Planning

This moist, primordial blog crawled out of the ooze in the Spring of 2008 as a warning about our house lust. Months later the financial crisis hit, real estate swooned and we all swapped squirrel recipes. A year later bidding wars raged as mortgage rates were forced into the dirt by a desperate government. Today our houses have made more money than we have, and the economy’s faltering again. The next chapter seems obvious.

Along the way, emotions have taken a beating. Some people think the doomer talk about housing is over the top and this asset will rise forever. They usually have all their net worth in real estate and are up to their curlies in debt. Others have been traumatized by the last two years, lost money in the crash, stuffed their wealth in the manly warmth of the orange guy’s shorts, and fret. Then there are those who smell of sackcloth and ashes, warn of depression or hyper-inflation, swear by gold and think recent gains will be repeated endlessly.

They are all nuts.

Housing values are not sustained by economic reality. Savers are getting a negative rate of return. And metals fanatics own the 2010 version of Nortel. The lesson’s simple: there is no silver bullet. If you’re not diversified and balanced, you’re future road kill.

By the way, my balanced portfolio (40% fixed income, 60% growth) is up so far in 2010 by 11%. Because it’s diversified, stock markets could plunge or bond prices tumble, and the consequences would be minimal. Oh yeah, and most of the growth is taxed at skinny rates while the whole thing can be converted into cash in three days.

Remember the rules: Diversify. Own stuff that pays you. Avoid tax. Be balanced. Be liquid.

And be smart. Which these people are not:

“Hi Garth: My wife and I are 31 and we live and work in downtown Toronto.  I spent 8 years in school, graduated in 2007 and am healthcare professional and my wife is a youth counsellor.

“We have rented for the past 3 years, within our means (approximately $1500). Our main expenses include my professional student loan (which thanks to Mike Harris and his deregulation initiative was at 155k upon graduation and is now 110k), my Canada student loan (13k), my wife’s student loan (6k).

“We don’t own a car, walk everywhere, and spend thrifty. Our combined income is approximately 150k a year. We have 50k in our rrsp, 1k in a TFSA and about 40k in savings.

“We would like to start a family and not have to worry about our unit being sold or otherwise and have move. During our search, we have found many homes in “cute” parts of downtown, from queen st w, leslieville and the annex (which we just can’t afford right now). It’s also quite frustrating going to view open houses where any decent house without major structural issues and/or decent part of town goes into a bidding war. What’s left is homes with the home inspector telling us the roof needs to be redone, the water heater changed and there may be foundation issues or not in a part of town we want to be.

“My wife, in an about-face from her thinking all along is inclined to rent for another year and save up a nice downpayment. I was thinking to buy in late winter when things are dire (seasonally). Secondly, can you suggest some preferred shares, ETF’s or other investment vehicles to help grow our rrsps and savings.

What do you think?”

Hmm. I think the age of entitlement is upon us, and this letter’s an example of why the outcome is so predictable. After all, here are two people in their thirties with $91,000 in equity and $130,000 in debt, for a net worth of negative of $40,000.

Yet, despite having less than no money, they’re merrily planning on having a family – which necessitates (they think) buying a house. Of course, with no money and yet an income of $150K, they’ll be granted a fat mortgage by any bank worth up to 95% of the value of a home. So I’d guess in about a year from now they’ll have a baby, a $400,000 semi in dodgy Leslieville, a wife on mat leave, no savings, no RRSPs, $130,000 in student debt and a $310,000 mortgage. Their negative net worth will still be $40,000. But if the real estate market declines by 15% over the next few years (that should be a no brainer), their negative net worth sinks to $100,000.

Meanwhile it’s a foregone conclusion their mortgage renewal in 2015 will be double or triple the rate they first sign at, which will just about eat up the last of the household income. All to feed Mr. House.

The greatest threat we all face right now is a collapse in the real estate market, and yet it is the most likely scenario. By driving the bulk of our collective net worth into houses, inflating prices and filling in the shortfall with record heaps of debt, we are imperiling an economy 65% driven by consumer spending. If houses plop, debt remains, net worth collapses and spending fizzles. That’s exactly what leveled the USA.

So long as young couples, as above, believe what they believe, then it will come. So long as bankers lend to people without net worth, it’s assured. So long as house lust blinds us to danger, the danger augments.

But there’s no simple solution. No depression, which means cash will continue to lose value. No hyper-inflation, no currency collapse, meaning gold’s just a commodity. No rebound, so houses deflate.

Rest assured, 95% of people won’t get it. Hope you do.

Toronto event, Tuesday November 9th

The venue for my talk in ten days has been expanded again with the addition of more seating. Consequently, there will be a new block of free tickets available here. You can register online Sunday night and Monday. The event takes place at the DoubleTree Hilton Hotel, 955 Dixon Road (on the airport strip). It is open only to blog readers.

248 comments ↓

#1 Get Real on 10.29.10 at 8:20 pm

This will not end well

#2 InvestorsFriend (Shawn Allen) on 10.29.10 at 8:43 pm

Regarding Dividend Investments.

There was full page advertisement in Financial Post for a new fund called Dividendselect15 learn more at http://www.dividendselect15.com

Sponsored by http://www.quadravest.com/

They will own 15 out of a list of 20 big Canadian dividend stocks.

They target 7.0% cash yield plus opportunity for capital appreciation.

Wow 7% sounds high from these stocks. Seems doubtful those companies have a 7% yield right?

Sure enough they only expect 4.03% from the dividends (had to go to prospectus to see that)

http://www.dividendselect15.com/PDF/DividendSelect15-%20English%20Final%20Prospectus.pdf

The other almost 5.0% will come from selling covered calls on 25% of the stocks. I called and investor relations said they expect to make 8% on the covered call strategy since market volatility right now is 20%.

Wow, in that case why not buy these shares yourself , sell covered calls on 100% of it and apparently expect to make 4 times 8% equals 32%???

Does anyone else think this investment is a bit too good to be true? That the strategy smacks of financial engineering? That there is more risk here than meets the eye?

Is this a reputable outfit?

#3 derrel on 10.29.10 at 8:48 pm

first comment I win.

#4 Toxicosis on 10.29.10 at 8:48 pm

Why would cash continue to lose value if there is no currency devaluation? Why contradict yourself and expect that no depression is forthcoming but expect certain financial disaster and doom for the boomers, the young and even the elderly? As the U.S. falls due to massive nominal debt and unfunded liabilities, how would the U.S. dollar survive if Asia loses confidence that the U.S. can pay off debts owed to these countries? These are not trick questions. As the U.S. falters why would we survive with our precipitous drop in trade. How do we pay off our debts with reduced corporate and personal taxes? Have any countries of the world lost faith in their currencies in the past 2 to 3 hundred years or longer. What happened then? I’ll take the opposing side of that bet and be happy with my hard currencies which have appreciated 35 % since I acquired them. Good luck with your trust in IOU’s, I guess we’ll find out whose right or wrong soon enough.

#5 Nancy on 10.29.10 at 8:50 pm

Tell this young couple to move out of Toronto. There are professional jobs elsewhere.

There are lots of Canadian mid-size cities without stupidly high housing prices. They’ll still suffer a fall when the rest of the market collapses, but a much smaller fall because the prices haven’t climbed as high as in GTA.

I know that Toronto people can’t *imagine* living anywhere else. But the cost of living in mid-size cities is so much lower than in metropoli (while salaries are pretty much the same) that I can’t imagine why anyone would give up so much to chain themselves for life to traffic snarls, crowds, grey concrete, overpriced everything, and life-burning commutes.

#6 mark on 10.29.10 at 8:53 pm

Seems boomers aren’t selling their houses fast enough for a real estate CEO in Australia. He’s decided to launch into them, pity about all his franchises who won’t get business and listings from offended boomers.

http://tasmanianrealestatetrouble.blogspot.com/2010/10/boom.html

#7 InvestorsFriend (Shawn Allen) on 10.29.10 at 8:55 pm

Ouch, Gath calls our 31 year old couple dipsticks. They have $50k in RRSP and $40 k savings but $130k debt mostly student loans. They earn $150k per year. They (might) want to buy a house this winter at seasonal low they say.

Garth calculates their net worth at negative $40,000

Well actually that is not economic reality. What about the hidden asset of their 8 years in school?

At 31 they are doing fine. Yes they were burdened with $155 student loan but have already worked back from a negative worth around $155 to just $40k negative.

I would say they have a bright future but should not rush to buy a house unless it is under $200k.

In my own case when I was 30 I have a net worth right around zero but a lot of education and a good job. Fast forward 20 years and the net worth is well over $1 million and the debt is zero and has been for some years.

I see a bright financial future for this couple.

Of course they should go ahead and start a family. Humans are meant to have kids before age 30, so they should get started ASAP.

If this couple can’t afford kids, who can?

#8 Mark on 10.29.10 at 8:58 pm

Both of them are basically civil servants. Their income is likely more at risk than either could imagine.

#9 Dan in Victoria on 10.29.10 at 9:08 pm

Ouch.
Not the warm fuzzy reply they were hoping for.
No use sugar coating it though.
You two are at a crossroad in your life.
Think wisely, you have a chance to make a choice here that will define the rest of your life.

#10 Brad on 10.29.10 at 9:16 pm

I am noticing alot more stories like this one in the mainstream media: http://money.ca.msn.com/banking/homebuyersguide/article.aspx?cp-documentid=26127042
Sentiment has definetly change in the past few months.

#11 Mark on 10.29.10 at 9:44 pm

#1 Investorsfriend (nice newsletter, btw!):

Basically those funds are set up to garner management fees for their promoters. The linked prospectus indicates a >5% front-end load, which, incidentally, would be a lifetime worth of MERs if you were to just buy the XIU ETF @ 0.17%/annum MER.

Covered call writing is quite dangerous as well. My fear personally would be one of conflict-of-interest and front-running of the fund by its insiders, or simply astute market participants. The markets for Canadian listed options are not deep and liquid, and bid/ask spreads are quite high.

The 7% ‘yield’ is probably sustainable, but it is problematic that it is being sold to investors on this basis, appealing to clientele who only ask, “whats the yield”, rather than actually examining the underlying business and the underlying investments.

The danger of such a fund, in my view, is they aren’t very diversified. Almost all financials, a couple oils, and a token drugstore and electric utility. No direct resource exposure whatsoever, and it is in resources where the magic is likely to happen in, at least, the near future.

#12 The Honourable John Embry on 10.29.10 at 9:46 pm

“I’m another person that worries hugely about hyperinflation, I mean the monetary path that they appear to be following, I guarantee you will lead to hyperinflation.”

John Embry continues:

“I think it could very well happen this time because the physical market is robust, and I’m told there’s not a lot of physical gold available right now…We could very easily overrun the shorts at Comex and force them to cover, even though they have extraordinarily deep pockets. If that happens, we are going to see some really spectacular price moves as a result.

…I think that’s why when these things move, all the gold stocks, I think you’re going to feel like your hair’s on fire they’re going to move so fast.”

John Embry has been in the business for 48 years. At the beginning of the secular bull market in gold, John was the only mainstream (RBC Capital at the time) institutional individual to proclaim the bull market in gold. RBC was saying that’s not the message of the bank, so John was taking a lot of heat for his stance. Fortunately for all of us Eric Sprott hired John out of the mainstream and the rest is history.

#13 GS on 10.29.10 at 9:53 pm

“Dipsticks” ??

Easy Garth, I think you may be getting just a touch bitter in your old age. Yes, this young couple would be smart to reconsider their housing desires; however, they should be applauded for educating themselves, and (I presume) finding jobs that they find meaningful and satisfying.

If you think Education is expensive, try Ignorance.

#14 Brico on 10.29.10 at 9:55 pm

#10

Is Alberta the only Province that you can “walk away” from with NO liability?

Is this true?

http://money.ca.msn.com/banking/homebuyersguide/article.aspx?cp-documentid=26127042

Quote from article:

“Unfortunately, that still didn’t prevent an almost 20 per cent price drop in real estate prices in 1991. Many people in Alberta (the only province where you can walk away from your mortgage and assume no liability) simply mailed the house keys back to their lender.”

#15 Min in Mission on 10.29.10 at 9:59 pm

Garth, It is amazing how there is humour in almost every example. Maybe a ‘black’ type of humour, but, humour none the less. I wish I had their problems. Decent paying jobs are going to become much more prized, we are going to have to adjust our outlooks and expectations. Why can’t more people see it coming?

#16 OttawaMike on 10.29.10 at 10:01 pm

Sorry but the sexy real estate agent costume is now sold out:
http://www.foxyladyboutique.com/d3767-sexy-costume-estate-agent-69-uniform.html

#17 A Devil's Advocate on 10.29.10 at 10:01 pm

Come to Kelowna, I’ll sell you a shack for cheap!

#18 OttawaMike on 10.29.10 at 10:08 pm

Has anybody here been considering the seasonal trade on lumber?
CFP,WFP and IFP all had a good week on the TSX.

With a double dip in US housing is it a risky trade or will the foreclosure crisis help drive demand for new homes and lumber?

Last spring the forestry sector took a nice upswing as well, averaging about 12%.

I’m probably just thinking out loud here as I’ve noticed most of these types of posts rarely receive a response.

#19 Patz on 10.29.10 at 10:11 pm

Garth sez:
“Rest assured, 95% of people won’t get it. Hope you do.”

Garth I’m sure all of us would be interested in some idea of how much the readership of your blog has increased over, say, the past year. Do tell. It’s is a rising tide lifting some boats. And your live sessions are the hottest (free) ticket in town—any town. So, some are getting it but clearly not enough to shift any trends.

#20 Devore on 10.29.10 at 10:11 pm

#4 Toxicosis

As the U.S. falls due to massive nominal debt and unfunded liabilities, how would the U.S. dollar survive if Asia loses confidence that the U.S. can pay off debts owed to these countries?

No one expects any country to pay off its debt, just service it.

#21 Dave on 10.29.10 at 10:16 pm

Nancy, I agree – We are in a small town (pop. 7000). Houses are cheap and there isn’t much pressure to spend to “keep up with the joneses”. We are far ahead of our city dwelling friends financially.
We are the same age and have the same income as the couple in the example. Our student loans are zero, both cars paid off and $35,000 left on the mortgage which will be paid off in 2.5 years.
If you can find a stable job (ours are both rock solid) it really is hard to beat small town living.

#22 Devore on 10.29.10 at 10:31 pm

#7 InvestorsFriend (Shawn Allen)

Garth calculates their net worth at negative $40,000

Well actually that is not economic reality. What about the hidden asset of their 8 years in school?

Really? What about the hidden cost of raising a couple of kids (on one income now)? What about the hidden cost of the interest on the mortgage? The hidden cost of care in their old age?

There’s an accepted way to calculate net worth, as I am sure you know. Now you’re just reaching to support your point. You add up your assets value, and subtract your liabilities. Education, skills, knowledge, attitude, they can be potentially used to increase assets, but they’re not an asset on your balance sheet.

I see a bright financial future for this couple.

Yes, but not with a financial anchor tied around their necks.

If this couple can’t afford kids, who can?

That’s the point here, isn’t it? In life, there are choices. You can choose a life of toys and granite, always struggling, or you can choose to live sensibly, and have a chance at raising a family while taking care of the future.

#23 Kitchener1 on 10.29.10 at 10:33 pm

I really dont understand the thinking of needing a house to have a family.

I grew up in Toronto, went to univeristy there and for my entire life (minus 5 years) I grew up in either apt buildings or condos in the core.

nothing wrong with living in an apt building with a family, its not the end of the world.

The couple is doing alright, but that 110K of student debt is huge and will take a lot of work to pay off.

Here is a thought, what if they have a kid, and God forbid, continue in renting, honestly until a kid is at least 3-4 years old, it wont matter if they have a backyard or basement to play in.

Trust this, nothing throws a fork into your savings or debt repayment plan like having a baby, mom always wants the best and dad goes along, this couple can forget about saving and repaying debt after a kid is born.

#24 goldenfox on 10.29.10 at 10:41 pm

By the way, my balanced portfolio (40% fixed income, 60% growth) is up so far in 2010 by 11%.

By the way, My rrsp of 100% gold & silver mining shares is up so far in 2010 by 48%

No diversification = danger. — Garth

#25 Junius on 10.29.10 at 10:42 pm

“Rest assured, 95% of the people won’t get it.”

I agree. I have spoken to so many people over the past year and so few will listen. I have reached the point where most of the time I just smile and let people keep on believing what they want to believe. As a species we are very bad at planning and even worse at challenging our assumptions and beliefs.

Slow learners we are.

#26 DiGiacomo on 10.29.10 at 10:48 pm

#10 Brad on 10.29.10 at 9:16 pm

I am noticing alot more stories like this one in the mainstream media: http://money.ca.msn.com/banking/homebuyersguide/article.aspx?cp-documentid=26127042
Sentiment has definetly change in the past few months.

————————

agreed! I noticed this change in the media as well!

other thing I’ve noticed is that when I flip past HGTV, it’s not longer stories of “sally and tim take their deadbeat-mold-infested-home, rearrange the furniture, and end up increasing the value of it by $$$$375,000!!!!”

now it’s more of “sally and tim are 3 weeks from bankruptcy and desperate to sell! Let’s follow their story as a well-dressed-straight-talking-realtor tells them to get realistic on their price, and how mowing the lawn and putting stainless steel appliances in can get their house sold for 25% under asking price – and fast!”

#27 T.O. Bubble Boy on 10.29.10 at 10:48 pm

This couple should just buckle down with their $150,000 income for another 2-3 years, and they’ll be in good shape.

They’d get to:

A) get the student debt down while interest rates are low
B) wait out the first wave of the housing downturn
C) figure out that there’s more to life than owning a dump in the annex

#28 Johnny C on 10.29.10 at 10:50 pm

Ouch… 155K student debt. That’s a big hole to dig out of.

My wife and I are 31yrs old, have 375K saved and renting for $900/mth and in no rush to buy. Going to wait a year or two until the market crashes then purchase our 350K house for cash and have approx 150-200K left over for investments.

Friends and family who are tens of thousands of dollars in debt (not including their mortgage) pressure us everyday to buy a home and we just sit back and smile.

Good times ahead!

#29 Mikey on 10.29.10 at 10:58 pm

Just heard on CTV that the Toronto Land Transfer Tax won’t be eliminated until 2012 if approved. TREB is very concerned as many homebuyers are expected to wait until 2012 to save the money from the tax. This would be a devastating effect on an already slowing market. Wow.

#30 T.O. Bubble Boy on 10.29.10 at 11:03 pm

@ #6 mark:

That article you linked to is awesome! The number of contradictions coming out of the RE industry in Australia is out of control — definitely a few insiders scrambling to come up with new ways to sweep the reality of the bubble bursting under the rug.

#31 Devil's Advocate on 10.29.10 at 11:04 pm

#7 InvestorsFriend (Shawn Allen)

I agree with you Shawn. We weren’t a whole lot different when we started a family, student loans, max mortgage, and a shitty economy (1980s). Kids are grown up now (no student loans – we paid half they paid half) at the doorstep of starting their own independent lives amid similarly precarious financial times. They too will do just fine.

At best such times. These skip a generation.

An education is a bargain at any price. These are experiences which make you stronger, it prepares them for the next time around and that they ought be prepared for it.

Prepared in such ways as buying a house when they are cheaper and having it paid for in time to weather the next. But the rental thing works for some to I guess… While I’m losing easily gained untaxed equity gains on a long paid for house you renters are paying me rent with your after tax income dollars. And how’s that working out for you again?

#32 Jody on 10.29.10 at 11:10 pm

Well this will not end.

#33 Thomas on 10.29.10 at 11:11 pm

‘So long as young couples, as above, believe what they believe, then it will come. So long as bankers lend to people without net worth, it’s assured. So long as house lust blinds us to danger, the danger augments.’

All true, but sadly it appears the market could continue for some time as there are still plenty of greater fools left, as above, begging for an overpriced piece of real estate.

If the economy North and South of the border stays on a muddle-through growth path (say 1-2%), inflation can potentially stay subdued for some time because of the slack in output capacity and BoC may not raise rates by much. Under that scenario there is no external pressure that pushes the market over the edge.

However, just like #10 Brad, I have noticed a change in sentiment towards housing in the media as of late. Maybe it’s the ‘animal spirits’ that put us on the downward trajectory. The fundamentals will do the rest …

#34 Devil's Advocate on 10.29.10 at 11:12 pm

#7 InvestorsFriend (Shawn Allen)

I agree with you Shawn. We weren’t a whole lot different when we started a family, student loans, max mortgage, and a shitty economy (1980s). Kids are now grown up (no student loans – we paid half they paid half) at the doorstep of starting their own independent lives amid similarly precarious financial times. They too will do just fine.

At best such times as these skip a generation.

An education is a bargain at any price. These are experiences which make you stronger, it prepares them for the next time around and that they ought be prepared for it.

Prepared in such ways as buying a house when they are cheaper and having it paid for in time to weather the next.

But the rental thing works for some to I guess… While We are losing easily gained untaxed equity gains on a long paid for house you renters are paying me rent with your after tax income dollars. And how exactly is that working out for you again?

Life… You get out of it what you put into it…

Your comment is awaiting moderation.

These are experiences which will make them stronger, it prepares them for the next time around and that they ought be prepared for it. !

Prepared in such ways as buying a house when they are cheaper and having it paid for in time to weather the next. But the rental thing works for some to I guess… While I’m losing easily gained untaxed equity gains on a long paid for house you renters are paying me rent with your after tax income dollars. And how’s that working out for you again?

Your comment is awaiting moderation.

