The transfer

Carlyle’s parents sold their semi yesterday. “They should thank their lucky stars, and BMO’s 2.99 special,” he says. No kidding. Boomer rescue. But let’s have a moment of silence for the kiddies who bought.

“Dozens came through to see it over the weekend,” he says of the half-house in the eastern wilds of GTA’s Scarberia.  Sixteen years old, and in need of a new roof. Listed at $415,000, sold for $400,000.  “A young couple, 20-something, ended up buying the house at 96 percent asking. How can twenty-year-olds afford 400k houses????”

More on that in a minute, since there’s a good chance an era’s about to end.

“Anyways I’m happy for my boomer parents (they needed to sell … Dad is almost 68 still driving rigs, mom almost 65). They are going to live at the trailer in Georgian Bay for the summer and then not sure. I’m trying to convince them to retire and do half the year in a Florida RV community during winter the other half at their trailer in summer.  It’s all they are going to be able to afford on their pensions.   Whatever equity they get from the house will be used to pay off debt – most of it :(. Basically they have nothing for retirement except government pensions.  The words on your blog about boomers ring true to me as I see it happening.  My folks are just in the first wave.”

But this isn’t about fool Boomers who blew six decades, putting it all in a house, saving diddly and now must retire to a trailer surrounded by losers. It’s about the fools who come after.

Yesterday this spiritually uplifting blog gave you the latest: federal bank regulators warning of sub-prime lending practices, no-income lines of credit and dangerous condos, while CHMC revealed it’s running out of money. This is big news. Big consequences, maybe.

Now remember the housing bubble is the result of two things. Crazy low interest rates engineered by the government. Plus a federal agency which wipes away risk, allowing lenders to make homeowners out of people too challenged to save. Oh, and that Property Virgins babe realtor’s tube top. Forgot that.

The agency is CMHC and borrowers putting less than 20% down (almost 100% of first-time buyers) must pay a hefty insurance premium. This does not insure them, but rather their lender. So banks can shovel money out the door, secure in the knowledge if their clients default on the mortgage, taxpayers will make them whole. A few things have happened as a result: banks have lowered their lending standards; people with putrid credit get the same low rates as Justin Beaver; and the real estate market’s erupted, resulting in higher prices (and bigger loans).

Something else, too. Banks have been using CHMC to insure ‘conventional’ mortgages as well – ones with a bigger down payment. This makes the mortgages more attractive when bundled into securities, called ‘covered bonds’ which are then sold to investors (does any of this ring a bell?).

Just two banks alone (BMO and Scotia) sold $4.5 billion worth of covered bonds in January, and last year investors snapped up $25 billion of these things – supposedly high-quality, being backed with residential mortgages insured by CMHC.

Ironically, these bonds then help the banks lower mortgage costs, so people can borrow their brains out and force house prices higher (requiring more loans). This is how you get stuff like BMO’s 2.99% fiver which caused such an endorphin rush among the horny.

Still with me? Good. Now we have a problem. Over a year ago CMHC convinced Parliament to boost its insured lending ceiling to a staggering $600 billion – about the size of the federal debt. Seventeen months ago there was $100 billion cushion left. By last autumn it was $60 million and in a few months it will be gone. It means taxpayers are on the hook (between CMHC and the national debt) for more than a trillion dollars. Scarier, CMHC has reserves so small they’d be wiped out if only a small fraction of its high-risk mortgage debtors defaulted.

More immediately, unless CMHC is bloated even further by an act of Parliament, it won’t be able to insure all the loans lusty young buyers and greedy old bankers wish to cover. Kinda like a money drought.

“It may serve to tighten the housing market,” warns TD economist Sal Gulati. In fact, it could do worse. The entire real estate structure now rests on the ability of 20-year-olds without any net worth to buy $400,000 houses from 68-year-old Boomers, thus rescuing them from themselves. It could be history’s greatest wealth transfer. The old guys get cash. The young victims get debt. If things tank, the bank gets the house, the taxpayers get gored.

If Ottawa doesn’t increase CMHC’s ceiling, real estate’s flames will lose their fuel. Prices will tumble and recent young buyers will be in negative equity until menopause. But if hundreds of billions more are added, Canada’s bubble grows more dangerous and the consequences more dire.

What will F do? Odds are he’ll up the ceiling, while restricting credit – eliminating the 30-year mortgage and dropping amortizations to 25 years. That will increase monthly payments for virtually every new buyer. At a time when prices are inflated and local markets volatile gasbags, it will do nothing but hasten, and deepen, the inevitable correction.

Carlyle’s parents may think life in a trailer sucks. But they’ve no idea how profoundly their asses were just saved.

Too bad who’s paying for it.

 

222 comments ↓

#1 Josef on 01.31.12 at 10:21 pm

First!!! OH Yeah BABY!!!!! TurnerNation’s stuck on imaginary Bay St. Today and couldn’t make it, First.

#2 TurnerNation on 01.31.12 at 10:22 pm

Weblog1

#3 James on 01.31.12 at 10:24 pm

First? cue rage from turner nation?

#4 James on 01.31.12 at 10:28 pm

Well done Josef! TurnerNation has been defeated. We sandwiched him niceelllly :)

#5 Smoking Man on 01.31.12 at 10:28 pm

To all my Bubble Heads and Basement Dwellers.

Bubble heads: Every time the machine turns on the MSM switch to get more red dots on the MLS you guys embarrass yourselves on here.

Fascinating reading all the wishful thinking about RE on here.

Ok bubble heads you sat on the sidelines in 2008 because the fundamentals did not seem right to you, or you were a bit scared. You jumped to the conclusion because it happened in USA it will happen here, without really looking at all the details, the brain of the herd.

If some of you remember me from my post at the globe and mail in Feb March of 2008. SCREAMING IN BOLD TYPE. By equities and real estate. I was ridiculed made fun of. I won they lost. I quadrupled my net worth in 8 months.

Many youngsters who work hard for the money are afraid to risk it. You achieved it through hard work, and not like good old me by being slightly smarter than the average bear, be it with old saggy balls, but still balls.

But your thinking is flawed, you can not be afraid of risk, You should make it a habit to gamble: Poker, Bonds, Equities RE, something. Get comfortable with gambling. Start off small but take risks, that is if you ever want to learn to make money.

I go to the casino, they take 10 dollars of every 100 I gamble in the long run, but I don’t do it to win, I do it to keep the edge. Not be afraid, it desensitizes you to money, if you think of money as too valuable, you will never risk it, and you will never make it.

And don’t tell me you do, because your posts tell me otherwise. And I know what you think before you do.

Without risk, you only have slave wages and no pension to look forward too, me and my fellow boomers are going to eat up all that loot, in fact you will go into debt for us. Sad but true, more of us than you and we vote.

The vast majority of you will not listen to me or the great bearded one who thinks he looks good riding a Harley, why?

Because it’s less risky and more fun to dream about watching your Granet loving risk taking peers get crushed because you were afraid of risk, they were not.

They won, you lost, your only saving grace and redemption now is to hope and dream they get wiped out. Other wise you end up the village idiot. The chicken shit looser. It’s not to late. I’m here to help.

I’m going to teach you grasshoppers how to think.

Let’s play a game.

Let’s pretend you are a paid lobbyist for the real estate industry, your goal is to deliver spin on why no Crash is Coming. Drink some wine dig deep and Write down your points. List all the pro positives. And dismiss your bias.

After you’re done, find the middle between your revenge motivated bias and what you wrote down. And you will nail the reality of the market in and around the actual zone.
And never forget how the herd thinks.

At which point you will be much more comfortable to take risks no matter what side you bet on. If you go from well before A and light years past Z in your analysis, make your bet, Bull or Bear, But Make a damn bet. Don’t keep sitting on the sidelines, coming on here and whining.

The hardest thing for the degree toting schooled tax farm slave to do is think without bias. School teaches you what to think and what to believe, not how to think and be completely void of beliefs, the absolute ingredient to success and discoveries (Shrinking Universe).

Are you guys not lucky I’m here helping my fellow humans?

And remember Kids it’s is better to be the dude standing behind the ho in stilettos and mini, who dropped a penny and does not know how (Maybe She does) to bend her knees to pick it up. Or is it?

Sorry about that one BEACH GIRL. I’m wasted and look I turned spell check on. Golly gee. All my cryptic shit, Not meant for the masses.

