Some lost souls who stagger on to this site by mistake remark that most people here are not normal.
God, I hope not.
A new survey of 15,000 folks (which is a monster) shows at least one-third of Canadians are in financial trouble. It also tells us they either don’t understand this, or refuse to try. Half the people think they’ll be okay in retirement, but have no idea why.
This is shocking enough. But it’s only part of the picture. As I’ve mentioned before, seven in ten have no pensions, six in ten have no retirement savings and only half have an RRSP, in which there’s enough money to fund two of their golden years. Two.
Want more? Mortgage debt is now at record-breaking levels. Canadian households have a debt-to-income level of 145% and six in ten workers say they’d be essentially screwed if they missed one paycheque. Like most Americans, our family finances are a disaster.
But it gets worse. Over 32% of the population is made up of Baby Boomers, those profligate former hippies who toked and snorted and grooved their lives away. Now these nine million geezers are nearing retirement and will basically suck the guts out of the health care and public pension systems.
But that’s just the half of it. The country’s finances have spiralled into Sani-Flush territory, with record debt at every level of government, topped off by the geniuses in Ottawa who will spend $56 billion more than they have this year. So, you know what this means – high taxes and increased interest rates. For, like, ever.
Now, take the circular saw you got for Christmas away from your neck and think about this for a minute. The conclusion seems inescapable: Most people are walking financial failures. And the hell of it is, they don’t even realize this fact. This also means the housing market is doomed.
Not, not just this bubble. Without a doubt the current frothy real estate gasbag will explode in some messy fashion soon enough, brought down by excessive prices, rising rates, stagnant incomes, the HST or flagging affordability. That’s a given.
But how about after that? What of all those people who have been sitting around waiting for the 2009-10 housing Hindenburg to go down in flames, just so they can buy a house for less? Will they be doing something solid with their hard-saved cash?
Probably not.
While 70% of us have diddly to retire on, this is almost exactly the same percentage of the population owning real estate. In fact, we now have the highest proportion of homeowners in the western world. We fell for the houses-are-safe-investments speech, HL&S. As the real estate market flies closer to the sun, Canadians are shovelling huge amounts of their net worth into their homes. And if you ask most people what they plan to live on in the long, pensionless future ahead, the answer’s simple and consistent: their homes.
But how do you cash in a piece of real estate, to gain the income you need for 25 or 30 years of not working, when everyone else is doing the same thing? With an aging population, spearheaded now by those millions of detestable Boomers, where are all the buyers going to come from? Will the newly-emerging Chinese middle class be snapping up houses in Winnipeg or High Park, happy to line sellers’ pockets with big bucks? And maybe they’d like some Nortel stock with that.
No, no. Time for a rethink.
I said here months ago the generation of the house and the GIC is over.
We’re well into a new age defined by debt. This will lead to higher taxes and less disposable income. Massive government financings will keep upward pressure on interest rates. The economy will sputter along. Many jobless people in their fifties will not work again. Government revenues will be thin and expenses soar as the country grays. And, of course, there are all those people who have saved nothing and apparently don’t care. Not yet.
In this world, all you need starts with ‘L’.
No, not love.
154 comments ↓
Liquidity!
Bingo. — Garth
China thank you Canada- You buy made in china mittens, hats, and Olympic kwap. No worry that Olympics expensive and put Canada into debt because China get rich.
And thank you USA and Canada for all your old factories. We really like jobs that used to be yours.
Also, Al Gore hero in China for helping get freetrade. He great communist who help NAFTA and GAT.
In this world, all you need starts with ‘L’.
Line of Credit?
LCBO?
Aha — I’ve got it: ‘L’ is for Lottery!
Garth,
I just want to thank you today for this Blog. There are very few places where people can share their views on financial matters like this. While the Blog skews towards us Bears and has many contrarians I really appreciate the opinions offered by the Bulls and others.
We all need to understand economics much better. We need to understand the behavioural part of our nature – the emotional side that so often prevents us from thinking clearly. Along with the laspes in our nature so well described in books like Dan Ariely’s “Predictable Irrationality.”
Thanks again. You help to make our world a more understandable and better place.
What is L? Liquidity? LSD? LDS?
Isn’t that Billy Gibbons and/or Dusty Baker of ZZ Top, along with my mom in the pic? Sure looks like it.
It is difficult to have sympathy for folks who, while they used to have good jobs, chose to spend it on the here and now instead of paying oneself 10-15% gross off each paycheque.
But to each their own. There is no such thing as a free lunch (unless thy name is GS), there is no bailout as the feds. are broke so for those banking on OAS and GIS, fuhgeddaboud id.
Those two may become one with CPP, the total amount increased slightly but that’s it. No more, as the cupboard is bare.
——
Breadlines US economy is dipping further.
Taxes Very good reason to spend as much as possible — on children / charities, etc. — so that when we all finish here, there’s nothing left for Big Brother!
Change Comment by wrh.com is better: “This is the new image of America, a homeless family camped out in front of a foreclosed mansion.”
Interesting hypothesis, esp. the first two sentences — a way to conveniently avoid publicity.
Every picture tells a story. Whoever termed the moniker “Global Hoaxing” was right on the money!
Strange First para. is interesting (whole article is), mainly because there are satellite pix of the US military build-up in America.
So Bush senior said something in 1992 which is true and happening today while the games go on, and very few notice.
And here is an opposing view of the preceding. The term “Information Overload” springs to mind!
Never mind the ‘konomee, that’s a distraction, that’s it. Comment by wrh.com is better:
“Morag, Poland is just 35 miles from the Russian border.
“You don’t have to be a genius to realize that this is being done deliberately to antagonize Russia, whose leadership understands that these Patriot missile batteries are not going to be aimed at Iran.
“Also, take a look at the timing here. One week from Monday is March 1st. This is a highly rapid deployment of these units and the military personnel who will support them.”
Note the speed is racing ahead. Why?
Less?
Damn you #1 Andrew for getting the right ‘L’ so fast!
My next guess was either Loblaws (L on the TSX) or Loews (L on the NYSE).
In this world, all you need starts with ‘L’.
Liquor?
Actually Garth, you perhaps overlooked the other possible “L” …
LUCK…
In this world, all you need starts with ‘L’.
Lobster
When the price of lobster goes back up you will know the economy is humming again.
Brew
@#5 rp
haha…LSD in Vancouver that certainly could be the case.
L = Leverage, isn’t that a good thing? Well then, ‘over’ leverage must be even more of a good thing.
Garth, I hope you are right. Like some of your posters I too have been waiting for years for the ‘Hindenburg to go down in flames’ (at least in Calgary) and D-Day seems so far away … The latest stats show sales and prices are rising higher and higher; it appears that we are loosing the battle.
Live-in parents…
“L” is love “man” ….check the picture
Have to agree with everything except–higher rates–
IMO–it’s all about the dollar–or rather about how to make it worth less then a dollar–
Devaluation-until one of these majors shit the bed–
Then what will governments/central bankers do,in order to halt a flight from paper money to hard assets ?
They will have to buy Gold to halt the run and stabilize/restore faith–in currency’s–
What else will happen?
Central banks rushing into the open market bidding up the price–causing a massive short squeeze against Commercial banks-ie-Goldman Sachs/JPM–forcing a massive short covering,as Commercials bid against governments to buy gold at any price–
Where people who have a “bit” will be smartly waiting–
The drool–runs from my keyboard–
http://www.youtube.com/watch?v=zAkq1OezI6g
“thank you China”
Yeah try looking in the mirror instead. We Canadians outsourced our labour to make a few extra bucks – at least a few extra bucks for those at the top.
Don’t like the fact that we are being sold “authentic native art” made in China? Try voting.
It’s not China’s fault if we hand them a noose and ask if they’d politely kick the chair.
Garth, how do you start-up your own weblogs?
Shane
How about “Lobotomy”?
In this world, all you need starts with ‘L’.
Lunch?
Legal Aid?
Longjohns?
Loquacity?
#9 Danforth,
Tonight after that game…..absolutely.
There are striking similarities between the housing Bubble and peoples seemingly Pollyanna view of their retirement. In both instances, they have a very short term view and do not sit down and actually give any sort of long term thought to their future.
Just as so many people are buying their houses today at what are historically high price levels, based on “can I afford the payments this month” giving no thought to “can I afford the payments when interest rates go up”. They also seem to have this approach when it comes to their retirement. “I’ll worry about it when it comes”! Sadly that is not retirement planning, it is called never being able to retire.
I find it very ironic that the same government that manipulated and changed the CMHC rules to create a bubble which has pushed housing affordability to all time lows are now pretending that they are concerned about the huge amount of debt that Canadians are carrying. What a bunch of hypocrites.
http://www.theglobeandmail.com/report-on-business/task-force-to-consult-with-canadians-on-savings-debt/article1476249/
Well seeing as how I enjoy this blog and it helps comfort me, with regards to my aging parents with little income and no assests. I will give you a free investing tip. Suncor stock is a screaming buy, within 3 weeks we will be running at full capacity again, a 25 precent hair cut this year because of 2 fires we had is a Blessing!!!!!!!!!!. in the last 18 months we had added 40% more trucks. Yes our production capacity has increased 40 %!! Yourwelcom, feel free to ask questions.
Garth, tonights blog posting is a very interesting one indeed.
…You pretty much paint a hopeless picture for Canada’s citizens.
Well… then how would you paint any other country in the world?
…Per capita, I can’t think of a single country that is capable of self sustanence as are the Western Provinces of Canada.
