painful to watch.
I can’t imagine this actually happening unless the banks are forced, because of the horrible damage inflicted on their collateral (other mortgaged houses). However, if they do reduce LVR, this will mark the absolute top.
#61 rory on 02.06.10 at 12:17 pm
———————————————–
A 20% haircut of all civil servants is a great idea!
Let’s axe the pay of M.D.’s and Ph.D.’s working in the government from $95,000 to high 70’s and from 70’s to high 50’s, effectively forcing them back into medical practice and scientific research in order to earn a living wage. Then we’ll have slightly-educated replacements protecting the health of Canadians, evaluating the health effects of drugs, medical devices and over-the-counter products. I’d love to see some experimental drugs tried on you. You get what you pay for. Be careful what you wish for, you just might get it….
“They (politically corrected zombies) are coming from nowhere – they are creating on site, by Canadian education system for many years, because for corrupted governing elites is much easier to manipulate the herd of “politically corrected” zombies, than independently thinking, self respected individuals”.
This statement needs clarification:
Canadian education system producing non-violent politically corrected zombies.
But, for example, education systems in Islamic countries are producing violent, aggressive, evil murdering zombies. (as well as Chinese communist education is producing communist violent zombies, as in the former USSR).
It is much better to live between non violent Canadian zombies, than between violent, murdering, evil Islamic or Communist zombies.
It is why we see huge immigration from Islamic countries, China and former USSR and Eastern Europe into Canada, but not from Canada to Islamic countries, China or Eastern Europe.
Of course this unbalanced immigration donating its part to blow RE bubble in Canada, because immigrants coming to Canada with money.
PS. Not all students are automatically became to be a zombies – there are many non-conformist students, that despite educational brain washing growing up into independently thinking individuals).
.#31 meggie on 02.06.10 at 3:40 am
I too, am sick of all the public sector bashing…RORY.
Worked 14 years at a cancer hospital and took my 7% rollback in the”Klein” years. Part timer and no pention.
Hubby works/worked 20 years welding/mechanic for the municipality. He took a 5% rollback. He works flippin HARD and comes home beat. He does have a pension and every time he gets his MEAGER cost of living allowance, it’s clawed back with his pension premium increases.
He has over $300 deducted every check. His wage is very AVERAGE. No wheres close to what they’re paying at Enbridge. Not ALL public employees have “gold plated pensions” and make 6 figures.
Quit painting everyone with the same brush. It only solidifies your lack of knowledge on this subject.
………………
Hi Meggie – my husband works with our municipality (school board) as an IT Network Supervisor. He does not receive anywhere near 6 figures. He’s not unionized, nor does he have an indexed pension. He’ll receive 1% increase this year. And, the school board will likely increase his contributions to his miserly pension plan. He also works a lot at home, sometimes 4/5 hours at night writing programs to increase efficiency. He does not get paid for it, but to him its a challenge that he loves.
I worked for our prov. govt. We took a 3% rollback in our wages as well as unpaid, mandatory Xmas leave. I also went through 4 ‘restructurings’ within a 5 year period. We never knew whether we’d have a job or not. I took early retirement, bought back 3 years of fed service from the late 60’s/early 70’s and have never regretted getting out when I did. The last 10 years that I worked, the morale was ‘toxic’. I worked in IT and the govt. would spend 10’s of millions of $ on a new software development methodology and software engineering methodology and POOF, another political party came in and it was caput. I was one of the team members on that project and another initiative which never went anywhere. Its very demoralizing and, as I said before, I was so pleased to be able to finally find a way out.
Yield Spread Premiums Prove Appraisal Fraud: The Key to Understanding The Mortgage Mess
Posted on January 17, 2010 by livinglies
…”Under normal circumstances if you buy a car, you can insure it once and if it is wrecked you get the money for it. Imagine if you could buy insurance on it thirty times over at discounted rates. So you smash the car up and instead of receiving $30,000 for the car you receive $900,000. That is what Wall Street did with your mortgage. This was not risk taking much less excessive risk taking. It was fraud.
So IF THE LOAN FAILED or was declared a failure as being part of a pool that went into failure, the insurance paid off.
Hence the only way they could cover themselves for taking $1,000 on a $500 loan was by making absolutely certain the loan would fail.
It wasn’t enough to use predatory loan tactics to trick people into loans that resulted in resets that were higher than their annual income. Wall Street still had the problem of people somehow making the payments anyway or getting bailed out by parents or even the government.
They had to make sure the homeowner didn’t want the loan anymore and the only way to do that was to make certain that the homeowner would end up in a position wherein far more was owed on the loan than the house ever was worth and far more than it would ever be worth in the foreseeable future.
They had to make sure that the federal government didn’t step in and help the homeowners, so they created a scheme wherein the federal government used all its resources to bail out Wall Street which had created the myth of losses on loan defaults for notes and mortgages they never owned. It would then become politically and economically impossible for the government to bail out the homeowners.
This is why principal reduction is off the table. If these loans become performing again, insurance might not be triggered and the investors might demand the full $1,000. With insurance on the $500 loan they stand to collect $15,000. without it, they stand to lose $1000. There is no middle ground.
So they needed a method to get the “market” to rise in values as much as possible to levels they were sure would be unsustainable. That was easy. They blacklisted the appraisers who wanted to practice honestly and paid appraisers, mortgage brokers and “originating lenders” (often owned by Wall Street firms) 3-10 times their normal fees to get these loans closed. They created “lenders” that were not banks or funding the loans that had no assets and then bankrupted them.
With the demand for the AAA rated and insured MBS at an all-time high the demand went out to mortgage brokers not to bring them a certain number of mortgages but to bring in a certain dollar amount of obligations because Wall Street had already sold the bonds “forward” (meaning they didn’t have the underlying loans yet).
With demand for loans exceeding the supply of houses, they successfully created the “market”conditions to inflate the market values on a broad scale thus giving them plausible deniability as to the appraisal fraud on any one particular house.