Garth hurry up and get the next post out, so I can post this, before this rant turns into a book, and my spelling goes down the toilet.

Nostradamus Le Mad Vlad don’t be mad at me for this one. Sort of drunk right now. You rock, I love you man, keep the links coming.

#6 T.O. Bubble Boy on 01.31.12 at 10:29 pm

Sounds like the U.S. “debate” over raising the debt ceiling… except that because of the 39% Harper ‘majority’, we won’t be having any debate — this is all up to F, who isn’t going to intentionally pop the housing anda debt bubble that he’s engineered to goose GDP numbers and make himself look better.

#7 mel in victoria on 01.31.12 at 10:30 pm

Time to lighten up on your non-core precious metals stocks..

Long term outlook still bullish…

Short term over bought and time to take some profits..

#8 ittybitty on 01.31.12 at 10:31 pm

Garth, I m 26, have enough money in the bank for a 20% down. I’m horny and nothing is gonna put out this fire. So let this correction come!!

#9 Brian on 01.31.12 at 10:32 pm

So, I assume no-one will ever be held responsible for the raping of a generation? Just like America.

Unbelievable.

“Here, lets use taxpayer money to basically screw over the entire country. ”

Nice government we have there in Ottawa. Assholes.

#10 TurnerNation on 01.31.12 at 10:35 pm

I may have tapped into the bunker’s security camera system to catch a glimpse of the Amazons about their daily tasks.

Okay that’s enought firsts from me. Time to let someone else take the prize (what prize?). Josef you still around?

#11 I'm Richer Than I Think on 01.31.12 at 10:36 pm

This blog is pathetic – I want more!

#12 City Slicker on 01.31.12 at 10:46 pm

Anyone see the cover of Canadian Business magazine:
“Prediction: Canadian Housing Market will Crash”

http://www.canadianbusiness.com/article/65694–prediction-the-canadian-housing-market-will-crash

Mainstream she goes.

#13 Josef on 01.31.12 at 10:49 pm

@TurnerNation

We took you out with a bang like a 50% R.E. CRASH!! You got spit roasted!!! haha!!!

I’ll be around as long as Garth is around. If I could only figure out how to tweet Garth, First!!! Hmmmmmm

#14 Uki_one on 01.31.12 at 10:49 pm

Congratulations to Josef !
You my role model now.

#15 Seven Stars and Orion on 01.31.12 at 11:02 pm

Is S. Cooper the antichrist? Will she be a lesser god in one of the lower levels of Hades? Probably not, but I’m scared enough to start saying my bedtime prayers for the first time in a couple decades – just in case.
BMO: Making Money Make Sense™
technical note: TurnerNation used to be first, but then he took an arrow to the knee. ooooooohhhhh.

#16 TurnerNation on 01.31.12 at 11:04 pm

#7mel in victoria on 01.31.12 at 10:30 pm

I’ve been buying ZSL.US (short silver) over the past two days.

#17 Duncan on 01.31.12 at 11:04 pm

Not so different in Australia, they are also offloading covered bonds. This is under the guise of “lowering borrowing costs” like it’s helping the general population of debt/property junkies, but really I think the banks are realising they need to change their daipers.

#18 Dom on 01.31.12 at 11:07 pm

Maybe I should borrow all I can and If the market goes south then i go bankrupt and give the middle finger to Canada. Canada hates free markets and democracy so best to borrow and screw over stupid Canadians. If F increases rates then i will borrow until I go bankrupt. I had enough and i will make it my mission to borrow borrow borrow. Maybe we blog dogs should plan on how we can borrow a half a million with nothing down . Is it best before going bankrupt to moving money to wife accounts. What if I split with wife on paper before going bankrupt and put all debts and mortgage on my name only. WARNING carney and F people will borrow borrow borrow until they go bankrupt including me. I had enough of working and i will join the debters and ruin Canada. i hate this stupid country.

#19 Carlyle on 01.31.12 at 11:18 pm

They love the trailer lifestyle though … On the lake, clean air, good neighbors.

I love my parents and I’m glad they got out when they did. It’s true they made alot of financial mistakes but they did a good job raising us. That counts for something.

I just hope that they will retire instead of working themselves to the grave … And that retirement will mean more time for them to spend together. The house was a rock around their neck and now they are free.

#20 Cash is King on 01.31.12 at 11:19 pm

I always wonder why the hardcover book “Too Big To Fail” came in a RED dust jacket with white lettering. Could it be that the author would be able to quickly remove the names of Fanny & Freddie with CMHC. Good thing our banks are already bailed out …. err protected.

Covered Bonds vs Collaterized Debt Obligations Tomato vs Tomatoe

#21 Smoking Man on 01.31.12 at 11:20 pm

#18 Dom on 01.31.12 at 11:07 pm

Nice plan I like it, been there done that, sec 160 of the tax code read it. First Grasshopper

#22 Michael on 01.31.12 at 11:21 pm

Ok, so here’s my story. I bought a house in 2007, renovated it and watched it decline in value towards the end of 2008, beginning of 2009. At that point, I resigned myself to the fact that I had stupidly bought a declining asset and my net worth took a big hit, and would probably not recover for a while. Yes, I treated it as an asset which is relatively fool hardy but whatever, that was the prevailing herd wisdom at the time and I wasn’t any better than the rest of the herd.

Now through sheer luck and no skill of my own, the market rebounded and rose to ever increasing heights until I decided to sell in 2011. For my troubles, I pocketed a huge profit.

Why did I sell? Well it’s become way too obvious that the market is over heated. One could argue that in 2007, things were already overheated and I agree and probably shouldn’t have bought, but I was younger and less wise ;) The housing market can’t keep up like this. There are just way too many misaligned factors like the income/debt ratio, for instance and no asset can go up for 13 years straight without any semblance of a correction. I’m renting now and proud of it.

It’s unfortunate that Garth has received a lot of flack, from realtors nonetheless but he’s been calling a correction for a while and I think he’ll be proven right soon enough.

Maybe this year’s the year of Garth! I’m certainly hoping so and you can bet that once the market corrects, I’ll take my earnings and upgrade to a much nicer home and for less than my last one.

#23 Matty on 01.31.12 at 11:22 pm

who is “F” ?

#24 dodgedbullet on 01.31.12 at 11:26 pm

Whatever happened to the Aussie Update from our upside down blog dog? :S

#25 Corban on 01.31.12 at 11:28 pm

Congratulations Josef! A little scripting magic (and no meddling from the bearded wonder) and you could have first every day.

Smoking man, you think TurnerNation will show up for a beer on thursday?

#26 Smoking Man on 01.31.12 at 11:33 pm

#23 Corban on 01.31.12 at 11:28 pm
Smoking man, you think TurnerNation will show up for a beer on thursday?
.

Don’t know but I’ll be there, look for the dude that looks like the guy from breaking Bad.

If you say hey are you smoking man I’ll say no. but if you say Shibilath Your in

#27 a prairie dawg on 01.31.12 at 11:33 pm

I call No Meemaws…

#28 Al on 01.31.12 at 11:36 pm

Another word from Calgary, a friend aged 30 owns two slum, and I mean slum, houses. Her family being Asian pitched in and rents them out. Of course she gets slum tenants and spends work hours getting them evicted for nonpayment, twice in the last year, several months in arrears. Not to mention the bad karma of kicking pregnant women out on the street, she now complains of living cheque to cheque.
But her motto is real estate always goes up and those slum houses are going to be gold in no time. I just smile and say I like renting.

#29 Fifty Percent Correction Predictor on 01.31.12 at 11:37 pm

there’s a good chance an era’s about to end.
- Garth.

How true!

#30 a prairie dawg on 01.31.12 at 11:38 pm

Like lemmings…

Canadians teeter on edge of debt cliff
http://business.financialpost.com/2012/01/31/canadians-teeter-on-edge-of-debt-cliff/

#31 John G. Young on 01.31.12 at 11:47 pm

#19 Carlyle

Thank you.

Wishing you and your parents all the best.

John

#32 Great Article! on 01.31.12 at 11:49 pm

#12 City Slicker

Great article.

Thanks for the post City Slicker. Sounds just like Garth!

#33 Sue on 01.31.12 at 11:50 pm

So, here’s a somewhat related question:

Hubby is 60. Still working (mostly self employed, gradually cutting back). Should he take out his CPP now, or wait? Pros vs. cons? We need some help here, people, thanks!