#35 Devil's Advocate on 10.29.10 at 11:15 pm

Sorry, iPad keyboard sucks

#36 TheFirstRick on 10.29.10 at 11:16 pm

My god Garth, I agree with everything you say and your position, but if I hear it once again I am liable to bang my head against a chunk of granite.

#37 CREA Circle Jerk on 10.29.10 at 11:21 pm

Garth said:

“…And metals fanatics own the 2010 version of Nortel.”

Garth, I agree with much of what you say, but you continue to be so wrong about metals. And is coming from a person who doesn’t won any because my wife won’t agree to own any. And you said yesterday in a response that gold is all driven by retail investors! Wow, dude, that’s so not true. It’s mostly central bank and hedge fund buying, with significant retail demand mixed in. Anyway, gold, silver, ag, platinum and other commodities will be buys as long as CB printing and currency wars debase money. The Western world is bankrupt dude.

That said, your diversification strategy is a good one but won’t be as profitable as owning an overweight allocation commodities. Silver is going to absolutely go parabolic soon.

And yes, the low growth environment will continue for a very long time with big black swan risk along the way. A plunge into depression is very possible should these black swan events trigger. So is a high stagflation environment driven by big increases in import costs. No one really knows except that the economy is gonna suck for quite a while. I don;t see any significant catalyst which will pull us out. Eventually it will come.

#38 Skeptic on 10.29.10 at 11:21 pm

I worry that the doomer talk about housing is over the top and housing will rise forever, but I have none of my net worth in real estate and zero debt. I’m a renter.

Who the hell can afford a “balanced portfolio”? Get realistic. I do not live the high life, by any stretch (I have a professional job and my sole means of transport is a bike) but have no !@#$ “portfolio.”

I am starting to think that Garth is being disingenuous for the sake of his own entertainment.

By buying into the bear arguments for so long, I’ve been utterly screwed. Prices in Vancouver are going nowhere. Not yet, anyway, and quite obviously nowhere on the horizon for anyone who’s looking at actual listings and sales. Duh. And prices were supposed to retreat years ago, I was assured and was convinced over and over and over and over and over and over and over again.

I’ve been such a fool. And not in the sense of this blog’s title.

There oughtta be a law.

You have no money and yet regret mot buying a house in Van. With what? If you can’t see you’re part of the problem, you deserve to stay on a bicycle. — Garth

#39 realpaul on 10.29.10 at 11:41 pm

It just got worse for those people hoping to retire. For the young people hoping to move up the government has driven a stake through their hopes of a promotion. Gex – X will be geriatric before they get the big job after this move by the government..

http://www.theglobeandmail.com…..le1776460/

If the government is going to penalize the retiree for 30% of thier CPP at the same time as they’ve lost home equity and been too long down the orange guys shorts then we can expect the current boomer genration to stay on the job until they die……who can afford to retire at this rate…….we’re all freaking doooooomed !!

And yes Garth, I realise the risk/reward of sector investing……tap city gambling at best…. I agree. After ten years of doing the gold thing I have been rotating profits into other macro shows……..ZMT…..CBR….XEG….maybe early for the move….but there has been a nascent stirring in the netherworld of basic materials. I have tapped into TIM for the move in green and CWW for the inevitable. Looking further out …the Uranium market has bounced considerably as have the REE………but nothing as safe as 11%. I’m sure as hell sure that you sleep better than I do.

But………………..I have a nagging problem with the returns we’re getting off conservative issues. Canada’s last reported M3 was 14% and real inflation ( the things I use all the time like food, energy, taxation, fee’s , transportation and all commodities is well over 30%). How do I exist in the future when everything I earn today is losing purchasing power faster than I can bank it? A 1990′s dollar is half what it was ……as a result prices of everything has doubled in that time. A 1970′s paper dollar has the purchasing power of .19 cents today.

Correct me if I’m wrong…but without exceeding todays standard dividend returns I am guaranteeing myself a bag of kibbles when I retire if I don’t take the risk today.

Money is depreciating in worth…inflation is raging…Bill Gross of Pimco just spoke up and called the artificial creation of paper money a Ponzi Scheme…….Bill Gross….of PIMCO….the largest most responsible money manager on the planet….calling the current system a fraud…doomed to fail !!!!!!! The most respected bond manager in the world is stating explicitly that the government is lieing to us. Men like Bill gross don’t come out and say things like this…..its a very powerful rebuke of the current Ponzi Scheme.

I have never considered myself a gold bug per se…..but I have been making money for ten years…above market returns….and every year I get the crap scared out of me by some event or loudmouth Finance Minister…or Treasury Secretary….but I feel that I have to stay in and take the stress and agro………..my wife hates kibbles.

#40 TaxHaven on 10.29.10 at 11:55 pm

“The greatest threat we all face right now is a collapse in the real estate market” ~ Garth Turner

Well, who are you hoping to save? The indebted, overextended negative-net-worth home”owners”? Or those of us who were frugal and thrifty, invested for income during the good times and now can reap the benefits of lower house prices?

And it IS possible to INVEST in currencies (“money”) and SAVE in gold. The simple mathematics of gold supply vs. paper currency supply dictate that the metal will outperform the paper as a wealth preservation vehicle.

Add to that the fact that one is printable and the other requires enormous effort to obtain. Add to that the mathematical impossibility of western welfare states actually returning to solvency. Add further the short lifespan of paper currencies vs. gold.

I suppose people think that commodities, energy and foodstuffs are in a “bubble” too, right? Actually, my bet is we haven’t seen anything yet price-wise for either precious metals or for commodities.

In other words, balance and diversification are likely to be a recipe for underperformance in a world of financial asset devaluation and real asset appreciation…

#41 Nostradamus Le Mad Vlad on 10.29.10 at 11:56 pm

-
“Planning . . . the economy’s faltering again. The next chapter seems obvious. . . all their net worth in real estate and are up to their curlies in debt. They are all nuts.”

So much for planning. Possibly a plan can be drawn up to offset another downturn in RE and the economy in general, by buying a winning lottery ticket?

“Savers are getting a negative rate of return.” — Only if they are fully divested (fondling) the orange underwear of the guy with the funny accent, but that’s their freedom of choice.

“And be smart. Which these dipsticks are not: . . . right now is a collapse in the real estate market, and yet it is the most likely scenario.” — Don’t be too harsh on them.

They’re young and starting out, which is what we all went through. Make mistakes, learn from them and don’t repeat.

“That’s exactly what leveled the USA.” — Wait six – 12 months, save a bigger downpayment and they could luck out on a 3-bdrm., 2 bath 1/2 duplex or townhome. They will be fine if they buy at a reasonable price.
*
Mike the Engineer – Story here says The Tipping Point has arrived. Right on cue — now all hell breaks loose!

Two more links, Mike. — “Our analysis argues that the month of November will see the flash point that begins to reverse the markets’ optimistic course. Plus — 8:55 clip Red alert!

What happens during a Bank Holiday.

EU haircut Short back and sides?

Is Russia controlled opposition? Probably not, but this gives both sides.

China’s crackpot boom-bust. Theory: If China decides to cash in plenty of US debt holdings, Zimbabwe Ben can either add more printing presses to his arsenal, or will the US default and shut China out?

Interesting Theory It could also play a major role in CC, as it wouldn’t be human-caused.

Complicating matters, silver + hyperinflation. Hyperinflation is a tool for politicians, and one that Obama might use to save his butt. Bank Holiday?

#42 Contrarian Canuck on 10.30.10 at 12:06 am

Didn’t you know, Garth…..we’re different!

http://financialinsights.wordpress.com/2010/10/30/were-different/

Even mentions you…

#43 Big Nasty on 10.30.10 at 12:08 am

Advice to the TO couple. I hope the interest in savings covers inflation. That being said, I would recommend topping off your TFSA’s & RRSP’s. It is a no brainer. If you park $20k into RSP, you will get around $6k back combined in tax return alone and please do not buy GIC’s – waste of time & $$$ at your age. For TFSA’s you could invest it in dividend paying instruments, ETF’s, TRUSTS, REITS etc. All the income you make is TAX FREE !!! & you can with draw it an anytime without $$$ going to the government. The only thing to watch out for are fees which financial institutions may charge. For your RRSPs, going 30% fixed income & 70% growth is a good start. If you plan to use Home Buyers Plan in RRSP, which allows $25k withdrawn tax free – might be good idea to park most of savings there first.

#44 nonplused on 10.30.10 at 12:20 am

Gold equals Nortel? I think you’re loosing it Garth.

Gold is a commodity, and commodities can not fall below the cost of production on a sustainable basis. Otherwise supply ceases to exist.

That said, the cost of production is lower than where we are, but not by more than 50%, so a price correction to the $800 range is probably the limit.

Unless of course the central banks dishoard all gold all at once, which would put great pressure on the price and probably bankrupt all the miners.

But I don’t think they could do that. It’s a game of cat and mouse. If Washington, for example, decided to dishoard the US stock pile, at some price China would probably take it all. That price is probably closer to $400/ ounce than 40 cents an ounce, which is where it would have to go for the ridiculous Nortel comparison to hold.

The price of gold is extended, and lots of people agree buying here is a bet on inflation, but even amongst the greats of the financial world you are a bit on your own comparing it to Nortel.

But it is a great metal to make high value coins out of if people won’t trust paper. And every government that has ever printed paper has eventually behaved in a way to cause people not to trust it. Will it happen again? Ask me after the mortgage fraud thingy has been resolved. If no one goes to jail and Bernanke papers it over with more QE (QE3 this time, QE2 is supposed to be stimulus), then I think we are on our way.

But as a way to get rich, I agree, gold isn’t going to make any millionaires. The miners have a better chance of doing that. Gold can preserve wealth, the same way oil or wheat futures can, but you have to be a tricky trader to get rich that way. And since gold, like oil or wheat futures, is subject to tax, it doesn’t even protect your wealth as much as you would hope, although in an inflationary environment you fair better than in cash. But you still gotta share your paper gains with you know who, even though the purchasing power of that cash has gone down.

Gold is for the rich. It’s a capital “sink” for a rainy day. It’s not an investment vehicle for the common man except as your 5-10% insurance policy. But it is not unrelated to monetary matters as it is the best metal for wealth exchange amongst the rich or the sovereign, better than say wheat, and it is a commodity so it represents final payment. (Cash is not final payment, it’s a promise to pay that needs to be redeemed to be tangible. Luckily it’s redeemable everywhere at present. At times past it wasn’t, which is why US money used to say “redeemable in gold” and you could do exactly that at a reserve bank.)

Gold may go Nortel one day and trade for $40,000 an ounce, but if that day ever comes we are all living in the United Nations of Zimbabwe. Dog help us.

And yes, gold goes up and down compared to other commodities just as they all do. There is a lot of “up” pressure right now due to the financial situation, but that isn’t going to go away any time soon. Even in paper script, the governments in the west cannot possibly pay all their forward and past (borrowings) commitment without a massive devaluation of the currency that feeds on itself. The reason it feeds on itself is because as they QE the money into existence to pay for current Medicare, pension, CPP, welfare, military, EI, and many other non-productive expenses, the extra money just makes it all cost even more the next year. The Ponzi scheme is close to collapsing.

Of course we could in theory “grow our way out of it”. But nobody is allowed to create wealth anymore without extreme bureaucracy and taxation, and even if those were made more reasonable we’re adding new non-productive expenditures far more rapidly than the economy can grow on its own. Even a population explosion has an upper limit on rate of growth. A 2% population growth rate has put 6 billion of us here in 200 years, but it’s hard to see how a 20% population growth rate could be done even if we wanted to. The economy has similar structural limits, or we’d all already be rich enough to buy our own planet. It has to do with investments in capital (equipment and improvements) and R&D (technology and education) but I don’t want to get in to all that right now. Suffice to say we can’t build the Star Ship Enterprise tomorrow even if everyone on the whole planet thought it was a good idea and chipped in. The technology and productivity isn’t there yet.

Unfortunately, governments have been spending as if we have a fleet of them conquering space already, mostly on non-productive things. Not that I am against non-productive spending, I enjoy the odd road side stop like Johnson’s Canyon. But every dollar spent this way is one more dollar that come out of growth, instead of going into it.

#45 Tim on 10.30.10 at 12:27 am

Seattle hit by Foreclosures
http://www.nwcn.com/news/business/Foreclosure-Epidemic-Hits-Seattle-area-106032243.html

Seattle registers a 71% spike in foreclosures.

Only 2.5 hrs away from Vancouver, same climate, right on the coast, better arts scene, home of Microsoft and Boeing, unemployment rate same as Vancouver at 8.5%…Guess what’s coming to Vancouver…

#46 Grace on 10.30.10 at 12:28 am

Garth: There will always be people who will willingly put their heads in the mouth of a lion.

Guess what happens?????

#47 Tim on 10.30.10 at 12:30 am

Instant Equity Condo in Seattle, save $50K today

http://www.flickr.com/photos/the-tim/4936339143/in/pool-1198167@N24

2.5 hrs from Vancouver…maybe the developer does work in Van too lol!

#48 The Original Dave on 10.30.10 at 1:18 am

Okay all of you, I’m going to put my neck out and say it – I think there’s going to be a serious decline in Toronto. A lot of people tippy toe around. I’m sorry, I don’t mean to sound melodramatic.

I’ve never seen the public so oblivious to a potential decline in an asset price. The sentence I wrote above matters more than anything. If you see the same thing, then you’ll agree. Now if Torontonians in general went into real estate with one hand and if every once in a while I heard someone utter the words “well, in case the real estate market takes a dip”, then I my sentiment would change.

It’s not that people all say “prices will go up forever” (although many do), it’s that there is absolutely no fear at all that prices could come down. It just doesn’t occur to them. Now I can’t think of a single asset that got this treatment (I call it the royalty treatment), that didn’t get clobbered.

Yeah, the fundamentals are out of whack, but from a market psychology standpoint, which I feel can be more important (especially when the opposite happens and it creeps up on people robbing them of everything), things can get down right scary.

Again, sorry for being a drama queen. I would consider myself a trader that trades in the most obscure markets. I’ve been involved in real estate as family business as well since I was 10 years old. I’m not seeking attention. I don’t treat all assets like they’re boom or bust, but sometimes there are things I see and hear from people that are completely out of whack, and I call what I see.

Real estate in Toronto and surrounding area might be the biggest bubble I’ve come across (sorry, saw Kelowna…that probably is the worst although I didn’t speak to enough people to understand the general sentiment). People don’t even fathom a price decline. I don’t care if you’re talking art collectibles, cottage cheese, sail boats etc., when there’s no respect for value and any price tag attached to the item is a good price, you have a serious problem that when the tide turns, will get ugly.

Good luck to all. Garth might be protecting himself by not saying how nasty it could get.

34% minimum drop in Toronto for it to reach fair market value. It will overshoot to the downside, so we will see prices trimmed by more than 34%. Take a calculator, look at the average price in toronto and minus 34%. That should give you the price decline but it will likely be more.

The Original D

#49 Timing is Everything on 10.30.10 at 1:23 am

Garth said – If houses plop, debt remains, net worth collapses and spending fizzles. That’s exactly what leveled the USA.

So what. The reset button must, will, be pushed at some point. That is why we have ‘bunkers’. We know a nasty will hit, just not when or by how much. Mild to wild?
————————————————————

#7 Shawn Allan.

I agree. They can start their family and get on with their one and only life they will ever have. I think they have a lot of potential. They seem to be asking the right question(s). Being called dipsticks for asking a question is just plain rude though. I’d tell them to rent a couple more years and wish them well.
Just my opinion.

Sno-cone please.

#50 Just a Tech on 10.30.10 at 1:36 am

How come all these people keep writing to you with ginormous incomes and have jack shit?? That is what’s wrong with Toronto right there. Too many dumb ass yuppies.

#51 Grandpa Grinch on 10.30.10 at 1:49 am

“But there’s no simple solution. No depression, which means cash will continue to lose value. No hyper-inflation, no currency collapse, meaning gold’s just a commodity. No rebound, so houses deflate.”

Another example of the blind leading the blind. The market shock in the fall of 2008 wasn’t the final blow to our financial system, it was an opening salvo. Never before in our history has there been gross market manipulation, government intervention, quantatative easing, “nationalization” & bailout of private enterprise by taxpayers to such an extent as there is today.

There is, however, a blog run by an ex Canadian MP who has a prescient crystal ball that can see clearly into the future. Far better than some of the best and brightest economic minds in modern history. Are you kidding me Garth. You haven’t got a clue…..

The only consistently diminishing and ankle-biting people on this blog are those who try to ram gold down everyone else’s throat. While financial collapse suits your investment portfolio, it will not occur in the lifetime of anyone reading this. You have enough doomer web sites to wallow in. Shove off. — Garth

#52 dd on 10.30.10 at 1:50 am

….swear by gold and think recent gains will be repeated endlessly….

True. However the problems haven’t been addressed. Nothing that government or cental bankers are doing brings us closer to the solution. The gains will be repeated until the problems are addressed.

#53 dd on 10.30.10 at 1:55 am

Quantitative Easing = not enough 3rd party debt buyers so the government has to purchase its own; failed auctions.

#54 McLovin on 10.30.10 at 2:26 am

Prices in an absolute free fall in Kelowna. Prices already down 20-30% from 2007 peak. (Although that is not showing in the “official” realtard stats)

http://kelowna.kijiji.ca/c-housing-housing-for-sale-SUNNY-NEW-KELOWNA-3-BDRM-CONDO-REDUCED-100-000-FOR-QUICK-SALE-W0QQAdIdZ238759271

I would have to say the Kelowna is the Las Vegas of Canada. Are there any other places that are down this much?

#55 jjpetes on 10.30.10 at 2:55 am

Dear Garth,

Your anti-gold rant is becoming embarrassing to witness. I won’t go into it again, and yes for all you that are going to bash me over my opinion in gold clearly do not understand that gold will no longer be a good asset class by either late this decade or early the next decade. You may pick the year to conclude a secular bull market.

You and many others simply do not understand that gold does not go up in price, its the monetary system to which its levered that alter in value that cause it to “appear” to go up in price. And yes one day we will have another sustainable stable monetary system and yes it can be fiat money, as long as the QUANTITY and channel of velocity is controlled.

What you do not get Garth, how can that be, is that gold is not leveraged to GDP, which is part of the reason why it “appears” to go up in price during deflation. Being caused by the contraction of credit, and debt deleveraging. As more people, particularly boomers as they are the majority of demographics, tighten spending and pay down debt removing liquidity from circulation. As well as decelerating the velocity of money through less borrowing, especially as this phenomena has occurred in Japan. The US is approaching symptoms of this. A result of too many as a percentage with micro debt balance sheet problems morphing into a macro economic balance sheet problem that affects the economy.

So Garth, stick to your post doctorate in photoshop and freshman timing in real estate. If you cannot even time real estate, then how is that your an authoritative view on the gold market?

It seems your gold rants and choice of pictures, are only to cause a raucous on the comments session, but hey nice salesmanship!

jj

Gold is a retail fad and gains will erase quickly as the US economy nears and bounces off the bottom. Investors overweight in metals need to be extremely concerned lest they miss the timing required to save their skins. If you have read any of my recent books I recommend a gold position, but within a balanced portfolio and certainly not exceeding 10% of NW (although that is now too high). You and other gold fans can justify all you want, but the more you do, the more you sound like the “it’s different this time” mantra of dot-comish 2000. You will see. In any case, your argument faltered and died once you found it necessary to attack me. This blog is offered free, and I do spend some time making the content worthwhile. Don’t be a petulant ass. — Garth

#56 confused and a little crazed on 10.30.10 at 2:57 am

hi garth,

like my post way back when sold in 2006. now housing is approximately 80 k-110 k more expensive ie sold house $580 same house now worth about $660- 690K…made about 50 k in investments over the 5 years with money from sale.

my finances 80 k RRSP mutuals funds/ 11K in TFSA Stocks/ 70 K in stock investment portfolio and 90 K in GIC plus term deps.

i make 48 k before bonus which I did n’t get this year and I have a corporate 401 k pension
no real esate…looking
but stocks with dividends 3- 8 % oil/ gas / iron ore /financials/ a little tech/ ….very diversified

following some of your advice from your book I ‘m getting a steady stream on $$$. after crash 2008… still made 7-8 K a year in %/ dividends and Cap gains

Iguess it ‘s ok better than losing . it covers almost all my rent over 90 %.

any further advice?

thanks

#57 confused and a little crazed on 10.30.10 at 3:02 am

ps…i just turned 39 this year and single.

admittedly i do notice there are more females available now that i older and more established . but i lot have the nesting …buy home effect. it’s from peers and parents

#58 vreaa on 10.30.10 at 4:11 am

Spot the fallacies and misconceptions:

BNN Don Campbell Interview Transcript –
“The Apocalypse Is Not Coming” –
‘Plateau’ As Worse Case Scenario

http://wp.me/pcq1o-1tu

#59 rob chris in Spain on 10.30.10 at 4:15 am

Sorry Garth bad advice, you’ve been writing this blog for too long to see the obvious. It’s human nature to want to buy a house and settle down and start a family. No matter what you say there is nothing wrong with that.

Better advice would have been to yes buy a house, but first get out of debt, secondly save up a 20% downpayment and finally wait until the bidding wars stop then buy.

BTW I really enjoy reading you blog and the investment advice is top notch, but I would like to know more about the ETFs and how you time the market.

Actually I didn’t give advice. And obviously they need to pay off debt before they buy a house. The larger issue is how emblematic they are of our entitlement society. — Garth

#60 Charles on 10.30.10 at 4:17 am

It is scary how much I read on this blog that translates word for word to the situation here in Australia right now. The description of life in Vancouver matches Sydney to the letter, with the asian investors, drugs and drug money propping up certain parts of the market, expensive coffee, crap infrastructure and obscene house prices that are starting to show signs of cracks with declining clearance [i.e. sales/listings] rates, the MSM carrying reports vilifying anyone who dares mention a bubble, the real estate agents who insist that price growth will continue (just maybe at a slower rate than in the past) and that the market will stabilise (but NEVER EVER go down).