#33 Diana on 02.06.10 at 5:53 am
It’s so great to see that common sense still exists in the world. I started preserving and freezing food in season a few years ago and my friends thought I was nuts. Thanks Garth….I don’t feel as crazy anymore
………………
I too started freezing food in season several years ago, especially when my veggie garden produced an abundance of toms, string beans, etc. I have a Foodsaver vacuum sealer machine. I have space so I buy lots of canned & dried goods when on sale. Hubby bought a small generator, etc. the other year. We went through hurricaine Juan and were without power for 1 week. Thankfully, we have great neighbours so we all got together, BBQ’d what was still viable. But still, we lost many hundreds of $$ worth of food (fridge and 2 freezers back then). Now we are really prepared – money in a home safe, coleman stove, etc., etc.
Hopefully this is not a signal that we are going to blame rich Chinese for our own housing bubble problem.
http://www.vancouversun.com/business/Mainland+Chinese+buyers+luxury+home+market+recovery/2531076/story.html
U S interest rate scuttlebutt is…no interest rate hikes until after the ALT mortgage resets…not before late 2011.
…Makes sense…if rates rise before then, we have real estate crash #2 in the U.S.
The U.S. will bankrupt the rest of the world first before it allows itself to BK.
…Canada is a close brother of the U.S.
Nostradamus jr.
Garth, the bunker looks like a 1.25M North Van special. That is of course if it’s on a 30 X 100 lot.
Nothing gets people scared like leverage going the wrong way.
88-danM
you must of missed a few posts–australia–one of their banks cut the LVR from 95% to 87%–so it can be done
can’t remember how far back that clip was
I took enough money out of the stock market in 2000 to pay cash for my house. I thank God that I did, the stock market went down after that and I had a house paid for. I like not having all of my eggs in one basket. My house has since been a much better investment than stocks. Stocks had their day in the 1990’s, housing had it’s day in 2000’s. Now, stock investments I think should be in cash. My house provides me with relatively inexpensive living compared to renting..I did not buy beyond my ability to service costs, taxes etc.
Your argument is probably emotional, not rational. $500K invested to yield a dividend income of 6% gives an income of $30,000 a year, or over $25,000 after tax – which is $2,000 a month. That’s enough to rent a $500,000 house – and you still have the $500,000 in liquid form. How is it better to own, exactly? — Garth
JeeZ Garth…you could probably get 300K for that thing. I’d sell!
20 reasons Global Debt Time Bomb Explodes Soon…
http://www.marketwatch.com/story/our-debt-time-bomb-is-ready-to-go-ka-boom-2010-02-02/comments
tom asked-
“What do you advise someone in their early 40’s with 200K in investments, but is still renting because of being priced out of the market? Continue to max RSP or save in a cash account for a down payment?”
Tom, you’ve left it a bit late, but i would put the majority down and buy a house in a place you like. cash is not king
Next big bubble?
George Soros warns of gold bubble
Published on January 28, 2010
http://www.commodityonline.com/news/George-Soros-warns-of-gold-bubble-25183-3-1.html
Whether you agree with this blog or not, home prices in some Canadian cities are not sustainable. While Canada’s average home index rate may be ok (http://www40.statcan.gc.ca/l01/cst01/cpis04a-eng.htm), most large cities are not priced right. Living in Calgary, and looking at a price index of 233.
Median home prices are currently at 4.9x median income ,which means that at 3.99% interest over 30 years folks are spending 43% of their net income on mortgage payments only. Taxes, insurance, utilities and repairs all not accounted for. That will probably bring it up to 46-50% of income spent on housing. Doesn’t leave much for “keeping the economy going”.
Conventional wisdom would say that a median SFH of 440k should really only be selling for 240k-320k, which is 3 to 4 times median income. That means that Calgary home prices are still highly inflated. A 25% reduction would bring it back to 4 times median income, which is still high.
I’m still in my early 30’s, have only owned one home before, so don’t necessarily have the experience of living through booms and busts.
It doesn’t take a rocket scientist to figure out that the home pricing is just not right…
#95 nostradamus jr. on 02.06.10 at 5:58 pm
U S interest rate scuttlebutt is…no interest rate hikes until after the ALT mortgage resets…not before late 2011.
…Makes sense…if rates rise before then, we have real estate crash #2 in the U.S.
*******************************************
Bernanke can only control the Fed fund rate–
Mortgage rates are set at the long end–
The 10/30yr are set by the market–
This is why “quantitative easing”
Printing and buying long dated treasury’s–to try and hold rates down,is in vogue —
Rates want to climb–the long bond is screaming risk–
Ben always thinks he knows better then the market–
Like to ask him how it’s been working for him so far–
So–imo–no interest rate hike–is totally USD driven–
“The race to the bottom”
Obama wants to goose exports,to create jobs–
A high dollar–is export negative–
Currency devaluation is in play–world wide–
I disagree with Garth on this point–
I say they cut next,or at the very least–hold-
The USD currently strengthening–is because of “perceived” safety–fear is starting to reinsert itself–
This is a pipe dream if i ever heard of one–
Sell to who–i wonder?
“Locke outlined a three-prong strategy to double exports by 2014: robust government advocacy for U.S. exporters in markets around the world, increased export financing and tough enforcement of trade agreements the United States has already signed to open foreign markets. Obama set the goal in his State of the Union speech last week of doubling U.S. exports to support 2 million American jobs, picking up on an idea touted for months by the U.S. Chamber of Commerce, a leading business group”
http://www.reuters.com/article/idUSTRE6131YM20100204
@ taco- I’ve only been tracking Kits, not East Van. in 2007 we had started the process of buying a condo in Kits. But then we came to our senses and kept renting
I don’t know what the serge of listings means. I have noticed that most of the units have jacked up their prices -only 27 today under 425K. I’ve been using ‘425K’ as my over/under benchmark for the land transfer tax threshold. Several of the properties currently on MLS have been their for months and aren’t exactly flying off the shelves. We had two units in our condo for sale recently (330K- 1 bed, 419K which was later reduced to 379K for a 2-bed) both units took +60 days to sell and I don’t know what they sold for. We’ll keep renting for half the cost of buying.
