Liquid love

Before that irritating holiday interruptus, this pathetic blog dropped the names of a few yieldy assets. Hope you were paying attention. This is what 2012 will be all about.

No, there will not be an economic apocalypse next year. No 2008 rerun or Lehman II. But markets will be volatile, choppy and dramatically unpredictable even though they’ll end the year higher. Perhaps arrestingly. In any case, your mutual funds will likely flounder and your equities flail. More than ever, income will be critical, especially for all the wrinkly people this site so loves to torment.

Next year, your first love should be liquidity. Financial assets will outperform real ones, including precious metals and certainly real estate. It could be the last period in which people talk about lost years in America, imminent collapse in Europe or global reckoning. A year from now I’d bet we’re all in a much better frame of mind, except for those who still have their net worth locked in illiquid bricks and mortar.

So if you don’t own assets that (a) are instantly convertible into cash, (b) far less volatile than stocks, (c) not correlated to equity markets and (d) pay you to own them, it’s time to start getting some. This is why I’m hot on preferreds, for example, which all this year paid their owners a yield of 5% or better, let them collect the dividend tax credit (and pay 80% less than with a GIC), and remained rock solid in value even as stocks soared and melted.

Of course, you need to get the right kind of preferreds, issued by the right companies. Personally I like perpetuals with fixed dividends, which just keep churning out tax-efficient income. And if they’re ever recalled (an unusual event) by the issuer, you’ll probably get a capital gain to boot. The risk is a sharp rise in interest rates, which would lower the capital value but not affect the payments. The odds of that happening are slim, but if it does take place, preferreds will cost less and I’ll be backing the Hummer up at the loading dock.

But this isn’t about preferred shares. If you want, I will devote an entire, sensuous, throbbing post to that topic. But not today. So keep your pants on and let’s talk about REITs.

Besides preferreds (and bonds, and exchange-traded funds), every 2012 portfolio should include real estate investment trusts. I’ve already given you the names and recent yields of a number of the top contenders, which coughed up yields of 6-12% this year, when most investors needed a magic touch just to break even. There’s every reason to believe this will continue.

To counter the idiot comments about to be written, remember that REITs do not buy houses, strip malls in Red Deer or triplexes in Etobicoke. They’ll be largely unaffected by any major correction in residential real estate values. Instead, they gobble office towers and complexes, sprawling suburban malls, chains of retirement homes or tens of thousands of rental apartment units. As such, REITs are all about one thing. Cash flow. They buy income-producing real estate using the usual leverage, collect rents and distribute cash to unitholders.

Last year major Canadian REITs jumped in value as group by almost 20%, and at the same time spit out an average yield of 5.5%. Over the last decade they’ve doubled the performance of the TSX, and trumped the increase in house prices by an even wider margin.

Unlike owning an actual piece of real estate, REITs are totally liquid. Most trade on equity markets and can be bought or sold with a call or a click. Unlike your investment condo, you know exactly the price of your REIT every hour. When you buy or sell, there may be a trade fee of a few bucks. When you unload your $300,000 condo, it’ll probably cost you $15,000.

You don’t need to get a mortgage to buy REITs, purchase mortgage insurance, try to find a tenant who won’t glue tin foil to the windows, or struggle with negative cash flow. There’s no property insurance to buy or land transfer tax to pay. No painting. No toilet floats.

REITs are cash flow positive and pay regular distributions. You don’t need to hire a realtor, suffer through showings or have morons walk through your asset in order to sell it. In fact, you can even buy an exchange-traded fund which owns a mess of REITs (XRE), giving massive diversification across everything from hotels to bank towers.

There are risks (as always), but they pale in comparison with buying a condo in Toronto or Vancouver, especially one yet to be built. Financial markets could start selling off, taking REITs with them. But unlike in a real estate correction – when you might wait months (or years) to unload your property – trust units can be sold immediately with the cash hitting your account in three days.

But the greatest difference between real estate and real estate trusts is this: properties cost you, while REITs pay you.

Why would you not want to own this stuff?

Especially with what’s coming.

172 comments ↓

#1 T.O. Bubble Boy on 12.26.11 at 10:02 pm

Agreed!

Some juicy, juicy REIT yields have presented themselves over the past few years.

I tend to have XRE mixed with a few individual REITs that I’ve picked up as prices dip.

#2 Cliff on 12.26.11 at 10:06 pm

I’m renting, liquid and investing exactly as you prescribe.

Thanks Garth.

#3 Helpful Advise on 12.26.11 at 10:10 pm

FIRST!!!

#4 Ben on 12.26.11 at 10:15 pm

Top Canadian REITs

http://www.myownadvisor.ca/2011/12/13/top-canadian-reits/

#5 T.O. Bubble Boy on 12.26.11 at 10:17 pm

Looks like the best real estate investment in Toronto is a run down house near Yonge & Sheppard with a lot that’s big enough to sell to someone (HAM) to build a McMansion.

Take your pick of these beauties:

$799k with a scary rental suite.
$825k with only 1 picture, taken from across the street to ensure that you can see the giant McMansion next to it.
$858k in “great condition” (so great that there are no pics of the insite).
$899k with a ” rare opportunity to purchase 2 adjoining properties” (you mean buying one run down house on its own isn’t an opportunity?)
$1.1M with no pictures at all!
$1.45M with plenty of pics that show this place hasn’t been updated in 50 years.

Being a realtor in North Toronto must be damn easy — no one is even expecting to move in!

#6 A Fan in Van on 12.26.11 at 10:20 pm

I’m very happy with both of the REITs I own: XRE and Riocan. Looking forward to a post on preferreds. I’ve had lots of trouble figuring out how to pick/buy them. All I’ve managed to acquire is 500 shares of XPF so far. I’m planning to invest at least another 20 or 30 k in preferreds. Would love it if someone (cough … Garth … Cough) could point my research in the right direction!

#7 LJ on 12.26.11 at 10:20 pm

http://www.alt-market.com/articles/438-the-economic-solutions-of-vampires

#8 smartalox on 12.26.11 at 10:44 pm

Thanks Garth, your last couple of posts make for excellent New Year’s resolutions! My wife and I will have to dump our mutual funds next year, because the IRS and her dual citizenship are tightening the tax noose around any form of mutual fund. Can anybody tell me if the same applies to trusts, like REITs? Does the IRS offer the same break on dividends that CRA does?

#9 not 1st on 12.26.11 at 11:02 pm

People can’t get enough leverage to own REITs in a huge amounts even if they are a good investment. Most simply don’t have a few hundred G laying around to get a real steady juicy income from them. You can’t factor capital gains into expected income, only dividends If they did have the initial capital, they sure as hell wouldn’t be worrying about risking earning a return from it. Right or wrong, most would have it socked away in a safe GIC.

And if you don’t have the money but still want to invest, no bank will borrow to you at 3.5% to invest at 6% on that scale, but they will borrow to you to buy real estate big time. 10% cash translates into 10 times that in real leverage with the CMHC behind you. Doesn’t that tell you something about what assets they deem safe as security? Why won’t the bank borrow to you to invest in their own preferred stock?

Of course it will. — Garth

#10 Uh Oh Canada on 12.26.11 at 11:04 pm

Yet Again! Our hardworking host has taken precious holiday time to post more financial information to benefit the masses. Garth, why do you care so much?

#11 Jon B on 12.26.11 at 11:24 pm

Let’s be sure to point out that Real Estate Trusts are a pretty solid investment, while Real Estate is shelter with the potential to be a wise investment. I’d rather buy a condo in a sunny American State and get the benefit of shelter with a long term hold strategy for an eventual captial gain than collecting my pathetic 5% dividend while sitting around in rainy Vancouver.

#12 Sue on 12.26.11 at 11:43 pm

Garth, would you PLEASE put a moratorium on the word “pathetic”? It’s, well, pathetic, how often you use it.

Try:

commiserable, deplorable, distressing, feeble, lamentable, miserable, piteous, pitiable, pitiful, puny, rueful, sorry, woeful, wretched….

Can anyone else help come up with some alternatives?

I cringe when it’s so often overused…..surely a writer of your talent can be more original?

Sorry to be critical. Love your blog. Really.

#13 Mike Rotch on 12.26.11 at 11:49 pm

Garth seems to be talking sense here.

What I’m wondering is if he’s considering a change in his model portfolio breakdown.

If I’m not mistaken, as of “Money Road” and the last couple years of blogging, he’s been saying

-60% growth investments (ETFs rather than individual stocks)

-40% fixed income investments (half in bond funds, half in preffereds and REITs).

So, in these troubled times, with preferreds and REITs looking maybe more attractive, do we look at changing the model portfolio to 50:50, with maybe 30% in preferreds+REITs?

Would love to see discussion. I can see valid points for changing, or for staying the 60:40 course.

Cheers,
Mike

#14 Bottoms_Up on 12.26.11 at 11:49 pm

#90 InvestorsFriend (Shawn Allen) on 12.26.11 at 3:28 pm
———————————————————-
I wasn’t complaining that I never received an inheritance that I had been banking on — in fact, I didn’t know the man, or his financial position, as he decided to remove himself from his immediate family many, many years ago.

I was complaining that one can contribute a lifetime of payments into both a work pension plan, and the CPP (together hundreds of thousands of dollars, if not more, after investment and compounding), and get next to nothing from it. It’s like a big eff’in vacuum…a black hole. A big black hole. This was very surprising to me.

I appreciate you enlightening me on how it works, but it really doesn’t seem right. And the thought that I could make CPP payments (tens of thousands of dollars) that fund you until you’re 95, but if I croak at 60 there’s nothing in it for me or my family, well that makes me sick. And the fact that if I’m supported by CPP to 95, and you die early and get nothing, that makes me sick too.

So really the CPP is a mandatory life insurance (pyramid) scheme, except in this scheme those at the bottom (the ones that die younger) never get paid.

#15 NotAGreaterFool on 12.27.11 at 12:04 am

I have been noticing a few homes for sale in Toronto that did not sale and are now showing as rentals.

In other cases, the homes we’re originally posted for sale, and while they are still for sale, they are also available for lease.

Example A:

http://www.realtor.ca/propertyDetails.aspx?propertyId=10920654&PidKey=1261727392

http://www.realtor.ca/propertyDetails.aspx?propertyId=11203651&PidKey=1640025734

Example B:

http://www.realtor.ca/propertyDetails.aspx?propertyId=11271569&PidKey=352602537

http://www.realtor.ca/propertyDetails.aspx?propertyId=11272478&PidKey=-628209369

There are others.

Is it better to rent these or own them? What does this trend mean?

#16 DonDWest on 12.27.11 at 12:07 am

I’ll agree with Garth in regards to REIT’s. I’ve always maintained the position that if HAM truly earned their money honestly and believed in Canadian real estate; they would have socketed all of their money into REIT’s.

The fact that most HAM don’t put their money into REIT’s and instead speculate on condos is all the proof I need to question where exactly the money is coming from. After all, how did HAM end up being rich in the first place by demonstrating such blatant financial illiteracy? Sure you’re not selling organs? Trading drugs? Or cutting a deal with the Chinese government?

All that HAM has done is price out the locals by speculating when the same investments that could be made with less risk and overhead via REITs. It makes greater logical sense for a foreigner to invest in our real estate through a REIT than to purchase a house, only to subsequently leave it empty in a Richmond, BC, neighbourhood. Makes little sense; and leaves one to question how that wealth was acquired in the first place.

#17 VanLarry on 12.27.11 at 12:41 am

In some cases it might be even cheaper to own REITs then exchange funds of them. XRE, for example, has a MER of 0.55. Buying the 13 holdings, thus paying only the commissions maybe cheaper then paying the MER every year.

Pinching pennies here.

#18 Trailer Park Boys on 12.27.11 at 1:25 am

I think Garth, in his usual craptic code, is saying invest in anything John Waters produces, and anything that defies gravity when the keg tap is opened.