#61 Deliverator on 10.30.10 at 4:54 am

http://jessescrossroadscafe.blogspot.com/2010/10/gold-daily-and-silver-weekly-charts.html

“The charts seem to be fairly obvious. Gold hit the pivot point for a ‘significant decline’ and rallied sharply. Silver is just a juggernaut, using the top of the old trend channel now as support.

Unless and until US equities crash, I would expect both gold and silver to continue to rally. The reasons are obvious to anyone who is following the markets and has even a basic understanding of money and economics. These are not charts so much as economic IQ tests.”

#62 seemac on 10.30.10 at 5:49 am

Default sales have come to Calgary. “But demand is coming back.”

And this is happenin’ too! Get in now. There’s still ten empty holes where these things were GOING to go;

http://www.calgaryherald.com/business/condo+tower+goes+into+sale+mode+Calgary+Beltline/3746675/story.html

#63 ralph on 10.30.10 at 5:56 am

Here are the results of The Economist property value survey:

Overvalued countries:

Singapore: 19.2 per cent
Hong Kong: 58.1
Australia: 63.2
China: 18.1
Sweden: 41.5
Belgium: 21.6
France: 42.5
Canada: 23.9
Netherlands: 23.6
U.S.: 4.6
Denmark: 19.4
New Zealand: 20.2
Britain: 32
Italy: 10.5
Spain: 47.6
Ireland: 13.2

Undervalued countries:

Germany: -12.9
Switzerland: -6.4
Unites States Using the Case-Shiller national index): -2.1
Japan: -34.6

#64 Old_is_Gold on 10.30.10 at 6:59 am

Voices from the past revealing the real nature of the beast that now stands ready to devour the sleeping middle class, which was the only buffer between the lords and the serfs…

Thomas Jefferson warned Americans and the world:

“If the American people ever allow private banks to control the issuance of their currency, first by inflation, and then by deflation, the banks and the corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their father’s conquered … I believe that banking institutions are more dangerous to our liberties than standing armies … The issuing power should be taken from the banks and restored to the Government, to whom it properly belongs.”

The Seventh President of the United States, Andrew Jackson, took up Jefferson’s fight and further warned his citizens:

“I am one of those who do not believe that a national debt is a national blessing, but rather a curse to a republic; inasmuch as it is calculated to raise around the administration a moneyed aristocracy dangerous to the liberties of the country.”

And to the moneyed elite Plutocracy of his time Jackson further said:

“Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves.”

Theodore Roosevelt as the 26th President of the United States warned his citizens of the power of the Plutocracy they were dealing with by stating:

“Behind the ostensible government sits enthroned an invisible government owing no allegiance and acknowledging no responsibility to the people.”

Q – What has every American President since Reagan, and every Canadian PM since Trudeau done that all their predecessors put together did not do?
A – Increased the national debt – indebted the citizens on a scale never before witnessed in history. And Obama has outdone them all!

Ask yourself – who benefits? You, or Wall Street and Bay Street?

Yes, blame The Man. Aren’t you too old for that? — Garth

#65 Buyright on 10.30.10 at 7:07 am

Time to buy USA Real Estate

“30 year mortgages” in the US as low as 3.4% Compare that with Canada, 25 year term 8.25 %

Economist property value survey
Overvalued countries:
Canada: 23.9

Undervalued countries:
Unites States Using the Case-Shiller national index):
-2.1

:)

#66 Shylock on 10.30.10 at 7:09 am

“No diversification = danger.” — Garth

This is a major el wrongzo when applied to a FULL-fledged secular bull market.

That’s how people get rich(er) without running out of cash for retirement!

#67 TS on 10.30.10 at 7:14 am

Hi Garth, we have registered for your Toronto event and received a confirmation email. Do we bring that with us on the 9th to get our tickets and entry to the event?

Just come. A simple DNA test will occur at the door. — Garth

#68 Shylock on 10.30.10 at 7:19 am

Where most of your UNdiversified money opportunities should have been.

buy US equities 1969 sell 2007

buy gold/silver 1970 sell 1980

buy high tech 1989 sell in 1999.

buy Oil 2005 sell 2008

buy Can RE 2000 sell 2007/2010

buy bullion 2000 sell TBA

buy Brazil 2000 sell TBA

There’s tons more examples.

#69 David B on 10.30.10 at 7:43 am

If these people “Can Not” agree they have to pay off debt, “First” then they are doomed! It is just that simple.

#70 confession of a real estate bear on 10.30.10 at 7:43 am

Hi ,people you have to practice patience. I got out of school in 87 and started a small fish farm. I rented a nice little place for 800 a month. That year a commercial fish farm came up for sale nearby. As i was just starting out i let it go . It went for 280000. Fast forward to 89 it came up for sale again. I had signifigant savings and was interested , alas some fool paid 575000 for this place. It had no house just the farm. I resigned myself to renting forever. In 93 four years and 0ne recession later my wife and i bought that same place for 232000. The macro condition for real estate today are even worse. So patience and savings will be rewarded. Fundamentals always win out it just takes too long sometimes.

#71 Ret on 10.30.10 at 7:47 am

$155000 +$13000=$168,000 in student loans.

How could this be? That’s 8 years of school at $20000 per year.

The province and feds are loaning out money to these kids that most will never be able to pay back. Many of these kids will find out that that their beer and fine arts degree was a complete waste of time and money.

The universities are wise to what has happened. Every kid now gets accepted and the government underwrites all the loans.

Foreign students just have to say “Permanent Resident,” the new politically correct term for Landed Immigrant, and they are in the game too. Universities and their employees are making huge compared to equivalent private sector wages.

This is why universities and colleges are overrun with students from China, India, and other third world countries. Taxpayers are fronting the money for every student loan.

If one beer and fine arts degree is good, then stick around for a Masters degree. Might as well. There are few jobs out there that pay more than $15 an hour.

#72 Buyright on 10.30.10 at 7:50 am

From Ben @ http://financialinsights.wordpress.com/
Two good points
1) The price to income ratio is perhaps the best predictor of the sustainability of real estate prices at a certain level. High price to income ratios relative to long term norms can exist in periods of declining interest rates, but set the stage for corrections when interest rates do rise

2) How does our income actually compare to the per-capita income in the US, where it costs “half” as much to buy the average house?

Yes we are different! Shocking that the per capita income is slightly higher in the US, while real estate prices are almost half of what they are here

#73 Investorfriend mom on 10.30.10 at 8:02 am

#2

Shawny, if you are the expert then why are you asking us about investments at ALL? that one mil you got is mommies, please give it back Shawny, mommy is hungry and cold.

#74 Aussie Roy on 10.30.10 at 8:15 am

For those who say its all about a shortage, it might pay to read how sales have fallen off a cliff in just 30 days. Shortage to glut without building a single new house for the UK.

Net lending, which strips out redemptions and repayments, was just £112 million in September, down from £1.62 billion in August, according to the latest mortgage figures published by the Bank of England.

Yes you read that correct from 1,612,000,000 to 112,000,000 in one month. Should be interesting with demand drying up how low prices will go in this second leg down.

http://www.telegraph.co.uk/finance/personalfinance/8096036/Britains-property-market-in-double-dip.html

Aussie Update

http://www.independentweekly.com.au/news/local/news/general/spring-market-not-all-roses/1983110.aspx

http://www.theaustralian.com.au/news/executive-lifestyle/perth-residential-sector-remains-buyers-market/story-fn6njxlr-1225944248911

http://www.couriermail.com.au/property/mansions-glut-on-glitzy-gold-coast-island/story-e6frequ6-1225945367545

#75 timbo on 10.30.10 at 8:15 am

#58 Deliverator,

http://www.reuters.com/article/idUSHAN46777220101029

“A State Bank of Vietnam circular issued on Friday also bans banks from lending gold for producing and trading small gold bars”

you are presuming that at any time you can cash in your gold. Interesting how small countries now fearing their currency is under-attack are closing windows and restricting trade. Read history and you will find out currency attacks happend in the past and action was taken.

Gold is not currency and can be price-controlled pretty darn fast if the G20 countries feel that it is being used as a tool to destablize. If it climbs slowly your safe but if it takes off …….wings can be clipped.

#76 bigrider on 10.30.10 at 8:40 am

Garth- If the market takes a nosedive this year, your preferred’s will take a hit at least equivalent to losing the 11% you are up this year(yes I know preferred’s are invested for income not growth but share price will decline temporarily nonetheless) and the bond market is completely overbought from any historical perspective. A hit to the market could take corporate bonds down 10% easily. If you are invested as you say you are 40% fixed income and 60% growth you are exposed at minimum .4 ish to any broad based decline.

I am up the same, around 11%, but feel a 20% broad based slide would take me down .4 to .5 of that. I don’t think you are being fair by saying that a decline would have minimal impact unless your definition of minimal is something like I have defined

A decline in the capital value of preferreds would not impact the yield one cent. So, no change in portfolio performance. Bond yields on existing assets, as well, will not change regardless of bond prices. No change there. No change in REIT yields. No change in stock dividends. So you seem to be talking only of capital gains. I suggest you restructure. — Garth

#77 CREA Circle Jerk on 10.30.10 at 9:27 am

#44 nonplused on 10.30.10 at 12:20 am

Brilliant analysis!

#78 T.O. Bubble Boy on 10.30.10 at 9:35 am

Speaking of hidden costs (Shawn Allen): what about the future interest on those giant student loans?

That $110,000 in student debt is probably sitting with a worse rate than the average mortgage…

So, if we asssume that the student debt has a 5% interest rate, that $110,000 could become probably $140,000 or more after all of the interest charges are factored in on a moderate payback plan.

$110,000 paid off at 5% over 10 years = about $1165/month for 120 months… and about $30,000 in interest by the end of it.

Best bet for this couple is to live frugally for a couple of years and try to wipe out that debt… otherwise, it will be an anchor on their finances for years to come.

#79 T.O. Bubble Boy on 10.30.10 at 9:42 am

OH GOODIE — more CMHC-backed programs for people with no money to buy homes!!!

The Calgary Herald has not one but two articles promoting the PEAK program from CMHC:

http://www.calgaryherald.com/business/Housing+program+builds+strengths/3750879/story.html

http://www.calgaryherald.com/business/PEAK+opportunity+homebuyers/3750877/story.html

Wake up “F” and Harper and Diane Finley and others! Home ownership is already at near-record levels… as the entire world (minus Canada and Australia) have learned, *not everyone should own a home*.

One could argue that most of the US foreclosure mess was caused by programs that tried to get a 65% home ownership level to 70%… a small percentage change, but almost entirely focused on buyers that are not in a position to buy a house.

#80 Devil's Advocate on 10.30.10 at 10:06 am

Prices in an absolute free fall in Kelowna. Prices already down 20-30% from 2007 peak. (Although that is not showing in the “official” realtard stats) – #54 McLovin

That is such BS. You must live in total misery allowing yourself to believe such gross distortions of the truth.

#81 Moneta on 10.30.10 at 10:16 am

betamax on 10.30.10 at 12:18 am
#206 Moneta: “40% of 50+ are FORCED into early retirement….I think there’s going to be a huge divide between the plan and reality.”

Well said. I read it is 40% of 60+ are forced into early retirement, but the outcome is the same.
—————–
Here is from the EBRI report:

“The RCS has consistently found that
approximately 4 in 10 retirees leave the work force earlier than planned (37 percent in 2007). Many retirees
who retired early cite negative reasons for leaving the work force before they expected, including health
problems or disability (28 percent), changes at their company, such as downsizing or closure (28 percent),
and having to care for a spouse or another family member (25 percent).”

http://www.ebri.org/pdf/briefspdf/EBRI_IB_04a-20075.pdf

#82 dd on 10.30.10 at 10:16 am

.#55 jjpetes

…US economy nears and bounces off the bottom…

What needs to take place for this to happen? Wishing and saying that it will doesn’t count.

#83 Sail1 on 10.30.10 at 10:34 am

There is, however, a blog run by an ex Canadian MP who has a prescient crystal ball that can see clearly into the future. Far better than some of the best and brightest economic minds in modern history. Are you kidding me Garth. You haven’t got a clue….

Garth, may I have a peek into that crystal ball, pleaeeeeeeeeeeeese with sugar on it.

#84 andrewS on 10.30.10 at 10:34 am

http://www.yourhome.ca/homes/realestate/whattheygot/article/882510–what-they-got-oct-30

What they got. The one that sold “over asking” (by about 3%) in 3 days, that’s the one where the tree is still green and the landscaping is in full bloom. Two months ago, at best.

The other one, with the really straggly shrub, has some flowers on the steps too. It “needs major updating” Given the state of the siding and the stunning landscaping (really, you can’t spare 30 seconds to water 10 square feet of lawn?) one has to wonder what it looks like inside. But hey, it sold for over asking so it must be worth including.

This propoganda gets worse and worse.

#85 Moneta on 10.30.10 at 10:35 am

How do we pay off our debts with reduced corporate and personal taxes?
——-
US treasury debt is at 14 trillion. GDP is at 14 trillion. Debt-to-gdp = 100%. But that does not include unfunded entitlements and state and muni debt. All in, it is estimated at anywhere between 400-800%

As time goes on, this ratio needs to go down because at one point too much of GDP will be going going to servicing debt.

There are 2 ways to get this ratio down:
1. To decrease the numerator which means writing off debt and/or taking away entitlements

IMO, they won’t write off debt, they will paper most of it over with QEs. They’ll also employ austerity which will cut entitlements.

2. To increase the denominator by creating growth or inflation.

If government can squeeze out the private sector just a little bit more, they’ll create inflation. Every time govrnment sticks its nose in a sector you get a bubble of inflation in that sector.

All we need are a few bankruptcies and a bit more M&A and that will do the trick to stimulate inflation. A lot of the over capacity is in sectors we will not be needing anyway. With rates at all historical lows, the time when firms will not be able to benefit from the impact of refinancing at lower rates is coming quickly. That game is now coming to an end.

And in Canada, our leader always spoon feed us the American way… with a lag.

#86 goldenfox on 10.30.10 at 10:40 am

Snippet from another blog:

Like so many I am trapped unable to sell my home. I should have been living in Guadalajara two years ago. But I was just too late getting my house ready to market. I missed the boat. Nothing I can do now. If I reduce the price of the house to compet with the forclosures (more every month than the month before in Atlanta) There would be no money to invest and live on in Mexico.

So I remain in my house paying rediculous taxes, insurance and monies to the gas, electric and waterworks. None of which has dropped in this economy. While in Mexico I´ve heard that deKalb County is going to raise property taxes. Well you couldn´t possibly cut your overhead now could you.

I hope I don´t sound bitter. I knew it was all coming down the track. I just didn´t move fast enough.

I can still treat myself to an occasional trip to Mexico that is until the border is slammed shut.

#87 Moneta on 10.30.10 at 10:45 am

At 31 they are doing fine. Yes they were burdened with $155 student loan but have already worked back from a negative worth around $155 to just $40k negative.
———
The point is that they have just worked like maniacs to go from -150K to -40K and they are entertaining a move that would bring them back to -150K.

Why would you do that to yourself? Are they masochists?

#88 Got A Watch on 10.30.10 at 10:48 am

#193 – “The boomers changed our society from one of independent people who worked their asses off to one of people who expect the government to take care of them cradle to grave.” – Well, the ones who voted Liberal or NDP did, the more right-wing Conservative types did not really support those. You have to realize the times were far different back in the ’60s and ’70s, politicians were merely giving what the voters wanted, and that was driven by global sentiment – Canada was not alone in going down the socialist/nanny-state road, every Western democracy went that way, to a greater extent (France for example) or lesser (USA, compared to say Sweden, UK or Canada). A discussion that could fill a bookshelf there.

“but the majority of them don’t know shit when it comes to hard work.” – well, I can only report what I have seen in my working life, and it is usually the older workers (Boomer or older) who show up on time every day, do the work asked of them, don’t complain much, and don’t argue with me when I tell them what to do (as owner/manager). The younger the worker, it was usually the opposite – had a problem getting to work on time, took a lot more days off, complained a lot, wanted to question my directions (“why”?) a lot (to which I answered “because I’m paying you to do it, if you don’t want to get paid, I’ll have to find someone else who wants to”), but had no problem asking for a usually undeserved raise, extra vacation time, bonus or whatever.

———————————————————-
# 203 – ” #81 Got A Watch

It was the boomers who cried and whined to the government to bring in all these Goddamn social programs that are killing us economically.

Please define social programs. And be specific. I am extremely curious about what you mean?”

huh? That was another commenter. # 193, referring to my comment, I guess, I did not say that. But “social programs” is a pretty broad category, depending on your political orientation, you could say almost every Federal Government and Provincial Government line Budget item is in there, one way or the other. A subject for another debate, we were talking about younger people who have a hate on for Boomers.
—————————————————

My final thoughts on that:

“It’s not this or that genration that deserves respect, it’s individuals who go to work every day and bust their ass just to make a dollar. There are lazy pricks in every generation and one can tell who they are because the first words out of their mouths are usually, “their oughta be a law!” or “the government needs to do this.””

I agree with that sentiment. I was moved to comment in anger by some of the other comments.

Lets face it, labeling an entire generation as “this” or “that” is not correct. A generation is just a group of people, each of whom has their own opinions. Sometimes they tend to think in the same ways, maybe a majority of them, but it’s never 100%. So I apologize for my broad sweeping statements there.

I do personally know some young Gen Zers who do not confirm to the stereotypes, which gives me some hope for the future. If you look at how the last “Great Depression” shaped the attitudes of the old and young alike for decades afterward, it seems pretty safe to assume that today’s citizens who had the misfortune to live through ‘The Great Recession’ of our times will have a different attitude to those of the recent past. And that is a good thing.

The next few years will see us all having a lot more to worry about than who to blame for decisions made decades ago. We need solutions, not blame.

———————————————————–

Garth, you have to accept part of the blame for the ugly turn those Boomer posts take. You could say the same thing without being so inflammatory, and that might help to keep the discussion more civil. Inciting generational hatred won’t get any of us anywhere. I know that was not your intention, but the post at the top sets the tone for the comments.

#89 Moneta on 10.30.10 at 10:52 am

Trust this, nothing throws a fork into your savings or debt repayment plan like having a baby, mom always wants the best and dad goes along, this couple can forget about saving and repaying debt after a kid is born.
————
Why the condescending attitude towards parents? Why not say that children always throw parents curveballs?

#90 Moneta on 10.30.10 at 11:00 am

jjpetes on 10.30.10 at 2:55 am
———-
You might be right and gold might keep on shooting up to the moon but the reality is that if this scenario does become reality, it means the economy is going down.

And gold will do nothing for the average Joe who’ll be liquidating everything to make ends meet. The average Joe should be filling up his pantry in such a case.

#91 Kitchener1 on 10.30.10 at 11:10 am

In terms of market dynamics. QE2 rollout will be fun to watch.

The market is already pricing in QE2, so if it turns out to be less, watch out below. Lot of volatilty right now.

Gold can go either way, I think long term it still has a way to go ($1600) level but that does not mean it cannot take a nasty dip along the way.

Looking at my various indicators, its all very dicey, the immediate short term trend, 6-12 months out does not look to good, if consumer signal their willingness to save instead of spend, its going to be tough for equity indexs the world over.

#48 The original dave

I agree, that Toronto and the GTA in general are going to go way past the 15% Garth predicts. Its going to be the 1990′s all over again and people that purchased in 2010 are going to be the 1989 group that had to wait until 2002 to break even.

My guess is 30-40% decline and fast, its not going to play out like it did in the 90′s and be a slow steady drop. Just looking at the 09 stats and how fast and hard prices dropped before the govt launched “emergency rates”. That year would have been an easy 30% drop if things continued the way they were going.

So, my take, 35% drop in 12-18 months, starting in spring of 2011. After that a slow stagnant market. See with the internet, things happen much faster then the past, sentiment that may have taken months to turn can now happen week over week. Watching the US downturn will only ensure that things happen much faster here. People in the US kept holding out for “hope” from 06-07-08, and things only got worse, so dont count on Canadians holding out that long.

7 of 10 own homes, many own 2nd homes, Canadians are already at peak credit. There is simply way to much inventory out there to clear.

#92 only the bankers laugh on 10.30.10 at 11:13 am

#59 rob chris in Spain on 10.30.10 at 4:15

If you were in Spain, you would know how decimated they are due to real estate amongst other issues of unemployment. There are bad times to buy even you have 20% down even after bidding wars stop. That could be just the beginning of negatively compounding drop in prices. I was in Barcelona this week and it’s really ugly. 50% minimum in most places.. one of my friends parents sold a business for $6MM, bought real estate for $10MM and it’s arguably worth $5MM thus wiping them out of the business they built for 35 years. Obviously an eggs in oine basket stupid move. The point is, on a smaller scale, we are doing this here by highly leveraging.

Of course, there are those who will abuse you for not buying at the top of real estate market and then try to impart their amazing life counsel and direction. Certain realtor “professionals” (sneaky sales squids powered by an arts degrees). They will try to say that it is no different than when they were kids, blah, blah, blah. However, taxes have marched forward dramatically, education is far more costly, defined benefit pensions have disappeared (may be a good thing with some of them failing), unions broken, wages have nowhere near kept up with inflation, high house prices created by emergency rates, manufacturing jobs to China, real professional jobs like accounting, engineering, medical back offices, legal back offices, etc to India (it ain’t just all call centres anymore), etc ,etc.