It is widely accepted that Iran, with all their WMNothingness has caused the massive snowstorm in DC and the east coast but St. Gorgeous Als has spoken forth with a new twist — it is NOT falling snow, just Earth scratching it’s head, releasing dandruff particles. Now to other stuff.
One thing always leads to another. After I saw Garth’s bunker and read the latest post, a friend e-mailed the new glossy Trailer Park Calendar Girls for 2010, with 13 pics to schmooze over. Not everyone’s cup of tea, but stunning pictorials nevertheless.
I then pictured those ladies posing around the Bunker. I prefer the Bunker. Column was good as the ladies, in all their states of drunken stupor.
——
This is the best Super Bowl ad of all time (sound up). / S & P headed back into triple digits?
Bernanke and debts go together like birds of a feather, and create bubblehead dolls, which are us.
——
About time! Hang ‘em upside down, by the balls in Death Valley and let the buzzards feast on their entrails (should have been done long ago) — they deserve no less. Netanyahu
Add this as well — Well, that was a short-lived reign. Obama, The New Nero — all nuked and on fire, all the time!
Now it’s almost forgotten, the details start to come out. Anyone recall Copenhagen?
CSIS and FBI? Seems like a good match, so this would appear to be the reason why ‘net controls are getting stricter.
To #59 Dan:
As the G&M article mentions,the Canadian big banks are
worried about an American style RE collapse and if that happens the banks are worried about Canadians defaulting on their credit card debt,which as far as I can tell is not backed by CMHC or anybody else.
To #91 Live Within your Means:
I don’t doubt the value, dedication, hard work and
sacrifice of many employees in the public sector.
Unfortunately here in Quebec we are treated a daily drumbeat on the front pages
of the Journal de Montreal,public sector employees
and management running up the tab with expensive foreign trips,meals,drinks,pay for no work etc.
Today was the story of a CEGEP (junior college)
director running up $65000 in expenses in five years.
$30000 for hotel bills
$340 for a mini bar
Get this $252 to fly between Vancouver & Victoria
in a hydroplane.
#104 JR
“Bernanke can only control the Fed fund rate–
Mortgage rates are set at the long end–”
…Unless the U S can bankrupt the world and crash commodity values first.
Causing China and the Arab states to lose all their gains of the past three decades.
…The flight back into the U S Dollar is then assured.
Nostradamus jr.
56 Dan on 02.06.10 at 11:58 am
You better grab a coffee and read up on bankruptcy laws in Canada…. you might be in for a rude awakening…
Sitting here sipping tea from dinner…..I notice the pride and personal satisfaction the blog dogs feel because of all the hard work they put in to keep on top of debt and live beneath their means………..and I wonder what living beneath my means, would realistically look like. It seems to hinge upon having a home free of mortgage payments, thereby freeing up the monthly income immensely. A well thought out garden…..perhaps some production of a saleable item…..garlic, parsnip, herbs. Sowing fall rye or other nutrient grass………instead of turning/plowing it in, come spring, run chickens on it using moveable pens. Save on feed costs. Run water from washing machine to irrigation tank for garden and peg out the clothes on a line in the sun to dry. I digress but, has this younger generation ever slept on sweet smelling sun dried sheets!!
I could go on but rite now an elephant is sitting in the room……….a huge rental payment every month elephant!
How to get that off my back until I can buy back in? Move to a hole in the wall for considerably less…….maybe, store furniture & live in my car……nah. Don’t need a larger salary, that will just increase my income tax and I would lose some benefits, ….. just need a free or cheaper roof over my head till RE corrects, crashes or the cows come home.
Is anyone familiar with BARTER? Is it actually legal re: income tax? What about trading my expertise & job skills for a place to stay. What ramifications would there be for an employer?
I would appreciate any constructive comments any of you would care to give.
With you in trying my darnest…to live beneath my means
thank you, elle
I am lost…where are we going?
The US government leaders are dictating what the US banks should be doing while the Canadian banks are suggestng what the Canadian government should be doing.
Oh…it’s different in Canada.
…The flight back into the U S Dollar is then assured.
Nostradamus jr.
***********************************************
Yes–A sharp market reversal can suck money back out of any spec play and the USD is the first to feel it–
I think USD/Yen/Gold will be the three havens
(gold late) as always–
It needs the pucker meter to hit the red zone,before it catches a bid–
If the safehaven play ever turns to (cough) gold first–
Katie bar the door–
Hello Elle @110
I’m a little confused by this statement:
“Don’t need a larger salary, that will just increase my
income tax and I would lose some benefits …..”
What benefits are you referring to? And you would still net something from the extra salary. Also you mention
buying back in. Why did you sell?
I do not barter my services, but I believe if I did, I would have to declare them as income at market value and pay
the income tax. I’m not sure what the rules are if you barter a service or labour that is not your usual line of
work.
BDG YYC – Good comment!
I do agree with the US bankrupting the whole world but slowly over time —- protectionism.
War on Global Trade…war on the streets!
Repeat of Nov 2008!
Final shakedown!
Governments will have to answer to them stealing wealth from us on an installment basis for 30 years.
Currency crisis yes…after this final leg down.
USDIndex to 0.86…they buy Silver at $12.00!
If your not a contrarian you’ll be a victim. If you cannot maintiain liquidity your dead!
who really leads the leaders ?
Number of Lobbyists*
1998 10,410
1999 12,956
2000 12,452
2001 11,773
2002 12,078
2003 12,842
2004 13,104
2005 14,028
2006 14,446
2007 14,827
2008 14,446
2009 13,643
Total Lobbying Spending
1998 $1.44 Billion
1999 $1.44 Billion
2000 $1.55 Billion
2001 $1.63 Billion
2002 $1.81 Billion
2003 $2.04 Billion
2004 $2.17 Billion
2005 $2.42 Billion
2006 $2.61 Billion
2007 $2.85 Billion
2008 $3.30 Billion
2009 $3.19 Billion
A larger salary would just increase your income tax?? Seriously? Tell you what, I’ll take any extra salary you don’t want.