#34 a prairie dawg on 01.31.12 at 11:53 pm

#23 Matty

who is “F” ?

- — -

http://www.fin.gc.ca/comment/minfin-eng.asp

#35 Tony on 01.31.12 at 11:59 pm

The CMHC will likely be defunct by this fall. The rich who haven’t left Canada yet will all leave when they see taxes rise by around percent 30 over the next three years.

#36 Canadian Watchdog on 02.01.12 at 12:00 am

Let’s get some charts up.

CMHC Total Issuance: http://i41.tinypic.com/dddlx4.png

Canadian Banks MBS Exposure http://i41.tinypic.com/105ck01.png

#37 fiendish Thingy on 02.01.12 at 12:02 am

Garth-

Any chance these covered bonds (despite CMHC) will put banks at risk of failing and thus negatively impacting bank preferreds?

If the Canadian govt. follows in the USA’s footsteps and bails out too-big-to-fail banks and their covered bond investors, I sure hope many people go to jail, and many get thrown out of office, unlike in the US.

Bank common stock perhaps, preferreds not. — Garth

#38 Lucky Me on 02.01.12 at 12:10 am

Genworth will help

#39 Rich in Calgary on 02.01.12 at 12:12 am

I saw this analogy in regards to the U.S. debt ceiling issue several months back, but it seems appropriate for CMHC:

“Here’s another way to look at the Debt Ceiling:

Let’s say, You come home from work and find there has been a sewer backup in your neighborhood….and your home has sewage all the way up to your ceilings.

What do you think you should do ……

Raise the ceilings, or pump out the poop?”

#40 Tim on 02.01.12 at 12:16 am

Interesting — does the fact that there is demand to buy covered bonds that are composed of CMHC-insured conventional mortgages imply that banks are too afraid to buy/own conventional mortgages that don’t have insurance?

If that’s the case, then their risk models must be pricing in a greater probability of a signficant (ie, > 5%) house price decline than their publicized reports admit to.

#41 Canadian Watchdog on 02.01.12 at 12:16 am

And let’s not forget to debate CMHC’s infamous Karen Kinsley who stated:

“Under international banking rules, if you are, as we are, a 100% government entity, you don’t have to put aside any capital. In order to have a competitive marketplace in Canada, it was important for the government to introduce a similar level of guarantee to the private sector insurers to allow them to compete with us.”

Or this when asked about low-income housing:

“We underwrite low-income housing or affordable housing but on a commercial basis. Just to be clear, we must, under our mandate in mortgage insurance, operate on a commercial basis with no cost to taxpayers. The question might be how we do that when it’s affordable housing.

Fairly simply, because the rents are so low, they’re affordable by definition. We are able to underwrite those properties recognizing (READY?) that in the event, heaven forbid, there is a default, there is some room in the marketplace to move those rents up to market. We wouldn’t want to do that, but it is a commercial mitigant to our underwriting in those areas.”

Read the whole truth and nothing but the truth here before they redirect the link like the last time I posted it: http://www.parl.gc.ca/HousePublications/Publication.aspx?DocId=5097272&Language=E&Mode=1&Parl=41&Ses=1

Somebody confirm that link is working please…

#42 Preciousss on 02.01.12 at 12:17 am

Not to fear Watchdog. The institutions will simply move the debt off balance sheet and be whole again. A bit of accounting chicanery thrown in.

Perhaps the government will hypnotize the masses with rosy Tweets. There now kiddies its all OK. Sleep well.

#43 DonDWest on 02.01.12 at 12:17 am

I’m curious how exactly the young, even the smart young, are supposed to evade this underserved wealth transfer?

Don’t buy a house, yes I get that, but you’re not exactly avoiding the wealth transfer by renting. The majority of landlords are baby boomers who bought back when housing was affordable. Currently, they’re pillaging the working young by collecting passive sitting on their ass income. Make no mistake, baby boomers are making a killing off young meat who are renting as boomers mortgages have already been paid off long since.

How do the young prevent their wealth from trickling down to the undeserving old? Shelter is a human necessity after all; and the old hold all the cards because they got there first.

I suggested then young settle/build their own towns based upon their own economy, along with a swift banning of the baby boomers from the area, but I was called all sorts of nasty names. . .

It sickens me that date of birth is the biggest determination of financial success in this country. People will never have the courage to admit that real estate has always been one of capitalism’s greatest weaknesses. Throughout history, the “free market” has continuously failed to meet the needs and demands of the populace in this one key area. I’m not advocating yet more bizarre government schemes nor full blown communism, but an acknowledgement that at least when it comes to real estate, capitalism fails to deliver. Sorry, but the bartering for a house like it’s the local flea market with borrowed money system doesn’t work. It never has, it never will, and no tweaking by government or corporations will fix it.

However seeing that this isn’t a radical website, and Garth still (reluctantly) believes in the system, I’m curious as to what exactly can be done from an individual perspective. That young couple doesn’t exactly have a load of attractive options. They could have bought that semi for 400k or rented it for $2000 a month – rip off either case. I suppose in protest they could have chosen to live with their parents, until their parents get a clue that it’s the outrageous housing costs set by their generation why the rascals are there in the first place, but Garth doesn’t exactly advocate this path either. Dorothy suggests we should buy $250,000 1940’s houses in Vernon, British Columbia. Maybe I could take Parksville’s advice; and build a rocket ship to colonize Alpha Centauri? What can I say? The more I demand solutions; the sillier the suggestions become.

#44 a prairie dawg on 02.01.12 at 12:23 am

#33 Sue

The feds are probably about to amend the rules for OAS, which he can’t get until 65 years old anyway.

Contrary to popular myth, CPP is fully funded, and may not see any cutbacks, but he’s still 5 years short of full benefits if he takes it at 60.

Just google CPP eligibility, and OAS eligibilty, and do some math.

No one here knows your full financial picture either. ie: Debt remaining, other investments and/or pensions.

The best advice I can give is to not take any advice from the internet. (besides this advice, obviously)

#45 City Slicker on 02.01.12 at 12:25 am

My conspiracy side tells me this is orchestrated like similar situations with housing around the world.
And last but certainly not least will be the great Canadian housing crash.

#46 chubster on 02.01.12 at 12:33 am

next – power grab by those entities responsible, followed by direct monetization. it’s just the US/EU playbook. if you are going to steal, first have the laws changed, then perform the crime. how the pros do it.

#47 Cookster on 02.01.12 at 12:37 am

Some of the guys at work who have been making fun of me for selling and sitting on the sidelines while they’ve gotten “richer” are starting to think this is a good time to sell. I might hang around the Duke on Thursday hoping to catch a glimpse of Smoking Man but he might be hard to tell since there is usually a bunch of guys in there that sound like him.

#48 poco on 02.01.12 at 12:40 am

#24dodgedbullet on 01.31.12 at 11:26 pm
Whatever happened to the Aussie Update from our upside down blog dog? :S
____________________________________________
you can find him here on the last posting

#55 Aussie Roy on 01.30.12 at 11:55 pm
Aussie Update

#49 guy from toronto on 02.01.12 at 12:44 am

seriously is there a blog dog meeting with beer involved on Thursday on Bay St.? count me in. where is it again? timing?

smoking man, what is with the secret handshake stuff. why don’t you just wear a name tag and we can all find you?

looking forward!

#50 BPOE on 02.01.12 at 12:46 am

Bottom line CMHC will raise the ceiling and thats a FACT! Remember the Conservative Government NEEDS housing to succeed. Any cracks show up and BOOM BMO fiver at 2.75. You heard it here first folks.

#51 Golden Stu on 02.01.12 at 12:46 am

Great post GT….

“while CHMC revealed it’s running out of money.”…
“low interest rates engineered by the government”….
“covered bonds’ which are then sold to investors (does any of this ring a bell?).”…..

Ive noticed over the past week or so, your tone is definitely sliding into Doomer “conspiracy” territory :-)
We will save you some canned squirrel at the next meeting.

People….Have a read of the “Big Short” to see how the scenario GT describes here unravelled. A great read.
http://www.amazon.ca/Big-Short-Michael-Lewis/dp/0393072231

#52 a prairie dawg on 02.01.12 at 12:51 am

“Now remember the housing bubble is the result of two things. Crazy low interest rates engineered by the government. Plus a federal agency which wipes away risk, allowing lenders to make homeowners out of people too challenged to save. Oh, and that Property Virgins babe realtor’s tube top. Forgot that.”