……oh yeah….. and sell Harley stock…

#19 martin9999 on 12.27.11 at 1:31 am

”’Financial assets will outperform real ones, including precious metals and certainly real estate”’

what do precious metals have in common with real estate?! and i dont see how are they connected

garth if you are so sure about metals goin south i hope you have some bearish positions on them, but of course you dont. you always keep a good 5-15% of your portofolio in metals as you have mentioned before

#20 Nostradamus Le Mad Vlad on 12.27.11 at 1:53 am

-
“Liquid love. Especially with what’s coming.” — Well, it can’t be austerity as that’s already here. Melt? Underway. Sex, drugs, rock ‘n’ roll and geriatric boomers? The Left Coast could stand to lose a million or so (mostly politicos and lobbyists — much better off without them), but I can’t speak for the other provinces and territories.

Care to enlighten us humble simpletons?
*
Porter Stansberry misdirects Americans to the banxters’ gold standard, and Major Silver Shortage Prices are set to rocket; Gold Forecasts Of course, weather forecasts are invariably wrong; Essentials rising, yet Boxing Day spending spree. Something doesn’t click; Shops happy as people spend like crazy.

Japan’s trillions; Ron Paul; Exit Stage Left; Oz Debts; Alabama Bonds; Nine underground economies; The World’s dirtiest bank; Abandoned Another Chinese luxury city; Stock returns Seems Garth is right.
*
Transfer of Sovereignty Interesting map further down, and Soros behind anti-Putin protests, but further reasons are given here. Mainly, sovereignty is being wiped out; Ice Sculptures in China. Pretty cool and colorful; Bugging Beetles Not VW’s, flying insects; TEPCO New ideas; Ron Paul Further evidence TPTB don’t want him in.

FEMA and the police state; 5:11 clip Sausages and fines. Wot about veggies? 3:11 clip Electric Universe 2012; Vatican Secret archives released; Vending Machines Not only do they take money, they’re also mind-readers; Enron and others The untold story; Dark Magicians Big word — Vorticular — which I don’t really understand; Disappearing Mom and Pop storefronts.

#21 Mark on 12.27.11 at 2:27 am

Ummm what happens to REITs when the businesses who rent the space in those big office towers downsize because they no longer need oodles of people to sell products to the 70% of Canadians who own their houses and won’t have a lot of discretionary income?

What happens to the REITs when investors develop a revulsion to RE-backed debt, especially when no CMHC guarantee is involved, and decide simply to slow/stop lending to the REITs?

Does anyone reading this blog (or the author himself) honestly believe that REITs will be immune to an overall credit revulsion towards real estate as an asset class?

#22 westcoast on 12.27.11 at 2:43 am

A whole post on Preferred Shares: Yes PLEASE! These things are really confusing, and it would be nice to get some idea as to what they are. My understanding is most are not retractable by the holder so the principle is tied up until the bank decides to call them.

That sounds like a major drawback in terms of liquidity, but maybe I just don’t get how they work. A post on preferred shares would be fantastic.

Thanks

#23 commercial question on 12.27.11 at 2:47 am

#19 DonDWest on 12.27.11 at 12:07 am

I’ll agree with Garth in regards to REIT’s. I’ve always maintained the position that if HAM truly earned their money honestly and believed in Canadian real estate; they would have socketed all of their money into REIT’s.

The fact that most HAM don’t put their money into REIT’s and instead speculate on condos is all the proof I need to question where exactly the money is coming from.
___________

This comment is both racist and unintelligent.

#24 Mister Obvious on 12.27.11 at 3:06 am

#19 DonDWest

I’m starting to read your posts these days since the boomer baiting subsided somewhat. Good input lately. Not overly long or short. You articulate rather well and aren’t afraid of a little white space here and there.

Interesting take on HAM, the origins of which I have long been suspicious. These are the kinds of post I read and think about a while rather than skip over. And sometimes there’s a lot worthy of skipping over.

#25 Lookinin on 12.27.11 at 3:08 am

Wow! It certainly is liberating to rent vs. being stuck in a rather illiquid asset like real estate. I think Jame Altucher on his May 15/11 blog entry:

- More cash. You never have to put down a down payment that uses up most of the cash in your bank account. You’re never going to see that cash again if you use it as a downpayment. It’s just gone into an illiquid investment and when you most need it, that’s when you are most likely not able to get at it.

- Less debt. It’s true a mortgage locks in your payment. But you’re greatly in debt so you are paying interest straight to the bank that has nothing to do with increasing your ownership. In many cases it will take 20 to 30 years before you stop paying that extra interest to the bank.

- Less inflation risk. Property taxes often goes up faster than inflation whereas usually rent does not go up faster than inflation (by definition, since government calculated inflation uses rents instead of home prices).

- No maintenance. Homeowners have to take care of all maintenance. Some years that might be nothing (unlikely) and some years that may go up much faster than inflation.

- Less overall costs. When property taxes and maintenance go up faster than inflation it means you are probably not covering the costs (plus the mortgage) via renting.

- More flexibility. In a global economy, opportunities can be anywhere. I like having my flexibility.

In other words, if you are a feudal lord today, you are laying out more cash than the renter/serf, and being caught in the spider web of escalating costs in every direction. Whereas the serf has only one payment, which is often contractually laid out for years (I have a contract that specifies my rent for the next ten years with my option to renew).

Which means that the serf can diversify his portfolio to a much greater extent than the feudal baron and the serf can more easily move to take advantage of opportunities in other geographical areas (as opposed to the serfs of medieval times that Mr. Sharga compares us to).

That downpayment that the feudal baron put out will only go up in value if housing goes up in value and its completely illiquid and usually a major part of his portfolio (little diversification). And he’s flushing money down the toilet with interest (which usually doesn’t go up with inflation), property taxes(which often go up faster than inflation), and maintenance (which goes up with inflation). The serf is flushing money down with rent. But has more cash in the bank, a more diversified portfolio, and is generating liquid cash (hopefully) from other investments. Or has the cash to be an entrepreneur, move around to take advantage of other opportunities, etc. This (in my experience) more than makes up for the rent.

Some people, for their own personal reasons, like to own a home. I have nothing against that. Go for it. Just make sure its not because of the hypnosis provided by the American banking industry which props up the American Mythology.
================
Well said, don’t you think?

#26 John Melville on 12.27.11 at 5:39 am

“A year from now I’d bet we’re all in a much better frame of mind…”

Hi Garth, I really wouldn’t bet on it.

#27 BC Boy on 12.27.11 at 6:15 am

Garth, write about unpredictible housing market as much as you want BUT keep that in mind owning a property provide security. Number one rule!

Do you own a property?

#28 Incubus on 12.27.11 at 8:43 am

ref :#18NotAGreaterFool on 12.27.11 at 12:04 am

Price to rent ratio

A ) 330

B) 250

B is a better deal

#29 Canuck Abroad on 12.27.11 at 8:45 am

18 / Notagreaterfool – Is it better to rent these or own them?

Rhetorical question, I’m sure, but here is Wychwood just for fun:

3.5m @ 4% mortgage = 140k (interest component only)
property taxes = 15k+
Wychwood Association fees = 1800
Repairs and maintenance @1% = 35k (lawyer’s number but seems awfully high to me)
Purchase costs (lawyers, etc) – no idea

So, let’s say around 200k to live there for the first year if you buy it. I have ignored the downpayment which incurs an opportunity cost of 6% as well as the fact that most mortgages in Canada are not interest only so you will also have to pay down some principle.

Property taxes and association fees are here:
http://www.chestnutpark.com/sites/default/files/property_files/feature_sheets/4%20Wychwood_sgiacomelli_web.pdf

On the other hand you could rent this place for 120k per year.

If prices fall 15% you are out of pocket a cool 525k even before you pay sales commissions to unload the property, which is more than four years rent.

If you have 3.5m lying around, you could earn 210k per annum on that (6%), rent for 120k, and have 90k left over every year.

In general, I was told that a property should sell for no more than about 120-150 times a month’s rent, otherwise it is cheaper to rent. Wychwood is priced at 350 times a month’s rent, which is obscene.

#30 Stupesing in Cabbagetown on 12.27.11 at 9:12 am

#31 BC Boy – OWNING, yes. But most people do not own, they rent from the bank for 35 or 40 years. The mantra here is “debt-free and diversified”.

#31 malkoo on 12.27.11 at 9:30 am

Garth,
Now that 2011 has passed (almost), how much did you make from REITs + Preferd etc – Losses = ?%

#32 sue on 12.27.11 at 9:34 am

must come up with another tag name. I am not “Sue” #13.

I can’t wait for the new season of “For Rent” and I have a feeling a lot of Canadians will learn to love this show like I do. “House Hunters” is so 2011.

#33 Macrath on 12.27.11 at 9:35 am

#6 A Fan in Van
Would love it if someone could point my research in the right direction!
—————————————————————————

http://www.prefblog.com/

http://www.ritceyteam.com/pdf/guide_to_preferred_shares.pdf

XPF has foreign holdings no dividend tax credit on these. I`m long CPD 100% Canadian. There is also a managed ETF (HPR) .

#34 bigrider on 12.27.11 at 9:37 am

“Markets will be volatile ,choppy and dramatically unpredictable even though they will end the year higher, perhaps arrestingly. In any event your mutual funds will flounder and equities flail ”

If the markets end higher, perhaps arrestingly, mutual funds will do well, perhaps dramatically well.

#35 househornyhousewife on 12.27.11 at 9:40 am

Garth,

It would be nice if you could give us the entire picture about REIT’s and preferred shares. Not just the benefits but also the risks. I am always wary when someone claims that a specific investment trumps all other investments and that we are stupid not to be investing our life savings in it. Everything comes with benefits and risks, EVERYTHING. For those of us who are not as saavy about financial vehicles, it is helpful to have ALL information, good and bad.

Many of us simply want to invest our money somewhere so that it earns a decent return but with as little risk to the capital as possible. We don’t want to have to constantly be tied to our computers, stressfully buying and selling stocks and bonds because not only are we not financial experts but we simply have other things to do. In other words, we want our money to work for us without us having to work extra because, let’s face it, we are too busy earning the capital that we are investing in the first place. Know what I mean ?

There are a few problems that my untrained eye can see in REIT’s. For one, it is one industry, the real estate industry. One therefore has to be careful about investing in it, just as one would be careful about investing in any one basket of eggs. If one chooses the wrong company or the wrong mutual fund of REIT’s and they do badly (say they expand too quickly, interest rates go up .. which they’re supposed to etc..) then the REIT’s also do badly. It’s an industry like any other, with its own risks and rewards. One also has to be careful with REIT to invest in as some of these are in mortgages to homeowners … perhaps those risky people that you keep talking about, who knows ? (one would hope that only the government would be stupid enough .. but wait, my taxes are invested in there !).

As for preferred shares. Agreed that they behave as solidly as bonds but that the income is in the form of tax advantageous dividends as opposed to interest income. Also agreed that these pay regular income as opposed to common stock which is victim to the volatility of the market. BUT a company does not have to declare a dividend on preferreds because, like common shareholders, preferred shareholders are exactly that, shareholders. Bondholders, on the other hand are creditors who get first dibs and who MUST be paid. When the income is flowing into a company, everyone will get a piece, but when it is not … This means that despite the “preferred” status of these investments, one has to choose carefully .. say banks or whatever .. but then I imagine that the cost of such rock solid preferred shares, like bonds, fluctuates with the market and interest rates.

What I am trying to say is that some of us (including myself) are not confident enough to be buying and selling investments on the market ourselves (this is how mutual funds became so popular, because supposed “experts” run a balanced portfolio with a certain amount of risk .. granted that said experts nowadays should be drawn and quartered because we are all loosing money but they are still getting paid their management fees). On the other hand, we are not satisfied with what has been happening with mutual funds but many of us don’t dare sell our funds and realize our paper losses. We are therefore hoping (perhaps even praying) that the future will see them get back on track.