Re19
Every thing you mention about universal insurance is wrong or makes no sence. Do you even know what COI means?
I also think that this is a particularly good year to buy a seg fund. 2010 is going to be a very challenging year for the stock market. Half the experts think the markets will tank and the other half see lofty heights.
The extra Mer , ( .3 of a point for a typical balanced portfolio) is a good deal when you consider the timing of the initial seg investment and the duration of the investment.
I could go on all day about this stuff but this is a real estate blog.
#95 Nos. jr.
Absolutely right! This is so obvious that anyone that can’t see that US will hold rates at present levels until late 2011/early 2012 is just plain naive!!! Hello Option ARM’s ?? Alt-A Mortages?? Almost all reset before Feb 2012. But Bear Blog Dogs won’t comprehend this concept.
The Fed will keep rates low (including quantitataive easing for the long bonds). In 23 months, the USgov/Fed won’t lose any sleep on significantly higher yields for the long bonds. Mostly everyone will have refinanced and the housing crisis over. RE will be flat in the US after that.
After this, the FED has to take the money out of the system that it put in via quantitative easing. Easy way to do that: Require Bank Reserve Ratio’s of 15%, instead of the present 10%. VOILA! One-third of loanable money gone with a stroke of a pen!!! But obviously it would have to happen gradually..maybe increase 1% per year.
I believe Canada has no Bank Reserve Ratios (Correct me if I’m wrong) . Does this mean that they can create as much money as they want by issuing new mortgages/loans etc??
Comment for Rory from yesterday
Rory,
Why is that when it comes cost cutting, some genius always throws out “cut civil service jobs” “cut govt worker salaries”? We are not aliens, we are just like everyone else. Trying to eek out a living and saving for retirement. I have a pension, but my contributions every two weeks are significant. People equal to me in the private sector have pay stubs that make mine look like a joke. I only assume that they are pumping the same amount into retirement investments as I contribute to a pension, so our true take home should be equal. At least that’s what I would do if I worked in the public sector.
But I would guess that you’re the type of person that would be the first to complain if a govt service you needed was eliminated or took too long. This is what happens when our jobs are cut, but yet everyone complains at the consequences. My “brothers and sisters” are just trying to do the best we can to serve the public.
You know, the govt doesn’t give me a call and say “Hey, we’re thinking of spending us into the dark ages. Whadya think, should we???”. Just because I work for govt, doesn’t mean I’m reasponsible for the decisions they make. Regardless, my employer has already announced the second round of job cuts in the last 6 months. Are you happy? Hopefully you can sleep better tonight know that.
How about we just try and deal with these economic challenges together. I’m not telling anyone to get rid of your job. Which is what, by the way?????
#98 carol-ann lamothe
…” I like not having all of my eggs in one basket… My house provides me with relatively inexpensive living compared to renting..I did not buy beyond my ability to service costs, taxes etc.”
Your argument is probably emotional, not rational. $500K invested to yield a dividend income of 6% gives an income of $30,000 a year, or over $25,000 after tax – which is $2,000 a month. That’s enough to rent a $500,000 house – and you still have the $500,000 in liquid form. How is it better to own, exactly? — Garth
***********************************
IMO she/he is very rational, stating clearly, that she/he prefers not to have all eggs in one basket, meaning there is a great probability that this person having investment aside from the house (RRSP, TFSA, etc..), while Garth advising to use $500K, borrowing against paid off house, invest in stock market (high risk) to earn money for paying rent.
Do not see much logic in it. Diversification is one of the rules in investing.
Majority struggle to provide for basic needs: shelter, food, own/children education; and only after that part is covered, investment gets in a picture. Owning a shelter could be a part of a diversified investment. Not everybody can stomach, or afford to be highly leveraged, and it is not advisable for everyone. Risk tolerance is very important factor in investment.
carol-ann lamothe surely prefers a good sleep at night.
Interesting article ‘how much does your neighbour owe’? Note the 2nd mortgages, comments suggested they were taken to protect against title fraud.
http://www.theglobeandmail.com/report-on-business/rob-magazine/how-much-do-your-neighbours-owe-on-their-mortgage/article1445137/
#52 Dawn in Calgary
Well, my evidence was anecdotal so I cannot deny other experiences are happening. My sister also reported today that now half the block is for sale. And the property I talked about selling over list really was priced aggressively compared to the other properties in the area.
If there is something going on it might be a last gasp before the flood of spring listings but you never know.
I thought realtors were obligated to present all offers. Maybe if you had gone through another realtor he would have had to show it. Seems like a lot of money to pay just to write an offer, but realtors can and do negotiate their fees. I had both realtors chip in to close a deal once, but that was when CMHC had a strict limit on how much they would lend me. I also used another realtor to sell once who had a low fat rate price for listing. He ran it very light, pounded his own sign in the lawn, no “staging”, put up the MLS posting and then let me know when the viewings were coming. That’s it. But it worked.
#72 omg
But remember if you are under water by $40,000 on a house you still own the house. Or at least you will start owning some portion of the house again once the $40,000 is paid back!
#102 Live Within Your Means
George “talks his book”, just like any trader. He is a currency trader, so the possibility of all currencies declining against gold doesn’t help him at all.
His former partner, Jim Rogers, on the other hand, is all over gold. Not to speculate but to buy and hold, as some portion of a commodities and emerging markets heavy portfolio. But Jim talks his book too. All traders do.
Note to all: If a trader, broker, or realtor is telling you something about which way the market is going, it’s pretty easy to guess how they are positioned. That’s true of “advisors” too, but at least most advisors admit it.
I used to work “in the biz”. I remember the parties especially, where some broker would drop 30 or more getting all the firms clients “loose” for an evening. The conversation inevitably revolved around forming a consensus on the markets until the ladies started doing shooters. Then there was dancing, and the occasional indiscretion.