- — -

There are more shows about RE on more channels now, than I’ve ever seen in my life. lol (not just HGTV) I have no less than 6 channels which regularly show newbies how to buy/flip/renovate RE or get cheap at auctions, etc. (I didn’t make a list of all the names. I didn’t know there would be a test…)
Usually after a season of this, most people become experts… (sarcasm)

But with that much positive reinforcement from TV shows, including commercials from banks and the misguided babbling from relatives and friends, added to the ultra low credit rate environment, most newbies don’t stand a chance. Then add in a fairly big dose of entitlement complex (because they deserve it) , and you have a recipe for disaster.

Herd mentality. Just like any market, be it stock/bond/RE/tulips

Anticipating the herd is a valid tactic in investing. As Buffet always said, buy when others are fearful and sell when others are greedy. Also known as buy low, sell high. It’s how rich people have stayed rich for centuries.

The moral: Don’t follow the herd. It’s risky, and the view sucks.

#53 45north on 02.01.12 at 12:58 am

DonDWest: Maybe I could take Parksville’s advice; and build a rocket ship to colonize Alpha Centauri?

your theory of class warfare between one generation and next ignores the central and obvious fact that they are related! Curious that you do not identify yourself as one or the other. Maybe you should just return to Alpha Centauri?

#54 chaser on 02.01.12 at 1:13 am

The tax payers are on the hook now? How about the borrowers? Aren’t the mortgage loans recourse?

#55 Mr Do on 02.01.12 at 1:13 am

The most excellent post I’ve read. Starts off with a real life story to convey “eh, this issue is real” and proceeds to dissect the factors. If you keep in the back of your mind, cui bono (to whose benefit?), the answer is crystal clear and it ain’t trailer lifers or the house horny.

Garth, you are a steward of the public good.

#56 Nostradamus Le Mad Vlad on 02.01.12 at 1:26 am

-
“But let’s have a moment of silence for the kiddies who bought. Too bad who’s paying for it. Kinda like a money drought. This is big news. Big consequences, this spiritually uplifting blog [and] people with putrid credit get Justin Beaver; they’ve no idea how profoundly their asses were just saved.”

When Harper said “You won’t even recognize this country when I’m through with it”, he wasn’t kidding. Stephane Dion may have been a quiet, reserved politician from Quebec, but he would be far more preferable to Harper.

BTW, First known pix of Garth’s Amazons.
*
#5 Smoking Man — No trouble SM. Keep ‘em coming!

#45 chubster and #46 Cookster — Good posts and right on the money. Not so much a generational transfer of wealth, more the removal of money from the system. We have to cope with what is left over.
*
Canada’s subprime crisis? This falls nicely with Garth’s post 2nite; Tobin Tax; IMF – EU Be nice to see Greece pull an Iceland stunt; Fascism or Communism? Under 40? Forget housing, concentrate on retirement via TFSAs; Amazon Preview Incl. a very complicated chart; Our So-Called Recovery; Record Earnings Peak oil? Not yet; Retirement Any time to start saving is a good time; Rigging Gold Market during dollar devolution; Danger I laugh in the face of danger! David Cameron Another money drought; Pya cut Not just happening to unions (MOTD = Match Of The Day).

China’s Gold Same reason as India — to subvert the IMF, UN, etc.; US$ under attack; Rare Earths; REITs Nice ones; Chinese New Year and the BDI; Volcker Rule Riddle; Tight Money UK; LuLuLemon; 6:08 clip For BPOE, and Housing Rebound? Fuggedaboudid; Robert Reich Cdns. will suffer the same fate as well; Five Major Banks headed for bankruptcy? Austerity Sux, and Germany calls the shots now (The Fourth Reich).
*
‘Quakes ‘n’ Things ‘Owzaboud a major one for the west coast? California runs outta money in 30 days or less; Weird World Is this doublespeak? Giant Pythons Not the MPFC crew; Iran New laser guided missiles; Falklands Wars here, there and everywhere; The Exorcist rides again.

#57 Lookoutbelow on 02.01.12 at 1:26 am

Do CMHC executives get big bonuses because right now they are raking in the insurance premiums and the mortgage default rate is minimal?

But when the $&@t hits the fan, sooner or later, CMHC will of course be bailed out by the ever faithful Canadian Taxpayers.

CMHC is truly “Too Big to Fail”. And all their eggs are in one basket, you got it, Real Estate.

#58 Debtfree on 02.01.12 at 1:35 am

I didn’t have to read all of the comments . You did garth . You’re a trooper . On a lighter note you should have heard all the retirees ( it’s pay day ) in the shops today . The topic of course was ” that snot nosed oily bastard in ottawa is going to screw with our pensions and our kids pensions .

#59 Don on 02.01.12 at 1:36 am

Been following Garthism for years now.

So Garth.

Will you walk off into the sunset after a job well done!
or
Stay around and say “I told you so”

I guess you could always “Turn as you are walking towards your next cause give the finger and say “Oooi: I told you so”

Thanks for the knowledge man

Hey Carlyle, glad to hear your parents got out, quality of life is defined in many ways. There’s a fair deal of good Americans living in traliers of all types across Arizona etc. Nice dry air, good sun, good company. My parents did a road trip and wanted to stay. Live cheap and keep mobile…seems to be the next boomer trend. Keep safe!

#60 Ronaldo on 02.01.12 at 1:41 am

33 Sue – this may be of assistance in making a decision.

http://retirehappyblog.ca/four-reasons-why-you-should-still-take-cpp-early-post-2011-rules/

#61 Renters Revenge on 02.01.12 at 1:48 am

“The tax payers are on the hook now? How about the borrowers? Aren’t the mortgage loans recourse?”
Mortgage loans are recourse but you aren’t going to collect if the borrowers declare bankruptcy.

#62 Florin T on 02.01.12 at 1:55 am

To the guy who wrote about housing and capitalism… yes it’s an old and unsolved problem.
In fact the housing situation will never be solved in a capitalist system, for it has its own contradictions.
See here http://www.marxists.org/archive/marx/works/1872/housing-question/index.htm

#63 cramar on 02.01.12 at 1:57 am

Well Garth… not all of us Cdn Boomers are destitute, foolish, naive or in debt! I reach the big 65 next week. Back in the early 1970′s with a wife and two little kids I realized the only way I would ever be able to afford a home is to get out of the GTA. I got a lower paying job and moved to Kitchener. Good move! One year later we bought a small detached fixer-upper with a decent lot, bordering on parkland, with 40% down payment. Brilliant move! I believe our mortgage was around 12%. A decade later we had it paid off.

Now after 37 years in the same house, the kids are long gone, and my wife and I find our home just a goldilocks dwelling—not too big and not too small! And with 37 years of upgrading and improvement it is highly marketable. Three houses on our street sold this past year—all over list with multiple offers! So this may be the time to sell.

Why sell when living is so cheap? It only costs me about $450/month for taxes and utilities. We have been considering the Windsor area where we can get a similar dwelling for 1/2 the price and even with upgrades to bring it up to our quality standards, we can pocket $100,000 to invest! We have been looking for 2 years, but have not found a house that is to our standards yet. But maybe this year. Or we might just rent an apartment and invest all of it. We would like to spend the winters in FL anyway, and if so who needs a house? I don’t care how wonderful Vancouverites think their city is in winter compared to Southern Ontario, Florida is much better.

The problem with Canadians today is they:

a) Take on far too much debt. To me anything is too much! We don’t lack for anything and for example have three cars.

b) Insist on living in, and buying insanely priced RE in cities like Vancouver, GTA, and Calgary.

#64 Ozy - time for a new political party in kanata on 02.01.12 at 2:04 am

Soon you’ll all be in the poor’ house, house poor and generally way poorer, so I say it LOUDLY:

Now is the time for a new political party (or more) in kanata!

Viva la revolution!

#65 Al on 02.01.12 at 2:09 am

Reminds me of the late 80′s when your real estate earned more every year than your job until it all crashed a few years later because of higher interest rates.

#66 Bubble Shooter on 02.01.12 at 2:15 am

I think someone is reading Garth. This came down the pipe about an hour ago.

http://www.thestar.com/business/article/1124551–mortgage-cmhc-firstline-ottawa-self-employed-new-immigrants-housing-market?bn=1

#67 Spiltbongwater on 02.01.12 at 2:15 am

If your house was filling up with sewage, you have 2 choices the keep the house from exploding, pump the shit out, or raise the ceiling to allow more shit into the house. Our government chooses to raise the ceiling. We are all doomed.