In the meantime, any future investments from our part must be in the form of safe, rock solid, low maintenance and extremely liquid investments because when the market does pick up, we will want to move these to more promising locations. We also want to have a portion of these investments in some sort of pension-like return envelope because many of us don’t have a nice cushy defined benefit pension plan from our employer (do those still exist ?). This is why I feel that these new GLWB’s can be useful for a portion of investment.

Although I agree that buying actual real estate as an investment is assinine (well duh, this is even worse that putting your eggs into one basket .. it’s putting your eggs into a locked vault that is full of foxes), I am not convinced that the panacea is the world of REIT’s and preferreds.

REIT’s are essentially investments or mutual funds that are invested in one market, real estate (yeah OK some are malls, office towers etc.. but in a future slow economy, are these going to be doing well ?!). And preferreds are essentially bonds that give a company the choice of paying out income to its investors (which is nevertheless in a more tax advantageous form for that investor).

All that glitters is not gold as the saying goes … not totally convinced Garth.

HHHW

You provide every known argument as to why people should not be their own investment counselors. A little knowledge is a paralyzing thing. — Garth

#36 Canuck Abroad on 12.27.11 at 9:49 am

A post for all the boomer haters –
http://market-ticker.org/akcs-www?post=199744

Really nice generation you got there. Just in case you thought the boomers were the ones who felt most entitled…

Ties in nicely with Garth’s post of yesterday to cut the little blighters loose and let them experience “life” rather than hang out indefinitely in your basement (free shelter, food, laundry, plus cars and iphones for christmas – or else).

#37 R2D2 on 12.27.11 at 11:28 am

Victims Sought in Countrywide Case

http://online.wsj.com/article/SB10001424052970203686204577116860378024808.html?mod=WSJ_RealEstate_LeftTopNews

It will take AGES beyond the [ statue of limitations ... ( defined as; an Italian guy peeing in a pool, after a boisterous, vigorous, Bunga Bunga, compliments of Silvio Burlesque Only ) ] before ALL the victims are found. Nobody knows why the SEC investigations have not followed the logic and flow through into DOJ criminal actions on all the fraudulent activity which was discovered.

They haven’t scratched the surface on mortgage holders who were wrongfully evicted as a result of defective ownership actions, because the legal papers were incorrect.

Herman Cain woulda fixed all that … or at least given out free hamburgers. It’s enough to cause Danny Williams to refuse to take Stephen Harper to the A & W for Amburgers and Woot Beer.

#38 GregW, Oakville on 12.27.11 at 11:31 am

Hi Nastra, Have you heard about this story yet?
I wonder if the Canadian MP’s , their family’s and farmers have? Do any of them even care?
Will they take action now to actually protect even thier own families Health, since if it happens, it will end up in everyones food supply, even theirs!

America’s farmlands to be carpet-bombed with Vietnam-era Agent Orange chemical if Dow petition approved
http://www.naturalnews.com/034500_Agent_Orange_Dow_2-4-D.html

“The corn, of course, would be immune to 2,4-D, so it would uptake the chemical and transport it right into the structure of the corn kernels, creating “Agent Orange corn bombs” that would be chemically unleashed when consumed by human beings.”

#39 NotAGreaterFool on 12.27.11 at 12:00 pm

32 & 33 – My question was rhetorical, as you have assumed. Point is it’s insane what prices are being listed for. Both options are nuts.

I think both your conclusions are reasonable and fair.

Any comments on why they are listed for lease and/or sale? Was hoping Garth can weigh in on this.

#40 45north on 12.27.11 at 12:12 pm

my hero Andy Miller:

MILLER: When I saw what was happening in the housing market, I liquidated all my multifamily apartments, shopping centers, and office buildings. I liquidated all my loan portfolios, and I’m happy I did.

http://www.financialsensearchive.com/editorials/casey/2010/0209.html

You don’t need to get a mortgage to buy REITs, purchase mortgage insurance, try to find a tenant who won’t glue tin foil to the windows. There’s no property insurance to buy or land transfer tax to pay. No painting. No toilet floats.

pretty funny

#41 R2D2 on 12.27.11 at 12:22 pm

#42GregW, Oakville on 12.27.11 at 11:31 am

Worse things than that have happened, Greg; I can recall an incident which resulted from GMF back in the late 60′s to the McIntre family in Ontario … from the area around Niagara West – Glanbrook.

http://www.youtube.com/watch?v=cv4B5o0ajis

#42 dogman01 on 12.27.11 at 12:37 pm

Hi Garth\and Others
What do you think of XTR? – iShares Diversified Monthly Income Fund.
Seems like an ETF of Income producing ETF’s.
I have been using as the place to put money when I am procrastinating or when other things look too expensive.
Pays $0.06 per month.
REITS look a bit expensive now, waiting for dips as that is what I expect over the next year, a few more sharp periods of fear with a general uptrend.

#43 eaglebay - Parksville on 12.27.11 at 12:40 pm

#31 BC Boy on 12.27.11 at 6:15 am
Garth, write about unpredictible housing market as much as you want BUT keep that in mind owning a property provide security. Number one rule!
——

Could you explain to me what kind of security is provided by a home rented “mortgaged” from the bank does provide?

#44 33rural on 12.27.11 at 12:48 pm

Could someone please recommend some REITs or ETFs traded on TSX with focus on US rental properties? Thx.

#45 eaglebay - Parksville on 12.27.11 at 12:51 pm

#44 GregW, Oakville on 12.27.11 at 11:31 am

Loser BS, you’ve been brainwashed.

#46 R2D2 on 12.27.11 at 1:03 pm

#42GregW, Oakville on 12.27.11 at 11:31 am

More on GMF / GMO from a current scientific source.

http://www.democraticunderground.com/100275329

The US EPA has been pretty much indifferent to dealing with such important issues … Excerpts from the Republican National Convention agenda … pre Bush era;

07:40 PM EPA Address #1: Mercury, it’s what’s for dinner

08:50 PM Seminar #2: Corporations: the government of the future

09:10 PM EPA Address #2 Trees: the real cause of forest fires

10:50 PM Seminar #3: Education: a drain on our nation’s economy

11:10 PM Hilary Clinton Piñata

11:20 PM Second John Ashcroft Lecture: Evolutionists: the dangerous new cult

11:30 PM Call EMTs to revive Rush Limbaugh again

11:35 PM Blame Clinton

11:40 PM Laura serves milk and cookies

11:50 PM Closing Prayer, led by Jesus Himself

12:00 AM Nomination of George W. Bush as Holy Supreme Planetary Overlord

#47 Canada Next to be underwater on mortgages on 12.27.11 at 1:04 pm

Australian households have now started what Canada is going to start or may have even started right now of being underwater on their mortgage. With Canadian ranked NUMBER 1 with the most debt in the G20 and an overbuilt condo/housing market to boot the crash is going to be a BIG one as flippers run for the tiny exit.

http://www.theage.com.au/business/new-reality-owing-more-than-you-own-20111221-1p4l2.html

#48 NOT ME on 12.27.11 at 1:31 pm

Any predictions for 2012
Will prices of real estate crash

#49 young & foolish on 12.27.11 at 1:37 pm

Ahhhh … sweet income stream !
It’s even sweeter than capital appreciation!

It’s a good time to be a renter.

Amen

#50 Canada = House of Cards. on 12.27.11 at 1:45 pm

#18 NotAGreaterFool

Ive seen alot of homes not selling along with price drops in North York. I think alot of people are seeing the house of cards housing bubble starting to fall apart. I’ve been looking for an investment to buy but nothing is cash flow positive and this with interest rates at 3%. People are so delusional or hoping to find a person with more money then brains. Anyone buying in this market has to be very ignorant to the facts. Even an idiot can look at the numbers and see prices do not make logical sense to buy. A correction in Canada of at least 25% needs and will place. Bankers wouldn’t lend out a single penny if it wasn’t back by the taxpayers. Canada has one the the biggest housing bubble in the world.

#51 coastal on 12.27.11 at 1:50 pm

Kinda surprised to see that people think REIT’s are safe from a real estate or stock market correction. Just look at the five year charts, great profit if you bought them at the bottom in 2008, they are peaking at a long term market top heading into a year where real estate will correct hard and stock markets will be very volatile. Doesn’t look like the safe place to park my money thanks.

Everything sold off in 2008-9, and REITs recovered very well, while continuing to pay you at least 5% every year. Factor in the distribution, and you have recouped more than 100% of any loss. Looks fine to me. As opposed to this blog. — Garth

#52 gary on 12.27.11 at 1:58 pm

There will be a lehman 2 garth,major writedowns coming from european banks which will spread causing further deleveraging all in the next 2 months.

#53 move in "THIS fall" on 12.27.11 at 3:04 pm

here’s a good example–exactly what garth is talking about:

http://www.realtor.ca/propertyDetails.aspx?propertyId=11420439&PidKey=-1329480069

over 1.1 million dollars…

and the best part is “you can move in THIS fall!”

woo hoo!

people really need to take a cold shower.

#54 Garth? on 12.27.11 at 3:08 pm

“First, this is not the US circa 2005 and general economic collapse is expected by any credible economists…”

- Garth

??????????????????
??????????????????
??????????????????
??????????????????
?????garth????????
??????????????????
??????????????????
??????????????????
??????????????????
??????????????????

#55 sue on 12.27.11 at 3:10 pm

HHHW
Garth is available to be your investment advisor and you will sleep like a baby. I couldn’t imagine trying to buy and sell these things esp when you have to monitor the situation daily. It is worth it to find a good advisor.

#56 falling knives on 12.27.11 at 3:14 pm

Isn’t there a clear over-supply of new apartments in the major metropolitan areas of Canada? Hasn’t this been well documented by Merrill Lynch and Garth Turner over the last few months?

But now the same Garth Turner believes that apartment REITS would be largely unaffected by falling residential capital and rental values!!!?

Basic economics and evidence from other markets suggests otherwise. Apartment buildings are part of the residential property market – you can’t cut it any other way.

Too many condos. Too few apartments. — Garth

#57 InvestorsFriend (Shawn Allen) on 12.27.11 at 3:29 pm

PENSIONS INCLUDING CPP ARE PYRAMID?

Bottoms up at number 15 is distressed by the idea that some will pay into CPP and pensions and if they die young, they collect nothing.

He says:

So really the CPP is a mandatory life insurance (pyramid) scheme, except in this scheme those at the bottom (the ones that die younger) never get paid.

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

Think of CPP and Pensions as a strange form of insurance against the “risk” of living and therefore and needing money after you retire. Perhaps for decades.

Like fire insurance if you don’t need it it, it never pays off.

The fact is if you die, it’s too late to give YOU back your pension money anyhow.

As I explained yesterday, CPP and pensions pool our risk of early or late death. The only way pensions can afford to pay some people until they are 95 is to use the funds from those who die early.

When there is a spouse involved they pay until both are dead, although often at a reduced amount on the death of one spouse.

It’s a great system. It’s under attack now. But over time as interest rates rise and the stock market does better, pensions will once again be seen as wonderful devices. They will, however become multi-employer portable plans because a single company cannot take the risk of promising fixed pensions for life.

Pensions are generally meant to be pre-funded and so are not Pyramid schemes. Sometimes they get under-funded, but that is by accident not by design. “Scheme” is a loaded negative word. Pensions are not schemes.

#58 Duke on 12.27.11 at 3:39 pm

Garth, Preferred stocks look fantastic, especially the bank bank variety. The only concern I have is liquidity. They trade on such thin margins I’d think they would be hard to purchase or get out of>?

Please enlighten

Best entry point is an advisor/broker. Exit in 5 minutes. — Garth

#59 Duke on 12.27.11 at 3:40 pm

sorry bank bank is big bank and margins is actually volumes.