In coming years, I wouldn’t wait for a quick drop and bidding wars to stop. It is renting for a few years and being astute about what’s coming, pay off debt and balance the portfolio. Think hard before you leap in real estate or precious metals after their huge appreciation. You would be joining the stampede too late.

#93 Burnt Norton on 10.30.10 at 11:13 am

#7 Investors Friend & #31 DA

Gotta say I would have agreed with you a few weeks ago but GT’s message is compelling to the point that I have come to the realization that positions like yours (and mine previously) are biased by an emotional gravitation to the home sweet home idea as well as the notion that the next 40 years will look like the last 40 years.

I have ditched the warm & fuzzies on scoring a land title certificate just so that the fam can gather round a dinner table under a roof decreasing in value and ostensibly owned by the bank for the next 20 years. So should this couple.

GT lays out rational, compelling, well thought-out reasons why the next 40 years will not look anything like the last 40 years. Well done if the past 40 years worked out for you. I wouldn’t assume the same outcomes for this young couple if they make similar choices at this point.

I also agree with points above on how kids change ones ability to pay down debt. Furthermore, their presence exponentially inflates the emotionalism that can obscure rational financial decision-making.

#94 dark sad person on 10.30.10 at 11:19 am

#167 Behavioral Finance on 10.29.10 at 4:39 pm

dark sad person,

You have much to learn about the financial history of the United States

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

I might have much to learn-but-i can guarantee you won’t be my teacher–

First of all–a “bit” of US history–
The US never went on Gold Standard until the mid 1800′s–after the Civil War (1861–1865)
This was when the famous “Greenbacks” were printed-in order to fund that War–
Only “after” that was GS fully implemented-

You are correct-about the volatiity during the time of GS-
Mostly because of the years of :bi-metalisim-
Gold and Silver were both currency–
Gold was locked to the $ and Silver floated–
Silver was more abundent then Gold–so it came onto the market in greater quantities–
As more Silver (money) entered the system-it would cause price in inflation–but–
It would also experience devaluation–against Gold and the price/oz. would decrease as supply ramped up-
Then it became unprofitable for Silver miners to produce as supply flooded the market-so–
Silver mines would close and stay closed until the (industrial) usage–depleted supply and then the price would rise and-gradually mines would open up and it would start again–BUT–
The US Government in its wisdom decided to lock Silver to Gold at a ratio of 16-1 gaurateed price-
This was a huge mistake-because of Silvers abundance and a set price-Silver mining became a bonaza–
So–money (silver) (inflation) gunned the economy and started an uncontroable inflationary expansion–
This gold/silver lock–actually weakened gold against silver–
Governments–finally realizing-that the artifical lock–had to end and so they cut the ratio lock and the pric of Silver collapsed and those (most) who held silver-lost their purchasing power–as Silver settled out at a much wider ratio and this caused a short sharp 2 yr recession and then it ended–

“This 1/16 ratio had to be abandoned in 1873, as huge deposits of silver were discovered and mined. In 1878, however, as a subsidy for politically influential silver producers, the Bland-Allison Act required the government to buy a limited amount of silver ($2,000,000 to $4,000,000 a month) at $1.29 per ounce and coin it. This compromise bimetallism, the so-called “limping standard,” was replaced by a gold standard in 1900. In 1896, when Presidential candidate William Jennings Bryan called for the “free and unlimited coinage of silver” at $1.29 per ounce, the free-market value of silver was only half that. Its value has been erratic in recent years, as documented in site
http://www.swiftsite.com/veritas/metals.html#Silver

There was also–simply sentiment “panics” during those volatile times of the US–becoming the US–
Ya know–taming the wild west?
Blowoffs from the civil war–the Gold/Silver locked ratio–also the horrendous inflation’s that were caused by the California and Klondike Gold rushes–(anomalies)

These recessions–were deep and fast-as Gold kept prices in line–as the chart i posted prior shows–

http://www.minneapolisfed.org/community_education/teacher/calc/hist1800.cfm

Prices remained stable–as you can see–from Fed data–even though–all of the Government interference distorted the bi-metal money supply and the reason for that was–
People who held Gold-always had stable buying power-because Gold supply remained relatively stable– other than those anomalies i mention above–

*****************************************
Now ask yourself this question. Would you see such a tremendous GDP growth if we were under a gold standard?
****************************************

Why not?

The internal combustion engine/automobiles–airplanes-harnessing electricity-lots of development took place under GS-

Your chart is of US GDP-

http://research.stlouisfed.org/fred2/series/GDPA?cid=106

This chart is of US Base Money supply-over the same time frame–

http://4.bp.blogspot.com/_nSTO-vZpSgc/SufrV85vfxI/AAAAAAAAHLA/hCeXqyws2vo/s1600-h/Base+Money+Supply.png

Keep in mind-when looking at those two similar curves of both charts–that printing money-adds to GDP-
Military expenditures–things like sending a ship load of bombs to a war zone and then blowing them up at a “cost” is also included in GDP-

You need to examine–what are the components that make up GDP-
Here’s some–they included state taxes-which are subject to increases at the whim of Governments-
SS-Food stamps-Welfare–are all added to GDP–
Any Economist will tell you-GDP is so skewed to what it’s supposed to represent-as to be an almost useless measurement-of “real production”
Paper–is not production–Credit–is not Production–yet it’s counted–
Granted–both can be drivers of production–but–not always–
Proof lies in what we see today–Inflation has hit a wall–called Sentiment–

http://research.stlouisfed.org/fred2/categories/107

Another good chart to look at the boom bust pattern of the Fed–is to follow Velocity-looks rather erratic as they blow and pop bubbles throughout their shady career of trying to control economies–

http://2.bp.blogspot.com/_nSTO-vZpSgc/SfU802nnsqI/AAAAAAAAF_c/qMWAgxm_uzc/s1600-h/M2+velocity.png

And here’s the big one-that should almost overlay your chart perfectly–
This is a decrease in your buying power of the $ i was talking about–(Devaluation)
You know-more paper chasing a basket of goods–driving up the prices?
This is what drives the flawed GDP data–
We can see this-from the Stimulus gooses of the last 3 years–

http://1.bp.blogspot.com/_nSTO-vZpSgc/Sf1Z6G6hQ1I/AAAAAAAAGCs/Odd9vGcqZ3I/s1600-h/Total+Consumer+Credit.png

So-to my original main point-
Prices remained stable under GS–is correct-as shown-
GDP data is and has never been a stable measurement-of growth–

************************
Here is a longer measurement of the stability of GS–in Britain-
100 years of it-in fact-
************
Professor John Taylor of Stanford University has argued that the Fed pushed short-term interest rates below levels predicted by an economic model of monetary policy based on historical patterns (the “Taylor Rule”).2 This episode of easy credit can also be put in historical perspective. There was no central bank in the United States until 1913. But the Bank of England was founded in 1694. After the end of the Napoleonic wars and postwar economic recovery, Great Britain enjoyed nearly a century of peace and prosperity under the gold standard, free international trade, and free movements of capital. It was the Pax Britannica. Prices ended the period roughly where they began.

http://www.firstprinciplesjournal.com/articles.aspx?article=1314

So–who needs to learn some history here?

#95 your mom on 10.30.10 at 11:30 am

“There has been a political and intellectual arrogance…….“We shouldn’t be so smug.”
http://tinyurl.com/3akm734

#96 Cookie Monster on 10.30.10 at 11:30 am

More bullion stupidity. Someone at age 50 going 50% into metals is 100% a gambler. — Garth
________________
How can you call recognition of precious metals as a store of value stupidity? The alternative is to recognize currency, which is a money substitute, as a store of value. A money substitute who’s quantity is controlled by central banking, government whimsy and fractional reserve based private banks, there is literally no limit to the amount of currency that can be created out of thin air in our current system today. A housing bubble would not have been possible to blow to the size we now have without a credit expansionary money substitute.

A strong ego and self confidence is good for sure but it must be tempered with some humility and an open mind. There are a lot of strong arguments I’ve seen on this blog over the last few months on the virtues of precious metals as money and I constantly see each and every time you knocking them. I respectfully guarantee to you that your views are wrong on this one.

#97 Milhous Plumbers on 10.30.10 at 11:36 am

The Feds won’t pay for higher education in this country.
The home banks profit from it. And when you look at all the government spending thrown elsewhere.

#98 Cookie Monster on 10.30.10 at 11:37 am

Garth, what do you have against sound money and arguments in favor of it? Why are you blocking my reply from your last blog after calling my argument “bullion stupidity”?

I have no idea what you’re referring to. Gold is, of course, not money. — Garth

#99 S.B. on 10.30.10 at 11:40 am

(I posted this on yesterday’s blog by mistake, posting again on today’s as it deals with Leslieville as mentioned in the blog post)

I used to live (rent) in Lesliville and know it well. It used to be the “Poor man’s Beaches” but now it’s undergoing Gentrification.

Still plenty of addicts and streetwalkers on the streets at all times of the day. People openly urinating on the front lawns of $450/k semis, street walkers baring it all on Queen E. during the night. Seen it all myself. Oh, and your car’s contents and anything they can pry off your house/property is the #1 source of the addicts’ income. A nice symbiotic relationship between have & have nots.
Dealers openly deal drugs in all local parks.

Do like living in narrow, cramped, musty-basement 80 year old semi houses, bought for 450k? This is your little piece of heaven on Earth, then.

Leslieville R/E trends for Sept:

http://www.leslievillepost.com/2010/10/17/sept-2010-leslieville-real-estate-trends/

Today they have rent vs. own charts listed on the main page, very interesting:

#100 S.B. on 10.30.10 at 11:42 am

I arranged to leave work earlier on the 9th so I can grab a seat at Garth’s T.O. event (pre-booked of course!)

Finally, the Garth World Tour hits my city. He can still pack the house; Rolling Stones eat your hearts out!
Looking forward to snapping up the souvenier books, t-shirts, rolling papers.

#101 jjpetes on 10.30.10 at 11:49 am

#90 Moneta

“And gold will do nothing for the average Joe who’ll be liquidating everything to make ends meet. The average Joe should be filling up his pantry in such a case.”

That is correct, gold will do nothing for the average Joe. If there is a basic way to describe the average Joe that would be individual or family with high debts, illiquid and potentially depreciating liabilities and will be faced with nothing parallel in recent history short of the Great Depression.

Even savers are forced to bail out banks with zero interest rate savings accounts. It seems to me an indirect bailout when the bank retain your capital and pay you nothing on it but turn around and lend it out at interest. This is a destructive dichotomy were in right now and for some lets say reasonably educated and aware Joes they will have little choice but to channel their monies where a gain better than zero can be met.

Where can capital end up? You name the commodity and even equities should perform well as in prices moving up for at least until the US dollar reverses its intermediate downtrend. I am not brave enough to be short anything for the time being.

It would not surprise me if the dollar busts below its 2008 support level of 70.70. Either way, whenever the US dollar trend is down shorting almost anything is very difficult and I certainly do not attempt it.

As for the average Joe, how do they prepare? Are they even taking the time and effort to educate themselves to prepare? In other words, as I have said before what happened to personal accountability these days? If your not aware or prepared you have no place blaming the banks, the government, your neighbor for their contributing to our fiscal predicament, you must therefore blame yourself! I rarely if ever hear that in the media these days but I think underneath it all that is why your not witnessing any real protests over whats going on here.

I think perhaps subconsciously or not deep down the average Joe deep down knows at the end of the day they can blame no one but themselves. I think we all feel a little that way so in essence we are all in this together.

Do I want to be in gold? It doesn’t matter if its chrome plated baskets if it retains my net worth during this, what I believe is going to be, an extraordinarily challenging decade or two coming up. The issue is most of the average Joes are loaded up with bad debt as there are two kinds of debt (good debt and bad debt) which I’ll leave to explain later.

Just keep learning, that’s all I and you and anyone visiting this and many other resources on the web can do to get through this period. The great thing is, and Garth is right on this, is that all this information is free! Short of your internet fees.

Garth may think I take him on in some subjects, gold being one of them, btw Garth I think all your pictures are appropriate, I mean what isn’t these days? However this is not my only resource for information as I am sure practically all agree to.

Garth does provide a value resource in writing this blog for those of us that are responsible and accountable for our own actions and even though sometimes the genX in me feels its time to take on a boomer like Garth there is nothing personal in any of it, regardless if he thinks I am an ass, which I probably am!

jj

#102 Taxpayer like everyone else on 10.30.10 at 11:51 am

88 Got a Watch. I came over this strange comment last thread

“Now that my Parents are boomers”

Now that doesnt make a whole lot of sense. You don’t morph into a boomer.

Or do you? While we assume the label applies to us, This kind of comment indicates a different kind of definition. It has little to do with age, and I have seen past comments applying it to people anywhere from their 30s to 70s. It seems to mean anyone who is putting too much faith in RE, and has failed to save enough in a diversified portforlio, either for retirement or for a substantial down payment.

So its really an economic and maybe social group as opposed to a pure demographic.

#103 Cookie Monster on 10.30.10 at 11:51 am

Garth, both you and Peter Schiff are/were right about the housing bubble but you couldn’t be farther apart over the issue of gold and silver as money. Only one of you can be right.

Peter has a radio show now called The Peter Schiff Show, if you’re so sure of yourself why don’t you call him and argue your position, 1-866-226-5620, convince Mr. Schiff he’s wrong. I’ll be listening.

Shiff is pumping his own investment business, Euro Pacific Capital. Wake up. — Garth

#104 Shylock on 10.30.10 at 11:56 am

The higher gold and gold related investments go up the more Garth censors, denies and omits.

While that is untrue, this is not a gold blog and will not become one. Most people have houses, GICs, RRSPs full of mutual funds, mortgages, scarce retirement assets and family obligations. That is the focus. — Garth

#105 Shylock on 10.30.10 at 12:22 pm

Then why don’t you change the blog name to
The Greater Sheeple.

“Most people have houses, GICs, RRSPs full of mutual funds, mortgages, scarce retirement assets and family obligations. That is the focus.” — Garth

I’m sure there’s a cult you can join. Maybe they do goats. Run along. — Garth

#106 Live within your means on 10.30.10 at 12:22 pm

Just come. A simple DNA test will occur at the door. — Garth

I adore your sense of humour!!

#107 wilde_at_heart on 10.30.10 at 12:24 pm

“cute” parts of downtown, from queen st w, leslieville and the annex

Those areas are not so ‘cute’ once you have toddlers that get into EVERYTHING. Like syringes and used condoms and broken beer bottles, etc. Not to mention the noise from drunk woo-hoos.

I’ve known many couples who started off in the ‘cool’ parts of town but it wore off by the time #2 was on its way and they moved to Riverdale, Bloor West or quieter areas. Mind you, they also bought a lot earlier in the decade when house prices weren’t so out of whack.

Also how is getting into $150K student debt the fault of Mike Harris? It would be wise to stay renting and pay down that behemoth before taking on new debt.

#108 Basil Fawlty on 10.30.10 at 12:29 pm

Two of my favorite financial analysts are John Embry and Eric Sprott, of Sprott Asset Management a Canadian Company. In listening to and reading their reports it seems to me that it is not so much a question of holding gold in your investment portfolio, as it is about holding hard assets or financial assets. Gold or silver are just the monetary component of a hard asset portfolio, which would also include, stocks, farm land, oil and commodities.
If one believes that quantitative easing will not happen or that if it does happen there will be no currency ramifications, then financial assets should do well. However, the hard asset crowd anticipates QE and further devaluation of the US dollar, which will push up the value of hard assets and push down the standard of living of poorly invested Americans.
Eric Sprott, mentioned that he would not be surprised if silver hit $50 soon. The manipulation of silver has now been admitted by the US regulatory body that watches that market and a possible shortage looms.

QE2 will be a non-event. There will be no purposeful US dollar devaluation. This is as delusional as Vancouver real estate. The party will keep going because all the players are infected, until it ends. You do not want to be in the room then. — Garth

#109 lonely limey on 10.30.10 at 12:33 pm

Devils Advocate #35

“Sorry, iPad keyboard sucks”

Bet you look cool using it though?

#110 realpaul on 10.30.10 at 12:37 pm

Retiring in Canada just got a lot tougher…and more expensive. The only solution is to keep working until you die on the job. US Social Security pays a thousand dollars more a month than the CPP…..get across the border if you can.

http://www.financialpost.com/news/Fighting+normal/3741740/story.html

#111 McLovin on 10.30.10 at 12:38 pm

Prices in an absolute free fall in Kelowna. Prices already down 20-30% from 2007 peak. (Although that is not showing in the “official” realtard stats) – #54 McLovin

That is such BS. You must live in total misery allowing yourself to believe such gross distortions of the truth. – #80 Devils Advocate

Devils Advocate are you a Kelowna Realtard? Have you clicked on the link I provided? I don’t own or even live in Kelowna I simply visit it for a week every summer (like most people) I have friends who live there and one who I am ashamed to say is a Realtard. He tells me its brutal.

Kelowna is NO BID. Quite simply places aren’t selling for any price. The new Waterscapes development is already down at least 30% if you can get a bid.

On the MLS alone in just Kelowna there are 1334 places for sale add in FSBO and you get at least 1,800 yet there are only approx. 100,000 people there.
That is one place per 55 people.

Kelowna is massively overbuilt, lacks any real industry except low paying tourism jobs 4 months a year. Kelowna is ground zero for the coming crash and if you don’t believe prices are down 20-30% from their 2007 highs just try listing your house for those prices.

I think you are like everyone else up there and in denial. The wealthy retiring boomer won’t save you because the $600K for a 1000 sq ft two bedroom condo you are asking is more than the retiring boomer sold his house in Hamilton or Winnipeg for. Kelowna per sq ft on condo’s is close to Vancouver buy rents’s are 1/2.

Kelowna will drop 50%-60% from 2007 highs. Welcome to Las Vegas.

Good Luck to you.

#112 Cookie Monster on 10.30.10 at 12:40 pm

Garth, my response went through now (boomers blog), I don’t know what happened there.

Excellent post Dark Days!

Yes Peter Schiff runs and investment business that specializes first and foremost in protecting and preserving one’s wealth, his whole investment philosophy is premised on protecting what you have then on making gains in real value not just trickery of moving the goal posts with fictional inflated dollar denominated gains. Trust me, I’m not naive, your flip assessment of Schiff’s motives is what’s naive.

This is my last post on this issue, I’ve seen to many sound arguments here to repeat trying to show you the light. Dude, you are stubborn!

#113 Patz on 10.30.10 at 12:40 pm

#7 InvestorsFriend (Shawn Allen)

“In my own case when I was 30 I have a net worth right around zero but a lot of education and a good job. Fast forward 20 years and the net worth is well over $1 million and the debt is zero and has been for some years.

I see a bright financial future for this couple.”

With all due respect Shawn, you’ve put your finger on the nub of the problem but not quite in the way you intended. The 20 years in which you achieved your $1 mil nest egg is not going to be repeated in the next 20 years and probably not ever. The path that led you to a personal summit now leads to a cliff’s edge.

#114 Devil's Advocate on 10.30.10 at 12:44 pm

Y’all ought not give up pn the US quite yet. There is good reason to believe the US will be the worlds saving grace as much as they have been the predominant catalyst of these current economic woes. That day may be a lot nearer than you think. And with that, Canada may very likely never go as low as you predict as we ride our American cousins coat tails back to properity with nary a hint the economic hurt others have endured.

Don’t give up on the US quite yet…

#115 Moneta on 10.30.10 at 12:58 pm

The issue is most of the average Joes are loaded up with bad debt as there are two kinds of debt (good debt and bad debt) which I’ll leave to explain later.
——–
Well just look at the couple in Garth’s example. They are 40K in the whole in terms of net worth, yet they have 90K in savings. I wonder how much is in commodities or gold? Maybe in their case it’s zero but I’m willing to bet that there are millions of Canadians tinkering with gold thanks to investment portfolios they have been able to built up thanks to the ability to get debt.

As they deleverage, this will surely have an impact on the equity markets. I can’t see markets going up unless our governments and central banks keep on tinkering with them. As they increasingly interfere, you’re going to get and ever incresing loss of confidence. And this can only screw up the ecohnomy and it underlying productivity.

So maybe there is money to make in gold but a lot of small overlevergaed players are going to lose their shirts because the ones who can win with gold in a currency crisis siutation are the ones who can sit on it for a long time without needing to sell it.

In the Great Depression, most of the little guys who sold their farms and bought gold sat on it for a decade and pretended to be poor. That’s what consfication look s like for the little guy.

#116 jimmy on 10.30.10 at 12:58 pm

Granite is an asset, prices are expected to increase exponentially in the next few years. I would short linoleum its going nowhere.

#117 joseph on 10.30.10 at 1:01 pm

“Some people think the doomer talk about housing is over the top and this asset will rise forever”

Garth, believe it or not there is a middle ground between those two polar opposites. Housing will fall in value for a period of time, and then WILL absolutely continue to rise forever until inflation stops. Not because the asset is worth more but because dollars are worth less. Duh…

Unless somehow inflation ceases to exist of course housing will go up, it might fall 30% then take 20 years to recover, but it will still go up from there. It just depends on your timeline.

House prices are determined by the ability of buyers to afford the asset. Asset price inflation is impossible without wage inflation. Wages will not rebound until economic growth is regained. — Garth

#118 John W. Warnock on 10.30.10 at 1:06 pm

Winning the Lottery
Garth, you are right. Selling your house today is like winning the lottery. Getting cash for doing nothing. A good friend of mine in Regina bought an old two storey house for $40,000 in the 1990s. Did nothing to it but upkeep, including painting and new shingles. A few weeks ago came a knock at the door on Sunday afternoon. “Would you like to sell your house?” Not a real estate agent. A Greater Fool who did not want to fork over $500k to $750k in the Mayor’s new development with not a single tree in sight. On the spot he offered $250,000 for a house assessed at $100k by the local tax authorities. How could she say no? She took my (and Garth’s) advice and has arranged to rent a three bedroom row house. $1200 a month. Wait for the housing market to adjust to people’s real incomes. Then buy again.