#68 poco on 02.01.12 at 2:26 am

Sue –here are a couple of links to your question on early CPP–and they have changed the rules starting this year (2012)

http://www.servicecanada.gc.ca/eng/isp/pub/factsheets/ISPB-348-11-10_E.pdf

http://www.cbc.ca/news/business/taxseason/story/2012/01/30/f-cpp-changes.html

#69 Suede on 02.01.12 at 2:28 am

CMHC ceiling is problematic but not ready to create a panic yet. Why? Still hasn’t made the front page of the Globe and Mail or Financial Post.

Raise the ceiling, postpone the days of pain. It’s like alcohol – the hangover comes eventually. Keep the gatorade close.

Tick, tock…

#70 John on 02.01.12 at 2:32 am

To the guy who asked , who is “F”?
that would be Jim Flaherty, the canadian finance minister who Garth refers to now and again, all these little abbreviations, are fine unless you are new to the site, you’d think he’d fill you in when you asked, but i guess not. There are a few others like TNL@TB, which is The Nice Lady at The Bank and some others that i haven’t figured out and don’t really care anymore either.

#71 McLovin on 02.01.12 at 2:39 am

Its Justin Beber Bieber not Beaver! My 6 year old was aghast!

Rodent rock. — Garth

#72 live within your means on 02.01.12 at 2:41 am

#33 Sue on 01.31.12 at 11:50 pm
So, here’s a somewhat related question:

Hubby is 60. Still working (mostly self employed, gradually cutting back). Should he take out his CPP now, or wait? Pros vs. cons? We need some help here, people, thanks!
………………

The following might help.

6 big Canada Pension Plan changes arrive in 2012
New rules could affect retirement planning
http://www.cbc.ca/news/business/taxseason/story/2012/01/30/f-cpp-changes.html

#73 Foggy on 02.01.12 at 2:45 am

@33 Sue
quote:
So, here’s a somewhat related question:
Hubby is 60. Still working (mostly self employed, gradually cutting back). Should he take out his CPP now, or wait?
————————
I went though this same exercise in my late 50s.
First of all to be eligible for CPP he must have stopped working, period. There is a 6% per year penalty for each year under age 65 if you take it early. For example. if he starts it at age 61 he will have 24% deducted from his maximum monthly payment. You will have to contact the CPP dept for his exact maximum (based on how much and how long he has contributed). Next figure out when you will probably die. The reason for this ridiculous premise is to calculate, is it better to receive less money, but get it earlier versus waiting until 65 with a bigger monthly pension but possibly fewer years to use it. Health concerns might be an issue.
OAS cannot start until age 65. And it is only for those who have a fairly low yearly income when they retire.

Start with that….

#74 renters rule on 02.01.12 at 2:53 am

BPOE — FOLKS yikes, what happened to you can’t lose, owning in Vancouver because it is like a license to print money, I buy three my husband buy three…… now it is not about the undeniable upward endless relentless acceleration of Van RE estate because GOD HERSELF wants to live here.. no, now it is about Harper crapping his drawers if the loftinest is not somehow maintained by gov’t policy because the SIHTF… FOLKS FOLKS FOLKS

#75 Mr Inconsistent on 02.01.12 at 3:06 am

CMHC’s total value at risk is over $1 trillion. You also have to count insurance of securitized mortgages in addition to on book insurance coverage.

I doubt it will be very easy to raise the CMHC ceiling. MP’s who don’t know anything about this issue (they still believe in the Canadian conservative banking culture myth) will probably have a knee jerk reaction against raising the ceiling because it sounds insane. Opposition MP’s can make a career for themselves by making a stink now and then tagging the inevitable bust on the Tories’ raising the CMHC limit. Only after a little time and lobbying money from the walking dead will it get through. But the fuse is already lit. Doesn’t matter, really.

#76 Zoronqueen on 02.01.12 at 3:07 am

Hello
From this article
http://finance.sympatico.ca/home/6_big_canada_pension_plan_changes_coming_in_2012/d226e624

They are making changes to encourage people to work beyond 65?

#77 rp1 on 02.01.12 at 3:34 am

#42 DonDWest:

“I’m curious how exactly the young, even the smart young, are supposed to evade this underserved wealth transfer?”

Minimize expenses, maximize savings, invest for the long term, and prepare to leave Canada. Because if you think the rip-off is bad *now* you haven’t seen anything yet.

Every level of government is spending vastly more than they take in, and this is when times are supposedly good. We can’t balance budgets without cracking the economy. When housing corrects this country will be so far down a hole it will be impossible to maintain the standard of living that Canadians are accustomed to.

That’s the biggest irony of it all. Young people buying 600k houses thinking it’s different here. Boomers sitting on 600k houses thinking they need socialized medicine. Anyone with a bit of sense can see that the government is on the hook for the housing bubble, and private interests have looted this country, just like in the US.

The damage here will arguably be greater. Canadians are naive and place far more trust in their government and media than do any other citizens of the world. We have watched this exact same story unfold in the US, and we have replicated it. The degree of stupidity or naivety required is not believable. Canadians are complicit in this.

Americans can print money and monetize debt with few ill effects because they have the world’s reserve currency. Who needs Canadian dollars? Nobody. Guess what? They’re worthless. People just haven’t figured that out. Despite all the debasement, an American dollar buys twice as much house, twice as much food, twice as much gas, and can be exchanged anywhere in the world. And you can buy them 1:1? And if you’re an educated young person, you make more money in the US too? Wow.

In short, Canada has never offered a worse deal. This country is selling a bill of goods. At least in the US everyone has modest expectations. They think China is going to eat their lunch. That may be true someday, but it probably isn’t going to come about with China building empty cities that nobody can afford. Canada has performed much better than anyone has any right to expect. For the majority in this country things seem perfect. That’s when you sell.

#78 AlexanderTheGreat on 02.01.12 at 3:42 am

This summer is going to be a bloody f’ing mess. Everyone is ejaculating over this 2.99% BMO offering, but what if it doesn’t work? Imagine if even at 2.99% 5 year fixed, housing sales are still slow. Then what will the realtors say? Things are crashing in Vancouver already (January numbers will be SO bad). I have seen condos that sold in the $380′s last year now listed in the $340′s and not moving. It seems like DT vancouver is being hit the hardest. And as far as Fraser Valley goes, nothing is moving at all, very few sales and very few price reductions. All I can say is… if everyone thought the ride up (13 year bubble) was fun to watch, the crash will be even more fun. What a giant mess though, and in the end, lots of pain caused… people will be declaring bankruptcy left and right, and the taxpayers will pick up the bill for CMHC.

#79 Devore on 02.01.12 at 3:49 am

#42 DonDWest

More whining from Don.

Throughout history, the “free market” has continuously failed to meet the needs and demands of the populace in this one key area. I’m not advocating yet more bizarre government schemes nor full blown communism, but an acknowledgement that at least when it comes to real estate, capitalism fails to deliver. Sorry, but the bartering for a house like it’s the local flea market with borrowed money system doesn’t work. It never has, it never will, and no tweaking by government or corporations will fix it.

You’ve just countered your own complaint. And will probably never realize it. What does borrowing phantom money, guaranteed by government, with massive, decades-long moral hazard and interference in the market, have anything whatsoever to do with free market or capitalism? Is CMHC some devious capitalist scheme? Who created the real estate bubbles and keeps them going? Who’s creating tax legislation favoring and subsidizing real estate owners?

Everyone here is too young to remember it, but there was a time when there were no mortgages. You bought a house for cold hard cash. Even when government created special rules for mortgage loans, they were only for serious people with big downpayments who would pay them off in a decade or less, not zero-down interest-only risk-free giveaways for speculators.

Get off your high horse and do something useful with your life, instead of complaining about how unfair everything is.

#80 Blacksheep on 02.01.12 at 3:51 am

DonDWest # 42,

“However seeing that this isn’t a radical website, and Garth still (reluctantly) believes in the system, I’m curious as to what exactly can be done from an individual perspective.”
—————————————————-
That’s Garth’s burden, You know better. Do all you can to wake the sleeping 20-30 something’s. Use the net and social media to make your peers realize, this system is designed to make both, you and them, it’s bitch.