#60 bigrider on 12.27.11 at 4:05 pm

Garth _ ” REITS ……coughed up yields of 6-12 % this year when most investors needed a magic touch just to break even”

Most honest line wrote today. You needed to be very lucky just to break even in 2011 in financial assets.

I wasn’t so lucky unfortunately.

I am sure all the “PH’D’s” on this blog were net positive with their portfolio’s in 2011.

Nothing to do with luck. — Garth

#61 Cato on 12.27.11 at 4:24 pm

Hope you had a good Amazonian Christmas Garth. I should have opted for the same, mine was full of in-laws who I have an uncontrollable urge to slap upside the head for financial idiocy.

I wandered into local Futureshop yesterday because I’m a cheap bastard who will step on babies to save a few bucks on a new beer fridge (why parents drag their kids along is beyond me). Got to overhear plenty of conversations amongst boomer parents with their 30 something adult children “Put this on your card Mom, ours is maxed out. We’ll pay you back”. Hope the holiday spending binge was worth it, the boost to retail is going to come with a painful hangover.

2012, like 2011, won’t be a particularly stellar year. It’ll be worse in Canada because our housing bubble will finally begin deflating taking jobs and sapping economic growth. Stagnant growth, anemic job market = bad year for everyone. Kind of like that movie Groundhog Day, its going to start feeling like we are reliving the same miserable year over and over again. Time is the only panacea for debt excess, there is no quick fix out of this hole. We are entering year one of what could be a decade of misery.

Capital preservation is key. Pounce on the short term opportunities when you find them, take profits when you have em. No big risks, no big gains. Be one of the lucky ones with a few pennies left in your pockets to take advantage of opportunities later down the road.

#62 foolsrushin on 12.27.11 at 4:54 pm

“Financial assets will outperform real ones, including precious metals”

I’ll take that bet.

#63 Onthesidelines on 12.27.11 at 4:55 pm

You provide every known argument as to why people should not be their own investment counselors. A little knowledge is a paralyzing thing. — Garth

I couldn’t disagree with you more. All people should make every effort to educate themselves and, thus, be better prepared to make informed decisions on the various issues affecting their lives.

Surely, you of all people, Garth, as a literature guy and a biker and presumably self-taught in finance yourself should have taken to heart the lesson from ZEN and the ART of MOTORCYCLE MAINTENANCE.

Too many professions still behave like the old sea captains in the days of sail who preferred to withold the rather simple practice of celestial navigation from their crew, cloaking the use of the sextant in mystery and complexity only to maximise and maintain their own position of power.

You may be self-taught, but as a fully licensed advisor, I am not. Anyone who thinks an amateur approach to investing in these times is good enough could, sadly, learn otherwise. — Garth

#64 April on 12.27.11 at 5:02 pm

#13 -Sue. You are picky…..
#17 – I’ll second that!

#65 falling knives on 12.27.11 at 5:10 pm

Re:#61. Garth there is no physical difference between an apartment and a condo. The difference is legal. If a condo is bought for investment purposes (as most are) – to be rented out, it is an apartment within the rental market – i.e. directly competing with multi-family apartment buildings. I am surprised by your lack of understanding on this issue.

REITs don’t buy condos. And most investment units eventually leave the rental stock. There will be no impact on residential REITs of a 15% housing price decline. — Garth

#66 InvestorsFriend (Shawn Allen) on 12.27.11 at 5:10 pm

CAPITAL PRESERVATION IS NOT KEY

Cato at 100, makes the logical sounding claim that “Capital Preservation is Key”.

Actually, no. Most investors should be highly dissatisfied with merely preserving capital over the long term.

In fact the vast majority of investors have very little capital and they NEED it to grow over time.

You can preserve capital by placing your money in a bank account, where it will not grow, at least not much.

Investing by definition involves laying out capital today with a rational expectation (but not a 100% guarantee) of making an acceptable return.

What matters to most investors is how much wealth they will have some years from now.

If you insist on not risking even temporary declines in capital you will forego a huge amount of probable returns.

He who insists on guaranteed capital preservation is not an investor but is a custodian of capital.

Nothing wrong with preserving capital but true investors are willing to make calculated risks with their capital.

Also, capital that is “preserved” but which is exposed to inflation, is preserved in form but not in substance.

Accumulating and growing your capital is the Key to riches. Capital preservation is a key to mediocrity. That should not be good enough for most of you. Don’t settle for mediocrity.

#67 Onthesidelines on 12.27.11 at 5:13 pm

Garth, Preferred stocks look fantastic, especially the bank bank variety. The only concern I have is liquidity. They trade on such thin margins I’d think they would be hard to purchase or get out of>?

Please enlighten

Best entry point is an advisor/broker. Exit in 5 minutes. — Garth
_________________________________________

I call BS on that. I have mentioned preferreds to my advisor/broker and been told that the main problem with preferreds is precisely this issue, namely, liquidity stemming from the difficulty of getting in/out.

It’s silly for you to blow this issue off without adressing why there is at least a preception of lack of liquidity in preferreds even from investment professionals.

Maybe he doesn’t like you. Can see that. — Garth

#68 jess on 12.27.11 at 5:16 pm

what about mud slides and rain?

Medellin, Colombia, now have a faster way to make it to the top of the steep hillside town of Comuna 13: a set of escalators that will help them climb the equivalent of a 28-story building.

The residents in this poor town have been making the trek up cement steps for years, but now, thanks to the $6.9 million project, they won’t have to work as hard

#69 InvestorsFriend (Shawn Allen) on 12.27.11 at 5:18 pm

INVESTING IN THESE TIMES?

(My last post should say Cato at 68…)

Garth said at 70

Anyone who thinks an amateur approach to investing in these times is good enough could, sadly, learn otherwise. — Garth

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

Oh yes, the great hoary myth that “these times” are rough times. Yeah you gotta watch out investing in “these” rough times. It’s not like the benign times of the past where we had, you know, world wars, depression, nuclear threats, stagflation, 9-11, the tech wreck and all those other benign things.

Give me a break.

But yes, most people should use an advisor, absolutely. Most folks have a life and are not interested in learning about invesments. Nor do they want the responsibility. Most people should start investing with their bank or a mutual fund advisor. After they accumulate 200k or so they may wish to get a better, lower cost advisor. And a few dedicated souls with some mathematical appitude and a strong interest in business can eventually become self-directed investos. There is room for all approaches.

It’s amazing how, in agreeing with someone, you still sound like a prick. — Garth

#70 jess on 12.27.11 at 5:19 pm

http://journalofaccountancy.com/web/20114944.htm
T

..”he value of the person’s primary residence is required to be excluded from the net worth calculation, according to Section 413(a) of the Dodd-Frank Act. Previously, the standard allowed the value of a person’s home to be included in determining net worth.

http://journalofaccountancy.com/Search/Results.aspx?Topic=Tax%7cInternational

=

“aberrational performance initiative.”

Encouraged by the results so far, SEC officials are widening the computer-powered scrutiny to mutual funds and private-equity funds. That means data on more than 20,000 funds are being fed into the SEC’s computers or soon will be.

#71 Alan on 12.27.11 at 5:32 pm

I own REITS and remember they are fully taxable on the income and any capital gain -if any. Owning your own property can provide you with a tax-free capital gain. There are no taxes on the sale of your principle property (even with a mortgage helper suite)
Yes, I know that is if you have any gains, but one only needed to have bought smartly a year ago to have a gain in RE today.

The problem with REITS is that you a pay a price for liquidity by having to watch the price of your units go down in should everyone want to exit at the same time. In addition, REITS are sensitive to interest rate hikes as they begin to compete with non risk assets that would pay a higher interest rate than today’s low rates. Nothing wrong with owning your own roof over your head at today’s historically low interest rate environment. The flip side of Garth’s commentary on Canadians owning too much real estate is that most Canadians use their home as a savings vehicle and they underinvest in stocks and bonds for good reasons -Volitility. Good real estate investing does not allow ou to measure the value of your property on a month by month or day by day basis. The investment CYCLES are different due to liquidity and rather than throw rocks the nature of this investment class you are better off understanding why you own it and that it must be looked at over a 10 to 30 year life, not monitored on a year by year basis.

Most people on this blog won’t remember that the real estate markets survived with 8-12 percent mortgages 20 years ago. It was common place. We still had market fluctuations and depressed markets for a few years but we also had good markets and years with the same interest high interest rates. Go figure?

So while everyone here wants to bash real estate for one reason or another, you are going to see that it won’t make a difference if you are a long term owner of real estate. Find a good location and buy, lock in a 3% mortgage. Get on with making money and living your life.

#72 Signpost in the bushes on 12.27.11 at 5:34 pm

A confident “fully licensed advisor” would only take fees after the investor has made money. Sample this idea; the investor (client) keeps the first 6% of all earnings and profits, and the advisor takes 25% of all earnings and profits above this level; e.g. 10% portfolio gain would net the advisor 1% of the portfolio value.

If the advisor fails to make a gain, for his/her client, of more than 6% then the advisor receives nothing. Sound fair to anyone?

An advisor who chases only returns does not serve his or her client well. Tax avoidance, for example, is of equal if not greater importance. — Garth

#73 InvestorsFriend (Shawn Allen) on 12.27.11 at 5:36 pm

WHO’s a PRICK?

Garth says to me at 76:

It’s amazing how, in agreeing with someone, you still sound like a prick. — Garth

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

Indeed, well Garth, then don’t ever say that I have not learned something from you.

Isn’t that why most of the regulars are here? To be pricks, for their own entertainment? Anonymous pricks too in most cases. Anonymous pricks are always the nastiest.

My words were clear. Parse them. — Garth

#74 not 1st on 12.27.11 at 5:48 pm

Garth, maybe you can work this topic into your liquidity story;

What about borrowing to buy dividend bearing stocks and letting the distributions pay that sucker off for you over 20 or 25 years? Good or bad play?

Amusing. — Garth

#75 now, now, Garth on 12.27.11 at 6:04 pm

Steady on, Garth, that’s not very holiday-like!

I actually happen to agree with you regarding Investor’s Friend, but that’s the first time I’ve seen you call someone a prick.

Well I guess technically you didn’t call him a prick, you just said he sounded like one :)

“It’s amazing how, in agreeing with someone, you still sound like a prick. — Garth”

I chose my phraseology with care. — Garth

#76 Onthesidelines on 12.27.11 at 6:41 pm

Maybe he doesn’t like you. Can see that. — Garth

“She” is a VP of one of the biggest brokerage firms in the country, and we’ve had close to a 20 year business relationship managing over 1mil in assets.

You might try following your own rules regarding civility here, asshole.

And you should work on your sense of humour. — Garth

#77 Just Wondering on 12.27.11 at 6:44 pm

Garth, the real problem is finding financial advisors that actually understand the financial market and know how to advise clients with specific goals. The 2008 debacle demonstrated just how competent most of these so-called advisors are. Retired people greeting and stocking shelves are now a common sight, not only at WalMart, but at many retail chains. Yes I know, the advisor says you haven’t lost anything until you sell. Unfortunately, some do have to sell off at least some as this is their retirement income. So, who do you trust as there are all kinds of people wearing the same hat?

Good advisors don’t sell things. Start there. — Garth

#78 Signpost in the bushes on 12.27.11 at 6:53 pm

A confident “fully licensed advisor” would only take fees after the investor has made money. Sample this idea; the investor (client) keeps the first 6% of all earnings and profits, and the advisor takes 25% of all earnings and profits above this level; e.g. 10% portfolio gain would net the advisor 1% of the portfolio value.

If the advisor fails to make a gain, for his/her client, of more than 6% then the advisor receives nothing. Sound fair to anyone?

An advisor who chases only returns does not serve his or her client well. Tax avoidance, for example, is of equal if not greater importance. — Garth

Isn’t “tax avoidance” how a good accountant earns his/her fee? Weren’t you advocating the need for a “fully licensed advisor?”