Tiny population w/ tremendous amounts of food/water/lectricity and commodities.
If Canada can’t support its citizens in retirement….China, India, U.S., Japan, Pakistan and Europe will erupt into war much sooner than later.
Nostradamus jr.
Garth, you boomer you. You’re not detestable.
” In fact, we now have the highest proportion of
homeowners in the western world.”
Where did you get that stat? Last I heard Ireland was in the “lead” with about 80%, but they could be the poster child for the RE bubble.
9 Danforth – doubly correct, liquor is very liquid.
Mr. Turner,
Is their any chance this task force might recommend some of your curriculum?
http://www.theglobeandmail.com/report-on-business/task-force-to-consult-with-canadians-on-savings-debt/article1476249/
A Vancouver rag is advertising a new box in the sky-condo, for about $350K. “Rent to own, with only $7k down…” They are doing everything they can to reel the last few suckers in. You need almost nothing down to buy into a condo in Vancouver now. Who is going to pay for all these irresponsible dupes when they foreclose?
Baby Boomer – The Locust Generation – We came, We partied, We got everything, We burned the house down and – Please take care of us.
It’s different here we really can spend ourselves rich, just follow the example of our selfservative government: take on the bad debts of the banks, insure no money down madness. Hell GW turned the free lunch into an art form, why can’t weeeeee! If enough people think they are rich then they will vote for borrow and spend selfservatives instead of tax and spend liberals. The surplus was due to overtaxation not spending cuts when it hurt or prudent spending when there were surpluses. Canadians should be proud our of our selfservative government, now we can fly our troups to places they shouldn’t be, to engage in campaigns we aren’t interested in, and we can even airlift the equipment we borrowed.
“Randy……I am the liquor……”
Jim Leahy
——————————-
Maybe this is what many Canadians will look like in 10 years time.
Larceny? But we can’t all be bankers.
Licentiousness? I’m doing what I can.
LIQUIDITY: –
Adjective: mellifluous, >mel = honey + fluere = to flow<
Sweet flowing money……….honey!
L = LOGIC
Damn there’s my handle blown, liquidity, or is it squidly.
#9 Danforth;
It helps.
Great One Garth, let’s see which knobs on this blog disagree with you!
LIQUIDITY…LIQUIDITY…LITTLE LUCK!
For those stuck in underwater properties….LIGHTER Fluid!
Lots of Loonies for Lunch and Liquor! Leveraged Ludicrous Losers Laiden with Large Loans.
Why is the age of the GIC over? If interest rates go up, won’t GIC rates go up also?
Three hots and a cot cowboy….
Free health care, free education, free dental, no taxes, no worries, lots of friends to play crib with and if you’re lucky you can be stoned all day long. Maybe you can even get into one of those prisons that has a golf course. Sweet.
Grey collar crime could go through the roof, after the roof caves in on the longest party in the history of mankind.
Go for gold, be the first on your block to Own the Prison Podium! Yay!
How about reverse mortgages, will boomers start taking those out en masse as a way to extract cashflow from their McMansions?
you guys forgot L = LSD think the picture dude used a little to much
“L”. Loonies, Liquidity or Lots-o-cash ?
C’mon now. A little balance if you please.
There is a lot of poverty in this country and if your blog is any indication there are going to be many more. Where I come from if you have 300 large for a house you must be set for life or crazy.
First of all if you are one these leper people Garth is referring to staring at unfinanced golden years you are not alone. If you are carrying debt and are over 55 get rid of it ASAP. Get setup in a scenario you can easily afford. If that means moving from your present home to something much smaller do it. If you live in one of these hyper inflated housing regions move away.
If you are in your 50s and permanently unemployed congratulations, you probably already have learned to live on nothing. The CPP and OAS you paid into all your working life even if reduced from today’s meagre levels will be a raise.
Forget about the latest big screen television, the vehicle outside at the ready or checking out in a nursing home. That’s for rich people. If your still reading this you are not one of them. You would be surprised how much your life can improve when you stop living like a fat bloated pig especially if you cannot afford it.
For further instructions read a little http://www.joebageant.com/joe/2010/01/bass-boats-and-queer-marriage.html
Nobody can take away your dignity or independence, not even Garth.
ps. Times of drugs and no money beats money and no drugs any day of the week.
Once again thank you if you let this comment stand.
“I said here months ago the generation of the house and the GIC is over.”
I hope your suggesting a death followed by a rebirth.
• Housing – I believe I would appreciate a house that is affordable without the help of a bank and as a reasonable % of my worth. Even if the bills double in coming years. Est. 400 to 800 a month. As long as I don’t loose my job.
• GIC – with rising interest rates, I see GIC’s as a large part of my portfolio. In the future.
Lithium, Laudanum?
I think people need gold, silver, and Land, lots of land to grow stuff, to feed animals with etc. One could grow drugs on their land to really pay down their debt, and if everyone did it what would the government do? Put everyone in jail? Not a chance.
and Luck.
HST Price Chart shows difference in costs from buying NEW home now at 5% GST versus 12% HST http://tinyurl.com/l5hqyn
If you can’t blame god, dog, or the weather, blame hippies. Cheap shot for a man of seemingly higher intellect.
The civilization that is driving you to your “bunker” and the rest of us into ruin or an early grave should be so lucky as to have a hippy philosophy reign. But I suppose that would be too hard a rain for the money changers to endure.
Imagine there’s no heaven…….
ps I just bought your book in a thrift store for $3.50. The Strategy, 1997. I plan to buy your current one sooner.
all good choices for ” L” but how about looser credit restrictions
loan money @ .01 % interest and we will throw in a cow/ barrel of oil/ a log tree depending on the province
hey don’t laugh…don’t think the govt did not consider it
( Is this a triple negative:) )
….I was hoping for L eftovers…..after the housing drawdown…
We sold our house 6mos. ago & feel great about that (more or less) as we’re within 45min/1hr drive from Toronto. However, prices have kept up but, we think we did the right thing in the medium to long term.
We purchased precious metals in amounts over the last 5yrs. We paid off all mortgages & have a rental with a small mortgage worth 1/8th the value of it. Great passive income.
Besides that, we have no debt. While our income (commission based) is down & my business is way down, we’ll manage on 1/3rd of what we make now.
All my friends & family think we’re nuts but; I don’t think the last laugh has been heard yet.
Why do I get the feeling I might be feeding them soon?
re: #3 T.O. Bubble Boy
EXCELLENT!!!
Just bought my 6th rental property last week and hope to find a couple more before the 20% down hits April 19. Thanks for the post about 70% of us own homes. So you think the other 30% renting will be any better off?
GEE, i hear 90% of us are in the stock market one way or another and that 90% of us buy, hope and prey the stocks go up. Its going to be a said time come retirement for those renters that have their money liquid in the stock market. Sleep tight and don’t worry about your liquid money in stocks crashing, cause you have NO control over them anyways.
So Garth, if my way to retirement, that is having rental property is wrong and there is NO way I am going back into the stock market, Nortel, Brex and others made that an easy decision for me, SO WHERE SHOULD THE MONEY GO? I agree not with GICS. But disagree with you saying in the bunker.
#159 from the last thread:
“By law landlords cannot not rent to you because you own pets. Thus, it is morally OK to lie to them or withhold the information, as they are not allowed to ask.”
By whose law–your law? Try reading the Residential Properties Acts or Landlord/Tenants Acts of various provinces (I am assuming you’re Canadian as I recommend this.)
In at least Alberta and Saskatchewan, not only are property owners “allowed to ask,” they’re “allowed to tell.”
You’re doing future tenants and future property owners no service by giving recommendations such as the one above.
And, increasing1%, you did indeed, at one time on this blog, recommend that people lie to owners and then just move the animals, specifically dogs, onto the property after the contract is signed. In Alberta, at least, that can get you evicted.
OTOH, even some apartment buildings do allow dogs. It simply makes sense for would-be renters, both those who want to be near dogs and those who do not, to ascertain that beforehand.
‘e means the L curve … it ain’t gettin’ no better … just like Japan in the 90’s
Flat maties, flat she be, so ‘ow do we sail thru this one, eh? Blow on the sails a mite, eh, see ‘ow that ‘elps! LOL
Garth, boomers will survive because they will simply keep working into the grave.
The new retirement slogan is Freedom 85.
Non-boomers: fewer jobs for you and higher taxes around the corner.
Looks like all that is left for many is love.
“…Baby Boomers, those profligate former hippies who toked and snorted and grooved their lives away. Now these nine million geezers are nearing retirement and will basically suck the guts out of the health care and public pension systems….”
Garth, why you are doing this? Aren’t here enough BB haters on this blog as is? You are the BB yourself, who “snorted and grooved” in your youth, aren’t you? BBs later, raised their families, worked, payed taxes, lined Federal coffers up for every body benefits. Why to make BBs a scapegoats now? I know you didn’t mean it, your tirade was just for fun, just to probe those hate mongers.
Re: #4 junius
“…We need to understand the behavioral part of our nature – the emotional side that so often prevents us from thinking clearly…”
I totally agree!!! Emotion=weakness. But, today, on the way coming back home from two months getaway in California and Arizona, and thinking of selling RPs and even the PP, to achieve the L, but… the minute I stepped in to my comfortable, paid off abode (not a bunker, but with some tuna cans and toilet paper in a storage room), I asked myself: “Why not to diversify and keep the PP for personal enjoyment?” Is this wrong? Please, anybody, what should I do?