#119 joseph on 10.30.10 at 1:07 pm

“Meanwhile it’s a foregone conclusion their mortgage renewal in 2015 will be double or triple the rate they first sign at”

Fixed rates are about 3.6% right now. How on earth can Garth or anyone say its a foregone conclusion that in 5 years fixed rates will be 7.2-10.2%?? The arrogance of this guy blows me away!

Come back in 2015. Your crow will be el dente. — Garth

#120 Timing is Everything on 10.30.10 at 1:10 pm

#104 Shylock

http://thenamelessmod.com/wiki/The_Goat_Cult

#121 Cookie Monster on 10.30.10 at 1:24 pm

House prices are determined by the ability of buyers to afford the asset. Asset price inflation is impossible without wage inflation. Wages will not rebound until economic growth is regained. — Garth
______________________
Not true, how can you say that! Wages have been stagnant in dollar terms meaning no inflation in wages, but over the same decade now house prices have doubled or more and they call it the affordability index.

It’s a function of low interest rate credit expansion, soon to reverse, that’s why it’s called a bubble.

#122 dark sad person on 10.30.10 at 1:33 pm

#115 Moneta on 10.30.10 at 12:58 pm

In the Great Depression, most of the little guys who sold their farms and bought gold sat on it for a decade and pretended to be poor. That’s what confiscation looks like for the little guy.

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

People didn’t buy Gold in the Depression-
Gold was illegal to own for people in the US in 1933 until 1975-

So what did people do to protect themselves?
They did what they always do-”eventually” in a crises-
They ran to Gold-in the only way they could-

http://2.bp.blogspot.com/_nSTO-vZpSgc/RbmMtplgCjI/AAAAAAAAAPk/NtN5JDlwHio/s1600-h/homestake.png

#123 Blitzkrieg on 10.30.10 at 1:39 pm

In defense of the Toronto couple, its only common to graduate from an 8 year program with debt unless your old folks were fortunate enough to subsidize your education. Keep in mind that it is either a law/med degree, meaning a gradual salary increases over the next 30 years, enabling a comfortable life.
Thats one way of going through life, self employment is another, allows you to start sooner and provides unlimited growth potential…

#124 DiGiacomo on 10.30.10 at 1:53 pm

i used to be an inflation scared gold bug, but then I ran the numbers

to quote warren buffett,

“You could take all the gold that’s ever been mined, and it would fill a cube 67 feet in each direction. For what that’s worth at current gold prices, you could buy all — not some — all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?”

meanwhile, every dollar in circulation has 10-100 more that exist only because of loan after loan after loan

cash is far Far FAR from perfect (I personally think Garth’s on the right page with diversification), but the way the fundamentals line up now, when everyone’s loans come due, I’d rather have the currency everyone’s debts and taxes are owed in than a shiny hunk of metal.

#125 robert james on 10.30.10 at 1:58 pm

#111 McLovin Actually,, the peak for Kelowna was April 2008,, Calgary peaked in July 2007 though.. I was at a party last night in Kelowna and was talking to a lady that said,,”I sure hope the market picks up this spring”.. They have a nice house that they built in 1994 and I am sure that it is payed for,, but they may be like a lot of other Okanagan folk and have a rental house or two,, I mean you can`t loose,,, It is a special niche market you know.. LOL By the way,, Rennie dropped the price on the unsold INVue condos by 40 % and a development in Penticton dropped their prices by 50 %..

#126 jess on 10.30.10 at 2:13 pm

Bond guy channeling Liu?

The Zero Interest Rate Trap
By Henry C.K. Liu

http://www.henryckliu.com/page179.html
http://www.pimco.com/Pages/RunTurkeyRun.aspx
==========
JIMMY
“Granite is an asset”
…especially, pink granite with the chiseled symbols…that was until all the earthshaking gods became displeased;^)

#127 daystar on 10.30.10 at 2:23 pm

“But there’s no simple solution. No depression, which means cash will continue to lose value. No hyper-inflation, no currency collapse, meaning gold’s just a commodity. No rebound, so houses deflate” – Garth

I’m trying to read how come you are taking so much flack today, Garth. A few of us are behooved to complain and argue about the impending future with you. Not sure why exactly, maybe this quote set our beloved gold bugs off and why they would react in such a way….

I suppose it comes with some measure or degree of success. Success after all, does inflate the ego and turn the average into experts. Gold is over $1300 an ounce and flirting with what I would consider its all time peak to be $1450 in the near future. Alas, however, one cannot look at trends and say they are permanent. (we rely on greater fools who think so for our own profits, but we pay dearly when we are those greater fools, no? … oh, the humanity)

All booms end with a bust and so will be the fate of our gold bubble. What pops it, its anyones guess. There are a number of reasons why. Sky high bubbly market valuations would top the list. A staggering economy that doesn’t get well can sober people up to practicality. Currency adjustments… and if we could all stop right there, this is at the heart of the issue with gold.

The U.S. had a 13.7 est. trillion GDP(nominal) in ’09. Nominally speaking, the U.S. money supply represents a full quarter of the worlds entire monetary value and its currency has been on a decade slide and picking up steam. In essence, the worlds best customer is getting poorer. Its the product of over 3 decades of trade deficits and living beyond ones means. A strong U.S. dollar has been great for those who borrow but the borrowing spree is over as buying power continues to wither and last I looked, these dollars spent over the last 30 years didn’t go towards things that generate cashflow, but rather, things that simply get “consumed”. All that debt that bought so little (save millions of houses people don’t really need) brings forth a needed check and balance (that, by the way, is sure to end gold’s bull run, a very large point I’m trying to make so don’t miss it).

What it will take for the U.S. to rise like the phoenix is a currency adjustment that makes them competitive in a manufacturing arena and while gold is pricing in this adjustment… for those who pay attention to currencies (you know, the affluent, 90 day experts & mildly curious) the U.S. dollar has a long way yet to fall. This period of adjustment will take years yet before it stokes the fires of manufacturing and until it arrives, structural unemployment, skyrocketing public debt, recession and good long list of other negatives will be the ongoing story of the day. On this landscape, we will witness a nation that goes from resting on its high dollar lorels to learning how to compete with a lower dollar once again and the adjustment will be painful, but necessary. Until that transition comes, none of this is good for RE in the U.S. or here in Canada, with an inept government manipulated RE market that has soared to bubbly valuations by s government policies with interest rate bottoms and CMHC wreckless regs that have no more gas left in the tank to create illusions of prosperity.

So what of gold…. to those who’s portfolios have risen from the shine of gold, “its time to cash in, don’t you think?” Take those gains? Does one seriously believe gold futures hasn’t already priced in this period of adjustment? Or do you believe the TSX is headed for 18,000 and a red hot ventures, with an index rising from below 700 in 09′ is headed past 2500 in 2011 on commodities alone? We will be lucky as investors to see a Ventures index past 2100. Everyone has been saying it (including myself) that commodities has been the place to be (and it has) but is that becoming “past tense” with valuation runups the likes of what we have seen? Do we not recognize bubbles when we see them?

Buy low, sell high, folks. Thats how we make money. Where are the markets right now? In mining, in metals… its high. Don’t think for one minute the herd will stay there endlessly to graze, things change. Just take my word for it. Is easier to imagine Ventures below 1,000 then it is at 2500. Its easier to imagine the TSX below 10,000 then it is above 15,000. And whats really easy to imagine? Asset deflation here in Canada taking a large bite out of middle class equity, enough to breed a Canadian recession all… on… its… own.

#128 dark sad person on 10.30.10 at 2:26 pm

#124 DiGiacomo on 10.30.10 at 1:53 pm

i used to be an inflation scared gold bug, but then I ran the numbers

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

I can never understand-why people “think” Inflation is why you hold Gold-because that’s flat assed wrong–
If people think we are going to have Inflation–which we’re not-
Sell Gold and Gold Miners and buy a house-
That’s a no brainer-

#129 bigrider on 10.30.10 at 2:27 pm

Garth #76 bigrider replied -” A decline in the capital value of preferreds would not impact the the yield one cent. Bond yields on existing assets as well will not be affected by bond prices.No change in reit yields .No change in stock dividends. you must be talking about capital gains. I suggest you restructure”

In order for you to have achieved your 11% return this year ,you also must be talking capital gains. After all, 60% growth ?? they appreciated , nest pas ? Surely your dividends have not equated to your 11% YTD return. Your bonds have returned what they have due to cap gains ,at least in small part. REIT’s, what no cap gains??? They have yielded 11% as well only?? cmon

Give me a break.

If you are going to profess a return of 11% this year and part of it is due to cap gains on your underlying assets as I have said , then surely to be fair, you must build in the decline in those underlying assets, albeit and granted inconsequential to the income game plan you profess, when those same assets decline in value in a broad base selloff.

You can’t have it one way and not the other

Of course I can. I harvest gains and keep yield. — Garth

#130 Edmontonian Here on 10.30.10 at 2:33 pm

WOW! Even with these historically low interest rates the realestate market her in Edmonton seems to be on the verge of a great price Plunge! We never did recover in prices with the low interest rates the government did to “stimulate” the economy. I just checked out the numbers today. On Kujiji there are over 16,000 ads in the housing section which includes Houses for sale and RE Services. Condo prices are down $40,000 from their peaks and sales are drying up quickly. Single family homes in the bungalow category are down close to $100,000! Down an avrg of $70,000 for overall SFH. 30 day sales on SFH have plunged almost in half since april last month same with condos! We may not be collapasing into a depression in Edmonton, but the housing market is! Also of note the retail rental downtown, which is a good leading factor of the economy plunged from historical highs in 2008-2009 to 2003 levels in just 3 months this fall! Taxi drivers are complaining they can’t make ends meet and are terrified of the provincial government of stopping the billions of injection from our sustainability fund to try to make the economy not look so rotten. Our unemplyment rates are DOUBLE what they were just 30 months ago…

#131 Dorf on 10.30.10 at 2:35 pm

Just a note of thanks to Dark Sad Person for answering my question on life insurance.

You confirmed what I was already concerned about.
Thanks for a very intelligent and reasonable answer.

#132 Snowman on 10.30.10 at 2:48 pm

“Asset price inflation is impossible without wage inflation. Wages will not rebound until economic growth is regained. — Garth”

“The average weekly earnings of non-farm payroll employees rose to $860.67 in August, a 4.4 per cent increase over a year earlier.”

All provinces up as average weekly earnings continue rise in August: StatsCan

Whaaa? %4.4 increase when the end of world is upon us? %7.5 increase in Alberta? Now … that won’t end well … lmao

“Fixed rates are about 3.6% right now. How on earth can Garth or anyone say its a foregone conclusion that in 5 years fixed rates will be 7.2-10.2%??

Come back in 2015. Your crow will be el dente. — Garth”

But then last year you said same thing, only asked people to come back this year. Not great at timing things, huh? Well, good thing there is the rain dance for the great fools to pass the time … I say, let them dance … fools

I say house prices are going to double in next 5 to 10 years …. scary enough for the basement dwellers? … hehehe …. Happy Halloween everyone !!

A 2% real wage gain is hardly the fuel of real estate revival. As for rates, I said a year ago they would increase. Since then the BoC has raised its benchmark rate three times. You have no points. — Garth

#133 Patz on 10.30.10 at 2:58 pm

The Automatic Earth posts 2 or 3 times a week. It is run by Nicole Foss who posts as Stoneleigh and her partner Ilargi. They usually have their post followed by a selection of other posts from very credible sources. On Thu Oct 28 they put a link to Garth’s “Pricks” post of Oct 25. (They post the text as well as the link). Both Stoneleigh and Ilargi are the best I’ve come across on the energy/finance nexus as well as a lot of other pertinent background on our ongoing crisis.

I don’t know if Garth has any special plans to mark the honour.

#134 bigrider on 10.30.10 at 3:28 pm

#129 Garth in response to bigrider- “Of course I can, I harvest gains and keep yields”

Harvesting gains means you sell the appreciated asset, which in turns means you are no longer earning the yield on that asset. I presume you redeploy proceeds into an alternative asset, again assuming for a yield, thereby exposing the proceeds to a possible appreciation or depreciation. If appreciation you harvest, a depreciation you continue to hold for yield.

The problem I have with your analysis is that you book your harvests as gains and build them into your total quoted return. When you experience a temporary depreciation, you build them out of your total return and simply quote yield only.

Come now Garth. We can go around this for a while. Harvested gains should be viewed in context and against ,unharvested, albeit temporary asset declines, would you not agree? If not in agreement please explain.

It’s called rebalancing. What a pointless discussion. — Garth

#135 Cheese Grater Fool on 10.30.10 at 3:34 pm

“Along the way, emotions have taken a beating. Some people think the doomer talk about housing is over the top and this asset will rise forever. They usually have all their net worth in real estate and are up to their curlies in debt. Others have been traumatized by the last two years, lost money in the crash, stuffed their wealth in the manly warmth of the orange guy’s shorts, and fret. Then there are those who smell of sackcloth and ashes, warn of depression or hyper-inflation, swear by gold and think recent gains will be repeated endlessly.

They are all nuts.”

Squirrels eat nuts and bugs… you see, even Squirrels diversify!
We have squirrel recipes so bugs and nuts are the bottom of the food chain!

#136 McLovin on 10.30.10 at 3:35 pm

Hey Devils Advocate, does this look like a strong market?

http://vancouver.kijiji.ca/c-housing-commercial-LOWERED-100K-KELOWNA-LOWER-MISSION-SEMI-WATER-CAN-FINANCE-W0QQAdIdZ238316998

http://kelowna.kijiji.ca/c-housing-housing-for-sale-REDUCED-BY-150-000-SUB-PENTHOUSE-W-SENSATIONAL-LAKE-VIEWS-W0QQAdIdZ234568655

I could go on but browse Kijji and look under reduced, there are 71 places that come up.

Face it, Kelowna is cooked. I think the Realtard that said there is 15 yrs inventory is a lot closer to the 1 yr that several people on here have stated.

Las K-Town or Kiami ? Which do you like better?

#137 Devore on 10.30.10 at 3:36 pm

#127 daystar

I’m trying to read how come you are taking so much flack today, Garth. A few of us are behooved to complain and argue about the impending future with you. Not sure why exactly, maybe this quote set our beloved gold bugs off and why they would react in such a way….

I’m sure Garth realizes perfectly well if he stops talking about gold, they will go away. Which means he’s doing it on purpose.

#138 morpheus on 10.30.10 at 3:36 pm

I’ll say this much Garth as it pertains to Gold. The only thing that has crushed a medioric rise in Gold since 1971 has been a VERY high interest rate shock ie. Volcker in the early 80′s. Are you suggesting that is in the cards? 20% interest rates? No way. That started the 30 yr bull run in the bond market, remember you could get a 30 yr bond at 15.25% in 1982. Think about that for a minute as we only get a paltry 4% now. Too much Fiat money has already been printed. You see a high interest rate puts a REAL value on money, whether you are the lender or the borrower. Right now, money is near worthless to save and they are giving it away for you to borrow. As you always say, that will not end well. We have at least 10 years of deleveraging to do as a society to purge the debt we have accumulated. So at the very least we will have a decade of anemic growth. Yet you want to call that a recession and not a depression. How is that even doom and gloom when 70% of the economy was predicated on the same credit expansion that is no longer sustainable.

#139 Moneta on 10.30.10 at 3:43 pm

Gold was illegal to own for people in the US in 1933 until 1975
——–
Just like prohibition or the gun registry or taxes… The law says what is says and people do what they do. Like I said, they had to sit on it.

#140 Dan on 10.30.10 at 3:49 pm

snowman= scared realtor. We have worried realtors on this blog everyday. Why? Why would realtors come to this blog if RE market was doing well? The fact is the RE market is doing very bad. Sales are down over 20% for the past five-six months and I believe it is even worse since realtor control the stats and REFUSE to allow outsiders or third parties to see this information. If the infomation was allow to be seen the numbers would prove the housing crash is WORSE then the realtors are letting on. The housing crash is here and now and only going to get worse.

POP………………………….

Realtors………………We are so f$%ked if people saw the data. We need more greaterfools or else the housing crash will be worse then the US.

#141 Devil's Advocate on 10.30.10 at 4:06 pm

mclovin…I don’t know why you want to try and impress me with facts. I know all the facts. Haven’t you paying attention?!?! I’m the big man in a small town. When I tell you what it is, you can take it to the bank

#142 Snowman on 10.30.10 at 4:30 pm

“A 2% real wage gain is hardly the fuel of real estate revival”

Who said anything about a real estate revival?

“As for rates, I said a year ago they would increase. Since then the BoC has raised its benchmark rate three times.”

So true, only the talk was about the “How on earth can Garth or anyone say its a foregone conclusion that in 5 years fixed rates will be 7.2-10.2%??” not the BOC rate.

Oh well, good enough for the rain dance dancers I guess … what say you Dan?

#143 Snowman on 10.30.10 at 4:33 pm

“snowman= scared realtor”

Dan, I see you’ve dressed as village idiot many, many halloweens ago and forgot to take your costume off ever since ….

#144 Soylent Green is People on 10.30.10 at 4:48 pm

This really is the funniest/saddest thing ever:
Our main expenses include my professional student loan (which thanks to Mike Harris and his deregulation initiative was at 155k upon graduation and is now 110k), my Canada student loan (13k), my wife’s student loan (6k).

Where or how on earth do they think they will be able to pay off these loans. Exactly what type of job were they gunning for. Bunch of “educated” sheeple, I have no respect for them.

#145 Midas on 10.30.10 at 4:57 pm

If you dollar bugs want to put your faith in pictures of the Queen and dead prime ministers, be my guest. I’m sure they’ll have some use down the road: wallpaper; toilet paper; fire starter.

A balanced portfolio: Sir John, Laurier, King, Borden and QE2. Enjoy.

We all live in dollars. Even you. Don’t be an idiot. — Garth

#146 Hosehead on 10.30.10 at 5:02 pm

Good dose of reality Garth. But let’s not go so hard on the young pups. This story proves that the next generation will not be nearly as well off as their parents. Houses (their parents own) have grown so much in price that the idea of owning one will come at the cost of having nothing else. No savings. Enough cash to retire for about 3 months. Which is where we’re at today.

It would be real nice to have a house AND have it only represent 30% of our net worth. But think about how that message goes down with the 30 something generation. Since the average cost of a house is roughly 350K in Canada that would require everyone to have a million bucks in cash before they buy. I don;t know the stats on the average Canadian student debt, but if this couple is any indication – YIKES! It will be well over 10 years before they pay that off. Just to get to zero. Then they’ll be at 40 and at zero. Then they are supposed to save a million bucks in the next decade (impossible with kids) and at the same time, somehow save for retirement? This is insane. Proving that this generation will be far worse off compared to their parents. That is the moral of the story.

#147 bigrider on 10.30.10 at 5:08 pm

#134 bigrider Garths response- “It’s called re-balancing. What a pointless discussion”

You did not address the issue. You are not representing your ROI on your portfolio fairly to your audience of readers.

And here we go round the mulberry bush….

#148 Timing is Everything on 10.30.10 at 5:30 pm

#145 Midas

Send your unwanted dollars to me. I collect ‘em….
then I trade ‘em for all kindsa stuff…food, gold, vacations, gasoline, cars, airline tickets, rent, mortgage, medication, clothing…everything really. Folks around here seem to like ‘em, even more than gold and silver.

#149 Dan in Victoria on 10.30.10 at 6:00 pm

I see a few posters have been into the smarties before Halloween……

#150 Devil's Advocate on 10.30.10 at 6:56 pm

#109 lonely limey on 10.30.10 at 12:33 pm
Devils Advocate #35

“Sorry, iPad keyboard sucks”

Bet you look cool using it though?

Not so much, but it is a lot less obtrusive than a notebook or netbook and since the demise of the MLS Catalogue a welcome return to having access to such information where ever and when ever without having to look so geeky at a wifi hotspot like Starbucks. 3G access anywhere… to anything my clients want to know. Ya go figure… some stuff I don’t know off the top of my head ;-)

#151 randman on 10.30.10 at 6:59 pm

“We all live in dollars. Even you. Don’t be an idiot. — Garth”

no Garth…we all live in houses!

please don’t discount the gold vs paper money debate

you say you recommend 10% diversified in PM’s…

that’s sound advice….your not really anti-gold..are you?

#152 OttawaMike on 10.30.10 at 7:07 pm

A friend of mine with lots of years in the realtor biz(former prez of the Ottawa real estate board) told me back in late 2007 that things were slowing down and prices were headed down. He turned out to be correct as we saw in late 2008.
I asked him the same question today and he stated there was lots of life left in this market. I respect his biased opinion and am beginning to think there is still some gas in the tank for this market. The rumours of Canadian real estate’s demise are greatly exaggerated, so far.
Yes certain areas of the city are seeing price decreases but desirable areas are still selling quickly getting close to asking or even above.

#153 Joe Q. on 10.30.10 at 7:10 pm

Is there a way we can filter out all the gold comments? This blog is supposed to be about real estate.

#154 Devil's Advocate on 10.30.10 at 7:16 pm

#111 McLovin

I am fighting the urge to look up the stats that prove you oh so wrong McLovin your are really just not worth the time… and if anyone chooses to believe your delusional rants so be it of them as well.

What I will tell you is not one of the numbers you provided are even close to the actuals. For example there are 2,018 single family homes for sale in the Central Okanagan not counting condos, mobiles or townhouses. That is a lot more than the 1,334 you quoted.