I have yet to meet an accountant who can put together a tax-efficient investment portfolio, restructure debt, help finance a maternity leave or master tax-loss selling. A good advisor plays a much wider role than merely trading securities. — Garth

#79 Bill Gable on 12.27.11 at 7:33 pm

DIY might work when it comes to making a shed – but – if you want to make sure you don’t step in a big mud pie – GET A PROFESSIONAL TO HELP YOU.
The Tax Code alone is a land mine filled field of fiscal traps, for heck’s sake!

Too many people I love and care for deeply, have made a hash of things. I dread the next few years, at least a decade out.

It has come to us as Parents to back up our kids mistakes. Gosh help you if you have no back up = believe me tnl@tb will not be there for you.

Sorry.

#80 Cato on 12.27.11 at 7:36 pm

#73 InvestorsFriend (Shawn Allen)

What an investor desires and what an average investor can reasonably achieve are two different things. How’s that saying go, “Hope in one hand ….. ”

We are entering a long term economic contraction brought on by debt deleveraging. There is simply less cheddar to go around. Dollars normally circulating in the economy are being sucked out by overhanging debt. We’ll never enter an outright depression thanks to ability of central banks to intervene but economic growth is going to be muted for a very long time.

While intervention might be seen as inflationary the deflationary forces acting on the economy are equally powerful. We get neither hyper deflation nor inflation in this scenerio. Simply cycles of deflation followed by inflation as central banks intervene. What goes up simply comes back down when central banks take foot off the gas.

Intervention does not create economic expansion. Only the private sector can generate wealth for benefit of all. We won’t get expansion until the deleveraging cycle is complete and consumer balance sheets are healed. Only then will we get an expansion that lifts all boats. Its not going to happen for a very long time.

There are always going to be trading opportunities, but your average retail investor and their advisors aren’t suited for it. On average they take far too much risk for far too little reward and have no idea how to hedge against the downside. They are getting bled dry attempting to time the markets. In these markets there are only winners at the expense of losers and not everyone is going to be a winner.

Anyone under 45 who carefully navigates this period will likely be in the best position to ride the wave of economic expansion when a new cycle begins. They are going to need it, the social safety net will be in shambles due to the boomer wave. My generation (mid 30′s) will need to prepare to finance their own healthcare in retirement. The boomers for the most part have run out of time and will not ride the next wave of economic expansion. They need to learn to protect what they’ve already have and prepare for modest returns such as those Garth is advocating. Anyone making big inflationary/deflationary bets to the contrary is going to lose big and get wiped out by the volatility.

#81 Peter NYC on 12.27.11 at 7:36 pm

#8 smartalox

Wife and I are dual us/Canadian would you mind sharing/elaborating on the issue you are referring to concerning IRS and mutual funds. I a not understanding.

#82 Kip on 12.27.11 at 7:42 pm

Is everybody happy? Don’t think so!

I’m just a blue collar boy but it sounds like snake oil to me. Is there a preferred for that?

#83 Mark on 12.27.11 at 7:44 pm

http://www.dispatch.com/content/stories/local/2011/06/25/older-marion-mall-is-sold-for-just-over-1-million.html

“Royal Bank of Canada had foreclosed on the property in 2010 because of more than $92million in outstanding mortgage payments, Severns said.

The 527,755 square-foot mall was reappraised at about $1.5 million. The bank bought it yesterday for the minimum bid of just more than $1million, Severns said.

How many Canadian REITs hold equity in properties that may suffer a similar fate?

#84 scared on 12.27.11 at 8:02 pm

REITs don’t buy condos. And most investment units eventually leave the rental stock. There will be no impact on residential REITs of a 15% housing price decline. — Garth

????Why would most investment units eventually leave the rental stock???

Actually, investment units (condos)that don’t sell in a declining RE market stay in the rental stock (apartments). Have you noticed the many developments that have sold out to speculators (flippers)? The REITS will compete with this huge rental market when the flippers can’t flip they become landlords. You did once admit that once RE values go down, the price of rent goes down with it. So REITS that invest in apartments aren’t affected by interest or rental markets? Wow, these must be REITS on steroids with superhero strength and an invisible shield.

#85 TurnerNation on 12.27.11 at 8:12 pm

#59move in “THIS fall” on 12.27.11 at 3:04 pm

Here’s another new ~million dollar townhouse – sandwiched between Lakeshore and Gardiner Expressway under the gaze of large condo towers:

http://www.realtor.ca/propertyDetails.aspx?propertyId=11283852&PidKey=831340109

#86 Tony on 12.27.11 at 8:31 pm

2012 a throwback to the 1930′s commodities implode, deflation accelerates unemployment goes through the roof. Worldwide depression in the making. Protect capital or lose all of it will be one of the phrases we’ll hear next year. Markets should finish 2012 between 33 and 40 percent down with January 2012 being the worst month of the year.

You are such a fun guy. — Garth

#87 Nostradamus Le Mad Vlad on 12.27.11 at 8:37 pm

-
#135 TurnerNation on 12.27.11 at 3:31 pm — “. . . and a religious theocracy keeps men on top.” — Same with all cults. By far and away, Christianity is the largest and most violent cult in existence. Hence, Crusades #4 is currently underway.

#44 GregW, Oakville — G’day Greg.

Yep, read about that a while back. Link here. The WH is not only a puppet run by its masters, but they are in cahoots with Monsanto, big pharma, banxters and the like. They only have to yell ‘boo’, and the response is always ‘how high and how far’.

Keep well!

“Good advisors don’t sell things. Start there. — Garth” — Well said. Took us a while, made plenty of mistakes along the way but we’ve had a really good one for night on two decades. It’s worth the effort.
*
The Empire Smokes Crack in a smelly washroom; Obummer Raise the debt ceiling again! Crony Capitalism All very well to end it, but what replaces it? Look at the end first, work back from there; 7:44 clip Real national debt crisis; Sears and K-Mart “We sort of knew this holiday shopping season was a disaster just looking at the far less than full trash bins around here. Between store closings and the release of the holiday workers, the January new unemployment claims will explode.” wrh.com; Economic downturn Stop at Capitol Hill; China Moving into Af’stan for oil.
*
Russia test fires two nuke missiles; Coffee Enemas The next Bre-X? 34:16 clip “White people will not let brown people rule the world, they will destroy it first.”; 3:57 clip Democrats running to Ron Paul; SOPA may / may not have differing views on alternative media (doesn’t touch the m$m), and Double Standard; Valuable Commodity “All warfare is based on deception.” The Art Of War. — Sun Tzu; Bypassing ‘Net Censorship Links in; Worthless Vitamin studies, that is; 1:26 clip Mall of America. Boxing Week sale? Indeed.

7:22 clip At last, alternative media is beginning to make sense, which is why Congress, the WH and Pentagon want to restrict access; McBolivia McDonalds closes all their stores in Bolivia; Kazakhstan Riots there, probably with the blessing of soros and Obama; US – NATO Infighting over Pakistan? Putin Protesters funded by west. That’s a shock; The Toilet “Nonsense. This is the CIA and Mossad trying to destabilize the Iraq government to force them to “invite” the United States to come back in. “Al Qaeda” is a phony front group for CIA and Mossad. Adam Gadahn. the so-called “American Al Qaeda” is in fact Adam Pearlman, the grandson of a founding member of ADL.” wrh.com; Susan Lindauer CIA asset speaks a decade after 9-11; Ten min. clip St. Goremeister of the Als. Apocalypse No!

#88 les on 12.27.11 at 9:11 pm

We Canadians have $1 trillion in Government debt, another $1 trillion in residential mortgages–that you talk about most days–and then another $500 billion in personal lines of credit,credit cards and personal loans.

Lets not even mention the underfunded pension plans and the future draws for CPP, OAS, and Health care going forward.

We are in ‘naw naw land’ ?? or !!

Would like your comment

Les.

#89 Beach Girl on 12.27.11 at 9:29 pm

#128 Westernman on 12.26.11 at 10:09 pm

Beach Girl,
” I might have the chance of landing a bigger fish than me ”
May I extend my condolances to the potential victim…

___

You do have a sense of humour, lets hope he doesn’t read this post. LOL. I venture into the New Year optimist.

#90 Evidence on 12.27.11 at 9:42 pm

#93 TurnerNation

hehe. nice.

it’s unbelievable, ain’t it?

#91 bob's my uncle on 12.27.11 at 9:54 pm

Garth, I can see the secret revelations in your writing,

prefs and reits are done. Housing is the only true value in our lives, the rest is monopoly played in the casinos. If your readership wants to get tangled up in the casino run by criminals than be it, but the smart money will stay in RE.

#92 Nemesis on 12.27.11 at 10:11 pm

@Nostra#95… re: the ‘restaurant’ whose spokesman is a clown…

¡Viva la revolución!

PS – I have a diabolical idea… and a challenge for our host… we ride from ‘exurbia’ to Bolivia… [yes, the MotorcycleDiaries revisited] and VideoBlog the entire journey…] GT’s visage/demeanor is better suited to pictorials, so ‘Nem’ will stay behind the technology. What say ye, Nostra?

Of course, if GT insisted on riding a Harley…

http://tinyurl.com/cudem2b

#93 Mike Rotch on 12.27.11 at 10:16 pm

If Garth sees fit to do requests, I’d love to see a blog entry focussing on tax efficient investing, maybe with a few hints on how to avoid the most common traps when completing a personal return.

I’ve been doing my own tax returns and “planning” (ha!) for years.

For now, my returns are seemingly shit simple as we’re talking about a T4, a few other slips and a modest investment portfolio. That said, the tax act and regulations are a landmine infested kill zone for the naive. I’ve heard a few horror stories, and frankly, I’m scared to death.

Also, when I plug and chug with Quicktax, UFile or the like. I do it carefully, but I also do it without real knowledge of the legal code behind the software formulas. I also can’t help but fearing that I’m missing out on something.

The problem is, I’m loath to spend a chunk of change on real professional help when I could instead invest that towards the time when I may need the pros’ help more……

#94 toroo on 12.27.11 at 10:24 pm

Garth , since you said it wont colapse , Im betting it will what ever you say do the opposite and we,ll be ok of course its gonna colapse what do you think will get the US working .. answer WAR ..

#95 45north on 12.27.11 at 10:54 pm

Mike Rotch: A colleague died in December. At his funeral, I spoke with his wife. She had spent her career working for CRA. She was distraught that the tax form had become so incomprehensible.

I like H & R Blocks tax return program. You don’t buy the software you sign up and do it on-line.

Whether by design or not the tax form is incomprehensible. You won’t understand it in 8 hours or 20. Especially stupid is the separate form for Ontario, pretty much the same calculations with minor changes just to keep you up at night. The main purpose is to keep 1000 civil servants employed at Queens Park.

#96 Aaron - Melbourne on 12.27.11 at 11:21 pm

From Aus….

http://theage.domain.com.au/real-estate-news/blogs/domain-investor-centre-blog/a-super-bad-idea-20111228-1pc1l.html

Industry groups claim that letting first home buyers to dip into their superannuation will boost housing affordability. But who does it really help?

A super (bad) idea? December 28, 2011 – 1:44PM

Read laterComments 29 .Industry groups claim that letting first home buyers to dip into their superannuation will boost housing affordability. But who does it really help?

In propertyland, it seems the default solution to housing (un)affordability has become to throw ever greater amounts of money at the problem, especially when it’s someone else’s money that gets spent.

It should come as no surprise that the loudest calls for more interest rate cuts and taxpayer-funded incentives — boosted first home grants, stamp duty cuts, etc — are coming from special interest groups like the agent-oriented real estate institutes.

These lobbying efforts, which are always framed in the language of ”improving” affordability, have become more aggressive as Australia’s property market has posted one of its weakest performances in years.

Never mind that a sustained decline in property prices probably represents the only way to measurably improve affordability after years of strong price growth in parts of the country.