Garth, I love the picture!
I have to admit, I’m afraid; I just can’t pull the buy into the stock market trigger. I see the stock market like we all see housing, it’s a bubble, goes up when people lose jobs, goes up on bad debt, goes up on mostly all the wrong reasons.
I just can’t seem to “get into” the market even reading Money Road. I want to as I feel like “I’m missing out” with just collecting a very secure 0.8% bank account interest that I could be collecting 3-5% easily. Preferred shares, corp bonds, safe stuff. But it feels like the risk the market will go down again isn’t worth the rewards.
Advice Garth or anyone else? Wait and hold, leverage in slowly, dump it all in now. 3-5% return a year and we’d be happy.
Mike
Competitive devaluations are on!
http://www.zerohedge.com/article/if-us-can-do-it-so-can-we-japan-keep-pumping-cash-and-monetizing-debt-until-deflation-goes-a
If we are to see a real estate glut, paper asset values dropping, debt increasing, long-term structural joblessness (or, more likely, WalMart-wage jobs), higher prices for life’s essentials and higher taxes we will also see cheaper currencies. Watch your beloved governments compete for bond purchasers! Watch food, health care and energy prices soar!
What goes up when all currencies are quantitatively eased to death? G-O-L-D. If you despise the yellow metal – the only REAL money – I have another four-letter word for you: R-E-N-T.
That’s what I’ll be doing.
L = Luck
Tell it like it is brother …… go in peace. May the spirit be with you.
Liquor & Whores
The bottom line?
Boomers will have to work work work and save save save.
It should favor the stock market and other financial investments. Also the fact that many boomers will have no choice but to keep working will help the economy.
Guessing the future has never been more difficult.
Ok, liquidity is a great thing. However, maybe this is the mindset of the average Boomer:
1) pay off my house. Live in it until I die (~25 years). This saves me having to shell out $1200/mo for mortgage/rent = $360,000
2) by staying in my bigger house, my children can come visit with their grandchildren and spend the night = priceless
3) when I die, the value of my home is passed to my children = priceless
The problem may be for those Boomers that are counting on selling and cashing in on their homes, but as you see staying in their home is also a form of ‘cashing in’. So, what is mindset of the ‘average’ boomer?
What do they live on from age 65-85? And how about the 6K/month medical care from 85-88? Goodbye inheritance. — Garth
#2 China Thank You on 02.21.10 at 10:06 pm
———————————————–
Well, “times they may be a-changing”. China is losing jobs to India (go watch the hilarious movie ‘Outsourced’).
Also, many Canadians are waking up to the devastation that is cheap products. At Costco the other day I bought 2 cotton t-shirts that were made in Canada, rather than the package of 4 that were made in China (same price). At Sears I bought a 3-pack of socks (made in Canada) rather than the 6-pack made in China.
My Chinese-Canadians friends also know the majority of stuff that comes out of China is crap. We will wake up eventually, it’s just a matter of time.
Hello Garth.
If average is normal then I am probably better than normal. I am just being modest. Those boomers in the picture look like they belong in Hawaii or something.
Ah yes debt and deficits. We don’t need them and we don’t need political leadership thats inclined towards borrowing money or indulging in social program spending and all the politically correct garbage that has been indulged in for the last 50 to 60 years.
Debt must be paid and politically correct fiscal foolishness must be cut off and repudiated ASAP.
The national government should only concern itself with the following.
1. Defence of Canadian territory.
2. Law and order.
3. Diplomacy.
4. Transport and Communications.
5. Coast guard and fisheries/off shore resources.
6. Treasury and fund raising. Includes Mint and BOC.
7. Internal affairs. National parks ,museums , Stats Can., Consummer and Corperate affairs.
No social stuff or subsides.
Leave social stuff and what is not included above to the provinces to fund and operate. No bail outs for the provinces either. They must also walk the hard path of fiscal discipline.
As for the population and their wild and crazy dreams of financial bliss that is expected from the treasury.
Well the party is over or soon will be and its time to wake up and smell the coffee. All the retirement moneycollected by the government was quite likely spent or borrowed by the government and then spent.
If there is anything left count it a miracle.
Steven
#52 JoeCalgary on 02.22.10 at 2:47 am
———————————————-
Ontario law.
“No pet” provisions void
14. A provision in a tenancy agreement prohibiting the presence of animals in or about the residential complex is void. 2006, c. 17, s. 14.
From: http://www.ontariotenants.ca/law/act02.phtml#RTA14
Things are looking promising after all!
The truth about the reality with respect to the economic future of the baby boomer’s golf years that seems less than promising is starting to sink in, for some, most yet have not understood the message. Although hearing they have not been perceiving! If you listen closely you will hear that you are about to have your full human potential recognized as a “Human Right” ! In order to feel as dignified person, you will soon have the right to work into your nineties.
With so many about to enter their golden years it will be impossible to sustain those masses ( of which I am one ) given the current and underlying economic circumstances. To those who think that retirement will be anything like the taking heads have promised, corporate media and government, ( I can’t see the difference, can you see the difference?) I would strongly suggest. “Don’t put away your alarm clock”, you’ll be needing it!
Location…Location…Location
Look around you Sisters and Brothers.
…Tent cities in the U.S.
…Empty cities in China
…Empty cities in Dubai
…Iceland’s citizens may veto all its foreign debt to UK & Netherlands
…Greece is grinding to a halt
…25% unemployment of under 25 in Spain
…Germany’s 4000 pilots on strike
…Japan’s economy cannot sustain/support its aging population
…Without world trade, China & India cannot support its 2.6 billion citizens
…Western Canada is the safest, contemporary corner in the world…only 10 million citizens with a plethora of natural resources to sustain itself.
Nostradamus jr.
“gray”?
EPI President Lawrence Mishel recently shared these data during a Senate hearing on the jobs crisis:
“People were consuming based on a sense of inflated assets,” going into debt to consume, or borrowing against the inflated value of a house. “That was an unstable growth and it fell apart.”
http://www.epi.org/analysis_and_opinion/entry/a_long_and_persistent_middle-class_squeeze/
For what it is worth…….
#39 Kestral
BINGO>>BINGO>>BINGO
Sure the rates for reverse mortgages are high today compared to regular mortgages, but as 9 000 0000 boomers start to look into them to fund their golden/silver years, competition will increase and the rates will become more attractive.
#22 dirtyoilbanndit ” Suncor stock ”
It looks good, but then you see the P/E 139.34. 139 P/E?!? That’s quite risky isn’t it? It’s up there with BreX before the bust.
Shouldn’t a P/E 139.34 raise some alarm?
Mike
What if the government gets fiscal “religion” (not that some members aren’t already giving theocracy the old college try) and moves from mamby pamby preaching to the actual practice of thrift? Who says government spending and borrowing can go on forever? Not Greece or Italy or Portugal or Spain or Iceland or the UK (regardless of the deluded views of their public and private sector unions).
I know quite a few citizens (mostly unemployed and underemployed) who are now, by necessity, on the cutting edge of a refreshing “movement” towards fiscal rationality, perhaps not witnessed in these parts for some 90 years. Oh and when has a government, that relies almost exclusively on various opinion polls and shallow corporate propaganda, actually led anything recently?
Black Swan anyone?
#57 Mike (Authentic)
Patience is a virtue. After the historic run-up over the last year (basically on the backs of taxpayers) the odds of continued upside are poor imho but the odds of a move in the other direction? Pretty good I think.
The lack of volume at present levels shows very few are interested in paying these prices. The “equation” I like to reference is: Rising price + declining volume = Wrong Price. There are a lot of mainstream bears like David Rosenberg who are looking to buy back in at much lower levels (try 150 points lower on the S&P500). While I can see a decent bounce developing from this area, unless the unemployment and excess debt situation is remedied (unlikely in my view), it should be considered a technical trade only.
I think the Japanese stock market might be most instructive for our investing future. Despite rallying several hundred thousand points over the last twenty years (essentially the total of all the upside points) where is it today? The Japanese bond market on the other hand…
62 pbrasseur on 02.22.10 at 8:22 am
The bottom line?
Boomers will have to work work work and save save save.
It should favor the stock market and other financial investments. Also the fact that many boomers will have no choice but to keep working will help the economy.
Guessing the future has never been more difficult.
************************************
huh?
Work at what–i wonder and how does someone working-help the stock market or the economy?
The economy must be healthy in order to drive job demand–not the other way around–
The stock market must have bullish sentiment attached, or it just plain and simple–wont go up–
This is why the “green shoot” phrase was adopted–this was to alter “sentiment” –
Sentiment–bullish and bearish–is “thee” most powerful of all market forces–
Whatever flavor of sentiment–so goes the market–
Here’s an example–
A developer builds 100 houses in a subdivision–he asks $400K for each house–he sells 98–
He has 2 left–
There is a line up of buyers for the last 2 houses–
A and B–are super bullish and afraid they will miss out–
They both offer $50K above asking and they sell for $450K-
Just like that–98 of those already sold homes increase in value by $50K–now they’re all market valued at $450–
Then say–2010 comes along and C homeowner loses his job and is afraid he wont be able to keep up payments–so he lists and finds there are no buyers at $450–
So he lowers the price to $350K and it sells–
Poof–just like that–every home owner in that subdivision lost $100 in home price value–
But–get this–the only cash money involved in these huge price swings–was between bullish A-B-and bearish C —
That’s sentiment–driving the market–
Lotto Max?
btw, I think you’ve been hangin’ with knucklewalker…
#65 Steve – you missed air and water quality (‘cuz it crosses provincial boundaries.) BOC isn’t fundraising, it’s stewardship of the currency. The mint is just a manufacturing shop – if it weren’t for the security issues, you could outsource it (not that I would – the mint is good enough to make notes for other countries and still make a buck on it
Garth, you’ve released an ‘L’ of a monster here.