I also remember getting unsolicited calls from our floor broker telling me what was going on down at the exchange, “funds are buying”, that sort of thing. Which meant it was going to be a slow day because I did almost everything electronic, so he didn’t call unless he had time to kill. Less paper internal paper work (the deals uploaded automatically to our systems), and you didn’t have to close out or settle. But if you had to move a big volume fast the floor was good.
However, I think it will decline with the broader averages in the months ahead.
#111 brainsail
…Canadian banks are suggestng what the Canadian government should be doing…
Actually, if you read between the lines it is Mark Carney of the BOC that is telling the banks to tell the government to do something.
#108 nostradamus jr.
…The flight back into the U S Dollar is then assured….
Sure … short term. Long term, with the endless US debt and money printing going on, the $US is going down down down.
To: #46, #54, #71, #77
Thank you for your supporting words.
#54, I am a man, and of the same vintage as you.
Reading all your words, it becomes apparent to me, that there may well be many of us in this city of like mind, but live isolated and encircled by the madness that is plaguing us right now. As cold comfort as that is.
As nice as it is to know that I am not alone with my perspective, it is still very sad to see that most other people on this post still believe in this economic system so much so, that they are trying to put reason to it. By that I mean, they look for fault with the banks, or look at some sort of mathematical/financial understanding.
Your all wasting your time, for it doesn’t work that way.
If you people do your homework, you will see the that world financial markets has been out in default for many years. Just take a look at the the global CDS market, it is in excess of 1.5 Peta dollars (that is, Peta=Quadrillion I do believe, forgive me but I come from science. Note Trillion is equivalent to Tera, and Billion to Giga). Now do the simple math, at 1% interest, we have 1 Giga dollars. CDSs are going for about 3-4%, excepts like Greece having sky rocketing CDSs at 5 going to 6%. Anyway at 3% that means the global CDS market requires to generate 3 Giga dollars or 3 Trillion dollars. The global GDP is 60 Giga $. We are talking about 5% of global GDP (or about 10% of Western GDP, since most of the CDS market is in the West) going to just interest payments.
GET THIS THROUGH YOUR HEADS EVERYBODY:
That’s 5% of global GDP going to interest payments to a very tight and small group of elites, and we have RECORD LOW INTEREST right now. Nominal interest rates should be about 7% that means CDS rates should be about 10% at least, that is 3 times what they are now. Globally that means 12% of GDP, and since the WEST holds on to most of those CDSs, that means 24% of the West’s GDP. As you can see basically this means we are caught in a credit trap…that means, FINANCIAL HELL IS HERE ALREADY! Here is an analogy, you are caught in a cave, and the only way out is through the front where there are a pack of wolves that will tear you apart. You have no food, no water, nothing. But you do have some rocks to throw at your hungry predators. You can keep them at bay, but you know you can’t stay there forever, you will get tired and need sleep, and then there is hunger and water. You are safe for as long as you are in the cave, but once you leave your dead. And no, there is no help coming, your alone. This is the situation we are in, we are just waiting for the inevitable.
Worrying about house prices, your mortgage and bank salaries, is pointless. Its like that poor soul in the cave who is worrying about his poor dog locked up at home with no food waiting for his master (who he will, unknowingly, never see again) to come.
You people are talking about things that have ABSOLUTELY NOTHING TO DO WITH WHAT IS COMING. My sincere humble apologies Garth, but I think all your good intentions are also a waste of time. This is much bigger than you understand. I really, do mean this sincerely Garth, profoundly, I do not mean to belittle you I really do believe you mean well. God bless you.
What is coming is a tsunami of incredible proportions. All currencies will be debased, governments will see to that.
If you really care about your families, and you really wish to protect them, here is my advice:
- Sell everything you have and cash up. Go into rent.
- Do not lock up your money into anything where you can’t get it out immediately, that means, FORGET THE STOCK MARKET.
- To protect yourself, the best insurance is GOLD. The real thing, not stocks , the stuff that is yellow and if you drop it, it hurts! All you need to buy is between 5% and 7% of your NET WEALTH, that will cover all your loses in currency devaluations and then some. For as currencies are debased, gold will sky rocket.
NOW FOR THE IMPORTANT STUFF:
- Buy your gold in small units, 1 to 10 oz, not anything bigger. It will be easier to trade with but also,
- You do not have to declare owning it when you buy in small amounts. If you declare ownership of large amounts of gold, as it is the law you must, the government will know where to come when they ban private ownership. YES THEY WILL DO THIS. HOW DO I KNOW? CAUSE IT HAS BEEN DONE BEFORE!
The next major disaster is at hand, where the CDS market will break, look here:
http://www.realestatedecline.com/mortgage-loan-reset-chart-2007-2015-pain-indicator.htm
From this chart you can see something worse than subprime is coming. Maximum stress will be applied at the end of 2011, start of 2012. You have till then to get out of the market, but I recommend DO IT NOW! First rule of profit…DON’T GET GREEDY!
This chart is a proxy, for the CDS market. Cause it is the CDS market that is underwriting this colossal debt. This chart is based upon US mortgages, but there is similar ones for all the West including Canada, they just kick in straight after the american collapse, hence you’ll see many many collapses for the next several years.
And note that is just the CDS market for housing, there are other markets that are in just bad mess.
Gentlemen of this blog, stop playing around with pebbles when a meteor is coming!
The signs are there and have been there all along. If you don’t heed them, you have only yourselves to blame, and not governments or bankers.
#110 Elle on 02.06.10 at 10:10 pm
I could go on but rite now an elephant is sitting in the room……….a huge rental payment every month elephant!
How to get that off my back until I can buy back in? Move to a hole in the wall for considerably less…….maybe, store furniture & live in my car……nah. Don’t need a larger salary, that will just increase my income tax and I would lose some benefits, ….. just need a free or cheaper roof over my head till RE corrects, crashes or the cows come home.