Never mind that the falling interest rate, cut in a time of global economic uncertainty, doesn’t mark a sustainable, long-term improvement in the financial position of would-be buyers.

Never mind that boosting the first home owners grant has a record for inflating prices (and debt) to unhealthy levels.

Never mind that home ownership rates haven’t improved despite years of government incentive programs.

These efforts to pump up the market could be simply written off as the normal activities of groups looking out for the best interests of its membership. Fair enough.

But then there’s the Real Estate Institute of Australia’s growing push to give first home buyers access to their superannuation to fund otherwise unaffordable purchases.

The REIA put the idea to the Commonwealth Government in a budget submission in April, with the (original) suggestion that first home buyers be permitted to use their ”voluntary” contributions.

By October, the group was advocating a new policy that would potentially allow full access to the funds in a super account, taking its inspiration from the ”success” of a similar plan in Canada.

The Canadian Home Buyer’s Plan

#97 InvestorsFriend (Shawn Allen) on 12.27.11 at 11:21 pm

GET SERIOUS

Cato at 88 says he is in his mid thirties and that

“We are entering a long term economic contraction brought on by debt deleveraging.”

Cato, my god in their mid thirties most people have some mortgage debt, maybe some student loan debt and little investments but years of savings ahead of them.

Put what you can 100% into the stock markets and then pray for it to fall like a stone. Maybe it will maybe it won’t. Either way you win.

If it goes up, okay. If the markets go down then you can benefit from putting in money at lower stock prices for as long as the low prices last.

The only way you can lose is to refuse to show up and invest in the markets.

And don’t hold your breath waiting for that long-term contraction. Every piece of cheese in existence is very real. And even if there is a contraction do you really think that corporations will stop making money? Own your share my friend.

#98 TaxHaven on 12.27.11 at 11:26 pm

In fact, you can even buy an exchange-traded fund which owns a mess of REITs (XRE), giving massive diversification across everything from hotels to bank towers.”

Money for everyone! More money for everyone! There’s more where that came from! Payola!

Risk has been banished… Head for South of the Border, Snowbirds! Everyone can make more money off of everyone else, endlessly!

REITs are a derivative. Derivatives ALWAYS feature counterparty risk. No matter how much Canadians may lust after it, insure themselves against it and have their governments ban it RISK will always be present.

Office vacancy rates could soar. WILL soar IMO. As will shopping mall store closures and vacancies. As has been said, what is coming is not a liquidity problem but a solvency, cash-flow problem for thousands upon thousands of income-starved Canadians.

So deflation will be upon us…or a crummy economy of printed money inflation: stagflation. Either way, why will all those “income producing assets” be in such demand? Why will all the malls, office towers and condo apartment buldings be full?

#99 Mike Rotch on 12.27.11 at 11:36 pm

Thanks, 45North.

It could be worse…..one of my American friends, showed me the ordeal the IRS puts him through. Well over a hundred pages for a family with 2 salaries, owned primary residence, and a relatively uncomplicated investment portfolio.

At least we Canadians only have to deal with a few dozen pages for that.

He is a bright guy, an actuary, and as he struggled through the idiocy of the IRS return, he cooked up an intriguingly simple flat tax scheme. One that would be attractive to a huge percentage of voters. Highlights:

-One tax rate, everyone pays 28% on taxable income,
-One refundable tax credit, equal for every family, at $22,400. No other deductions, period.

OK, so here’s where it gets interesting:

-if your household makes 80,000 or less, you don’t pay a dime in federal income tax.

-if your household makes zero income, you get a refund equal to $22,400…..this number is significant because it was approximately equal to the national “poverty line”

-Based on a back-of-cigarette pack estimate with believable and conservative looking numbers, it looked like federal revenues would be approximately flat, or perhaps higher by a small amount with this taxation approach!

Amazingly – you’ve helped every middle income earner hugely, “eliminated” poverty, and boosted revenues in one bold manouever!

So brilliant it’ll never happen!

Would love to see a finance minister with half a brain have a serious look at this and, if the detailed study supports it, grow a pair and make most of us a whole lot happier!

#100 Bottoms_Up on 12.27.11 at 11:47 pm

#73 Onthesidelines on 12.27.11 at 5:13 pm
————————————————–
Garth has mentioned many times that one owns preferreds for the distributions, not for the liquidity. Basically pick your entry point, get your advisor to pick some preferreds up for you at that entry point (because of the low liquidity it could take several days or weeks to buy them at your price).

Whenever Garth writes about preferreds I always picture a semi-retired person with $200,000 to invest that is looking for a stable, longer-term income stream from that money — yes, the capital may go up and down over the years due to the lower liquidity, but this person doesn’t need the $200,000, they need the income it throws off every year, so the 5% yearly distribution is the moneyshot for them……and eventually they will get back somewhere around $200,000, maybe a little less, maybe a little more, but that is of not a huge concern to this person.

#101 Mark on 12.27.11 at 11:57 pm

#104, REITs are also highly sensitive to interest rates, and the willingness of investors to lend money to them. In loose credit situations, ie: the past decade, they go up. When credit tightens up considerably, they could lose most of their value.

Just because policy interest rates are low, doesn’t mean that lenders will want to lend to REITs. Especially if the metrics continue to deteriorate.

#102 Snowboid on 12.28.11 at 12:01 am

Had a chance encounter with a Vancouver RE agent (who caters to Chinese investors) this morning. Turns out she is here in the Phoenix area looking for investment properties for her clients.

As well, she already has a few of her own places she rents out as vacation properties.

Didn’t have a chance to ask her what she thought of the Vancouver market – but it was interesting to see her down here on behalf of her clients.

The going rate for a vacation rental Oct-Apr is about $ 2200-2500 a month, and about half that the rest of the year. This is for homes with less than $ 150K into them (if bought within the last year or so).

#103 Bottoms_Up on 12.28.11 at 12:02 am

#61 InvestorsFriend (Shawn Allen) on 12.27.11 at 3:29 pm
———————————————————–
How can it be called a ‘pension’ if one can pay into it their entire working career and not benefit from it?

To me, that’s a ‘scheme’.

And I used the word ‘pyramid’ in the sense that those that get the most money out of it are the ones that live the longest (hence the pyramid shape–but come to think of it, those at the bottom–the ones that die first–pay into it their entire lives, and that money goes to those above them in the pyramid, whereas they don’t get anything back, so ya, it is like a pyramid scheme).

#104 HDJ on 12.28.11 at 12:09 am

Garth, Any thoughts on rehypothecation?

http://www.zerohedge.com/news/guest-post-run-global-banking-system-how-close-are-we

#105 GregW, Oakville on 12.28.11 at 1:03 am

Hi #49 eaglebay, re: Your comment to me.
Just a rhetorical question for you: How can you be so sure?

You might find this interesting to think about too. If haven’t seen it yet.

Plato’s “The Allegory of the Cave” ~7min.
(You can find other explanations of it too.)
http://www.youtube.com/watch?v=-Ei7LqbYb8M

#106 Nostradamus Le Mad Vlad on 12.28.11 at 1:30 am

-
#98 Nemesis — “¡Viva la revolución! What say ye, Nostra?”

Done! Currently, there is a Pineapple Express coming in now (temps. are climbing 2nite), so we can set off shortly.

By using this machine, we can go thru Venezuela first (swipe Chavez’s oil), then meet up with Garth’s former Amazonians at Burger King in Bolivia!
*
Fall in Living Standards Can anyone spell austerity? Borders closed if Euro sinks; Check and see if there any old, forgotten bank accounts; Boomerang Gen Happening more and more.

US$1.8 bln. in shoplifting; France 12-year unemployment high; China Going for new US business in 2012, and China involved in the greatest transfer of wealth. That’s because the cycles are changing; The Carlyle Group “Coincidentally, George H. W. Bush was meeting at the Ritz Carlton Hotel in Washington on the morning of September 11th with one of Osama Bin Laden’s brothers.”; The 1% Who are they? US$ domination Just another brick in the wall; BRICS in general; Japan; Harsh times; Outlook “The Dollar remains the hooker with crabs while many other currencies have AIDS.”; Some predictions do come true.
*
Mild here, cooler in the south Atlantic; Iran – Pakistan Curious to see who has been holding this up, and what the reason is; Drug Cartels build radio station; Living Off The Land Illegal in SF? Why the establishment is terrified of Ron Paul; IAEA Kannaduh transporting weapons?

#107 Mel on 12.28.11 at 2:15 am

Thanks Garth, I will buy some when ‘ share prices’ come down.

#108 Country Bumpkin on 12.28.11 at 2:26 am

Hi Garth,

Just found out about this guy. Let the truth be known…

http://www.chrismartenson.com/crashcourse/chapter-6-what-money

#109 The Thing in the Basement on 12.28.11 at 3:04 am

105 Mi Krotch – Isnt there a “short form” in the US that your friend can use? Also, his proposed tax structure sounds like a form of the guaranteed Basic income and it’s probably still covered in first year econ classes.

In its simplist form, the $22K is given to every family and it replaces all forms of assistance – welfare, EI, OAP etc.
But every tax structure has its “leaks”.

#110 Trailer Park Boys on 12.28.11 at 3:23 am

Hey listen….

You rocket appliancysts shouldn’t piss off Garth….he’s channelling good info through his tailpipe…err Harley’s exhaust.

We agree with apeparrel stock. why we bought REITman’s.

Also, apparently with Smart Meters, they can be re programmed so your grow opp overhead is waayyy looow.

Mike Rotch?…aha we get it Miker O’tch …..(Irish right ?)

#111 These pretzels are making me thirsty on 12.28.11 at 4:59 am

#52 NOT ME
“Any predictions for 2012
Will prices of real estate crash”

Okay, that’s it..
Where have you been and what planet are you from?

#112 SB aka Mr. B. on 12.28.11 at 5:34 am

Thanks for the link #4 Ben. I want to be like you guys, there is only one way. For now this is a good reference.
http://www.myownadvisor.ca/2011/12/13/top-canadian-reits/

#113 Last on 12.28.11 at 6:21 am

#105 Mike Rotch. The question everyone forgets when talking about a flat tax, what is income, if you sell your house is that income, what about capital gains, dividend income. What if you sell your farm.

The problem isn’t the brackets (only three in the states) but the deductions.

#114 House on 12.28.11 at 8:53 am

Hope thse REIT’s don’t have a Sears or Kmart in their malls!

There is no word of Canadian store closures. — Garth

#115 TurnerNation on 12.28.11 at 9:27 am

Hi Garth, FYI still flying, still under 65?

They are killing us softly…in open air camps this time.

http://www.wtkr.com/health/fl-tsa-scanner-concern-20111223,0,7069776.story

Cancer concerns mount over TSA body scanners

Airport body scanners like those used in Fort Lauderdale and Orlando may pose a significant cancer threat, particularly to those over age 65 and women genetically at risk of breast cancer, some medical experts warn.

Because the scanners’ lose dose of radiation penetrates just below skin level, it could imperil the lens of the eye, the thyroid and a woman’s breasts, said Dr. Edward Dauer, head of radiology at Florida Medical Center in Fort Lauderdale.

“I think it’s potentially a real danger to the public,” he said, noting that even a small dose could be risky for people predisposed to cancer. “This is an additional exposure.”

The Transportation Security Administration insists the scanners are safe and cites independent studies, saying the radiation levels are far below acceptable limits. Still, a growing chorus of scientists and doctors say that even a small dose of radiation could pose unnecessary danger.

#116 T.O. Bubble Boy on 12.28.11 at 9:33 am

@ #91 TurnerNation:

That $925k townhouse with $730/month condo fees, plus probably $500/month in property taxes equates to at least $6k a month out the door to live there.

Absolutely insane! Who is the target market for this place?