Who knew there were so many wordsmiths reading this !
Just bought my 6th rental property last week and hope to find a couple more before the 20% down hits April 19.
that is having rental property is wrong and there is NO way I am going back into the stock market, Nortel, Brex and others made that an easy decision for me
—————————————————
you really need, for your own sake, to start reading about investor sentiment and psychology. You’re clearly buying in at tops in all markets (not just stocks). You bought into the mania that was Nortel, you bought into the mania that was Bre X, and you’re buying into the mania that is real estate. You’re following the herd.
After you get slaughtered in real estate, where you going to go? Like many, many others, you’re seeking a safe, high paying investment after getting smoked in the stock market. It’s not the stock market or any market that is the problem for you, it’s your thought process. You’re going to keep losing. The key to investing is to invest in areas people aren’t interested in….for the time being.
I hear it so often that people lost money in stocks and refuse to get into that market and so they dump $1 million into real estate- waiting to lose even more.
Thank God I don’t think like this. The greatest mystery for me is: after the real estate market gets killed, where will the herd point to as the safe investment? They might just call it quits and figure the only way to make money is by sweating and working hard.
#51 Andrew
Its no suprise that you don’t like the stock market given the names you listed, Bre-X an Nortel. Both became very emotional investments, not unlike like your Casey Serin collection of leveraged “rentals”. Of course your using the exact same mentality to invest in real estate, get in before you can’t anymore.
Wait till the “bids” dry up and the “asks” start moving the RE prices down, April 19th.
Best way to become a real estate millionaire, start off as a real estate billionaire – Peter Scfhiff
“The University of Toronto’s foray into aggressive U.S.-style investing is coming to an end following a decade of disappointing returns and a $1.5-billion loss that wiped out nearly 30 per cent of the school’s pension and endowment funds in a single year. ”
http://www.theglobeandmail.com/globe-investor/u-of-t-to-curtail-aggressive-investing/article1476669/
There has to be a lesson here. I wonder if their new strategy will be lots of GIC`s ?
to 57 Mike (Authentic) on 02.22.10 at 4:26 am…
Mike, I hear you. Sometimes the market feels like a carelessly built explosives magazine, which could self destruct at any minute!
Having said that, if you do the math dividends are still preferable to GIC’s. My strategy is to invest in higher quality DRIPs (BCE, Telus, Brookfield Emera, TCP etc etc) and then try to ignore the ups and downs in the principal, but rather focus on the income, which keeps growing and growing.
If you assume that, over time, any losses in principal will be recovered, then you can relax and get paid 5-6% dividends (and growing) while you wait.
L… L… Oh, a Luger!!
#51 Andrew
I thought you were supposed to buy low and sell high?
#38 chaostology …. the longest party in the history of mankind took place after all the dead were buried . The time was 1347 to 1351 in europe the plague killed 3/5ths of the pop. the party lasted 100 years . Lots of housing lots of everything .. The reason it hasn’t happened again is the only those with immunity lived to pass on their genes to us. Black swan anyone ?
I’m wondering exactly what survey the author is referring to. That would be important to know.
Life – it all starts and ends with Life
With all the grubbing, the worrying, the robotic routine of day to day, the worrying about tomorrow, you forget to look at today. Carpe Diem. Those hippies understood that.
Unfortunately, their ideals were brought low by a fatal fallacy, as stated by Hunter S. We are now hanging on the “grim meat hook of realities” and we “are all wired into a survival trip now”.
The fallacy that bought them down? I’ll leave you to discover that. It’s quite obvious when you watch the news. Oh, Hunter S. was not normal either. “The problem with normal is that it only gets worse.”
#57 Mike:
…and in the meantime, for at least the short term, why have your cash sitting in a bank account paying 0.8%?
You can get 2-3% with the online banks – Ally, ING, the new Canadian Tire offering…
I know it’s not what Garth is recommending, but you’ve gotta be able to sleep at night….
Nice work on the post today. The three sets of blog dogs that read this blog (“Boomers are great”, “Boomers ate my lunch” and “The past is the past”) can all agree on one thing – no matter how you see the past, the future is gonna look pretty bleak for us all as the boomers move into the harvesting time of their life cycle. And it would appear that most of them (and those of us that follow) haven’t put away enough nuts for the long winter.
I say give it two more years before the M$M makes this a central point of discussion. Unless of course there’s a war…
Garth et al:
I was listening to Bob Chapman. At about 3 minutes into the 10 minutes, he recommends to the people in the USA, invest in Canadian Treasuries. I thought “Nostradamus le Mad Vlad” would find Bob’s comments on the EU issues, etc.
Investing in USA RE:
Bob C, does predict that homes now valued at 200k will go to 100k. I know some guys on your blog Garth are looking to the USA for a good investment. Might be too early to jump in. They state 3.5 million(USA) vacant homes and the US banks are holding back properties so they don’t “crash” the system.
Here is the Link: Enjoy…..
http://www.youtube.com/user/TheBobChapmanChannel#p/u/2/4JiV7lFKt14
BOOMERS UNITE….liquidate now, pool your resources, and start a commune for the chronically groovy. Tell the man to kiss our chitlins ’cause we haven’t yet forgotten Timothy Leary, and we’re all set to turn on, tune in and drop out.
Failing that plan, I aim to join a Hutterite Colony and tend a flock of sheep. Peace to all.
#72 Mike (Authentic) on 02.22.10 at 9:50 am
————————————————-
Is it possible that the P/E on Suncor hasn’t yet reflected their acquisition of Petro Canada? Both Petro and Suncor were great stocks before the merger…it’s very likely the combined company is undervalued here…
Hippie-baiting, Garth?!
Well I guess despite fleeing from the Harper assemblage old thought patterns do die hard.
At any rate, this old long haired acid eater looks to have very little problems with the financial end of ‘retirement’ as the accumulation of roughly a million in cash PM’s and oil stocks might indicate. As well I own free title my home with a large productive garden and have no debts. For a fair portion off that bounty I do have to thank three rather bent real estate developers for giving me the opportunity to play whack-a-mole. Boy were they pissed how that game ended.
Say, what is this L for liquidity, last I heard you were preaching cash is trash? Well however that conversion came about, good for you. My view (for what a hippie’s thoughts are worth) is that it would, as well, not be a bad idea to have some silver Maple Leafs in the sock drawer; the times are not just-a-changing, they is crumbling. Of course until they do crumble one might, as well, think a few oily thoughts –http://www.ft.com/cms/s/0/ba370018-1f19-11df-9584-00144feab49a.html
BTW love the pics above (you and wife at last bikers bash?) Did you know that if hippies die they go to hippie heaven? I think it is a little beach off of Punta de Mita circa 1982 where they dress up as rednecks and drink Dos Equis.
http://www.youtube.com/watch?v=8Bc0WjTT0Ps
va con dios mi amigo interesante
Well Garth…..after reading thru the blog today, looks like
“Freedom 85″ may very well be the reality!
Cheer up, all you fellow Boomers, all we need is L.
A bit of brown on that old hippies’ beard and a little dye job for the misses………that’il fool anybody! …won’t it?
Yes the L secret is out, it’s …………
L’oreal
100% Gray coverage
elle
Enhance your hair’s tone, experiment with a dramatic new look, or cover grays with color that reflects your personal style, find your perfect shade.
#81 Renting in Rosedale “DRIPs …”
Thanks RinR, that helps. I assume then “long term hold with income” is what helps relax market anxiety. As you are not just paying attention to the principle, but also realise income gains offset losses?
#78: “The greatest mystery for me is: after the real estate market gets killed, where will the herd point to as the safe investment?” Risk adverseness is my guess. I imagine the next 10 years after the Great Depression few invested into stocks.
#73 robert – “Rising price + declining volume = Wrong Price” I’d like to learn more, could you do a longer post on your thoughts? I’ll have to read up on David Rosenberg.
Thank you all for your continued thoughts.
Mike
#68 Nostradamus jr.
You will learn to share… the 25 million from the East will be coming for our share of your “plethora of natural resources” as will others from the south… resistance is futile…
two reports canadian and australian
http://www.financialliteracyincanada.com/documents/Consultation_Report.en.pdf
http://taxreview.treasury.gov.au/content/Content.aspx?doc=html/home.htm
so does the poor subsidize the wealthy?
if you get more poor into the pool …what would be the incentive to spend on preventative medicine?
From the Australian :
“In a mandatory scheme, people who die before or shortly after the age at which the annuity commences support the income of those who live longer. Consequently, there are potential equity issues, especially for groups in the community who tend to have lower life expectancies, such as low income earners and Indigenous Australians.
A voluntary system would mean a person can insure as much of the risk as they wish. However, the pool would not be as large as under a mandatory system. This would place more risk on the provider, as the people choosing to insure are more likely to be those who consider they have a good chance of living beyond average life expectancies. The provider would pass on this risk by offering a lower income than might be payable under a mandatory scheme. This is particularly the case where the income is guaranteed.