“I’m curious how exactly the young, even the smart young, are supposed to evade this underserved wealth transfer”
————————————————–
Stop voluntarily giving the system your money.
No RRSPs, no new cars, no houses.
Baby Boomers need you, to buy their crap.
You know who owns the houses and business’s.

Find the smallest/cheapest place you wouldn’t live in, and rent it.
Everyone starts a slave, but strive to be an owner, things look different from the other side of the fence.

Simply posing these questions, shows you already understand things, 97 % of the masses don’t….and most likely, never will.

take care,
Blacksheep

#81 Aussie Roy on 02.01.12 at 3:55 am

Aussie Update

Australian house prices plunged by the most on record in 2011 as global economic uncertainty and concerns about its impact at home kept a lid on demand.

An index measuring the weighted average of prices for established houses in eight major cities slid 4.8 per cent from a year earlier, according to the Australian Bureau of Statistics, the biggest calendar-year drop since the data began in March 2002.

http://www.smh.com.au/business/property/record-slump-in-house-prices-in-2011-20120201-1qsid.html#ixzz1l79mz1OW

Brisbane home prices plunged the most among Australian capital cities in 2011, as lagging demand weighed on an oversupplied market.

House and apartment prices in Brisbane fell 6.8 percent last year, according to a RP Data-Rismark report released today. Across Australia’s eight capital cities, prices slipped 3.6 percent last year and declined 0.2 percent in December.

http://www.bloomberg.com/news/2012-01-31/brisbane-led-declines-in-australia-home-price-in-2011-on-lagging-demand.html

THE Future Fund has transferred assets out of property, debt securities and alternative assets and into cash holdings as it prepares for a long period of ”subdued economic growth”.

http://www.theage.com.au/business/future-fund-prepares-for-slower-growth-20120130-1qpmg.html#ixzz1l7A9ptWS

Why Gold Coast real estate agents are the world’s supreme optimists…. Or loose with the truth

http://www.kochie.com.au/20120129527/why-gold-coast-real-estate-agents-are-the-worlds-supreme-optimists-or-loose-with-the-truth#comments

HONG KONG (MarketWatch) — Chinese manufacturing remained sluggish in January, with rival readings of factory activity hovering near levels that indicate activity is neither expanding nor contracting, a result which analysts saw as suggesting cooling economic growth.

http://www.marketwatch.com/story/china-manufacturing-data-show-contradiction-2012-01-31

#82 Devore on 02.01.12 at 3:56 am

#43 a prairie dawg

Contrary to popular myth, CPP is fully funded

Of course CPP is fully funded. That’s because a CPP check and spare change from the couch will buy you a $5 footlong once a week. Maybe.

Real public and private (defined benefit) pension plan managers stain their pants every time Bernanke opens his mouth. They’re still modelling contributions and benefits on a 7-7.5% rate of returns.

#83 Canuck Abroad on 02.01.12 at 4:05 am

219/Daisy Mae (yesterday) – #176 CANUCK ABROAD: “Most condo owners won’t be taking losses this size, they’ll just declare bankruptcy if they have to sell.”
******************************
….and lose all their remaining assets in the process.

***

Absolutely. No strategic default in Canada. I’m assuming the condo buyer scraped together every last penny they could scrounge in order to come up with the 5 or 10% deposit needed to buy. So a $150k loss will wipe them out completely and then some. At that point, best to declare bankruptcy, take the credit rating hit, and start over with nothing.

I think that sort of thing should be making the banks nervous. There is not longer any stigma to bankruptcy in the USA, and we could see the same thing in Canada.

#84 Devil's Advocate on 02.01.12 at 4:05 am

#208John G. Young on 01.31.12 at 6:46 pm

The next insult I’ll not throw your way but rather be condemning of me for my inexplicable tendency to be drawn into such trivial debates as this with the likes of you.

I beg to differ. Not irrelevant or trivial because your affectations speak to your character — at least the character you choose to present on this blog. – #217John G. Young on 01.31.12 at 8:16 pm

And yet just the other day I was accused of being insecure – go figure. But I do seem to recall something of Psych 101 which might explain the incongruities in my personality – insecure, affectatious poseur that No doubt you will have fun with that one. I am and we haven’t even begun to address my A.D.H.D. “Squirrel”.

But seriously 6’ 5” tall John G., my annoying personality traits aside, I attend these forums to share my infinite wisdom on matters of my “profession”. How that transposes to matters of real estate I will let you and the blog dogs continue to debate. But despite my crude way with the English language I do believe that I am, from time to time, able to shed some light on the purpose, meaning and intent of the “Cartel” (Garth speak for CREA).

You see these are indeed challenging times and as Gerard Celente says “when people have nothing left to lose they start losing it”. You are losing it 56’ 5” John G.. Let’s try stick to the topic that we may discuss something more in keeping with the intent of this blog shall we for I am way to easily distracted by such tripe condescending behaviour as yours that is, let’s be honest, less relevant here than that of my own. In other words 6’ 5” tall John G.; call me what you will, at least I do not patrol and clog up these blogs posing as the “grammar police” but rather do so with intent of offering something that adds and prompts discussion relevant to the topic at hand. “Squirrel!” Excuse me, did I not mention I am easily distracted?

Now back to our regular programing.

#85 Kip on 02.01.12 at 5:10 am

Alright! Let’s hear it for the Boomers!

Oh, and that trailer park retirement plan? Hardly original, they stole that from me!

#86 D on 02.01.12 at 5:22 am

Man, we are lucky!

It turns out we are not moving back to Canada from the UK (expats) but going straight to the USA. This allows us to completely skip the Canadian housing market and buy into USA. Whew. You would be amazed how overpriced Canadian RE is vs USA RE.

Now if we were moving back to Canada we wouldn’t have bought at all till Canada’s housing bubble blows.

See ya’ll!

#87 Devil's Advocate on 02.01.12 at 5:23 am

Interesting editorial today Garth. Got me thinking. I need to do some research.

That aside, why would a 65 and 68 year old couple buy a roof over their head? Freedom 55 and beyond… hard to sail the seas while the anchor is set.

I’m busy marketing my boomer clients homes to the next generation of 20 somethings so my clients can bring to you their crystalized equity that you might help them supplement their OAC and CPP. The 20 somethings are 35 years or more away from that goal my clients just recently attained. And of the 20 somethings future, well who’s to say their diligently thought of cautiously executed 35 plus year plus homeownership plan may not culminate in much the same?

Now if you keep scaring the 20 somethings away, not only will my business suffer but yours will soon too.

Who ya gonna save Garth? The weapon you do battle with cuts both ways. But more damning your, albeit, good intent to save one or the other might very well be detrimental to both as the future you cannot see.

Did you catch that one 6’5″ John G.? I considered “… , all be they, good intentions…” but that wouldn’t be nearly so much fun. And I am sure you can find grammatical error elsewhere in my post. Fly at ‘er “Dude”. };-)

#88 Freedom 55 on 02.01.12 at 6:30 am

A 1/4 million dollars for a walk up wooden condo in Edmonton (more in other cities) is idiocy!

http://www.beazer.com/new-homes-for-sale/Dallas-TX-Willow-Ridge.aspx

#89 Kip on 02.01.12 at 7:00 am

“But this isn’t about fool Boomers who blew six decades, putting it all in a house, saving diddly and now must retire to a trailer surrounded by losers.”

Surrounded by losers? If I had to pick between people I’ve met at trailer parks and idiots I’ve come across in forums like this, I’d pick them, hands down!

#90 Leopotato on 02.01.12 at 7:16 am

Hi #53 Chaser,

“The tax payers are on the hook now? How about the borrowers? Aren’t the mortgage loans recourse?”

When a person goes bankrupt in BC anyway (I expect it’s the same across Canada), they can either keep the house or ditch it as part of the bankruptcy. If you just walk away from the house but keep paying all your other debt, the house goes into foreclosure. The bank sells it if they can, but that could take a couple of years. In the meantime the debtor’s life is in limbo. After the sale, the debtor has to pay the difference, which now includes bank fees, etc. Here is what most people will be doing. Everyone has over $1000.00 in unsecured debt. If not, take a vacation before you declare bankruptcy. All you need is $1000.00 of unsecured debt and you can declare bankruptcy right away with the house being listed as one of the debts being defaulted on. You go down to the bank with a letter saying you are not paying for it anymore and hand over the keys. In either 9 months or 21 months, depending on income, you are out of bankruptcy. There is only one rule here. If you owe Capital One any money, make sure to pay them off before you declare bankruptcy. They will be your first line of attack towards re-establishing your credit after you are discharged. Next a car loan you can afford with all your new found wealth. Pay loans on time, don’t charge more than 50% of the C1 card limit and in no time you qualify for another millstone around your neck (aka mortgage). One more thing, if you own a paid off Hummer, you will have to sell it and put the money in your sock drawer. You can’t have a vehicle worth more than $5000.00. But, I’m saving the best for last. If you have an RRSP, except for the amount you paid into it in the last year, it’s exempt from bankruptcy. It’s yours to keep. The bankruptcy business in the lower mainland of BC is booming right now. CMHC is going down!