#117 bob's my uncle on 12.28.11 at 10:17 am

“-if your household makes zero income, you get a refund equal to $22,400…..this number is significant because it was approximately equal to the national “poverty line”

that’s a fabulous tax system, I’m sure many would love your friends brilliant idea…

#118 Ret on 12.28.11 at 11:10 am

Flat Tax -Not a chance.

Half of the Canadian income tax filers pay no income tax now. We already have a huge income redistribution system in place now. One half carries the other half.

Canadians would never give up their deductions to accept a flat tax. Politicians wouldn’t give them up either. That’s how they buy votes. Everyone gets a thousands in deductions and thinks that he is getting his neighbour to pay in effect subsidize his kid’s tuition, babysitting, safe deposit box, (past) home renovations, home energy retrofits etc. Screw thy neighbour if you can. It is all so Canadian!

Gotta love those senior tax credits too, that are given to the most wealthy group in our land. Their kids can pick up the shortfall in revenues from those deductions or we can just keep adding it to the tab.

Fair is fair. After all, seniors vote, the kids, not so much. Put the dough where the votes are.

#119 eaglebay - Parksville on 12.28.11 at 11:58 am

#86 Cato on 12.27.11 at 7:36 pm

What do you mean by “big loser”?
As long as there is a market, there are transactions.
There are always buyers and sellers for a price.
For every loser there’s a winner.
Pessimists need not apply.

#120 westcoast on 12.28.11 at 12:01 pm

What about preferred shares ETFs?

Canadian:
http://www.claymoreinvestments.ca/etf/fund/cpd

North American:
http://ca.ishares.com/product_info/fund/overview/XPF.htm

These would solve the liquidity issue, but are there drawbacks to holding preferreds as ETFS or is it better to hold as individual preferreds (and on that note, is it better to hold Bond ETFs or individual Bonds?)

#121 Devil's Advocate on 12.28.11 at 12:16 pm

I know, I know… there are flaws in his argument but…

HOUSING TRUMPS STOCK MARKET

http://tinyurl.com/8xpxpb3

Knick-knack paddywhack,
Give a dog a bone.

Have fun. };-)

#122 Okanagan Renter on 12.28.11 at 12:30 pm

I for one am excited about transferring my RRSPs that are rotting in the orange short man’s mutual funds trough to a self-managed, diversified portfolio. I’m thinking specifically of Boardwalk REIT (BEI.UN), as it’s mostly apartments. As far as REITs go, I’d bet that this might be one of the safest. With the housing market feeling the pinch, more savvy people (or just plain desperate) will choose to rent. In any case, for what it’s worth BEI just announced “solid results for the third quarter of 2011 for The Trust” (http://www.theglobeandmail.com/globe-investor/news-sources/?date=+20111110&archive=prnews&slug=TO812).

Anyone watch Boardwalk Empire?

Thanks for all the great work, Garth. This blog is now one of my many addictions. Actually downloaded as many entries during the Xmas break when I could find a connection to read back at the cabin where there was no wifi. Like a hit of sanity, which only lasts for so long.

#123 The Thing in the Basement on 12.28.11 at 12:38 pm

128 Westcoaster – “Bond ETFs or individual Bonds?”

A good question where I hope Garth could clarify. Holding bonds in a fund (mutual or ET) would not allow one to tailor the bonds maturities to the individuals timeline. Not so much a problem in short term bonds as the interest rate effect is minimized and a large portion
of the funds holdings should mature each year. Very long bonds go up and down with the IR, but can also serve as
a safehaven as opposed to buying for their yield.

#124 cj on 12.28.11 at 12:41 pm

2012 is predicted to have much the same volatile market. What do you think about covered call ETFs for the yield? HEX -top 30 TSX, HEE – energy. HEF – financials

#125 Victor on 12.28.11 at 1:04 pm

As a consequence of my boycott of this blog, I will therefore not be discussing the massive advantages of yield-producing assets, such as preferreds, REITs and trusts. Nor will I refer to a new report by Macquarie Research listing 50 of these suckers and their yields (Bell Aliant 6.7%, Artis REIT 7.8%, Crombie REIT 6.6%, Inter Pipeline Fund 5.8%, Retrocom REIT 8.7%, BMO or CIBC 5.0%). I won’t detail the benefits of collecting dividends, claiming the dividend tax credit, and paying 80% less tax than on a GIC.

Thanks for the tips, Garth. Did a little boxing day shopping today and will now be the proud recipient of juicy dividends from these stocks in 2012:

BA 1000 shares
AX 1500 shares
IPL 1200 shares
RMM 4000 shares

No GICs for me ;)

#126 Van guy blazin kush on 12.28.11 at 1:37 pm

Free Christmas presents!!! Buy property at Seranade Langley, get 1 year of mortgage payments or car. I’ve seen this before, ya in 2008-09

#127 Victor on 12.28.11 at 2:51 pm

Online Poll: Do you think Canadian home prices will drop in 2012?

http://www.theglobeandmail.com/report-on-business/vote-do-you-think-canadian-home-prices-will-drop-in-2012/article2276566/

#128 MarcFromOttawa on 12.28.11 at 2:52 pm

Garth,

Did you ever think about having a permanent section to your site about basic information on investing for us noobs?

ETFs, individual REITS, prefered shares, evil dutch orange guy, asset allocation based on age and goals, bonds, corporates etc….

Also quick question for anybody. How high of a net worth (or liquid net worth) should one have before seeking help from a professional advisor?

Thanks

#129 So Not The Best Place on Earth on 12.28.11 at 3:27 pm

http://www.kelownadailycourier.ca/national-news/four-fatal-shootings-rock-metro-vancouver-in-four-days-police-say-deaths-unrelated.html

The headline speaks for itself.

#130 Beach Girl on 12.28.11 at 3:31 pm

All is going well today, going out tonight.

Love poor Amy Winehouses’s version of “Our Day will COME”. Well hopefully mine will too.

Regarding poorly built homes in distant subdivisions.

Second home bought with Outstanding Computer Software Salesman in 1985. A 3,600 square foot Canada Home product in Unionville. Complete piece of shit. Dumped him and the house in 1995, before everything had to be replaced, him too. Windows, floors, roof, kitchen cabinets. At least I had a swimming pool. Thank God the Chinese had arrived. I was so out of there.

Second family home, as I was stuck with the 2 maggots (re idiots). That was a Greenpark home in Whitby. That home home was built worse than the Unionville abode. Not being racist but we called it Whiteby. Well the new swain installed a swimming pool. Keep him and that for 13 years.

My dear departed mother, best friend and confidant would visit every 3 days, and ask me what the HELL are you doing out here. As she made us another drink. by the pool.

Mom, I am turning into a ZOMBIE.

The only constant in my life is the need for a 86% heated swimming pool, which I have now.

Wish me luck, my fellow bloggers!!!

#131 Onthesidelines on 12.28.11 at 3:42 pm

At #118 SB “Thanks for the link #4 Ben. I want to be like you guys, there is only one way. For now this is a good reference.
http://www.myownadvisor.ca/2011/12/13/top-canadian-reits/

Interesting site, but these top REITs like much of the defensive dividend paying sector seem to be pretty crowded at this point with everybody already having piled in the past couple years.

My main concern in buying into these REITS after the great run up they’ve already had would be the same I would have with gold, realestate or any asset that seems to be overpriced due to too many investors piling in. Is it in a bubble and what is the fair price for this asset when the dust finally settles?

Buy high, sell low is a poor strategy even with dividends.

#132 Abitibi Doug on 12.28.11 at 3:55 pm

@Victor, post #133:
I have also been boycotting this sad, pathetic blog (well, at least not posting any comments) but broke from tradition and looked today. Thanks for the tips, especially for Retrocom REIT.

#133 Junius on 12.28.11 at 4:03 pm

#86 Cato,

I agree with your post. Deleveraging remains the main economic theme. It could be for a long, long time.

#103 IF Shawn Allen is to be ignored as usual.

#134 Junius on 12.28.11 at 4:06 pm

Garth,

One question about REITs. Are you concerned about specific REITs that are over exposed in retail shopping malls?

The reason I ask is that one clear trend in retail is the movement of shopping from bricks and mortar to online. Do you see this as impacting REITs in general or just specific ones? Or not at all?

#135 Bill Gable on 12.28.11 at 4:11 pm

“Tom Porcelli, chief US economist at RBC Capital Markets, says he is not buying the recent positive data on US housing. He sees US home prices dropping another 10% – 30% in 2012.”

Although just one man’s opinion – but my sibling bought a joint in California and she has watched the whole gated community they bought into, either foreclose, or people are so far underwater, they walk or try and sell at super discounts.

Now she is left as one of the few owners, who have the distinct pleasure of paying for the pool, the golf course, and looks like there are problems with guesthouse.

Tried to tell her, but, people get deaf when it comes to RE.

If this guess is right, 2012 is going to be nasty. But, again this is just one opinion.

#136 Linda Pearson on 12.28.11 at 4:38 pm

MarcFromOttawa on 12.28.11 at 2:52 pm
“How high of a net worth (or liquid net worth) should one have before seeking help from a professional advisor?”

Hi Marc – I don’t know if any adviser would be interested but, looking back from my almost mid-sixties, I wish we had started with dollar one.

#137 InvestorsFriend (Shawn Allen) on 12.28.11 at 4:41 pm

PREFERRED SHARES, REITS, AND OTHER HIGH INCOME EQUITIES

Consider also some of the restaurant royalty funds. Some of these are “top line” entities where the entity gets a fixed percentage of sales no matter wghat the earnings of the restaurant is.

That does not eliminate risk to the income stream and certainly does not eliminate risk of market value fluctuations due to interest rate movements or to cycles of fear in the market.

BUT, it does lower the risk compared to many equities. And they offer an attractive yield.

I am familiar with the Boston Pizza Royalties Income Fund which yields 7.8%. Again, not without risk.

I would expect little or no growth in the distributions but I would expect the distribution to be maintained. (Though it can always fall if sales at the restaurants fall or restaurants close. New restaurants do not cause the the duistribution to rise as new units are issued when new restaurants are added. Well technically 10% more restaurants would cause the distribution to rise by almost 1% assuming no cannabalization of existing restaurants.)

Bottom line, I like it as an investment.

#138 Smoking Man on 12.28.11 at 4:59 pm

A bat and a ball cost $1.10 in total. The bat costs $1 more than the ball. How much does the ball cost?

If your answer is 10c Wrong

#139 Smoking Man on 12.28.11 at 5:04 pm

Correct answer is .05

#140 new_era on 12.28.11 at 5:05 pm

Mabey buying a house for zero down is not a bad Idea

http://money.cnn.com/2011/12/28/real_estate/foreclosure/index.htm?iid=GM

Yep buy of zero down, or even 5 % down with cash rebate and default after several months. If the market goes south. Then tie down the foreclosure process in the courts for several years and live rent free.

Make sure you move your assets to someone elses name. They can’t get anything if you have nothing to give.

#141 HAM backing out of deals on 12.28.11 at 5:15 pm

Just talked to a Realtor in North york who tells me that so called HAM have been backing out of deals as of late. Realtor buddy expects RE to fall 15-20% this year along. The jig is up and even the Asians are backing out. I wonder if it has something to so with China and their crashing housing bubble? Going to be a bad year for those who bought a home the past two years. Can you say underwater mortgages coming to town.

#142 Prem on 12.28.11 at 5:21 pm

The market is dead in Brampton. It’s just unreal how nothing is selling. Brampton is littered with for sale signs and the situation seems to worsen each month. The economy is in bad shape and many people are just getting by on credit. We all heard the stories of people walking away and going back home. Wouldn’t be surprised if this trend continues as people just can make it .To think interest rates are low. Happy new year to all but 2012 is not looking so good.

#143 Beach Girl on 12.28.11 at 5:41 pm

MarcFromOttawa on 12.28.11 at 2:52 pm

“How high of a net worth (or liquid net worth) should one have before seeking help from a professional advisor?