Guaranteed or non-guaranteed products
The provision of a guaranteed income, while providing greater certainty for retirees, would present several challenges. For example, providers would need to satisfy the capital requirements set by the Australian Prudential Regulation Authority (in respect of reserve and matching requirements), which could increase the cost of the product. Providers would also need to price expected mortality improvements into the products, which would be challenging to predict accurately. Given these challenges, it is likely that the products in the private sector could be offered only by life insurance companies.
With a non-guaranteed product, a person does not purchase a right to an income but a right to a distribution from a pool of assets. This moves the investment and mortality risk from the provider to the individual. These assets have similar risk characteristics to those applying in the accumulation phase, with the exception that investment returns are supported by deaths of the members within the pool.
Private versus public provision
Private entities, such as life insurance companies, can already provide products that insure an income over a person’s life. Depending on the product, other entities may also be able to enter this market.
The government is already the main provider of longevity insurance through the Age Pension. This may provide the infrastructure to enable a person to purchase an additional guaranteed income. The government may also be able to offset the risks inherent in offering an income guarantee more effectively than the private sector, especially if the government has to insure private sector guarantees.
#81 Renting in Rosedale said:
“then you can relax and get paid 5-6% dividends (and growing) while you wait.”.
That’s only going to happen when the corporations you’ve invested in are making money. During the last downturn I watched a number of my holdings reduce their dividends. It seems that everyone suffers in these downturns and that there aren’t really too many safe havens for your money.
#66, google is your friend.
BC law
Alberta law
Saskatchewan law
Manitoba law
etc., etc. So, what’s wrong with Ontario? Does this province want only slumlords or something?
I thought you lost your marbles Garth and were going to say (more) Leverage… as in debt
L is for Liquor. What you will need to drown your sorrows.
They say 1 or 2 drinks is good for your health. Why not be in the absolute best of health, drink 12? Hic. At least you can take the empties back for a refund.
Canada is in not the greatest of shape. Lucky for us that so many other nations are Governed even more poorly. We won the race by finishing almost last, while the more irresponsible raced ahead to the economic collapse finish line.
Whatever your problems, you can still be thankful to live in Canada. Our issues are relatively minor by comparison.
Unless you are a Government worker -they will be facing a lifestyle realignment, forced by plunging tax revenue and enormous deficits. I would feel sorry for them, but I can’t, as a taxpayer who gets no say in the matter, sorry, no pity there. Save the economy – fire all Government workers now! The new class warfare – the pigs at the trough vs starving taxpayers. Note the fuzzy media ads from your friendly public unions – not enough lipstick on the planet for that task..
laxitives
#78 Dave & #79 SMW
Some great points, however you only lose in real-estate if you sell when the price is lower than what you bought it for. You control this. With stocks, you have zero control and as you know Nortel was bigger than all 5 major banks here. Stocks are a guessing game. You are right about following the herd though thats why I am not in Gold and bet you are. Where will the fast moving herd go next after Gold? or after losing more $$$ the second time around in the stock market? Don’t hurt yourselves in saying the one safe place to invest as we all need shelter, “Real-Estate”. Guys, this blog has been saying since 2008 to be a renter. Go ahead and follow the renting herd. Since 2008 my real-estate has gone up over 38%. A bit better than where your grandparents are parking their money in GICs.
My thought process is bang on. My $$$ in rental property now provides me a ROI of over 50% and rents should go up again as this blog continues to scare some herd home owners to sell and become renters.
I guess you can pick stocks better than me and perhaps I can pick real-estate investments better than you?
The only question I seem to never get answered here is what to do with the liquid cash flow ($10K) monthly every month from the rental properties?
I have saved $120K of it and put it away for a rainy day. So I now have a problem, where should I invest the 10K monthly??? Not is stocks, gold etc as the herd is in those things.
Looking forward to your comments…
Agree with ‘Renting in Rosedale’
Half of my stocks (200K) in high-quality Oil, Telcom.
(Yields 6-10% )
I bought TU, BCE one month ago after I did my Due diligence on WIND mobile and other new service providers.
(WIND mobile pay north of 20% on their debt and they had lots of network problems after they launched, and only got 10K in first month.)
Wanta move to Vancouver with 1 million dollars to buy a house on the westside? Don’t.
http://www.yattermatters.com/
Apparently in the US where prices and sales are still in decline the builders are still building. Same here in the Lowermainland/vancouver/White Rock area , new high-rises, some finished approx a yr ago still not sold out. O but just listen to the local news and things are “hot”. An old friend [87] who used to be a builder in Nanaimo said they did the same thing in the 70’s and some of the builders” lost their shirts” when real estate sank.
L = LOAN
Is that some kind of strange Masonic hand signal he’s making?
@ #68 Nostradamus jr.:
Did you forget that most of those natural resources are owned by Americans & Europeans, thanks to “foreign investment” (i.e. selling off Canada’s best assets) since the 1980’s?
Boomers are going to be hurting in the next few years.
They drank the RE and stock market hype kool aid with the rest of us.
I see the effects everyday out here in GTA west. I am seeing guys well into their late 40’s and 50’s doing stock clerk work/getting buggies etc… in Walmart/Canadian Tire/Home Depot etc…
Its crazy, highschool kids and even kids well into their 20’s are competing against their parents for low level service jobs.
Even in skilled labour market, I have heard many teachers that are into 60’s taking on substitution teaching jobs leaving those who just graduated without work. So many senior technical guys are now taking on contract/consulting/programming jobs that people in their late 20’s and early 30’s are finding it impossible to find work.
Why pay some fresh out of school kid 40K when you can get someone with 20-30 years experience willing to work for you?
Same thing in trades, so many under the table contractors that are already collecting CPP/Pensions are doing work for cheap because they do not have the same overhead as a guy in their 30’s or 40’s with business/insurance etc..
This is just some thing that I started noticing in the last 12-18 months, so its just the start of this new trend.
Sad indeed.
The boomer retirement effect is barely in its infancy.
The wave is heavily back end loaded.
Here is a breakdown of the numbers in 5 year increments. Should not that the “wave” actually extends past the boomers … and is still visible into GenX before it drops off. Houston … we have a trend … a long one.
Current Age and Population in the group:
(divide by 2 for approximate households represented)
60-65 …. 1.6 million
55-60 …. 2.1 million
50-55 … 2.3 million
45-50 …. 2.6 million
40-45 …. 2.5 million (First Gen-X ers)
The actual retirement wave extends 25 years. While technically there are slightly less than 9 million boomers there are actually more than 11 million people in the “wave” … more than half are younger than 50 with 20 to 25 years to go to retirement.
Only a third of the wave will retire over the next 10 years.
Curious that there is a big bulge in the demographics in the Age 40 to 55 region … with the peak sorking its way through the past 5 to 7 years or so. Hmmm … the 40’s … prime “move up” age for RE and of course entering into the peak earnings years. Yup about 7.5 million churning through the economy …
Funny … the steriotypical representation of old foggie boomers f’ing everything up in the markets might seem a bit odd … the numbers might actually indicate that if you’re a 40 come early 50 something … you could be doing it to yourself.
Something else to thing about … you might really want to get very very familliar with the wave if you are in your 40’s come early 50’s … its very important to you!
. Now if you prefer not to serve that necessary but unpleasent role … all you have to do is to look around at what most 40 come early 50 somethings are doing … and do something different. One thing you might do is anticipate what those people will be doing over the next 5 or 10 years, as a herd and get out in front of it. We know what they’ll be trying to do in 20 years or so …. and between here and there they may have a hell of a lot of debt to clear off their books … a lot of taxes to pay (including whatever it will take to pay for the eventual CPP and OAS they might hope to collect … they do after all represent the bulk of the retirement wave … and in the mean time they’ve got a lot of saving to try to do for their old age. Now if you happen to be 50ish and looking to retire in the next 5 to 10 years … you are mostly out of time … ready or not … and you better be doing exactly the right things if you are on the not so ready side … and fast … the conventional “right” things by the way could be the worst things to be doing … but they will be popular with the herd … for a little while before they are hated and the next wave of “who could have known?” sweeps across the land 
.
You’ll notice that that wave has a very steep incline as it rises to where you sit somewhere on the top of its peak which spans 10 years. Now find the part of the chart that’s immediately behind you … the part that has all those present 30 somethings in it … look down … no no … way down … they are the ones who are going to be buying all your “stuff” cheap. There is a simple way to describe your circumstance if you are sitting there on that 40 something peak … the term is … generational BAGHOLDER
We got a lot of figuring out to do Lucy… a lot.
Luck to all.
Garth,
Do you have any comments as to how the ending of the IMPP in March 2010 will affect credit markets for residential and commercial lending?
http://www.montrealgazette.com/business/Ottawa+confirms+extending+IMPP+months/2043070/story.html
My understanding is that the end of IMPP enabled credit flow into the mortgage market by basically trading cash for MBS instruments. These actions provided Canadian banks with capital/liquidity to continue lending in a time period where they would have pulled back. Currently, it can be said that the credit markets are only on a sustainable course of expansion due to record-low interest rates and liquidity injections to banks holding more and more of these loans.
With avg Canadian debt-to-income ratio at 1.43 it is barely manageable and yet could continue to 1.6 if current rates hold.
Do you see the ending of this program to be another catalyst of events for the real estate correction once rates start rising?
Do you see substantial political pressure to NOT extend this program even if rates go up and credit markets begin to contract(if they do)?
If Canadian banks see the trouble ahead from a mere 1% increase in interest rates where 10% of mortgaged Canadians will be financially screwed; wouldn’t they further rein in lending to boost capital ratios for future losses in other lending businesses as soon as this program ends (no more free gov’t cash injections)?