Is anyone familiar with BARTER? Is it actually legal re: income tax? What about trading my expertise & job skills for a place to stay. What ramifications would there be for an employer?
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Of course those things are all possible and the bonus is–
Your starving the beast (government)At the same time–
Sell yourself–labor/brains for whatever you want-as payment–
If you don’t tell anyone about it–i wont–
#23 nonplused said:
“…A fine arts degree would cost what its worth (about how much dad is willing to pay to get junior out of the house for a few hours a day) and instructors would be paid accordingly. Throw in government guarantees and the whole system goes crazy…”
All civil society institutions, especially universities, do not, and should not, exist to serve just the whims or needs of the business or commerce sector of the community. It should be obvious from the word ‘university’ itself that a universal, all-encompassing education is the purpose of these institutions. Of course, the business community is absolutely free to open their own private colleges. In fact, there are many private colleges in Canada….hmmm, I wonder why the business community doesn’t put their money where their mouth is and recognize or hire from there? Or, pour their own private money into them?
And I guess the only worth in humanity is in the business, dentistry, engineering, and pure science schools, and no good ever came out of the other disciplines.
I guess pumping out MBA’s by the tens of thousands and lavishing them with the most senior positions in our banks and corporations, fresh out of school in their twenties with their young-bulls high-risk gusto, while pushing out any older, wiser staff, that was the smart thing to do (Wall St, Bay St), which has led us to today?
Call me crazy, but I think we’re more than slaves to the gods of commerce. And if you really knew anything about the subject, you would realize how absolutely tiny and minuscule the fine arts department of any school is compared to Engineering, Business, or pure science. So keep blaming easy-target problems that don’t exist if it makes you feel smart.
And no, I’m not a fine arts graduate, nor do I have anything to do with the arts.
#20 Ecco Vancouver: Amen brother/sister! I’ve been saying this for years. A stroke of the pen makes you poor again. You forget to mention the US confiscation of Gold in 1933. A devaluation of people’s money by 69% ! I’m betting the politicians didn’t lose much. Better follow their lead this time…
http://en.wikipedia.org/wiki/Executive_Order_6102
http://www.the-privateer.com/1933-gold-confiscation.html
#94 Amy,
No doubt more people than ever will blame the Chinese for keeping prices up in Vancouver. It has been part of the dialogue for many years now. Clearly there continue to be major dollars arriving from Asia although the numbers now are not anywhere near what they were in the 1990s.
It remains the potential great Black Swan of the Vancouver marketplace. Ask a realtor holding a property of 2 million or more and they will tell you that they expect the buyer will be from Asia. The last line about the threat of a wave of people from Mainland China who will arrive with bags of money to purchase homes is a constant topic among the RE elite. For many, it is an expectation for the investment properties they hold.
I don’t think that there is any question that this will remain a feature of Vancouver Real Estate and will keep Vancouver less affordable on average than other Canadian markets. However as a group they are also aware that other Canadian markets are much cheaper than Vancouver – not to mention many U.S. destinations where the value buys are now. How much influence this group will have on the RE prices is really the issue but obviously their size will matter a lot. What impact the coming burst of the Re bubble in China will have on our markets is still unknown.
My view is that it is just one factor in a complex market. The dominant characteristic for the next few years will remain affordability and the impact of a crappy economy. The vast majority of potential buyers in Vancouver are not looking in the 2 million plus range but well under $1 million.
“live beneath your means” is sage advice and something my wife and I have done for the past 35 years.
With lots of career bumps along the way, it certainly has been a lot less stressful not having a huge monthly nut to crack.
The basic rule of thumb we have practiced for 35 years is to make sure that we could meet all of our living and debt obligations with 65% of our current take-home income.
Did we “keep up with the Jones’?” Nope. We did without a lot of things to keep our debt/payments at a level that were manageable. Did we ever feel hard done by? Nope. Everything in life comes with a price. And, personal financial stress was something we were not prepared to pay.
The reality is that you can live debt free if you work at a plan to achieve it. Set a target date when you want to have all of your debt retired (when I was 28 we set a goal of 40 and achieved it) and be absolutely dedicated to your plan.
Besides, as Og Mandino once wrote, “Be concerned about more important things that carrying gold to your grave.”
Look at the Cynicsm is growing on this board….actually what is being discussed is “Corruption on the grandest scale”….business, political and religous corruption
Of course they affect real estate values…so live where it is safest….business, politically and religous wise.
…MBA’s/Investment Banking gone wild… becoming more and more creative/aggressive to shift investors equity, (Mutual Funds, Govt &Prvte Pensions, by manipulation, bnkrupting or taking private companies…then IPO’ing them back to these same investors…ALL THE WHILE POCKETING THE PROFITS.
…Washington Lobbyists, killing Stem Cell research companies in favour of their Big Pharma bosses who continue milking the system providing expensive drugs that provide no real cures for diseases or non required defibulators for patients on at least a one for one basis…prescribing doctors collect their vigorish $$$.
You do know Doctors no longer pledge to the Hipocratic Oath.
food for thought…
…Let us wait and see just how much of the donated $$$ actually is spent in Haiti
…Europe’s Multi Culturism experiment is dying… look no further than the current show trial in Denmark…M C there is now nothing more than Islamism.
Nostradamus jr.
#110 Elle on 02.06.10 at 10:10 pm
—————————————————-
You mention living in your car. Ever thought about selling the car? You will save $ on insurance, lease, maintenance, gas, tires etc.
For some this works out to $10,000/yr.
Garth…is there anyway that posters on here can PM individuals that share like minds?
I simply do not believe in the pollyanna “things will be just a bit rocky economically” mindset that many on here have. I do not wish to continue beating a dead horse in my assertions that we are headed for the greatest depression of all time….but I would like to communicate with the few on here that “get it”.
Anyone else on here with a “guns, gold and garden supplies” mentality interested?