There are not 500 FSBOs in Kelowna. We track them and maintain a database of them as we work under Exclusive Buyers Agency and are not affraid to, infact enthusiastically willing to, sell them to our clients if they are the right product for them. We know there are less than 200.

Kelowna’s population (Peachland to Oyama) is about 160,000 not 100,000. I am assuming you are including Peachland in your numbers as it was the specific topic of your previous rant?

But for a very, very select few condo’s are not selling for anywhere near $600.00 per square foot. They max out at about $400 per square foot with an average closer to $225.

2007 was not the peak… 2008 was the peak of the market.

Wrong, wrong, wrong and I am willing and able to prove it… contact me at [email protected] and I will do so with the exact numbers.

Now in your defence, there is in Kelowna, as is the case across Canada, some price capitulation but not nearly so much as you claim. Prices may be 10% off from their highs but not nearly 30% not nearly at all. Again I’d be happy to provide you the exact numbers and the sources of those numbers just flip me a quick request at [email protected].

#155 hobbitt on 10.30.10 at 7:20 pm

I bought Maple Leafs years ago as a hedge. Now I am trying to sell them and can’t find a buyer in all of Saskatchewan. Lots of sellers though, including banks.

So much for the supposed liquidity of gold coins. It would be easier to sell some real estate.

#156 john m on 10.30.10 at 7:24 pm

blame the boomers,blame the economy..BUT..we have a much bigger problem with Mr “H’S government..too much swilling at the trough i think>>>>>>Federal spending on Canadian embassy properties and diplomatic residences abroad has soared 430 per cent since Stephen Harper’s Conservative government came to power on a promise to rein in the diplomatic decorators.

The front entrance of the Canadian embassy in Brasilia, Brazil. The latest government figures show Canadian taxpayers shelled out $85.2 million last year on dozens of Foreign Affairs department property projects.The front entrance of the Canadian embassy in Brasilia, Brazil. The latest government figures show Canadian taxpayers shelled out $85.2 million last year on dozens of Foreign Affairs department property projects. (Reuters)The latest government figures show Canadian taxpayers shelled out $85.2 million last year on dozens of Foreign Affairs department property projects that range from all-new embassies to an elevator in Kabul.

The information contained in the latest federal public accounts shows that in 2005, the year before the Conservatives came to office, total spending on Canada’s diplomatic digs was just over $16 million.

The public accounts show Foreign Affairs currently has projects worth just under $200 million that are either under way or have just been completed.

The latest compendium of diplomatic makeovers for the past year includes a new embassy in Spain, relocated into a magnificent downtown office tower described by Foreign Affairs as “the most prestigious and emblematic building of the 21st century in Madrid.”

Just fitting up the embassy offices in the ultra-modern Madrid tower cost Canadian taxpayers $4.7 million.

A few lucky embassy staffers got some nice digs in the past year. The Canadian government paid $2.5 million for one house in Washington, and another $2.1 million for a staff quarters in London.

Canada’s embassy in Port-au-Prince, Haiti, was damaged by the devastating earthquake in January this year. In the aftermath, the Canadian government paid $1.4 million for emergency repairs to the embassy, and another $1.7 million for temporary staff housing.

After years of trying to move from owning embassies to leasing them, Foreign Affairs is now building a number of new ones, including in Moscow ($8.3 million), Damascus ($6.4 million), Prague ($4.8 million), Dhaka, Bangladesh ($4.2 million), and Stockholm ($4 million).

Construction of a new embassy in Pakistan has already cost more than $7 million just for the land and preliminary plans.

The largest single embassy project detailed in the public accounts for the past year was in Kabul, as Canada prepares to withdraw from its combat mission in Afghanistan and expand its civilian presence there.

Spending on the project in the past year topped $20 million, including $9 million for renovations, $11 million to buy property, and another $1.4 million to clear it of possible landmines.

Read more: http://www.cbc.ca/politics/story/2010/10/29/gregweston-embassy-spending.html#ixzz13tEvAn6w

#157 Devil's Advocate on 10.30.10 at 7:31 pm

#136 McLovin on 10.30.10 at 3:35 pm

Hey Devils Advocate, does this look like a strong market?

LOL… Those are nothing but overpriced FSBOs to begin with (as are most all FSBOs).

Surely you can do better than that to make your point McLovin. Hell even I can do better than that to make your point for you.

#141 Devil’s Advocate on 10.30.10 at 4:06 pm
mclovin…I don’t know why you want to try and impress me with facts. I know all the facts. Haven’t you paying attention?!?! I’m the big man in a small town. When I tell you what it is, you can take it to the bank

Imposter… and those were far from facts McLovin posted… fictitious made up bullshit BS is all it was. But you go ahead and believe it if you like. Make your best decisions relying on their validity… Be sure to post and let us know how that works out for you…

And what exactly are you trying to accomplish by impersonating me? Apparently I make a big enough fool of myself on this Blog without your help.

Or do I? Apparently not as I seem to need your help in making me look the fool. And who again is the fool?

#158 Devil's Advocate on 10.30.10 at 7:35 pm

I hear this years absolute must have Halloween costume is to dress up as none other than…
Devil’s Advocate
;-)

http://www.youtube.com/watch?v=ChWs1d5kots

#159 Devil's Advocate on 10.30.10 at 7:46 pm

You all honestly can not fathom how much I am lovin’ this…

this market… my market…

this time… my time…

this economy… my economy…

Like I said… I’ve been waiting for this for more than 5 years…

Perfect…. absolutely perfect…

everything is perfectly aligned…

you can not possibly know how rare an opportunity this is to come along…

Exciting… very exciting

when preparation meets opportunity.

And “no”… I am not vultchin… quite the contrary actually.

#160 Marty on 10.30.10 at 7:46 pm

Garth, you claim you got or will get a return of 11%.

Question: How are you measuring your claim of 11%. Did you factor in CPI and adjust for price of gas 10% higher than last month? And that QE2 is on the way? And that Canada has increased its USD reserve holding to all time high?

I don’t get it!! You claim CMHC and government policy are responsible for this debacle but you INVEST USING THE VERY FIAT CURRENCY THAT HAS ENABLED MONEY OUT OF THIN AIR FOR PEOPLE WITH NO INCOME.

I’m calling you out as a hypocrite.

If you really STUCK to your guns you would divest all your FIAT DOLLARS and purchase real commodity money such as gold and silver. AND TODAY YOU WOULD HAVE WRITTEN ABOUT 30%+ RETURN SINCE 2001.

BUT I think you want to make fees with your services, so change your service to selling bullion, you’ll see how business will BOOM in next 8 months.

ahahAH.. BOOM!!

Great blog… but you son of a ‘b, I got you pants down today.

If you only knew how you sound. I regret you’ve been so led astray. — Garth

#161 Nostradamus Le Mad Vlad on 10.30.10 at 7:50 pm

-
What a delightfully delicious day today! Hung the laundry outside, dry in six hours. No dryer, no power usage!
*
Mid-terms “It looks like “Osama bin Toner” really was a bomb, because it just blew up in Obama’s face!” :-$

Saving Obama “And sure enough; we got one!” wrh.com.

Re: The FF yesterday. “Post this link to the UPS website everywhere so people can see for themselves that the claim of a terror bomb on a UPS flight from Yemen is a total hoax!” wrh.com. So here is the link — US Govt. is a fraud. “Before you believe Yemen, remember Iraq!” wrh.com.

Faking It – “CNN is already blaming “Al Qaeda” for yesterday’s toner-cartridge-of-death. But not only was the toner cartridge a hoax, so is all of Al Qaeda!” wrh.com.

BoA in receivership.

Fixing the Economy – “The cost of borrowing money from private banks is never-ending debt that enriches banks and gives bankers the power over the economy of the nation.”

Clear view of the gap between rich and poor (no middle-class).

Dirty Tricks I’m glad I don’t live in the US and have a mortgage.

Garth, we need another good fake crisis to bitch, whine and argue about! I’m so empty of things to blab on about! Speaking of fraud . . . “Where this article says that “…the biggest banks have routinely mishandled homeownership documents,” there is a word which should follow the word “routinely”, and that is “deliberately”.” wrh.com.

GC was the reason behind mass extinction on Mars.

GW and Ocean Temps. Comments at end are good.

Canton, Ohio McDonalds suggests how employees vote in mid-terms. Frank The Hedgehog is a likely candidate!

Ahhh, Secrecy – The EU loves it.

#162 Keith in Calgary on 10.30.10 at 7:56 pm

#153 Joe Q………

Just remember that all those who hold and recommend GOLD are always there to remind you how much MONEY their GOLD is supposedly worth.

But folks like me who are CASH rich never go around telling folks how much GOLD our CASH is worth.

Heh……..snort.

Funny ‘dat.

#163 Skeptic on 10.30.10 at 8:00 pm

You have no money and yet regret mot buying a house in Van. With what? If you can’t see you’re part of the problem, you deserve to stay on a bicycle.

Oh I have money. I’d just be in a much better position if I’d not been a bear these last five years.

You said you have “no !@#$ portfolio.” My mistake for taking you seriously. — Garth

#164 Devil's Advocate on 10.30.10 at 8:07 pm

#152 OttawaMike

You would be well advised to listen to your friend as they clearly have a balanced perspective on where we are headed. Contrarian in the right way

#165 randman on 10.30.10 at 8:30 pm

#155 Hobbit

Are you really that dense?

Here’s one for you in Prince Albert

http://www.goldsilveroz.com/Bullion-Saskatchewan-PrinceAlbert.html

Let us know if you need help finding the potty!

#166 renter on 10.30.10 at 8:40 pm

Gee, Devil’s Advocate, you are insufferable.

All your little lectures and “oh so pleased” with your life. And you know everything. Right.

Give it a rest.

#167 Don on 10.30.10 at 8:53 pm

Question for Devils Advocate: How many houses have you sold lately and can you provide proof – and I don’t want to see last years time stamps. Put your money where your mouth is. In addition please provide proof from 40 other realtors in your area for the last year right up unitl the end of October. Any

#168 Devil's Advocate on 10.30.10 at 8:55 pm

#166 renter on 10.30.10 at 8:40 pm
Gee, Devil’s Advocate, you are insufferable.

All your little lectures and “oh so pleased” with your life. And you know everything. Right.

Give it a rest.

Cheer up buttercup, you too could live such a life, content, competent, happy and energized. Really it’s a lot less work than you think. As a matter of fact the world is geared more to such glee than it is gloom. Ya gets out whats ya puts in.

#169 OttawaMike on 10.30.10 at 9:00 pm

Want cheap a McMansion rental in the USA?

Get a deal under the section 8 program!
Corporal Klinger might be your neighbour:

http://realestate.msn.com/article.aspx?cp-documentid=25434829

#170 Willy H on 10.30.10 at 9:27 pm

Looks like Canuck vultures aren’t the only one’s preying on half dead RE prey in the USA. I guess the Aussie vultures flew right over “The Best Place on Earth” and landed in Phoenix! I doubt these folks are following Garth’s 30% exposure RE guideline! Are these vultures going to be declawed?

Check out the link:

http://money.cnn.com/2010/10/29/news/economy/australians_real_estate/index.htm?hpt=T2

#171 Paul on 10.30.10 at 9:33 pm

#154 DA

Only 10% of the high? I think it’s more than that. And with more higher end places selling this past year, doesn’t that make the average go up?

#172 Devil's Advocate on 10.30.10 at 9:50 pm

#167 Don

Well now Don, I might be willing to oblige under certain circumstances… but I don’t think this is the place to do it…

More to the point; to do so would require that I disclose the earthly identity of me the Devil’s Advocate and subject myself to the ridicule of my peers for as often as I can set the Blog DAWGs to howling my comments are often not so flattering of the real estate industry itself. ;-)

#173 Ant-626 on 10.30.10 at 9:59 pm

Nice post, Garth. You’ve mentioned 99% of Canada inhabitants and split them by classes. So they are all nuts, and so am I. Then, you’ve must have invented philosophers’ stone which brings you guaranteed profit of 11%. I hope you will enjoy double digits gain in your portfolio by the end of this year. Just don’t forget to cash it.

#174 Bottoms_Up on 10.30.10 at 10:00 pm

Realtor trying to drum up a Kanata bidding war (house priced ~100k below market, no offers, no showings until Nov. 3rd):

http://www.realtor.ca/propertyDetails.aspx?propertyId=10081522&PidKey=1369553338

#175 Patz on 10.30.10 at 10:16 pm

#44 nonplussed

Interesting post with a lot of good points. I remember a scene in a surrealistic movie years ago, where a character went up some stairs, opened a door to,… empty space and had he stepped out he would have been in free fall. That door is marked “growth.” Except for some occasional spurts most likely in Asia, economic growth is and will be no more. It had to come at some time. We live on a finite planet and we’ve overspent, over consumed, over populated in short, overshot this sphere. I think the reckoning will come hard, fast and soon. But hey, call me a cockeyed optimist, it might have a few sputtering years in it yet. But getting back to growth and business as usual, not gonna happen.

#176 Cashman on 10.30.10 at 10:18 pm

#4 Toxicosis on 10.29.10 at 8:48 pm

With almost $1.5 Trillion in debt, I doubt any President could pay it off with out severe hardship to the country. Not that this is already happening thanks to Helicopter Ben and his band of merry magicians. why with the stroke of a pen, all that debt will be gone and the last one’s to find out about is the gullible public, who take what Obama and CNN say as gospel. As I see it, there already is a race to devalue all major currencies of the world.

#177 hobbitt on 10.30.10 at 10:24 pm

165 randman on 10.30.10 at 8:30 pm

Are you really that dense?

Here’s one for you in Prince Albert

http://www.goldsilveroz.com/Bullion-Saskatchewan-PrinceAlbert.html

Let us know if you need help finding the potty!

————————————————————
Thanks for the kind words, pinhead.
A web site written by a 7 year old!

Some clippings from the site:
Custems and or dode and buyers reconacblelaty
This website is my Saskatchewan gold and silver bullion and coin shop.

I am pleased to serve bullion coins and bars to the areas of in Saskatchewan Canada Prince Albert, Melfort, Tisdale, Birch Hills, Kinistino or about 100km from my home town of Kinstino at this time.
Payment Methetheds are as followed.

I have called this individual and he’s NOT BUYING!
Do you check before you post, or just Google and paste?

He referred me to his buyer in Vancouver.

#178 Defrauded2 on 10.30.10 at 10:30 pm

It’s really seems quite sad when I discuss the Garth Turner Blog with friends and family as I often do. I feel obliged to tell them not to defrauded or mislead by the talking heads found within the mainstream media who offer a different vision. I differ somewhat with you Garth a bit about the nature of the fundamentals, that play into the Canadian real-estate market, but I do agree that a house can no longer be considered a store of wealth. Sadly, I just heard of MORE auto layoffs in Windsor, and of a confirmation that the Ford St. Thomas plant will be permanently shut down with a year. Ford will be returning the leased tooling, and selling off the land…… Maybe for some future RE development.

Expectations are about to burst for many and as I said quite sad. It won’t end well because we all have been defrauded or more likely deluded.

Better run there’s a hockey game on and the Leaf’s are going to win! Yea! This year for sure! Yea! RE prices in Toronto(or Va, or Cow Town etc) will never drop, because we are different!

http://www.bloomberg.com/news/2010-10-29/gold-will-outlive-dollar-once-slaughter-comes-commentary-by-john-hathaway.html

#179 tboon pickens on 10.30.10 at 10:33 pm

British Columbia economy close to collapse (says chicken little)

B.C.’s illegal pot industry generates between $3 billion and $7 billion annually, estimates Plecas.

Diminishing demand would not only negatively impact the underground economy, but could cause a wider ripple effect, with retail and restaurant industries taking a hit, as well as real estate.

http://goo.gl/2jgV

#180 Devil's Advocate on 10.30.10 at 11:02 pm

#171 Paul on 10.30.10 at 9:33 pm
#154 DA

Only 10% off their high? I think it’s more than that. And with more higher end places selling this past year, doesn’t that make the average go up?

Averages… are a dangerous stat. Some are up others are down. I would say, from what I see day in and day out, the “average” price drop in Kelowna from their most recent highs would be less than 10%. Certainly I could show you a good number of homes that have dropped more than that. I doubt I, or anyone else, could easily provide proof of a 20% or greater price drop on any given property in Kelowna that wasn’t grossly overpriced to begin with and even then that would be a negligent example as the only true indication of value is what it sold for at the high and now at the current low. So you can’t speak of yet unsold homes which have reduced their prices as they never sold in the first place and that is a very good indication they were overpriced to begin with.

GET IT?

10% is a nice round number to work with but I would say on the high side. 20% naw and 30% plain rediculous.

#181 Nonplused on 10.30.10 at 11:04 pm

CREA – thanks!

I thing Garth hates my posts. He’s only commented a couple of times, but not to my point only to details I got wrong or areas I didn’t explain well, taking the side I was being a fool whereas I think I was just reckless in penmenship.

That said, I agree with almost everything Garth writes, but for som reason I enjoy correcting his reckless penmenship. But I know he is a busy man. He does us a great service, for free, and he is but one man with limited time.

He is right to warn against speculating in gold; it’s a fool’s game. But my guess is he just doesn’t have the time to explain the role of gold in the world and also realizes it’s not a subject that’s important to most of his readers.

Bottom line: Gold is the original commodity ETF. It’s for the rich, and they trade it as such. It goes in and out of circulation as governments feel the need to establish confidence in their currencies. It spends the rest of it’s time in a vault.

#182 mb on 10.30.10 at 11:04 pm

The Mexican fisherman
An American investment banker was at the pier of a small coastal Mexican village when a small boat with just one fisherman docked. Inside the small boat were several large yellow fin tuna. The American complimented the Mexican on the quality of his fish and asked how long it took to catch them.
The Mexican replied, “only a little while.”
The American then asked why didn’t he stay out longer and catch more fish?
The Mexican said he had enough to support his family’s immediate needs.
The American then asked, “but what do you do with the rest of your time?”
The Mexican fisherman said, “I sleep late, fish a little, play with my children, take siesta with my wife, Maria, stroll into the village each evening where I sip wine and play guitar with my amigos, I have a full and busy life.”
The American scoffed, “I am a Harvard MBA and could help you. You should spend more time fishing and with the proceeds, buy a bigger boat with the proceeds from the bigger boat you could buy several boats, eventually you would have a fleet of fishing boats. Instead of selling your catch to a middleman you would sell directly to the processor, eventually opening your own cannery. You would control the product, processing and distribution. You would need to leave this small coastal fishing village and move to Mexico City, then LA and eventually NYC where you will run your expanding enterprise.”
The Mexican fisherman asked, “But, how long will this all take?”
To which the American replied, “15-20 years.”
“But what then?”
The American laughed and said that’s the best part. “When the time is right you would announce an IPO and sell your company stock to the public and become very rich, you would make millions.”
“Millions.. Then what?”
The American said, “Then you would retire. Move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take siesta with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos.”

#183 McLovin on 10.30.10 at 11:05 pm

Devil’s Advocate:

Now I’m really confused? Which one are you? Oh well, I guess it doesn’t really matter you are a Realtard after all. Hell, you probably don’t even know who you are. To do what you do you had to ditch your ethics the day you passed your 5 week licensing course.

But please answer my one question:

Las K-Town or Kiami ? Which do you like better?

#184 Devil's Advocate on 10.30.10 at 11:14 pm

#171 Paul on 10.30.10 at 9:33 pm
#154 DA

Only 10% of the high? I think it’s more than that. And with more higher end places selling this past year, doesn’t that make the average go up?

Sorry, I did a poor job of answering your questions and comments.

A.) Yes, only 10% max I’d say.

B.)Believe what you want. It makes no difference to me other than if you call me a liar – which I am not and will always defend myself against such accusation.

C.) Yes the high incidence of multimillion dollar sales has skewed the average upward significantly. In fact the average this month is up over 20% just because of that. Despite that I am telling you that the “real average” when you back that out and look at individual real examples (ie a house that sold at the peak and then again this month) prices are down on “average” something closer to 10% others more and yet others the price actually went up moderately.

#185 Nostradamus Le Mad Vlad on 10.30.10 at 11:52 pm

-
#159 Devil’s Advocate — “You all honestly can not fathom how much I am lovin’ this…”

Like wrestling with a pig in slop!
*
BP in the foodchain. Finally! Now we can clear our throats! Further.

Currency Wars Yogi Berra said, “If you come to a fork in the road, take it.”

MGM Films to get reorganized.

Is Hard Currency toast? All things run their lifecycles and there are new births (inventions) to replace the old ones.

Just when you thought it was safe to go outside again, here another (fabricated) crisis!

Apocalypse Burger Fries and ketchup with that?

Cdn. Discord Screw the feds. They’re no more than a bunch of lying whackballs.

GPS and RFID in Brazil, in cars.

Solar Blasts from Nov. 8-11. Links in. Say, aren’t The Tipping Points happening during Nov.? Plus — Volcanic Nutbars.

Link in. One acre, if farmed properly, can feed 30 people.

Junk One and Junk Two.

#186 dd on 10.31.10 at 12:13 am

“Shiff is pumping his own investment business, Euro Pacific Capital. Wake up. — Garth”

And you don’t charge for private investment advise?

No. — Garth

#187 dd on 10.31.10 at 12:18 am

“Gold is, of course, not money. — Garth”

And fiat currency is not money either. If it was it would be a store of value. My dollar today should buy the same quantity and quality of goods 10 years on.