This Globe article implies that Canadian banks have more than enough capital to absorb these increased losses but we all know that Carney always points a rosy picture ahead. Where is this financial report for the “stress test”? I’d like to see what numbers they use!
http://www.theglobeandmail.com/report-on-business/carney-urges-prudence-on-debt/article1396431/
In my opinion, the Bank of Canada should be investigating how many mortgage holders are supplementing their mort. payments with other lines of credit. With a avg debt-to-income ratio of 1.43 and debt faster,further expanding; I truly wonder if they ran the simulations only considering the average mortgage loan/income financials without considering other debt obligations. We all know that the recourse nature of Canadian mortgages will likely stress all other avenues of lending before households crack solely due to mortgage repayments. If they did not take these factors into account I fear that the mainstream outlook for Canadian economy/banking system could be drastically understated.
oops … 50ish should be 60ish – about 8 lines up from bottom of post. Sorry about that.
this is the now corrected bit from the above …
… and in the mean time they’ve got a lot of saving to try to do for their old age. Now if you happen to be 60ish and looking to retire in the next 5 to 10 years …
.#98 JoeCalgary on 02.22.10 at 12:52 pm
——————————————
lol, Didn’t you know I live at the centre of the universe?
It is interesting to see that rules can vary that drastically province to province…
Post #51 &102 Andrew. I have some friends who have done as you. Pretty shrewd guys. They to have done well.
You have 5 properties generating $10000 a month so roughly $2000 each (nothing for the sixth cause you bought it last week)
My question is when did you purchase those properties?
My buddies won’t touch anything right now.
And these guys are smart.
Just wondering.
The problem, in essence, is that in current system each generation is expected to somehow create its own wealth from scratch and then spend it all before they die. The system in which this is possible requires an ever expanding economy in which investments will grow predictably over time. This is a relatively new development, and one that is clearly not passing the test of time. Perhaps it is worth while to look back and see how this has been done for a few thousand years that precede the recent generations: people had offspring in order to assure their own dignified existence in their old age. To that end the parents would pass their assets to their heirs in exchange for care. In this way families, the most fundamental building blocks of any society, become less vulnerable to the short term vagaries of any economic system.
Greetings: Just returned from Calgary, helping my son and his sweetie prepare their condo to put on the market. They are spending a fair bit of change to upgrade a lot of the shoddy materials that were installed by the original builder. Replacing all the doors, jambs, and casings and all baseboards. New carpet and laminate flooring as required. Also a complete re-paint. Huge amount of work, not done yet. I wish I was happy over this but they are going into hock for 4 big ones plus; to have a new home built in a more remote sub-division. The most depressing thing is that 3 weeks ago, I left him a copy of “The Greater Fool”. It is sitting on a bookshelf un-read, know that because I asked him.
I will return next weekend to carry on and attend birthday party for their 1 year old daughter, our first grandchild. I know they were not carrying a dangerous amount of debt when they bought the condo 6 years ago, that is about to change and my wife says this new home purchase is none of my business. Sadly she is right, and even more depressing is that they could have picked a home from hundreds of existing ones that my generation the BB are wanting to sell. Many of these are in great well established communities with access to transit, all amenities, and services. A large number of them have been upgraded over the years and have lovely landscaping,are near playgrounds and schools which desperately need new students. My wife and I have only ever owned one new home, all the others have been fix-er-uppers which I am fully capable of doing and assisting them with. It is not to be and any comments I might make are falling on deaf ears. I went through this blog twice looking for the most important “L” word that Canada is sadly lacking and didn’t find it. { LEADERSHIP }
#52. JoeCalgary
“And, increasing1%, you did indeed, at one time on this blog, recommend that people lie to owners and then just move the animals, specifically dogs, onto the property after the contract is signed. In Alberta, at least, that can get you evicted.”
—————————————————-
Please show me where I said that, esp. @ dogs (I don’t even have a dog btw). I will be sure to apologize profusely, if that’s the case.
(Although saying I’ve ‘progressed from lying’ to saying I did ‘recommend that people lie’ are two different things)
I do know I referenced an e-mail from an acquaintance that I’d received the morning after posting about frustration with blatant ‘No Pet’ rules, that turned out to be the same as what Bottoms_Up actually ‘recommended’/referred to that day, and to which a link has been provided today at #66.
I did also post after this that I had been ‘approved’ for the rental I wanted, and was upfront about the pets.
I posted sometime after that about one of the factors that can push people to buy, as financially suicidal as it may seem, is the frustration in relation to renting and having pets, and may, in that post, have mentioned how it can push some people to lie when they have limited rental options
Gordon Brown , along with almost all Government are coming right out and calling for a world constitution.
http://www.youtube.com/watch?v=9oHpTHt7Lig
Garth gives zero insight into this push in any of his investment material and even refuses to address this in his blog. This is the beginning of a Tsunami that all investors should be aware of yet Garth keeps everyone focused on the little ripples lapping at their ankles. One has to ask who he really is looking out for? The push to form a North American Union signed into law in 2006 with the final signing scheduled for 2010, yet not a peep from the self proclaimed investment Guru? That is just too odd.
There will be no NAU. And no mastodon attack. — Garth
Where did all the money go?
“Between 1992 and 2004, the average taxable income of the top 0.1 percent of families rose from $1,270,000 to $2,650,000 (in 2007 dollars).” By 2008, the average income of the top 0.1 percent had risen a further $710,000 — reaching a total of $3,360,000.
In terms of accumulated wealth, the picture is even more stark. The median net worth of the wealthiest ten percent of Canadian families increased 35 percent between 1984-1999. They gained a further 65 percent from 1999-2005, while the wealth of the bottom 50 percent of Canadians saw no gains since 1984.
Much of this staggering wealth comes as a result of a tax system that has been getting less progressive since the 1970s — particularly since 2000. In the days of nation-building, Canada had a tax system that was amongst the most progressive anywhere. According to a 1995 article by Roger Smith, “In 1949, PIT [personal income tax] rates ranged from 15 to 84 percent and there were 17 brackets. In 1994, the range was 26.35 to 46.4 percent and there were 3 brackets.” In 2009, there were four federal brackets: 15 percent, 22 percent, 26 percent, and 29 percent on an income over $126,264.”
http://thetyee.ca/Opinion/2010/02/21/DobbinRichTaxes/
Our problem is not that taxes are too low. — Garth
Hi Dan,
I purchased one property per year starting in 2005. If a property cash flows well then I will continue to purchase more. Am I carefull? YES. I do not invest in hot run up markets like Vancouver, Toronto etc.
As you may know, the interest is a write off anyways so you just need to make sure the property cash flows very well and has huge upside to increase the cash flow. I like deals that come with a very big lot or land in a very good location. Keep in mind I have 12 months to find one very very good deal. I investigate as much as i can about the seller to see why they are selling and what they want in a deal (closing date etc). Cash deals have worked best with no conditions and quick closings. I usually put 20% down to avoid cmhc. I am now positioned to purchase 2 this year and its nice to leverage the banks money at todays rates. Its also great against inflation. Garth talks about the bubble and high prices but i am sure he could also write many posts on why realestate is good as well. The number one reason why most of the blog dogs are the way that they are? “NO ACTION”. Hope this helps.
#108 TO Bubble Boy
“”Did you forget that most of those natural resources are owned by Americans & Europeans, thanks to “foreign investment”"
….Protectionism & Nationalization will change all that…
That’s a given…only question is when.
Nostradamus jr.
102 Andrew on 02.22.10 at 12:55 p
You are right about following the herd though thats why I am not in Gold and bet you are. Where will the fast moving herd go next after Gold?
The only question I seem to never get answered here is what to do with the liquid cash flow ($10K) monthly every month from the rental properties?
My thought process is bang on. My $$$ in rental property now provides me a ROI of over 50% and rents should go up again as this blog continues to scare some herd home owners to sell and become renters
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The herd is in gold?
You can’t be serious–the herd doesn’t even know how to spell gold–
The herd is in real-estate and overpriced growth stocks,that will correct back to their true valuations before to long–
As for your 10K/month–expect less over the next few years as rent prices lead the house prices “much” lower–
btw–Gold–can you show me something else that’s into the 10th year of a bull market–
Sure–gold could correct lower,and still remain in a bull trend–
Gold shines in uncertainty–always has–always will–
No shortage of uncertainty–as far as i can see–
Sounds to me like–you missed out on gold and are about to get your ass handed to you–in your RE holdings –
#113, LOL back at you…your center of the universe days are numbered.
I’m so adamant about this because we’re posting on a blog where the recommendation is strong that owners sell and become renters. At least some of us who rented in the past became owners because we could not stand the way renters were treated by then-existing laws. I personally moved into the curious position of eventually renting-out property after the laws had changed to favour the tenant. It hasn’t been fun. For example, while it is fairly easy to have unwanted pets removed, it is not nearly so easy to remove unwanted long-term extra people!
So, please be upfront about animals, about smoking, even about alcohol consumption. Some landlords and other tenants occupying the same building won’t mind, while others will. I’m saying they deserve the right to be able to do due diligence and to be able to make an informed choice.
#102 the herd in gold? How many people do you know own gold? Less than 2% of the population own any exposure to gold at all. Thats not what you call a herd.
97 pjwlk on 02.22.10 at 12:49 pm…
“…During the last downturn I watched a number of my holdings reduce their dividends…”
So true PJWLK!