#133 Knucklewalker,
I enjoy your posts but “guns, gold and garden supplies” is too extreme for me. Although watching that idiot Sarah Palin address the tea bagged lunatic fringe yesterday did make me wonder about the sanity of our society.
I am of the view that things are much worse than most people seem to acknowledge. People here in Vancouver are particularly oblivious because of the OWE-lympic stimulus and the fact our housing market has remained relatively stable. There remain many people – probably the majority – who believe we are headed for a V-shaped recovery.
I believe it will be U-shaped and we may even have a slight double dip in Q3 and Q4 of 2010 or even into 2011. What I do believe is that the Road ahead will be very rough for many people and certainly less good for all of us.
Good luck. If I am wrong I am happy to admit it and join you later!
Hello 118 Truth
I took my economics courses when there was a reserve ratio. The concept was straightforward. A higher BOC
rate raised the reserve requirement, so the banks in turn would raise their rates in turn reducing the amount loaned out. However, the banks could set their own rates, just as long as the reserve was met. I’m sure you
knew all that.
I found this little summary from 2002 (no reserves):
http://classes.uleth.ca/200202/econ1012b/ch11.PDF
What I always have to remind myself is that the BOC is a bank, and is the banker for the govt and the chartered banks. As such it has govt securities on deposit and moves these amongst the chartered banks to create a
similar effect.
Do you remember when the crisis first hit? The BOC rates dropped immediately, but the banks clammed up tighter than a straight mans sphincter in a gay bar. So there can always be as ‘disconnect’, at least when lowering rates. Nothing wrong with a little extra reserve I suppose.
Raising rates may have a more immediate effect.
Ah yes we used to live in a Country with a good future…debt was being paid off…jobs were plentiful…bankers used caution…real estate was affordable and our way of life (health care etc) was sustainable.In just a few years the CRAP party has blown our surpluses,ignored our environment,drove us deeply in debt,became the highest spending government in Canadian history,twisted the law for power using tax dollars,refuse to be accountable,in a world crisis gave the banks a free reign by using billions of tax dollars to assume their bad debts and encouraged them to pump out more risky loans backing them with our tax dollars………they have created a tsunami and as worried as we are you can bet they are sweating under their collars………and rather than face up to reality they are continuing to preach success with only a hope that a miracle will save their incompetent asses.
#94 Amy
Hopefully this is not a signal that we are going to blame rich Chinese for our own housing bubble problem.
_________________________________________
It’s probably more of a sign that Global wants to butter up its real estate sponsors before they have to report on higher interest rates and more restrictive mortgage rules.
Here’s another Global a$$ kissing article.
http://www.vancouversun.com/business/Winter+Games+influence+local+real+estate+impossible+know+good+know/2531088/story.html
$500K invested to yield a dividend income of 6% gives an income of $30,000 a year, or over $25,000 after tax – which is $2,000 a month. That’s enough to rent a $500,000 house – and you still have the $500,000 in liquid form. How is it better to own, exactly? — Garth
Oh please Garth, you’re not that naive. Housing is an emotional asset, and don’t even try to tell us you’re not emotionally attached to your bunker. Kinda hard to bury a fuel tank in the backyard of a rental, or install a permanent generator. Reducing it to figures isn’t even half the story.
I responded numerically to a numerical argument. Surely a university guy can understand context. — Garth
It pays to be on this site. I printed out the Chapters (25% off) coupon from the Internet ( a tip from a recent blogger) and off I went and picked up my own copy of Garth Turner’s Money Road today. Paying $20 was a bit steep for me but $15 was just right. Thanks.
108 miketheengineer on 02.04.10 at 8:02 pm
I survived cancer (bone) about 26 years ago. I did conventional therapy, and “mega” dose of Vitamin C. When I wasn’t barfing, and could stomach it, I took about 1000mg daily. I did this a year into remission. I had a strong “prayer” group of little old Italian ladies who were praying daily for me as well, though I didn’t know it at the time. I learned about the Vitamin C from Mr. Silva. I met him at the Hamilton Cancer Clinc at the Henderson Hospital. He told me how he started with the Vitamin C and how his cancer “shrank” in size (with conventional meds as well) They gave him 6 months and he stretched it to over 2 years. I used Vitamin C and mom purchased a juice extractor, and I drank “pure” fresh fruit juice and Pure fresh vegatable juice as well. You have to do a radical change in your life, and most importantly, you must have the will to live. The doctors and nurses at the Henderson were awesome…..just awesome. Believe it or not, I do have some fond memories of that experience.
……………
Wow – I recall 7 years ago when I was diagnosed with stage IV cancer and before my op. I had a bone scan. I had read and heard from others that bone cancer was extremely painful. Turned out my bone scan was negative. Great news.
I’ve had so many CT scans. Just had a PET/CT scan 2 wks ago and results were good considering. BTW, I only had to wait 2 weeks. Though I really haven’t changed my lifestyle, I do consume lots of vitamins, including those that bolster my immune system. My onc. considers I’m an “outside the box” patient. Last month she considered sending me to see a world renowned Dr. in Quebec City, depending on the outcome of the PET scan.
Sounds like you might be one too. I consider myself extremely fortunate, but try to take life one day at a time, yet, preparing for the future.
I know there’s a new thread and only the “doomers” will come back for one more peek–
Your called doomers by most–to me–
you are the truth seekers–the deep thinkers–
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#134 junius on 02.07.10 at 11:24 am
“I believe it will be U-shaped and we may even have a slight double dip in Q3 and Q4 of 2010 or even into 2011. What I do believe is that the Road ahead will be very rough for many people and certainly less good for all of us.”
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I wish i could believe in a U shaped recovery–but–
just cannot see it–
The biggest obstacle–imo–is “what” do we have for a driver,to pull us out of this?
What do we (the world) have-as an economic engine, to employ the billions of people on this planet?