You just abandoned credibility. — Garth

#188 Canuck on 10.31.10 at 12:22 am

This couple with their student loan debt should be looking at duplex’s in places like Whitby http://www.realtor.ca/PropertyDetails.aspx?&PropertyId=10078579&PidKey=-434329030

Until such time as they’ve retired their student loans, they shouldn’t think about a detached home. Whitby’s a very nice town, close to Toronto yet has easy access to cottage country or campgrounds. Young families who camp keep costs down while enjoying the plenitude of water facilities. They need to expand their vistas and not confine themselves to living in expensive neighbourhoods that they can’t afford. With some juggling, they can afford a house.

#189 Fiendish Thingy on 10.31.10 at 12:57 am

QE2 will be a non-event. There will be no purposeful US dollar devaluation. This is as delusional as Vancouver real estate. The party will keep going because all the players are infected, until it ends. You do not want to be in the room then. — Garth

I hope you’re right Garth; I’ve been waiting for the dollar to rise 5-10% against the loonie before I move the proceeds from the sale of my California home into my Canadian accounts (in advance of our relocating to BC). Then I can diversify into preferreds while awaiting the day when prices drop enough to purchase a home and have a chunk left to continue to invest.

#190 dark sad person on 10.31.10 at 1:22 am

#127 daystar on 10.30.10 at 2:23 pm

So what of gold…. to those who’s portfolios have risen from the shine of gold, “its time to cash in, don’t you think?” Take those gains? Does one seriously believe gold futures hasn’t already priced in this period of adjustment? Or do you believe the TSX is headed for 18,000 and a red hot ventures, with an index rising from below 700 in 09′ is headed past 2500 in 2011 on commodities alone?

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

Wow- as the great Seer-Carlos Castaneda’s-Pontificates
Oooops i mean Daystar

btw-that name “Daystar” is typical of what some toked out hippy would have given their child-
“back in the day”
Ya know-like
Frank Zappa-named his daughter “Moon Unit”
Anyway–amazing how you can peer “inside” the mind of Goldbugs–yet–
still come up with all the wrong reasons-
Why they hold Gold–

http://www.youtube.com/watch?v=w8y0JLPQl94

#191 GP girl on 10.31.10 at 1:26 am

#156 john m
Sort of like Harper’s promise of more transparency and accountability – not.
And for the latest tidbit in keeping with “Free Trade” as he is a fervent believer, check out the link.

http://toronto.ctv.ca/servlet/an/local/CTVNews/20101027/EU-trade-101027/20101027/?hub=TorontoNewHome
Welcome to the globalization of poverty courtesy of your friendly caring government and corporations.

#192 Wildroseblogger on 10.31.10 at 2:12 am

#13 GS- best line ever on this blog

#193 OverTheMountain on 10.31.10 at 2:53 am

This blog is offered free, and I do spend some time making the content worthwhile. Don’t be a petulant ass. — Garth

Garth. Thank you!

#194 Rob now in Nova Scotia on 10.31.10 at 6:57 am

Garth, like the rest of the mushroom media, the higher gold goes, the more negative you become. Can you please name me one other asset that has gone up 20% per year, every year for the last 10 years? Yes, diversy, but for gawds sake, have some precious metals in your portfolio.

Read my book, then spout. My portfolio has always included gold. The problem is fanaticism and overweighting, leading to the inability to see that cap gains should be regularly harvested. — Garth

#195 Jack on 10.31.10 at 7:55 am

Many households are in great financial trouble. This one couple bought a condo for a flip. They got up one day and just signed the papers. Fast forward a couple of years and they are now trying to sell either their condo or house and now it’s a horse race. If one of those horses don’t cross the finish line they will be bankrupt. The financial/housing troubles is starting to fall apart and time is not on people side.

#196 Cashman on 10.31.10 at 8:07 am

#16 OttawaMike on 10.29.10 at 10:01 pm

Is the sexy realtor costume on back order? Does the model come with the costume as well?

Just asking.

#197 pbrasseur on 10.31.10 at 8:36 am

Garth (or anyone) – Who finances those loans since governement IMPP program is complete? I know CMHC insures them but the money still has to come from somewhere. So the question is, if government (through BoC) has stopped securitizing loans who does it and why is it still so easy to get a mortgage?

#198 TaxHaven on 10.31.10 at 9:17 am

RE: #194 Rob now in Nova Scotia…

“Read my book, then spout. My portfolio has always included gold. The problem is fanaticism and overweighting, leading to the inability to see that cap gains should be regularly harvested.” — Garth

Well, I guess ultimately it depends on what one’s definition of “money” is. I won’t belabor the point other than to reiterate that gold is money and has been for millennia.

The risk in playing around investing and harvesting returns in dollars ~ which I DO ~ is that a)the currencies are all being continuously devalued vs. real assets and b) the supply of paper dollars is continuously growing while that of gold is barely increasing in comparison.

Have your long-term savings in gold (and cheap property) and the play money account and day-to-day stuff in dollars.

And always remember that investing is a continuous process of switchin and re-weighting, buying and selling of assets in greater supply and lower demand for those in shorter supply and thus higher demand.

Actually the goal for most people is not the accumulation of assets that retain inflation-adjusted value, but having a good life. And that is lived in dollars, not commodities. The attitude on this blog this weekend is morose. Perhaps it will exorcised tonight. — Garth

#199 Devil's Advocate on 10.31.10 at 9:27 am

#183 McLovin on 10.30.10 at 11:05 pm
Devil’s Advocate:

Las K-Town or Kiami ? Which do you like better?

As parable with reference to the moral fiber of Kelowna or the actual locations of Las Vegas or Miami?

If parable, both have their application;

Las K-Town aptly describes how one coming here to earn a fortune more often loses a fortune.

Kiami describes how wonderful it is in the summer but how busy it is then too with partying yahoos (all year long)

If of the real locations… neither for the above reasons.

#200 Got A Watch on 10.31.10 at 9:28 am

#190 – “btw-that name “Daystar” is typical of what some toked out hippy would have given their child-
“back in the day”
Ya know-like
Frank Zappa-named his daughter “Moon Unit”
Anyway–amazing how you can peer “inside” the mind of Goldbugs–yet–
still come up with all the wrong reasons-
Why they hold Gold”

I see you have been taking your asshole pills every morning there, DSP. What is the point of this comment?

In the future I will just skip over your idiotic comments, just as I do with DA’s. There are only so many hours in a day, and the time should not be wasted.

It’s the internet, people use all kinds of odd nicknames. I can think of a lot of insulting things to say about a guy who chooses a name like yours, as it speaks to your personality.

I suppose Daystars crime is he dared to take an opinion opposite to that of yours. Shocking. It seems you think everyone must agree with you, or you get all nasty about it. You could have just said you disagree, or ignored his comment, but your personality seems to require winning every argument at all costs.

Honestly, Daystar has made many great comments on this Blog, about all sorts of issues. Your own, not so much, you appear to have only one issue that you can comment on, over and over and over and over like a boring broken record. It does not matter how many charts you post, with your attitude, who really cares what point you are getting at.

But if we are going to get all upset with others comments, how about your own? What-is-up-with-all-the dashes-between-the-words-in-all-your-comments? Is-English-your-fourth-language-or-did-you-just-decide-to-invent-your-own-unique-grammatical-style? Write-a-sentence-much? Speak-English-much?

Ya know, I used to be a goldbug myself, years back. Till I looked beyond the rhetoric, and decided the typical goldbug is a linear thinker who can only see things in their own groupthink fashion, but like to call themselves “contrarian”, in a way that excludes any other points of view. Since then I treat it as just another asset class to trade in and out of, the old fashioned way, you know, buy low and sell high. And for that purpose, gold is not as preferable as silver is. I have traded in and out of silver many times, holding as much as 30K oz at a time, none at other times, starting from when silver was at $7. At the moment, I own various miners, mostly uranium and rare earths, where the % gains this year on many have far outpaced gold or silver. So an argument could be made that for active traders, gold and silver are a waste of time. You could have made far more this year on a garbage stock like NFLX even.

The bottom line is the bottom line, which means how much % gain my trading accounts see by the end of the year. Whether it was in gold, silver, miners, agricultural, or squirrel jam futures. That requires emotional detachment from your holdings, which means they are to be bought and sold when it seems right. Take the profit and move on.

If you can’t trade actively, then holding some gold and silver is a decent second choice, I have always recommended 10%-25% or more for anyone’s portfolio. While the Bull market continues. It is my estimation the Bull run in gold will end in a few years towards the end of this decade, and then the next 20 years after that will be not a period to own gold. Just like previous periods in history.

If you are going to buy something, you have to know when to sell it. Unless you just plan on leaving it to somebody in your will.

#201 State of Mind on 10.31.10 at 10:09 am

#200 Got A Watch re “#190 “Daystar” – “The bottom line is the bottom line, which means how much % gain my trading accounts see by the end of the year.”

Got a Watch, get a clue buddy! Do you have to be such a jerk to people because you own gold? Seriously, if that’s what gold does to you, then you can have it!

Money changes some people (like you) for the worse!

Get a life, get a clue.

#202 Midas Touch on 10.31.10 at 10:13 am

#153 Joe Q. “Is there a way we can filter out all the gold comments? This blog is supposed to be about real estate.”

100% agree with you there.

#203 Kitchener1 on 10.31.10 at 10:33 am

Lots of gold speak these past two days on the blog.

First. Gold will never, ever be money again, sorry folks just not going to happen, the govt worldwide need the power to tax to survive.

For all of those crying about going of the gold standard.

Take a look around your neck of the woods, see all those new hwy’s, roads, utilites, hospitals, office buildings etc… well, thats all because we went of the gold standard.

There is simply not enough money in the world to create and build with a gold standard. sorry, but you guys want to go back to the infrastructure of the 1960′s thats all good but dont expect me too.

Simple logic, how much has the population grown over the last 50 years? How much gold has been mined since then? Sorry but with a gold standard, poverty would only be worse, much worse and the divide between the haves and have nots would be huge. Just like it was back when Kings and Queens rules the land, back when gold was used as a currency.

As for asset allocation, yes, please buy some gold as a hedge, BUT, for the amateur investor, taking profits is a must and for people invested in gold it becomes to much of an emotional issue to sell and take gains, thats why its a dangerous commodity.

if you dont take profits then you havnt made any $

#204 Devil's Advocate on 10.31.10 at 10:34 am

Been posted on here before and worthy of it again… and again… and again

IF

If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you
But make allowance for their doubting too,
If you can wait and not be tired by waiting,
Or being lied about, don’t deal in lies,
Or being hated, don’t give way to hating,
And yet don’t look too good, nor talk too wise:

If you can dream–and not make dreams your master,
If you can think–and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two impostors just the same;
If you can bear to hear the truth you’ve spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build ‘em up with worn-out tools:

If you can make one heap of all your winnings
And risk it all on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breath a word about your loss;
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: “Hold on!”

If you can talk with crowds and keep your virtue,
Or walk with kings–nor lose the common touch,
If neither foes nor loving friends can hurt you;
If all men count with you, but none too much,
If you can fill the unforgiving minute
With sixty seconds’ worth of distance run,
Yours is the Earth and everything that’s in it,
And–which is more–you’ll be a Man, my son!

–Rudyard Kipling

#205 Josh on 10.31.10 at 10:44 am

Re: By the way, my balanced portfolio (40% fixed income, 60% growth) is up so far in 2010 by 11%.

By the way, My rrsp of 100% gold & silver mining shares is up so far in 2010 by 48%

Those are great returns, but there are very few people that are comfortable with a portfolio like that. Sure, everyone would love to earn 50% returns a year, but not many people would have the stomach to go through portfolio returns of -50%, which are very possible in your portfolio. The average person is risk averse, and would be more comfortable with a portfolio that Garth is recommending, which will provide stable, constant returns. Is gold in a strong 10 year bull trend? Yes. Can gold go to $3000, sure can, but is it’s also in a bubble due to the fundamentals. Two of the greatest investors and billionaires, George Soros, Warren Buffet both know it is… Am I going to make money off this bubble, you betcha, I’ve made a ton of money off of Gold’s run, but remember that Garth is trying to reach out to the average person through this blog, not the 3% of the population with a way above risk tolerance that is willing to bet their retirement fund on incredible returns. For all you gold bugs, you may be right that gold has much higher to climb, but remember that the average person will start freaking out when their portfolio losses 25%, some even less.

#206 Hiteclowtec on 10.31.10 at 10:45 am

#202 Midas Touch

Or better yet just redirect the gold bug traffic to the Bre-X blog

http://oikonomikablog.wordpress.com/2010/10/29/sprotts-embry-on-king-world-news-the-fun-is-just-beginning/#respond

#207 Devil's Advocate on 10.31.10 at 10:47 am

I’m not suggesting it will happen but Naill Ferguson makes a good argument that the US could return to the gold standard check it out…

And if that did happen you know what would happen to the value of gold right? What happens to anything government touches?

And that is precisely why everything is unforecastable to a degree due to the potential meddling hand of government.

I know of two individuals in an old folks home… same age… same deteriorating condition. One has a good net worth with good income. The other has little of anything. The one with net worth and income pays $4,000.00 per month for care, food and shelter (after tax so more like $6,000 before tax dollars)… the other is subsidized and pays just $1,200.00 per month for the same thing. Now does this make sense at all? Guess it depends what side of the fence you are on right?

Moral of the story… we must all save, save, save so that we can be taxed, taxed, taxed so our brothers and sisters who enjoyed life and spent it as they earned it, without saving for that rainy day, can be cared for in old age as we hope to be able to care for ourselves.

#208 timbo on 10.31.10 at 10:51 am

107 weeks to clear banks housing backlog. WTF?

http://blogs.wsj.com/economics/2010/10/30/number-of-the-week-107-months-to-clear-banks-housing-backlog/

buying property in the US with that much shadow inventory is insane. Prices have nowhere to go but down. Without public money to stabilize the market (false bottom) it will self feed as more and more people give up and walk. Even with public money I don’t think it will hold as people are gaming the system now.

Checked out a seattle blog and people were actually defaulting, saving up for 1-2 years before estate sale and then using a straw buyer to re-purchase home. It does not seem legal but the mindset has really changed.

#209 S on 10.31.10 at 10:51 am

I am perplexed at the emotion some posters here exhibit towards gold bugs and their views. It seems this website is devoted to real estate and other economic issues and holding gold falls into that category. Love it or hate it, it is at least on the subject.

On the other hand there are posts not related to the spirit of this blog at all, such as (but not limited to) the ones authored by Nostradamus Le Mad Vlad which seem to draw no criticism at all. Now, I occasionally do check out the links NLMV posts here and I’ve had a few good loughs so no complaints here. How do most of these relate to Garth’s Real Estate blog, however, is beyond me.
Just wondering…

#210 miketheengineer on 10.31.10 at 11:26 am

Garth et al:

Nostradamus Le Mad Dude:

Thanks for the links

1 week till the tipping point.

In case you haven’t seen this yet, Alex Jones and Linday Williams discuss the US Conditions at present.

There are 5 segments. In one of those segments, Mr. Williams states…..”get 6 months of Food and Water because it is going to get worse”

Enjoy the link:

http://www.youtube.com/user/thealexjoneschannel?blend=1&ob=4#p/u/31/WNJ95qLAyac

#211 Sail1 on 10.31.10 at 11:33 am

#160 Marty

Great blog… but you son of a ‘b, I got you pants down today.

You take this way to seriously, look at it as entertainment. Use what you like and throw away the rest. Seems like for you its sticking to firmly to the peanut butter.

#212 miketheengineer on 10.31.10 at 11:33 am

#204

Devil’s Advocate

Love the quote from Kipling….

#213 BrianT on 10.31.10 at 11:34 am

#207Devil-Yes, it makes sense-people should face reality and realize that once you are in an old folks home IT IS OVER-no ands, ifs or buts. That is why you do anything you can to stay out.

#214 BrianT on 10.31.10 at 11:37 am

#205Josh-Soros is heavily invested in gold and gold mining shares. Also, both Soros and Buffett are well know for saying one thing (advising you to do one thing) while doing the opposite.

#215 S.B. on 10.31.10 at 11:44 am

All the 20 and 30-somethings who are buying all the 1, 1 + den, and 2 bedroom condos for 300-550k in my concrete jungle area of Toronto, what will occur when they wish to raise a few kids and enjoy & pass on the simple pleasures of their childhoods: a game of catch, or mowing the lawn, tending to a garden, backyard pool or BBQ, making a snow fort or firepit in the backyard?

When you are living 30 floors in the air with a tiny balcony, facing another block of condos 200 feet away, near the highways and railroad tracks, this is relaxing?

What happens when they try and sell their units in the few years in favour of houses, from where will the next wave of greater fools originate if interest rates are no longer at 2.5%?

#216 EB on 10.31.10 at 11:44 am

“I occasionally do check out the links NLMV posts here and I’ve had a few good laughs so no complaints here. How do most of these relate to Garth’s Real Estate blog, however, is beyond me.”

It’s just part of the net ecology – NLMV is kind of a remora attaching himself to Garth’s shark. He wouldn’t attract Garth’s page views on his own blog, so he makes an effort to provide enough useful content that his own mini-posts are welcomed. I don’t think it’s worth getting too stressed about since this kind of poster adds some occasionally useful content.
.

#217 McLovin on 10.31.10 at 11:48 am

Devil’s Advocate:

Los K-Town or Kiami were references to that fact that Kelowna BC is well on its way to becoming ground zero for the coming crash due to massive overbuilding. Just like Miami and Las Vegas. Kelowna losses will likely be the largest in the country with prices dropping 50-60%. They are down 20-30% even if your BS “stats” don’t back it up.

I think I will go with Kiami. Remember, Realtard you heard it here first and if you put in your email blasts to your lemmings McLovin wants credit.

#218 McLovin on 10.31.10 at 12:13 pm

Devils Advocate:

To address the fact that you feel that my links to actual places for sale are not indicative of the market lets focus on Waterscapes a place the pumpers tried to get me to buy:
Nearly “Sold Out” on Day 1, this the “tallest building between Kelowna and Calgary” sits 1/3 empty with dozens of beautiful lake view units for sale. My Realtard friend tells me that a place that cost $550K incl GST would be very lucky to get $400K. (Sounds like more than 10%) This was the jewel of Kiami and built by a great builder and it’s down 25-30% IF one can get a bid. Want rent it? Again an 1100 sq ft 2 br condo of similar cost (no view) in Yaletown gets $2500 min per month these units languish for months looking for a renter at $1500 a month. What a joke. Kelowna doesn’t even have enough people who can pay $1,500 a month!

Let me guess, your reply: “Well McLovin, this is a one off situation and is not indicative of the true nature of Kelowna. It was sold at the height of the market and while the market was not overpriced then, this development was. The market is now currently underpriced. BLAH BLAH BLAH, Realtor speak”

Devil’s Advocate you have absolutely no credibility. While I find it brave of you to expose the fact your are a Realtard to the wolves on this Blog you are actually reinforcing the negative stereotypes of your profession by refusing to acknowledge the true state of the market in Kelowna. You stubbornly cling to old stats and not look at what is happening to today and how it will affect “official” stats in the months to come. Kelowna is an a power dive and everyone knows it but you (and your clients sadly)

I may look you up at Starbucks in 2012 if I decide to buy up there for 50-60% todays prices. Oh wait, I could buy at Invue for 40% today! (But I’m sure that’s not indicative of the real market right?!)

http://www.invueliving.com/

#219 dark sad person on 10.31.10 at 12:27 pm

#200 Got A Watch on 10.31.10 at 9:28 am

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

Sounds to me like you wound your Watch too tight-or-
maybe-it’s-just you-who’s-wound-too-tight? – - – - – - – - – -
Of course you missed the “irony” of someone named
“dark sad person” ribbing someone named “daystar”
btw–if you don’t like the name DSP–take it up with “G”
he named me that-way back when i said Bond rates would fall-which indecently came true-
how about that huh-

I see you always have “advice” on what people should be-or should have been trading in-or even how people should be spending their afternoons-ya know-the way you do-

REE and U–I’ve been in both since the bottom-but unlike you-i don’t come on here bragging or trying to influence anyone on when to buy or sell something-or calling a top in something-like Daystar did and if you could see past the end of your own self righteous nose and were capable of understanding my “over your head” comment-
That all the reasons he gave for holding Gold-are not the reasons anyone “should” hold it-or sell it-at least not anyone who knew actually knew anything about it–

So-you can just scroll by my name and I’ll suffer the consequences of the loss-or-
Learn to read-learn to accept the fact that “irony” is hard to get across on a chat board and the intent can easily be misunderstood-
I too like a lot of stuff Daystar writes-so how’s that grab ya?

You see it’s like this-
G doesn’t want people advising others to buy Gold on this board and i actually agree with him-
On the other side of the coin though-he also should not want people advising selling it either-cuz-
There’s two trades-in that sentence and people can get their ass burned doing either one–get it?

So keep trying to take control of the tone of the board and how and what people should say and what bugs you and whine and snivel and have a great day-

#220 jess on 10.31.10 at 12:39 pm

=
http://www.washingtonsblog.com/2010/10/how-did-banks-get-away-with-pledging.html

Tuesday, October 26, 2010
How Did the Banks Get Away With Pledging Mortgages to Multiple Buyers?

……”Bakowski sold the mortgage assignments to
multiple investors, promising high rates of return and using all the money he generated to “keep the scheme afloat,” according to his plea agreement.” (florida)
…..
National Bank of Keystone, WV. One of the worst failures per $ of assets in FDIC history. The management hid a Ponzi scheme in the loan servicing area for five years. Paid interest to investors with their own principal. Two auditors missed the fraud and later were sued by the FDIC acting as receiver for the dead bank.

Friday, October 29, 2010
Fraud Caused the 1930s Depression and the Current Financial Crisis

Shiller said the danger of foreclosuregate — the scandal in which it has come to light that the biggest banks have routinely mishandled homeownership documents, putting the legality of foreclosures and related sales in doubt — is a replay of the 1930s, when Americans lost faith that institutions such as business and government were dealing fairly.