The trick is to pick the ones least likely to do that, but its hard to do. Manulife, for example, was a shocker, eh!
But some have huge red flags, example those in highly cyclical industries, those that are controlled by capricious offshore investors(Husky), those that poorly managed (Manitoba Tel) or are in declining businesses (Yellowpages). I own Yellowpages by the way, its just too tempting notwithstanding that the business model has no future.
The simple, essential services and utilities seem to be the safest (phone, hydro, pipeline). After all, what could go wrong??
It is so difficult to try and figure what the boomers are suppose to do. They were suppose to down size, vacation more and lavish their grand children with gifts and money. We make ludicrous assumptions based on what we think a 60 year old should be doing. When I was a kid, a 60 year old sat if from of the TV all day and passed gas and waited for the Grim Reaper. Today, the 60 year old is running full and half marathons. Eventually, time does catch up to all of us, but todays 60 year old is yesterdays 45 year old. Go down to your local park that five or 10 year old kid’s dad can easily be 60 today.
Its not the age its the mileage that counts. Just imagine your grandpa and his girlfriend in spandex shorts. More of us are living longer, but the real change that has occurred is that we’re living better which can through those demographics off by a decade.
or more.
120 Andrew
Good stuff man. You, unlike most of the pansy assed RE bulls on this blog actually put your money where your mouth is, and have bought thinking things will flatline or continue up. If you are outside TO Van/Vic, or Calgary, you likely can weather a bit of a pull back anyways.
Sounds like you are in a market where you can buy stuff and show positive cashflow – real “revenue properties”.
On the west coast investment properties are advertised as “holding properties” – you buy them, lose money on them every month, but since RE always goes up they will be worth more in five years than what you have put in them. This has worked wonderfully well for people over the past 20 years here.
IRT #116
Wow. If I was your son I would burn that book. Enjoy your time at the birthday party because I suspect this will be the last time you are invited to help with reno projects or anything of the sort.
44 Real Estate Bear
HST on New Homes
Somebody can correct me if I am wrong. But the HST paid on input materials can be claimed back in full by the builder. The current PST cannot be claimed back.
So ultimately the costs of constuction are lower and, through competition amongst builders, will be passed on to consumers through lower new home prices. (YES, YES, I can hear you saying the builders will not pass it along – go review a first year economics text.)
The bottom line is that the HST will not have as big of an impact on the housing market as people may think.
The impact comes immediately by adding a new level of tax on real estate commissions, legal fees, appraisal fees, mortgage fees, moving costs etc. As for the embedded nature of the tax, go and review the GST experience. — Garth
the INVESTOR herd is in gold and oil so i guess some of you have no money to invest in anything?
When will my ass be handed back to me? I thought this was supose to happen in 2006? Then 2007, then 2008 AND Then again Garth thought in 2009?. OOOh, you have it now, its gonna be this year, ya 2010 I will have my ass handed back to me. LOL. Dude, my 2005 first rental purchase will be paid off in less than 7 years all the thanks to the renters that are paying it off and a few speed payments. I have $125K sitting in the bank. So if i wanted to I could pay it off right now. So tell me when you think my ass will be handed back to me? Maybe after April 19th? or is it going to happen July 1st when HST hits or maybe Nov when interest rates go up 25 basis points? LOL.
You are right about one thing though. I do not have any Gold as Silver has more upside and I would not make the mistake of investing in the yellow stuff when the cheaper silver stuff is more under valued.
Just to recap: in 2005 I was a working slave to a job with no extra income. Today, I no longer work in a job and have $10K monthly cash flow and 6 new assets to my name. Even if real-estate goes down 20% – even 30%, I will still have the money I put down in equity on the first 3 rentals. Again, where should I invest the 10K monthly cash flow? Its no fun paying down the mortgages when the interest is a write off.
btw–Gold–can you show me something else that’s into the 10th year of a bull market–
YES “HOUSING MARKET” – Wake up!
The herd is in gold?
You can’t be serious–the herd doesn’t even know how to spell gold–
THE HERD CAN”T SPELL “HOUSE” Either BUT THEY WANT THEM MORE THAN GOLD!
More commie propaganda to tickle Garth’s mustache!
“The Rich and the Rest of Us, released last week by the Canadian Centre for Policy Alternatives, confirms what many low- and middle-income Canadians have felt for years as they work harder and longer than ever just to get by.
The feeling is – and facts bear it out – that wealthy Canadians are getting richer at a rate much faster than those in the middle or at the bottom.
Indeed, as the study discovered, the gap between the rich and the poor has grown considerably over the last 10 years, even though the poorest Canadians have seen their family incomes rise, but nowhere near as fast as those in the top 10 per cent of income earners. And those in the middle have also seen the gap widen between themselves and the rich.”
http://www.thestar.com/comment/article/187764
Garth, I’ll be frank. I’m young. I don’t fully understand – actually I understand very little about taxation. But evidence does seem to point toward a trend of rapidly decreasing taxation at the highest income levels and on corporations while simultaneously shifting the burden of taxation to what was once the middle class. (Which is where I have entertained hopes of having a Canadian family one day)
If this is simply the way it works I’ll get with the program but at first blush it doesn’t seem fair.
http://www.ctf.ca/PDF/95ctj/1995CTJ5_02_Smith.pdf
“L” is for losers. Think about it. There is no other way. If you win and prosper, somebody somewhere loses and goes to bankruptcy.
foundations matter
South Padre Island, Texas. 31 story leaning condominium building is demolished. Thought to be the tallest imploded building in the world. This demolition took less than 20 seconds. The building was less than 100 feet from some expensive beachfront homes
http://vimeo.com/8157499v=QO2q4LErGN4&feature=player_embedded
http://www.brownsvilleherald.com/articles/tower-102675-ocean-island.html
http://www.rioleo.org/an-engineers-nightmare-ocean-tower-south-padre-island.php
fake Botox
http://www.washingtonpost.com/wp-dyn/content/article/2010/01/24/AR2010012403013.html?hpid=topnews
“Disfluency functions as a cognitive alarm,” Alter says. “It sets up a cognitive roadblock and makes people think, and it triggers a sense of risk and concern.”
====
So, naturalists observe, a flea
Hath smaller fleas on him that prey
And these hath smaller fleas to bite ‘em
And so proceed ad infinitum.”
Boomers, boomers, boomers. People always forget. In EVERY generation, the clueless hardest partiers DON’T SURVIVE into their 70’s and 80’s and beyond. The people in every generation who do survive are always the smartest and healthiest. In a generation where ciggies (thanks, Fab Four) and pot both were chainsmoked and nothing was ever turned down except by geniuses, only the geniuses will be experiencing old age.
And they will not only have the health to work, they’ll have the intelligence to make a living. And thrive.
The stoners? The partiers? All dead in their 50’s if they’re lucky. Just like the alcoholics and smokers of the previous generation.
So all that hippy anti-establishment bs? Survival of the fittest. They did the world a favor by living fast, dying young, and leaving a corpse that looked, and was, for all purposes, thirty years older than it had lived.
Unless of course they were born with Ural Mountain genes and would have lived to 120 without substance use. Then they will make it to 80 and beyond as a drag on society.
But few and far between, and sadly, mostly women.
But hey, we see them every day working the registers at Wal-mart, don’t we?
Thanks for the reply Andrew. Sounds like your timing for you was right. Its always nice to hear about someone who is self made.
Remember though, you’ve only been at it 5 years, real estate can be a cruel, cruel mistress at times.
As long as you have that factored in you should be okay.
Well done.
How ’bout ‘L’ for Lentils …. hell with a little olive oil and sprouts you’ve got a complete meal really cheap…. damn…hope it doesn’t come to that
Riveting posts today, but I have been thoroughly enjoying fondling my income tax return, in gloriously sunny, warm weather (the street sweeper went past this morning, cleaning all the grit up. Watch us get dumped on in a few weeks!).
——
#164 Daystar on 02.21.10 at 9:40 pm — So true. Whether known or not, everything is interconnected and cannot be separated, as no one is an island.
Will Rogers said, “People spend money they haven’t earned, to buy things they don’t want, to impress people they don’t like.”
He should reincarnate and start saying the same things all over again, because people just don’t get it!
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But first, a little FUN!
Well anyone can see which side of the fence he sits on!
Debt, debt and more debt Forecast of US debt until 2015. Whither Canada — on the same course?
Italy — Turns out that Italy is having a spot of bother larger than Greece. Maybe now it is easier realizing that it is not just North America in trouble.
What is China buying, if not US Treasuries?
How about 17% of Teck (mining company) and 13% of Singapore-based Noble Group., a global commodities trading/supply-chain manager with $36 billion in sales. Resources which can be used, or paper (treasuries) which can be burned?
Kurt I think if I was running Canada I would want control over the bank of canada and the mint and they would be sub organizations of the treasury. Ownership of the means of production and lending of currency would be the primary means of fund raising for the national government. Proceeds from the investment of capital would replace taxation and put government in a position where it has no fiscal responsibility to anyone outside the government except its servants, suppliers and the economy from which it would reap dividend and interest income. Getting started requires creating capital equal to the value of canada and investing it through the banking system in canada first and the strongest economies abroad second and attempt to obtain an average return of 6 %. Once that is achieved then comes the budget slashing and the debt repayment over 8 to 10 years with a 10 to 20 percent savings rate plus interest.
If all goes according to the 10 spreadsheets I’ve done then Canada will wind up with roughly half a trillion in the bank , No national debt, no taxes, rebuilt trust funds earning income to pay for limited social programs.