____

Marc from Ottawa, when you are a high net worth individual, you don’t have to ask them, as they are clamouring, all over your back. Also the Prime Minister sends you a letter for being somebody. That means you are getting F**ked and paying to much taxes. I personally don’t buy into that shit, but Garth will tell you it works that way.

Any response, Guru. I do actually like you. Tell the truth Garth, letters are sent out to High End Performers.

Marc you are not there.

Beach Girl’s been drinking the lake water again. — Garth

#144 brad in saskatoon on 12.28.11 at 5:45 pm

well i see realestate falling the 15% around saskatoon. just my observation , i own realestate here but i am not selling , .
atleast if companies go bankrupt i do not loose everything . plus i still get the income from the rent every month .
also with so many people going to the hilt in debt we savers need to see some defaltionary times as super inflation will kill us and the debt junkies will be laughing as there assets increase.
any thoughts on inflation or deflation ? anyone?
it is tempting to max out debt and buy assets, maybe not real estate but business assets. any thoughts. problem is a dollar saved today is not a dollar anymore it quickly becomes .95c .
anyways good blog , like reading here have learned lots from both the host and many comments

#145 InvestorsFriend (Shawn Allen) on 12.28.11 at 6:17 pm

WHAT’S WORSE THAN HAVING TO PAY TOO MUCH INCOME TAX?

…Not having to pay much income tax… thankfully, my income tax bill has risen sharply over the years. The percentage tax rate on high incomes is actually down a lot, but still with higher income, comes higher income tax. This is a burden I gladly bear.

#146 Van guy blazin kush on 12.28.11 at 6:34 pm

I heard from a developer buddy of mine that the realtor involved in the sales of homes sold along the cambie st corridor is getting sued. Apparently the developers were lied to regarding the number of units they are allowed to build. 6 properties were sold for 3.4 mil each. Anyone else hear about this?

#147 TheTruthHurts on 12.28.11 at 7:20 pm

“No, there will not be an economic apocalypse next year. No 2008 rerun or Lehman II. ”
Right.. and can you tell me what I’m having for dinner next year too? Where do you come up with such hogwash predictions? You know as much as the readers here..and that’s NOTHING.

How’s that gold-and-depression thing working out for you? — Garth

#148 Mister Obvious on 12.28.11 at 7:20 pm

#147 Smoking Man

Interesting counter-intuitive question. The ball is $0.05 the bat is $1.05 (one dollar more) for a total of $1.10.

The mind sure wants to jump at $0.10 for the ball doesn’t it?

#149 Trailer Park Boys on 12.28.11 at 7:56 pm

Beach Girl….

You don’t fit this profile do ya…

http://henrymakow.ca/

Scroll to “My Marriage is a Living Hell,” – Tender-hearted man

If so Bubbles is interested.

#150 Trailer Park Boys on 12.28.11 at 7:58 pm

#147 Smoking Man

Does who gives a rats ass count as an answer ?

BTW quit pulling the fire alarm when we are doing our Grade 5 equivalency exams.

#151 Signpost in the bushes on 12.28.11 at 8:06 pm

#154WHAT’S WORSE THAN HAVING TO PAY TOO MUCH INCOME TAX?

…Not having to pay much income tax… thankfully, my income tax bill has risen sharply over the years. The percentage tax rate on high incomes is actually down a lot, but still with higher income, comes higher income tax. This is a burden I gladly bear.—Shawn Allen

Would you be interested in learning about the concept of “enoughness?” Or must it be “More, more, more?”

#152 Nostradamus Le Mad Vlad on 12.28.11 at 8:20 pm

-
Spoke with Mom today, who lives in Jersey, Channel Islands just off the north coast of France.

She said economics were hurting people in so many ways. At least 1,500 sleep on the streets (shelters are all full). If one loses their job, within a few months they are out of their abode.

The Channel Islands are tax havens, where rock stars, film and TV idols routinely keep their money. If the UK ever joins the Eurozone and go with the Euro, the CIs lose their status automatically.
*
2:32 clip Food Stamps and GD2 welcome you; Global Bank Run and MF Capital — when? Liar Liar The bigger the lie, the greater the crash; The Brothers Grim Reaper Not quite, but the end is in sight; US Shoppers New debt crisis, and UK prepared for Euro failure, but people aren’t; Af’stan – China sign US$& bln. oil deal; Obombination More debt and store closings; Suicide on Wall St. A little mesmerizing, but it makes sense; m$m pushing turnaround for economy, but six individuals control 95% of the m$m; Pawnbrokers booming.
*
War with China Sooner rather than later? And Demonizing Iran; Idle threats or empty rhetoric; Indefinite Detention Congress – Obomba; FEMA Camps Not exactly Butlin’s Holiday Camps; Lawsuit At least it wasn’t the F-35 Harper wants; Cancer “The short version is that dichloroacetate (DCA) causes regression in several cancers, including lung, breast, and brain tumors. But don’t expect it to be available any time soon. The reason? Conventional cancer chemotherapy runs $9000 a month and DCA only costs $100 a month.” wrh.com; 4:37 clip FOX-TV admits Ron Paul is a major frontrunner finally, and 2:10 clip Ron Paul’s non-aired interview on FOX-TV; The Big Lie and we suckers continue to absorb this garbage, and War is God Another reason for the cycle to finish; Libya Like Iraq, a bunch of bozo yes-men are in charge.

CC New Year’s Resolutions and Greenland Record cold; TEPCO Passing the buck, as usual; 7:18 clip Despite what Garth says, the US is still declining; BP’s ad campaign crashed by activists (good — they deserve it); Strategic Encirclement of Syria and Lebanon leads to war.

#153 Smoking Man on 12.28.11 at 8:34 pm

Well done mr obvious

Had my wife asked me I would have said 1. But a qaunt phd dude approched me with it so I knew the ovious answer was wrong. Thought about it for 10 seconds and nailed it. Know one else got it right

#154 renters rule on 12.28.11 at 8:49 pm

Given the humungous price correction from original asking, and the nifty “special features” (missile silo included)… I’d say this wins the 2011 Garth Residential Special Offering of the year! ;-)

http://ca.news.yahoo.com/blogs/daily-buzz/missile-silo-sale-ready-become-family-home-185046359.html#more-id

#155 terces on 12.28.11 at 8:53 pm

Sorry Garth, and with all due respects, REITS are subject to cap rates just like all other commercial properties. Look south of the 49th – the proof is in the pudding.

At the end of the day the only thing that counts in investing is how much you are up at the end of the year. If a REIT (or preferred or fill in the blank with anything else) gives you income, but it falls in value what is the sense. At the end of the year you have to add your income and add or subtract your capital gain or loss to arrive at your profit for the year.

Cap rates are a study in their own right, and anyone investing in commercial properties should take lots of time to study this issue.

Commercial real estate has been my business for more than 20 years, and I believe REITS have huge risk.

Modern portfolio theory does not make any sense in a secular bear market which we are deeply in right now. It makes sense and money for portfolio managers to make money, but it is not valid for investors wishing to make a profit.

Canadian REIT investors enjoyed solid capital gains in 2011 and pocketed distributions, while you worried. Guess what? — Garth

#156 Pr on 12.28.11 at 9:13 pm

Their is 2 ways to conquer and inslave a nation: One is by sword. They other one by debt!

#157 AGIC on 12.28.11 at 9:21 pm

#140 Onthesidelines “…main concern in buying into these REITS after the great run up they’ve already had…Buy high, sell low is a poor strategy even with dividends.”

Yes, to reiterate this: “Timing your purchases; and
Capital gains are the primary goal and yield/income is secondary. NEVER fall in love with any investment because of its income stream”

Unless you want income. (And that’s why lots of people invest.) — Garth

#158 TurnerNation on 12.28.11 at 9:29 pm

#157Mister Obvious on 12.28.11 at 7:20 pm

Thanks for explaing – also explains why I will never write any type of LSAT, GMAT etc. Will fall over on math related questions.

For everything else I have a calculator.

#159 45north on 12.28.11 at 9:37 pm

Smoking Man:
bat + ball = 1.10
bat = ball + 1.00
therefore
ball + 1.00 + ball = 1.10
ball + ball = 0.10
ball = 0.05

#160 AGIC on 12.28.11 at 10:02 pm

#149 new_era

I can only associate you with people who still in super markets and think they are the smartest one.
Be aware of a BAD CARMA.

#161 AGIC on 12.28.11 at 10:18 pm

Garth on #152 Beach Girl on 12.28.11 at 5:41 pm
“Beach Girl’s been drinking the lake water again. — Garth”

Who else could say it any better?
Though, that’s exactly how I felt, when I came across of her #139 @ 12.28.11 at 3:31 pm gibberish.

#162 Smoking Man on 12.28.11 at 10:22 pm

#167 45north on 12.28.11 at 9:37 pm

Obviously schooled

you made it sound so hard.

#163 Happy Easter on 12.28.11 at 10:26 pm

A passer-by said “Happy Easter” to me today.

He wasn’t joking.

Canada’s in bad shape.

#164 Beach Girl on 12.28.11 at 10:44 pm

#158 Trailer Park Boys on 12.28.11 at 7:56 pm

Beach Girl….

You don’t fit this profile do ya…

http://henrymakow.ca/

Scroll to “My Marriage is a Living Hell,” – Tender-hearted man

If so Bubbles is interested.

___

Ah, you are just a wimp. You don’t deserve female companionship. Hey, my date went well.

Garth, really did get a letter from some Evil Prime Minister in the 80′s. I think I can prove that.

#165 The Thing in the Basement on 12.28.11 at 11:57 pm

167 – 45N – Algebra. A thing of beauty.

#166 SB aka Mr. B. on 12.29.11 at 5:59 am

Onthesidelines #140. Appreciate the advice. Thinking REITs could be part of the balance.

#167 “I had a chance encounter with a Vancouver RE agent who caters to Chinese investors. Turns out she is here in the Phoenix area looking for investment properties for her clients.” | Vancouver Real Estate Anecdote Archive on 12.29.11 at 10:05 am

[...] “Had a chance encounter with a Vancouver RE agent (who caters to Chinese investors) this morning. Turns out she is here in the Phoenix area looking for investment properties for her clients. As well, she already has a few of her own places she rents out as vacation properties. Didn’t have a chance to ask her what she thought of the Vancouver market – but it was interesting to see her down here on behalf of her clients. The going rate for a vacation rental Oct-Apr is about $ 2200-2500 a month, and about half that the rest of the year. This is for homes with less than $ 150K into them (if bought within the last year or so).” – Snowboid at greaterfool.ca 28 Dec 2011 12:01am [...]

#168 Rene on 12.29.11 at 3:43 pm

I found your picture for your post on being a vulture.
http://dilbert.com/strips/comic/2009-06-26/
It may be a copywrite violation. Don’t ask me; I’m not a lawyer.

#169 Rene on 12.29.11 at 3:48 pm

*copyright.

#170 Arse on 12.29.11 at 6:24 pm

Which Index or ETF best represents the overall movement of REITs?

#171 “I had a chance encounter with a Vancouver RE agent who caters to Chinese investors. Turns out she is here in the Phoenix area looking for investment properties for her clients.” on 12.29.11 at 8:01 pm

[...] “Had a chance encounter with a Vancouver RE agent (who caters to Chinese investors) this morning. Turns out she is here in the Phoenix area looking for investment properties for her clients. As well, she already has a few of her own places she rents out as vacation properties. Didn’t have a chance to ask her what she thought of the Vancouver market – but it was interesting to see her down here on behalf of her clients. The going rate for a vacation rental Oct-Apr is about $ 2200-2500 a month, and about half that the rest of the year. This is for homes with less than $ 150K into them (if bought within the last year or so).” – Snowboid at greaterfool.ca 28 Dec 2011 12:01am [...]

#172 konstantin on 12.30.11 at 8:41 am

How can indvidual investor buy preferred shares of a bank for instance?