The former chief accountant of the S.E.C., Lynn Turner, told the New York Times that fraud helped cause the Great Depression:

The amount of gimmickry and outright fraud dwarfs any period since the early 1970′s, when major accounting scams like Equity Funding surfaced, and the 1920′s, when rampant fraud helped cause the crash of 1929 and led to the creation of the S.E.C…”

http://georgewashington2.blogspot.com/2010/10/fraud-caused-great-depression-and-this.html

#221 charles on 10.31.10 at 12:44 pm

Oct. 29 (Bloomberg) — John Pottow, a professor at the Univesrity of Michigan Law School, talks about a study showing bankruptcies among U.S. retirees increased. Pottow speaks with Mark Crumpton on Bloomberg Television’s “Bottom Line.” (Source: Bloomberg)

http://www.youtube.com/watch?v=K9Skmkxu1Xc&feature=sub

#222 Taxpayer like everyone else on 10.31.10 at 12:51 pm

209 S – this blog is based almost entirely on emotion. Our
host starts it everyday trying to whip up the dogs. People
are sad they cant afford a house. People are fearful of
losing their savings. People are angry at the govt. Some
are jealous of others success.

Have you ever tried to turn down the emotion of a ranting
blog dawg? It’s interesting. Blogger ‘A’ goes on about a certain topic. Blogger ‘B’ presents strong evidence tha ‘A’ has reached an incorrect conclusion. Two things usually happen 1) a big fight or 2) ‘A’ continues to bark but
changes the direction, ignoring ‘B’ completely.

Seldom is there logical debate.

And the reason Mad Vlad should be allowed to post? I only check his links very occasionally bu I’m all for
keeping him as I can’t recall him insulting or fighting with
anybody.

#223 culler on 10.31.10 at 12:56 pm

Shiff is pumping his own investment business, Euro Pacific Capital. Wake up. — Garth

Pot calling the kettle black?

What is being pumped here? A $20 book? Horrors. — Garth

#224 Timing is Everything on 10.31.10 at 12:57 pm

#205 Josh said – “The average person is risk averse, and would be more comfortable with a portfolio that Garth is recommending, which will provide stable, constant returns.”

Agreed. Mostly because ‘average’ folk have to work for their investment dollars, some very hard. No silver spoon, no large inheritance to ‘play’ with, no lottery win. But, if folks play their cards right, most in Canada, can have a ‘good life’. As Garth said…That is the goal.
Some risk is required, know your limit, play within it.
There are many paths to that ‘good life’….and many definitions.
I too may be sending Garth an email, with a question or two….That time in our life…If he promises not to call me a ‘dipstick’…or worse. ;)

#225 bill on 10.31.10 at 1:18 pm

hobbitt

http://www.vbce.ca/index.cfm?fuseaction=fx_services.Gold&Silver

#226 Dan in Victoria on 10.31.10 at 1:19 pm

Kitchener 1 @ 203
“If you don’t take profits then you haven’t made money”.
I would add, you’ll never go broke taking a profit.

#227 Dan in Victoria on 10.31.10 at 1:55 pm

S @ 209
Just look at it this way, were making cookies with a bunch of diffrent reciepes.

Some turn out some don’t.

I like to think of Mad Vlad across the water as the sprinkles on top.
Some days I want them, some days I don’t.
But I like the option.

#228 Dan in Victoria on 10.31.10 at 2:01 pm

Mike the Engineer @ 210

Lots of panic, the last while a whole bunch of “sites ” have crashed, broken up, closed membership, and splintered.
Interesting. Good to see you around a little more.
Things Good?

#229 jimmy on 10.31.10 at 2:06 pm

Harper needs to cut some fat, too many double downs. Harper is a lousy manager of our finances bout time to bring our budget in line and stop borrowing money. Bring back Paul Martin, he knew how to do things right. All the pain we suffered for Canada to balance the books have been for not and now we are 50 billion in the whole we untold billions in future CMHC liabilities.

Don’t tell me that the economic crisis couldn’t have been forseen that is if all you watched was 100 Huntley Street.

#230 eaglebay on 10.31.10 at 2:13 pm

#37 CREA Jerk

You don’t own metal because the wife says NO?
What kind of man are you?
I suppose she made you buy a house too.

#231 hobbitt on 10.31.10 at 2:23 pm

#220 bill on 10.31.10 at 1:18 pm

http://www.vbce.ca/index.cfm?fuseaction=fx_services.Gold&Silver
=======================================================

While I thank you for your link, my point is, gold coins are not as liquid an investment as the sellers would have you believe.They make believe you can go back to the Scotia Bank where you bought it and exchange it for money. Not so, the kind lady just laughed and said “We sell it, we don’t buy it!” If I bought a car from Toyota, they would give me SOMETHING for it when I wanted to sell it.Not sorry, you need to take it to Toronto. They are the only ones buying used cars. But hey! We can sell you a new one.

If I have to drive to Vancouver or Toronto to get rid of it, that’s not always an easy thing to do.(health issues)

People from Toronto and Vancouver, I don’t expect you to understand how far away the ends of the earth are from Saskatchewan.

#232 eaglebay on 10.31.10 at 2:25 pm

#43 Bigs Nasty
RRSPs are not the best idea. They will be taxed at 100%.
If you invest in your own self administered account the taxes would be much less. Only half of capital gains are taxed. Another Government scheme. Pay now or later.
And don’t forget that the $25,000 Home Buyer’s Plan has to be repaid or you’re taxed on it.

#233 S on 10.31.10 at 2:37 pm

#216 EB on 10.31.10 at 11:44 am
#222 Taxpayer like everyone else

Agreed with both of you hence I said “no complaints here”. I am just perplexed at the number of negative comments targeting those who favour gold as investment vs very little negativity towards links posted by Vlad which are full of conspiracy theories. As far as I’m concerned NLMV’s post are welcome and the links sometimes interesting to browse through. Likewise, though, the gold bugs should be left alone as well as they sometimes make good points.
On another note, a while ago there was a documentary available on line that perhaps someone here would remember. It was based on the Kondratiev wave theory and postulated that social moods are not reflections of economic realities of the day but the other way around: economic crises reflect social moods fluctuating with Kondratiev wave. I’d like to see it again so if anyone here could post a link I’d appreciate it.
Thanks

#234 daystar on 10.31.10 at 2:53 pm

#190 dark sad person

Are you picking on lil’ ol’ me? While some of your pontifications about me may be true… what in the world do you have against Carlos Castaneda, what did he ever do to you, whats Carlos got to do with it?

Listen… I can understand your angst against my moniker… its bright… y’know… something less than preferred by a “dark, sad person” but just leave my buddy Carlos out of this ok? ;) (oh yeah, and if you disagree with my own opinions, maybe try to… er… ah… explain yourself? Just a thought, especially concerning my opinioned reference to the future of market index’s, I’d like to hear that one. If you wish to debate, y’know, participate in the fine art of persuation, personal attacks won’t be enough to make a dent, lets fluff it up some kind of meaningful counter next time ok?)

One love
Peace… out

#235 Analyst Analyzer on 10.31.10 at 3:08 pm

Garth, I hope your portfolio does contain at least 10% of gold and silver companies. Lots of gains there although you might want to wait for a correction before getting in.

#236 eaglebay on 10.31.10 at 3:13 pm

#91 Kitchener1
“if consumer signal their willingness to save instead of spend, its going to be tough for equity indexs the world over.”
Why would that be?
What would happen to the savings?
Invested in businesses, production, technology or R&D maybe?
Wouldn’t that be good for the real GDP, job creation and to grow the economy?

#237 Don on 10.31.10 at 3:14 pm

I have no problem with NLMV, as I occasionally check out the links provided. A little doom and gloom, but I tend to never leave a rock unturned in forming my opinion. A little doom and gloom is unhealthy for critical thinking, just can’t let it get the best of you.

Devil’s Advocate, there are many ways you can remain anonymous and provide some real hard facts to support your point of view. Judging by the time you spend on here you are not spending that much time with current clients, of course I may be wrong, but I thought being a realtor meant always being busy. You dedicate a fair deal of time to this blog, more than the average poster for sure. I wish you well in the future I sure you will be in the high end – low end as they are the only properties moving at the moment.

I am my friends are sitting on the sidelines as we knew this was coming to a theater near you. I am not jealous of others, I am happy for them, some made some money others have wrapped themselves in debt as a result of peer and parental pressure. I called it back in 2005, reassured my friends and family that this can’t last, boomers building big houses for a short stay in places where the local economy cannot sustain the prices. Take away the drug trade in Vancouver and a certain amount of the real estate activity would also go down. Kelowna is a nice place in the summer, a lake and desert like mountains, not much else.

#238 InvestorsFriend (Shawn Allen) on 10.31.10 at 3:39 pm

Dan in Victoria at Number 226 states

you’ll never go broke taking a profit.

Hmmm Warren Buffett says in his 1987 letter

http://www.berkshirehathaway.com/letters/1987.html

Of Wall Street maxims the most foolish may be
“You can’t go broke taking a profit.”)

Dan, you better give Waren a call and straighten him out on that…

#239 Devil's Advocate on 10.31.10 at 4:04 pm

#213 BrianT on 10.31.10 at 11:34 am
#207Devil-Yes, it makes sense-people should face reality and realize that once you are in an old folks home IT IS OVER-no ands, ifs or buts. That is why you do anything you can to stay out.

True, but sometimes things happen that you don’t expect and incapacitate you beyond your ability to choose the alternatives. A young mind trapped in a useless body subsequently pumped with prescription drugs benefiting only the pharmaceuticals and keeping you on a schedule of convenience for your caretakers. Saddest thing I’ve ever witnessed. I refuse to let myself go there.

#217 McLovin on 10.31.10 at 11:48 am
Devil’s Advocate:
Los K-Town or Kiami were references to that fact that Kelowna BC is well on its way to becoming ground zero for the coming crash due to massive overbuilding. Just like Miami and Las Vegas. Kelowna losses will likely be the largest in the country with prices dropping 50-60%. They are down 20-30% even if your BS “stats” don’t back it up.

I think I will go with Kiami. Remember, Realtard you heard it here first and if you put in your email blasts to your lemmings McLovin wants credit.

Well you certainly went on quite the little tirade there didn’t you McLovin? Take a chill pill Buddy. The stats I provided are real… dispute it all you want what I told you is real.

Now on the other matters of your little outburst Mr. McLovin… let’s address these links to those FSBOS you suggest are a good indication of what’s going on in the market shall we?

Both were condo apartments offered for sale in the $1,000,000 price range and both had price reductions of about $100,000 as I recall. That is a 10% ASKING PRICE drop. And that asking price is of a FSBO that has not sold… how can you possibly say that is any good indication of what the market is doing?
Now condos are definitely the weakest link in our real estate markets today. Apparently you were preyed upon yourself by a developer who told you they were near sell out. These developers were building properties they had no intention of selling to end users. They were building to sell to property speculators. I could go on and on about the Bull Shit going on in that segment of the market. Suffice it to say I believe, in principle, we are on the same page with respect to that segment of the market other than it is not down by 30 of 40 or 50%. You need to look at real selling prices McLovin not asking prices. You will be happy to know those developers who started out asking lofty prices are not getting them, have now missed the market and are paying dearly for their miscalculations…. but the drop even in that seqment is not nearly so severe as you believe.

I would love to sit down with you McLovin and explain how the market really works and enlighten you on its current state so that you might make informed comment if not financial decision in the future with better knowledge such that you don’t hurt yourself but that, I can tell would be a risky venture for me to undertake. You appear very hostile and I am not about to jeopardize my own welfare for the sake of yours.

Really you are so wrong on so many levels… best advice I can give you right now is to start with the very basics; please don’t run with scissors in your hand McLovin. You got a lotta learnin’ ta do. Please don’t hurt yourself by doing something stupid before you do. You don’t have to listen to me but please, open your mind if not a book.

#240 Devil's Advocate on 10.31.10 at 4:33 pm

#237 Don on 10.31.10 at 3:14 pm
… Devil’s Advocate, there are many ways you can remain anonymous and provide some real hard facts to support your point of view. Judging by the time you spend on here you are not spending that much time with current clients, of course I may be wrong, but I thought being a realtor meant always being busy. You dedicate a fair deal of time to this blog, more than the average poster for sure. I wish you well in the future I sure you will be in the high end – low end as they are the only properties moving at the moment. …

Don, I agree, I am on here to much. That being said my business allows me opportunity to post in between appointments etc. I am often in front of two computer screens have an iPad and an iPhone and can easily hop on the net at most any time. Sometimes I do so in haste and my postings, as you will no doubt have noticed, are riddled with errors as I have no time to proofread.

Now that being said I do not have time to seek out all of the references to the truths I post here so that you can easily confirm or deny them as so. If anyone wishes to dispute that which I post please feel free to do your own research and reply with valid refutation. Please though do not refute with an argument riddled with it’s own flawed logic as I have seen so many times before. I do not have the time to explain facts to you and correct your ineptitude.

Clearly by these statements I do hold firm that what I say is truth. Admittedly I have made some attempt of my own at forecasting the future of the real estate markets but that is my opinion based on historical fact and would never imply that someone ought make decision based on my forecast. I offer so only as opinion and always state that my crystal ball is not so clear as others believe theirs to be.

A further matter of fact is that I have stated I am in much agreement with Mr. Turner on many points – something the Blog DAWGS seem unwilling to acknowledge or hear. That being said, on these Blogs there is much I disagree with Mr. Turner on – mostly his malicious depiction of the real estate industry. Yet I know Mr. Turner himself uses and individually respects members of that industry.

Yes I do spend way too much time on these blogs. I must do something about that character flaw of mine which compels me to right wrongs. If I don’t learn to abstain I should probably at least change my name from Devil’s Advocate to Don Quijote. (oddly enough I have grown quite fond of D.A. and am reluctant to let him die – and that is just plain weird)

In closing don’t worry about me Don, I work as much as I need to and sometimes more as I want to.

#241 Ben on 10.31.10 at 4:35 pm

Remember the pump on real estate, well now the pump is yellow

http://campaign.r20.constantcontact.com/render?llr=orkbnrcab&v=001_3wh4u6-fR-IsOgCEL8dBHDGf4jZ0Hsp9AikFal5noihNoLuo7zX6kVvyghPDeSymnGNNJF5pf9Lq1xuuiMjgKTN0vn3gBSYBMYkQk27-Ec%3D

#242 Devil's Advocate on 10.31.10 at 4:47 pm

#237 Don on 10.31.10 at 3:14 pm
… Devil’s Advocate, … I wish you well in the future I sure you will be in the high end – low end as they are the only properties moving at the moment. …

And thank you for that. There is a kind of truth there Don… There are unique specific pockets in the market which present tremendous opportunity right now. I am excited about these opportunities which I intend to exploit to the advantage of my clients and subsequently me. Trust though that there is no vulturistic preying upon others in this plan…and that is the beauty of it… it is a win for Sellers, a win for Buyers and a win for me! Perfection! Love it! Been waiting a long time for this… knew it was coming… just took a little longer than I thought it would… history may not repeat but it sure as HELL does rhyme

;-)

#243 daystar on 10.31.10 at 4:48 pm

#200 Got A Watch

Hey, thanks for the compliments, there. Facts are, I don’t always agree with everything I say, especially in hindsight. Its human nature to make mistakes, and plenty of them but what I find is that the motive behind the search for the truth is more important than what one actually finds. One is lost without good will behind them and it shows here with each and every comment on this site as an example.

Assumptions… judgment… its best to embrace the fact that we are products of our environments and look for the big picture when we can because our answers do lay there. How many of us are ego driven with our opinions or participation? Too many to be truthful. Some question… others teach… others crack funnies… and some just boast or belittle to build themselves up and its obvious to the readers just who they are.

Its when we park our egos and search for the truth that we actually understand what it is that we find. I don’t mean to sound like Carlos here, but they say knowledge is power and it is… but only in latent form. True power comes from wisdom, the bestest serrendippidous application of the knowledge we hold. It should go without saying that incomplete knowledge or incomplete truth holds us back, but even if its complete, without the right will behind its use, it lays wasted because the truth often remains unrecognised, its beholder made blind to it which is why I’m openly questioning the motives of the readers and participants in this site. Why are you here?

Most of us come here to this site because we want to be wise with our money and while money is the numerical common denominator of all values, its the reason, the motive of why we pursue it that should be up to question because our motives can literally blind us from reality. Some of us want to get rich as nothing more than an ego self getting mechanism. Thats a fact. To brag, to buy toys and spouses, to feel intellectually and monetarily superior, to be the center of attention. Others… want to make money so they can provide for their loved ones and themselves as they get older so they don’t end up entirely dependent in their winter of life. Regardless of motive, we all have lessons to learn but some are so much easier to teach than others…

What does one say to someone who is caught up in success so much so, that they forget to cash in regardless of their motives for profit? I’ve been a DIY investor for 11 years now, mostly in equities, techs and energy in the begnning, but mainly in mining. I’ve been a part of emotion, greed… of fear… of hope… of loss and gains. I’ve made all the classic mistakes. Bought to high, sold to soon, didn’t trust my initial instincts… but even so, its shaping up to be another year of healthy gains. Take heed readers, I’m an experienced investor that knows what to look for. (yes, I’m building myself up for a reason, for readers to take very seriously what I say next)

You are so right, Got a Watch. One has to have an exit strategy. One has to have some kind of idea where market indexes and sectors are headed and where the market caps are of what they invest in, or they are gambling and not too wisely. While there are those who don’t like me calling a peak on gold, it should be discussed. The markets are forward looking. How much of the falling U.S. dollar has already been priced into gold? I’m willing to opinion that most of it already has with gold with upside shrinking dramatically. Lets ask ourselves… does gold as a commodity have the potential to double over the next 2 to 5 years now? Its $1358 an ounce. Does it have the potential to hit $2700? Highly doubtful. One has to ask whether the world sees fit to mine deposits that hold less than a gram of gold per tonne to see the answer to that one, banks have better plays in mind. But what of natural gas at $4.00, a bushel of spring wheat/durum at $4.00 or less, of Lithium trading at $3.50 to $370 a pound… do these commodities as an example have the potential to double within 2 to 5 years? More so than gold I would think, its a no brainer. Gold to me, like RE, has lost much of its lustre and shine.

I’m calling for gold to top out around $1450 an ounce, Ventures to top out at 2100 and a market selloff starting some time around January. I believe the market runup will all by itself be enough to trend markets lower, but there is a risk of a U.S. state declaring bankrupcy that drops markets lower, perhaps signifigantly when coupled to prior market valuation runups, falling RE environments and high consumer debt, between 3 to 9 months from now. Thats my opinion as an investor, and I’m comfortable with it, thats what my instincts tell me.

Over the long haul, the real estate environment is a loser for 7 to 10 years, depending on the severity of the bottom here in Canada and as assets deflate and taxes rise, so will consumer spending shrink and jobs disappear, especially in construction (real estate is currently 20% of our GDP) and that bodes ill for provinces like Ontario. Intergovernmental debt to GDP rose in Canada by close to 7% last year. This is clearly unsustainable. Household debt to GDP is also growing at unsustainable levels. Canada has experienced a credit expansion under Harper that is unprecidented and in my opinion, quite dangerous to the health and well being of this nation and yet, this party still somehow manages to get 35% of Canada’s votes in this nation. Whether or not we face our present problems now or kick the can to face growing problems later, public debt is swelling and tax increases along with interest rate hikes are certain regardless of who we elect. We’ve got some tough times ahead, especially if we keep the current government that stays its course with more record deficits so what I”m saying here is… take profit in good times. Its what the rich do well. Bunker in. Don’t get lost on successes because they can be quite… temporary?

#244 dark sad person on 10.31.10 at 4:51 pm

#234 daystar on 10.31.10 at 2:53 pm

Just a thought, especially concerning my opinioned reference to the future of market index’s, I’d like to hear that one. If you wish to debate, y’know, participate in the fine art of persuation,

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

Sure-would love to see what your seeing-since from my understanding of your post- you’re calling the end of a 10 year bull–

About the monikers?
People need to lighten up a bit-what could any of it “mean” in the sense that someones blog handle could actually mean anything-

#245 Get Real on 10.31.10 at 4:55 pm

Hi Garth

Waiting for your next article.
This thread has gone too off track

#246 Dan in Victoria on 10.31.10 at 4:55 pm

SA post 238.
I’ll let you hi lite the good parts for me / others.

#247 Jeff Smith on 10.31.10 at 6:14 pm

>#45 Tim on 10.30.10 at 12:27 am
>Seattle hit by Foreclosures
>http://www.nwcn.com/news/business/Foreclosure-Epidemic-Hits-Seattle-area-106032243.html

>Seattle registers a 71% spike in foreclosures.

Only 2.5 hrs away from Vancouver, same climate, right
>on the coast, better arts scene, home of Microsoft and Boeing, unemployment rate same as Vancouver at
>8.5%…Guess what’s coming to Vancouver…

I can see one glaring difference. Vancouver has Chinese immigrants coming over with boatload of money to keep prices going up up.

#248 S.B. on 10.31.10 at 7:48 pm

Here’s an account and rationale from somebody who bought a pre-sale Wall Centre False Creek condo across from Olympic Village. It’s different there!?

http://forums.redflagdeals.com/need-advice-jumping-into-re-market-uncertain-958681/

“I am a little nervous as my general feeling is very bearish regarding the economy. However, given the prices and the realization that Vancouver RE prices will probably continue to rise (50k new people move here a year from all over the world/Canada and there is not that many units being built) I think I should be in the clear.”