Also the defence and infrastructure spending will boost national security and the economy. The pools of capital will tend to enable productive investment and of course make it possible to rebuild the nations gold and silver reserves so that one day we can get back to real money instead of unbacked monopoly money.
The key to pulling this off would be discipline, a plan and the guts to do it. You will not see it done by democratic or communist politicians. They don’t have what it takes. Its not really about politics its about running a business for profit and power. Which is how it should have been done all along. I just need to be king to make it happen.
Steven
#78 Dave & #79 SMW
Some great points, however you only lose in real-estate if you sell when the price is lower than what you bought it for. You control this. With stocks, you have zero control and as you know Nortel was bigger than all 5 major banks here. Stocks are a guessing game. You are right about following the herd though thats why I am not in Gold and bet you are. Where will the fast moving herd go next after Gold? or after losing more $$$ the second time around in the stock market? Don’t hurt yourselves in saying the one safe place to invest as we all need shelter, “Real-Estate”. Guys, this blog has been saying since 2008 to be a renter. Go ahead and follow the renting herd. Since 2008 my real-estate has gone up over 38%. A bit better than where your grandparents are parking their money in GICs.
My thought process is bang on. My $$$ in rental property now provides me a ROI of over 50% and rents should go up again as this blog continues to scare some herd home owners to sell and become renters.
I guess you can pick stocks better than me and perhaps I can pick real-estate investments better than you?
The only question I seem to never get answered here is what to do with the liquid cash flow ($10K) monthly every month from the rental properties?
I have saved $120K of it and put it away for a rainy day. So I now have a problem, where should I invest the 10K monthly??? Not is stocks, gold etc as the herd is in those things.
Looking forward to your comments…
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actually, I’ve been in real estate for my whole life, with plenty of properties. I don’t think you pick real estate better than me and you obviously don’t pick stocks better than me. I’ve mentioned many times, I’m into gold juniors, lithiums and a couple of other sectors -I don’t and won’t get into details as I that is my hard work and sweat. I have a few stocks that made me over 500% in 2009 and one that made me over 1000% in the “lithium” sector. No toilet fixing required there.
You obviously haven’t done your homework, as you’ve stated that stocks are a guessing game – this is why you got slaughtered. This blog doesn’t represent the consensus opinion by the way. In fact, I’ve never heard the public this optimistic of an asset class (Canadian real estate) ever. True, life long investment students understand how dangerous that is.
Rents won’t be going up as rents fall with sale prices in credit contractions…again you haven’t done your research.
Were you ever patting yourself on the back (as you are now) about your purchases in Nortel? Try thinking back on your attitude and behaviour at the time that Nortel was flying. If it is the same as it is now with real estate, this should be telling you something.
It’s not about losing in real estate or any investment, it’s about maximizing when investing. Ideally, I don’t want to buy an asset that pays me a dividend (or rent), while the asset falls in price. It be ideal to purchase in sectors that have opportunity to grow while collecting a dividend or when the time is right rent.
The good thing about bursting speculative bubbles is that they have a way of humbling people that don’t understand investing. The arrogance is typical behaviour from the crowd that buys into the bubble. They continue to fail to realize that even a turkey flies in a hurricane.
Andrew, who are you kidding? You read Don Cambell’s books and joined REIN and you’re patting yourself on the back. At the end of the day, you’ve been buying since 2005. You’ll learn your lesson again.
What’s with the spelling of “lose” with so many posters?
It’s: Lose, as in “I’m going to lose my shirt on this deal”
and Losing, as in “Canada is losing in the medal count to Korea”
Not “Loose” and Not “Loosing”!!!
You are right about one thing though. I do not have any Gold as Silver has more upside and I would not make the mistake of investing in the yellow stuff when the cheaper silver stuff is more under valued.
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silver had more upside in 1720, 1772,1825,1873,1929 too, but it didn’t rise faster because industrial commodities lag in credit contractions.
You’re not prepared to learn anything. You sound like that housewife I knew 10 years ago who was an expert when it came to picking tech stocks.
#130 Andrew on 02.22.10 at 5:13 pm
So tell me when you think my ass will be handed back to me? Maybe after April 19th? or is it going to happen July 1st when HST hits or maybe Nov when interest rates go up 25 basis points? LOL.
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Lets talk in a year–the RE devaluing should be about 1/3 of the way through by then–
#143
Amen to the spelling comment.
Also:
Has anyone noticed that when posters trash the idea of being a landlord, they often invoke the image of the landlord being forced to fix a toilet (often at 2 AM, to boot)?
I’ve never been a landlord but I have been a renter and an “owner” for more than 20 years, and I don’t recall ever having to get a toilet fixed. I’ve unplugged a few by myself but never had to have one repaired.
Just an observation.
andrew
you’re postings don’t make much sense to me–it would be great if everything you state about owning 5/6 rental properties– cash flow– money in the bank –planning to buy 2 more properties this year is true but hard to believe
–why worry about apr.19 (20% down for rentals) when you say you already put 20% down
–you say your rentals have gone up 38%–we had a downturn in spring 2008 and didn’t really start to recover until summer 2009–there’s two of your properties not at 38%
–where does your 10k cash flow come from that you say you can bank
–you say you still have morgages you have too pay– does that not use the rental money you have coming in to pay for that
–you must be charging a fortune for your rent and if you don’t buy in high end areas (van etc) i don’t imagine you can charge astronomical rents
–you say you were working in a job in 2005 and now don’t have to–boy how things have changed for you
two scenarios–you’re really a millionare and are speculating in RE
-you’re first two properties are grow-ops
sorry but i think this is all BULL
give more details if you can
ps– here in BC rents can only be increased 4% per year so on $1000 rent it goes up a whopping $40
i believe other provinces have similar laws–for a landlord it didn’t sound like you knew that
pps– for all your wealth and riches you don’t sound like a happy person
Speculators are alive and doing very well levereging cheap money and buying over priced real estate. Too bad we have a revenue Canada agency which turns a blind eye to real estate speculators. Auditing their tax returns would at least force these greedy people to pay their fair share of taxes.
RE #2 China thank you Canada
and thank you china for buying WTC scrap metal. I’m Sure it has not, and will not be recycled. valuable evidence to ensure future favored trading partner status.
#51 Andrew
The stock market has been manipulated since around 1995. The dot-com crash and the credit crunch crises are just fancy cover-up names for stocks manipulated since the year 1995. The last two crashes in stocks occurred and because of the insane level stocks reached just like DOW 10,000 today is an insane level. Fair market value is around 2,500 to 3,000. The stock market will crash and burn again and maybe finally it will fall back to it’s long term trend line meaning where it would be without stock market manipulation.
charles,
Thank you for mentioning Joe Bageant – I highly recommend his book “Deer Hunting with Jesus” – a very enlightening portrayal of redneck America. Quite applicable to many parts of Canada, having observed first-hand the residents of these remote regions. Mostly conservatives who end up supporting the very policies that destroy their livelihoods as factory jobs are outsourced and recreational real estate development drives them out of their hometowns they by raising property prices far beyond what the local wages can carry.
Great points Tony! Dan, thanks for the nice comments.
Dave says: actually, I’ve been in real estate for my whole life, with plenty of properties. I don’t think you pick real estate better than me and you obviously don’t pick stocks better than me.
Dave, if you have been in real estate your entire life and can’t make it then I think I am better than you at the real estate game, and you should try another gig.
Call me lucky if you wish, but the fact is you have been in the real estate game alot longer than me and have failed. LOL, JR stocks. LOL.
Glad to hear you investigate (read what others say about different markets) and plunge your money into JR stocks off other peoples advice. The only control you have in your stocks is to buy or sell. The CEO controls the company and you have NO say! Thats a sure way to be noticed as following the herd Dave.
Unless you are willing to share with us the stock you purchased in 2009 that went up 1000%, i would suggest that you are full of moose shit! While we are at it questioning your integrity, SILVER does have more upside than Gold and your little stats are very comical. OOOH and Dave, I think I will sleep in tomorrow morning as I am out of the 9-5 rat race thanks to my smart real estate purchases while not being in the real estate game my whole like.
Glad to hear your Xwife did her homework and investigated. She was smart to leave you 10 years ago as you just don’t want to listen and learn.
Well, it’s amazing. The miracle has been done. Well done.
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jonsmit
# 136 – Future Expatriate
I think you have taken the “party” allegory a little too literally. The party the boomers have had is based on borrowing from the future (financially and environmentally) and living it up “like it’s 1999″. Plus just taking it for granted that schooling, jobs, housing, etc. etc. will just be there for them when they need it. The party ends when there is no more for them to borrow against, and when the healthcare and other services are not there in their old age.
Also, as you’ve highlighted, there is as much variation between boomers as there is between boomers and others. Kudos to those who have lived responsibly.
I admire your thoughts on the wages of sin, but I don’t think that’s how things play out. There is a lot more luck and good genes and stuff we can’t control involved in living a long life. All of that lifestyle stuff and saving nuts for winter is so much Puritan (and Dr. Oz) propaganda. Granted, living hard does take out quite a few people early, but I don’t think it prevents some people from living a long, long time.
# 110 – BDG YCC
Thanks for that reasoned analysis. I felt something like that but you have crystalized the whole idea in my head.
You are so right about the “generational bagholders” and the back end load to the boomers/front end load to the Gen Xers.
Now if I could only heed your warning and think for myself, given this now-obvious information…