#91 Aussie Roy on 02.01.12 at 7:42 am

Aussie Update 2

PROPERTY values have plummeted across Monash in 2011, and are expected to fall further this year as Victoria’s population growth eases.

Statistics released this month by the Real Estate Institute of Victoria show every suburb across the municipality experienced a downturn in the past 12 months.

Wheelers Hill was the hardest-hit, with the median value dropping more than $100,000 – or 16.7 per cent – over 12 months.

Mt Waverley’s median dropped 7.6 per cent ($60,500), while Mulgrave dropped 2.2 per cent ($11,700).

The sliding figures mirrored a Melbourne-wide trend, with 210 suburbs falling and only 58 rising.

Melbourne’s median house price fell by 5.2 per cent in 2011, from $580,000 to $550,000.

http://waverley-leader.whereilive.com.au/news/story/house-prices-diving-in-monash/

Now even the mining sector doesn’t look that strong.

A BHP Billiton Nickel West restructure will slash 150 jobs and slow mining activity despite a slight increase in the embattled price of nickel.

The Mount Keith nickel mine in the Northern Goldfields of WA is expected to lose 30 employees in the coming weeks. But the vast majority of axed positions are expected to be from the Nickel West offices in Perth

http://www.theage.com.au/business/bhp-gears-down-nickel-mine-jobs-lost-20120201-1qsyg.html

#92 House on 02.01.12 at 8:00 am

“Crazy low interest rates engineered by the government.” Ah, ha so Mark is just a stooge and not the best central banker in the whole world.

#93 detalumis on 02.01.12 at 8:07 am

Actually the father is not a boomer, the earliest boomer will turn 66 this year. Some of us are not even 50 yet.

#94 Freedom 55 on 02.01.12 at 8:14 am

#77 AlexanderTheGreat on 02.01.12 at 3:42 am

Buying wooden walk up condo’s in the mid $300′s is complete idiocy

Look at these SFH mansions in the mid $200′S

http://www.grandhomes.com/

#95 Pr on 02.01.12 at 8:20 am

Now you have been warn by almost all part of high places, in central banks, government, IMF, to watch out, Real estate , now, is a very dangerous place to be.

An imploding global economy can happen in Internet time and would make the Great Depression look like a party. So long for your equity!

#96 House on 02.01.12 at 8:27 am

So I see that CIBC announced yesterday that it is changing the rules on “stated income” subprimes.

#97 Sean on 02.01.12 at 9:04 am

But this isn’t about fool Boomers who blew six decades, putting it all in a house, saving diddly and now must retire to a trailer surrounded by losers.
—————————-

Sweet! I say we vote each day for “line of the day”… Garth, you’re a good man bringing us laughs each day!

#98 pbrasseur on 02.01.12 at 9:13 am

@rp1. #76

Great post, best one I’ve read on this blog for a while. As you say, unlike the $US and to some extent the Euro, the $CAN is no reserve currency and when we try to print our way out of this mess we will get a whole lot poorer.

#99 Steven Rowlandson on 02.01.12 at 9:14 am

Carlyle’s parents sold their semi yesterday. “They should thank their lucky stars, and BMO’s 2.99 special,” he says. No kidding. Boomer rescue. But let’s have a moment of silence for the kiddies who bought.

Yes indeed a moment of silence for the poor souls that bought. They just got financially killed with the stroke of a pen after getting sucked into doing something stupid. Play the funeral march please Garth.

#100 Kip on 02.01.12 at 9:19 am

#19 Carlyle,

I know you are reading the posts and you should feel good about your parents decision to live large and enjoy it. They are going to have a ball in Florida while many on this blog are hiding mom’s basement waiting for the financial sky to crash on them!

Hats off to your parents who played the game and won!

How is ending up on government assistance ‘winning’? — Garth

#101 TurnerNation on 02.01.12 at 9:26 am

A slanted Leslieville (skinny) semi, offered 600k!!!!

http://www.leslieville.com/listings/356-logan-ave/

ps. is Shelly Cooter a regular blog dog now, here for the shock and awe on this ridiculous weblog?

#102 truth hammer on 02.01.12 at 9:31 am

I have to wonder why so many Canadians end up in dismal trailer parks surrounded by savages on their CPP and OAS. You can live worse than cockroaches when you can get a really decent furnished apartment in Asia for under $400 a month. English is spoken here…hospitals cost a pittance compared to MSP premiums. I know a ex Vanouverite who had skin cancer surgery recently for just under $600…and didn’t have to wait 6 months to see a dermatologist…he was diagnosed and treated in the same week!!!!!! and he’s 100%. today….this is just one example….I am surrounded by ex pats from Europe…but for some reason Canadians hunker down to die a miserable death in some dismal trailer park. Why??? $400K would allow you a really decent retirement anyway in Asia. Sun, fun and little getaways. Travel is not taxed here like it is in Canada…so you can fly from Kuala Lumpur to Sydney Aus for $99. A beachfront apt in Batu Ferrighi Malaysia will set you back under $300 per month…..a good meal on average is $1.50…sitiing outside enjoying life…instead of ‘shudder Georgian Bay Ontario. Retiree’s ….run for your lives…Asia isn’t Mexico…it isn’t even foriegn. Its safer than Canada…I haven’t read of a single person being bitten by a police dog or being tasered for not wearing a seat belt since I got here. People are friendy and respectful…unlike most places in Canada…..imagine !!

#103 a prairie dawg on 02.01.12 at 9:34 am

#81 Devore

Of course CPP is fully funded. That’s because a CPP check and spare change from the couch will buy you a $5 footlong once a week. Maybe.

- — -

Well that’s fairly obvious to most people. It was never designed to be a “Greek” pension anyway. Anyone relying on it to fund their retirement will be shopping in the pet food aisle, but only on ‘sale’ days.

#104 TurnerNation on 02.01.12 at 9:38 am

#19Carlyle on 01.31.12 at 11:18 pm

Welcome back or did you ever leave. Still in shi..I mean City Place :)? I know a renter there, and the area.

Crowded, 40 story building with only 3 elevators, dog dung eveywhere outside (most are slobbish renters). Endless construction, a single access road for 8-10 40-storey buildings.

#105 TurnerNation on 02.01.12 at 9:40 am

26Smoking Man on 01.31.12 at 11:33 pm

Is that Duke devon or westminister? Devon is stone’s throw from my workplace. Still, I think anyone would be leery of meeting you in person… :)

#106 fancy_pants on 02.01.12 at 9:47 am

most of the folk on the hill are just puppets putting in their 8 years to collect a fat juicy pension. None of them really give a flying f* what goes down as long as their pockets are lined. Those that do (did) eventually succumb to the $. They’ll raise the CMHC cap.

Same goes for the provincial morons. McGuilty has driven Ontario so far into the red it makes Greece look prudent.

Power corrupts, doesn’t matter where you look. I now know why hell was created and it wasn’t for the whores and drunks.

#107 disciple on 02.01.12 at 10:40 am

Excerpts from Joseph Trento’s work:

“The entire scenario is complex, reflecting events taking place over several years time. But the bottom line is that Gingrich and his wife were allegedly attempting to shake down Soghanalian (a now dead arms dealer) for a $10 million bribe and that, from the beginning, operatives for Israel were on the scene, acting as middlemen for the Gingrich duo.

Mrs. Gingrich first made a connection to Soghanalian through her position as a former paid pitchwoman for the Israel Export Development Corporation (IEDC)—a front for a group of Jewish billionaires eager to promote Israeli exports into the United States. Behind IEDC were such big names as Larry Silverstein, owner of the World Trade Center at the time of the 9-11 attacks; Sy Syms of the SYMS clothing chain; and Lawrence Tisch, who controls the CBS media empire.