Sure–some technological break through,could come along,some new innovation that can propel us forward–god forbid another world war–
Hyper-inflating the credit money system is over–
Credit has found a ceiling–it’s run its course–
All we have left is–Debt–with the collateral falling out from under it–
http://3.bp.blogspot.com/_nSTO-vZpSgc/SrZEryPbjkI/AAAAAAAAG7I/ASu_UKtTHNA/s1600-h/debt+vs+gdp.png
Over production of “everything” has created a glut on the market,that will take years to work itself off–
Too many houses–autos-china toys–just too much of everything and world debt–
like nothing ever seen before-
Ecco Van says above–
“Get out of debt and get liquid”
I agree with that-including having some gold–
I wont say buy gold–because people focus on the price–
This is wrong–the price is not about gold–
The price is about your money devaluing-
Gold doesn’t do anything–it just sits there–
Everything else revolves around it–
Gold has always been the anchor of the monetary universe–
This is how you should look at gold–the same for the folding dollars in your wallet–
http://home.earthlink.net/~intelligentbear/dj-au-ratio-lt.gif
3 times–the Gold/Dow ratio has been between 2 or 1-1
We are coming off a historic high ratio of 44-1
(there is your credit expansion)
notice the ratio spread is again narrowing-
Your gold buying power is increasing–
Here is a chart of CPI (consumer price index) vs Gold
http://www.wiltontech.com/purchasing-power-of-gold—100-year-chart/Purchasing%20Power%20of%20Gold.jpg?attredirects=0
Notice the sharp reversal in 2001–
There imo-is your credit money system hyper-inflating–
That is NOT run of the mill–inflation induced–
Look at the chart from 1980-2001–
That is inflation’s effect on gold–
Gold always keeps up with inflation–but–
does poorly–price wise–against most assets-during inflation–
Look at the long bond–(Greenspans conundrum)
He hiked rates 17 times–trying to “gradually” prick the bubble–and the long bond refused to climb–
imo–Gold and the 30yr could both sniff out hyper-inflation–
(btw–few agree with me on this)
http://finance.yahoo.com/echarts?s=^TYX#chart1:symbol=^tyx;range=1y;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined
It’s “never” about how many $ you have–or–the price of gold–
(ask the Zimbabweans )
It’s “always” about what a dollar or gold can buy–
Politicians hate gold–
Because gold governs governments–
No foreign wars–no printing money and buying votes–
No massive credit manias–
Fractional reserve banking–must also be killed–
Gold forces monetary discipline on people and more importantly on governments–
It saves people (savers) from theft via government/banker monetary inflation–
(dollar devaluation)–
Don’t worry about us being forgotten about–we will have a few chapters written about us and the future generations will say–
How could the Dutch have been so foolish to believe,that one tulip bulb,was worth mortgaging the family farm for-
How could the Canadians have been so foolish to believe,that they could borrow and spend their way to prosperity–
We are witnesses to a mania/insanity–an experiment in paper,that is coming unglued–
All the green shoots and talk of recovery–are– nothing more then an inflationary blow off,being goosed with your children’s future debt,by slime-ball politicians that only care about being re-elected
#97 Poco
I’ll try to restrain myself, and explain this one more time. If one bank stops lending 95% for any given deposit, and goes back to only lending 90%, all the people borrowing from that bank can only borrow half as much. This is a mathematical fact, not an opinion. Westpac bank in Australia has reduced its LVR from 92% to 87%, which will reduce the MAXIMUM borrowers can borrow by 38%. Last year Westpac had 40% of the market for new loans. If this credit restriction is fully implemented, it will mark the end of the bubble in Australia. LVR restrictions are THE MOST INFLUENTIAL forces on house prices at this degree of leverage. Do the maths. It’s a fact.
I’ll give you one more very extreme example to get the message across. $10,000 deposit. The bank will lend you 99%. You can borrow $1,000,000 to spend on a house (ignore the fact you couldn’t service the loan, this is just so you understand the principle). Now the bank tightens its credit requirements by 1%, and will only lend you 98% on this deposit. You can only spend $500,000 on your house. A ONE PERCENT CHANGE in LVR has resulted in a FIFTY PERCENT reduction in house prices. If you can’t borrow the money, it just isn’t there to spend, regardless of sentiment. Prices are determined by banks and how much they are prepared to lend; emotion and how much people “want” to pay has damn all to do with it. This is mathematically inevitable: if Canadian banks tighten LVRs and the government can’t or won’t replace the ENORMOUS hole this will create, the bubble is OVER.
“They simply cannot see that wealth is ultimately preserved by the muzzle of a gun or with a steel blade.”
Yes and that is why the governments have taken away your rights to owning a gun or knife (over 4″). We can’t have the people standing up for themselves now can we?
#125 Ecco Vancouver on 02.07.10 at 1:01 am
Fresh insight and lots to think about – and act upon. Thank you for you post and advise… Oh yeah, keep it coming — please!
I showed my BF this blog and the picture of your bunker.
He said That’s my dream home! We had a good laugh…but the truth is it really is….and I like it too!
Really. We both enjoy the simple life. The crazier things become in this modern world,the stronger my conviction that we(all collectively) need to get back to basics. I have scaled down in the last few years and honestly am much happier for it. The BF has determined a location on his acreage to build us a bunker. Excessive amounts of money don’t buy happiness. When I plant my garden, I feel good about growing vegetables and fruits with heritage seeds(not GMO). I can rest assured knowing they are certified organic…I certify it… When I buy local meats/fish, It feels good supporting the local economy.
For me, it feels good to not be wasteful. It breaks my heart when I see the images of child labour and the suffering of the poor. I don’t want to be part of the cause of that. Therefore we try to do our part by being more self reliant, taking care of the things we have and fixing things instead of throwing them out. We, need to teach by example the younger generation about these morals. It seems to me they are no happier with all their gadgets and gizmos than we were. We had rivers, lakes and streams for activity, etc.
Hold on to your hats the booming Olympic spin wrt to housing and stock markets all fueled with full support and drive from Ottawa ( yeah same one that’s on vacation) has been ignited and will explode with buy buy buy …. Greater Fools = Super Greater Fools.
Me I choose to stand pat, how about you?