Soghanalian said he was first approached by Morty Bennett of Miami, who told the arms dealer he had a business associate who had an “in” with Mrs. Gingrich and that it might be possible to use that connection on Soghanalian’s behalf.

Knowing U.S. sanctions on Saddam Hussein’s Iraq were preventing the arms dealer from collecting a legal debt of $54 million owed to him by Iraq, Bennett told Soghanalian that Mrs. Gingrich could help arrange—through her husband, then the speaker of the House—the lifting of the U.S. embargo so the arms dealer could secure his debt.

Sometime later, Bennett came back to the arms dealer, saying Mrs. Gingrich wanted $10 million to get the job done.

Soghanalian was told $5 million was for Mrs. Gingrich; another $1 million was for Bennett. The recipients of the remaining $4 million were not named, but those who know how Capitol Hill bribery works presume this money would be used to help “grease the wheels” among other members of Congress who would help Gingrich expedite the operation.

Soghanalian told the FBI he was instructed the bribe was to be paid to the Washington office of IASPS, which would, in turn, launder the money to the Gingriches.

Finally, with everything in place, the FBI set the trap for Gingrich. A lavish reception was scheduled for June 8, 1997 in Miami at a luxury home, which had actually been rented by the FBI for the sting. Soghanalian was supposed to meet Gingrich there and solidify the deal under FBI electronic surveillance.

However, at the last minute, FBI Director Louis Freeh sent down the order that Soghanalian was not to attend the event—which Gingrich did attend— and the two-year-long investigation was brought to an abrupt end just when the FBI might have caught Gingrich agreeing to accept the payoff.

Journalist Trento quoted one FBI agent, who said: “We got so close, and when the target was in sight, we were stopped by Washington.”

#108 Loan money to anyone on 02.01.12 at 10:47 am

Since the experts agree there’s no housing bubble in Canada (there’s just a balloon), it should be an easy decision for F to leave the CMHC insured lending ceiling at its current level.
There’s nothing wrong with young people having to save for a few years first to get a decent downpayment.

#109 maxx on 02.01.12 at 10:53 am

“Banks have been using CHMC to insure ‘conventional’ mortgages as well ”

Consummate abuse of taxpayer money. How is this allowed to happen? Small wonder Canadians are losing trust in government by the day. CMHC should be dismantled immediately as banks are the most adept risk assessors anywhere and they should be forced to manage risk on their own.

#110 disciple on 02.01.12 at 10:55 am

As you all should be aware, Blackwater/Xe was bought by Monsanto in 2010. No wonder that a company engaged in the “science of death” as Monsanto, which has been dedicated from the outset to produce toxic poisons spilling from Agent Orange to PCBs, pesticides, hormones and genetically modified seeds, is associated with another company of thugs.

Almost simultaneously with this development was the purchase of 500,000 shares of Monsanto, for more than $23 million by the Bill and Melinda Gates Foundation, which with this action completed the outing of the mask of “philanthropy.” Another association that is not surprising.

It is a marriage between the two most brutal monopolies in the history of industrialism: Bill Gates controls more than 90 percent of the market share of proprietary computing and Monsanto about 90 percent of the global transgenic seed market and most global commercial seed. There does not exist in any other industrial sector monopolies so vast, whose very existence is a negation of the vaunted principle of “market competition” of capitalism.

Like Monsanto, Gates is also engaged in trying to destroy rural farming worldwide, mainly through the “Alliance for a Green Revolution in Africa” (AGRA). It works as a Trojan horse to deprive poor African farmers of their traditional seeds, replacing them with the seeds of their companies first, finally by genetically modified (GM). To this end, the Foundation hired Robert Horsch in 2006, the director of Monsanto.

Blackwater, Monsanto and Gates are three sides of the same figure: the war machine on the planet and most people who inhabit it, are peasants, indigenous communities, people who want to share information and knowledge or any other who does not want to be in the aegis of profit and the destructiveness of FAKE capitalism.

#111 The Thing in the Basement on 02.01.12 at 11:01 am

70 McLovin’ – if Garth lets allows blog names like “Peter
Goesinya” then the “Justin Beaver” reference shouldnt surprise!

Anyone trying to sneak in a double entendre will be soundly spanked by an Amazon. Final warning. — Garth

#112 poco on 02.01.12 at 11:18 am

#72Foggy on 02.01.12 at 2:45 am

I went though this same exercise in my late 50s.
First of all to be eligible for CPP he must have stopped working, period.
____________________________________________
you’re a little foggy on that point—many changes to CPP in the past few years –check the links posted above

#113 Devil's Advocate on 02.01.12 at 11:26 am

Anyone trying to sneak in a double entendre will be soundly spanked by an Amazon. Final warning. — Garth

And that is supposed to be a deterrent?!? Sign me up! Please. };-)

#114 Big Mike on 02.01.12 at 11:35 am

Thanks for this amazingly timely article I was debating this very point on HuffPo and it seems many or most Canadians don’t understand this fact about CMHC. The it’s different here crowd.

#115 Heart of the World on 02.01.12 at 11:37 am

This just in from the New York Times:

‘Where the region [Atlanta] once attracted thousands of prospective home buyers drawn by plentiful jobs and more affordable living, that influx has dwindled. Local unemployment, at 9.2 percent, is slightly higher than the national rate, in part because one in every four jobs lost was connected to real estate, a much higher rate than in the rest of the country. Those jobs have yet to return, while even people with work are having trouble qualifying for loans.’

Seems Atlanta has been particularly hard hit by the housing bubble, and prices there are still in a free fall, while Phoenix on the other hand has stablised (maybe only briefly)…

I just left Vancouver, where every second vehicle on the road is a tradesman’s pickup truck, with the shiny metal tool box built into the box. All of these guys, I think, are driving off to their jobs building condo towers. I know it has often been wondered on this blog what Vancouver’s economy is really based upon? For the answer to that check out my newly devised ‘pickup truck index’.

Glad I got out in time.

#116 Daisy Mae on 02.01.12 at 11:48 am

“Now remember the housing bubble is the result of two things. Crazy low interest rates engineered by the government. Plus a federal agency which wipes away risk…”

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

So…the three stooges in Ottawa are responsible for all of this, as we know. I guess that’s what we get for giving them a 38% ‘majority’.

How is the government going to explain this, as they’ve taken no responsibility to date?

I really don’t blame the ‘virgins’ — they’ve been offered something for free so they’re going to take it. It’s just called human nature.

#117 maxx on 02.01.12 at 11:51 am

#30 a prairie dawg on 01.31.12 at 11:38 pm

The list of worried parties in paragraph 4 makes no mention of bankers. Only the bankers laugh….for now.

#118 Daisy Mae on 02.01.12 at 12:01 pm

#19 CARLYLE: “The house was a rock around their neck and now they are free.”

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

Sounds like the debt what the anchor around their necks…and selling the house set them free.

#119 Coraline on 02.01.12 at 12:15 pm

Garth, do you you know anything about the history of CMHC’s “portfolio insurance”? I honestly didn’t even know it existed until today.

#120 cramar on 02.01.12 at 12:16 pm

@ #100

What places in Asia would you recommend for Canadian ex pats?

#121 torontorocks on 02.01.12 at 12:23 pm

Hey – where is the beertinis on Thursday? Duke of Devon or Westminster (First Canadian one or TD Bank).

I’m in – where are we meeting and what is the secret handshake.

More importantly will Mister Turner be there or will he be too busy satiating his nymphos.

#122 Preciousss on 02.01.12 at 12:28 pm

This is shaping up to be a year in which blind monkeys will be able to throw darts at a stock board and win. It will be something special. Currency moves and high costs of essentials will mute your gains. Real gains are your friend in these times.

#123 Van guy on 02.01.12 at 12:29 pm

http://www.yattermatters.com/2012/02/not-your-average-dragon-vancouver-real-estate/#more-28399

Larry’s preliminary numbers are out for Van. Avg price up MoM, sales down MoM/YoY, listings up. There are still some signs of HAM, but they are slowly fading.

#124 Beach Girl on 02.01.12 at 12:31 pm

#5 Smoking Man

And remember Kids it’s is better to be the dude standing behind the ho in stilettos and mini, who dropped a penny and does not know how (Maybe She does) to bend her knees to pick it up. Or is it?

Sorry about that one BEACH GIRL. I’m wasted and look I turned spell check on. Golly gee. All my cryptic shit, Not meant for the masses

____

Now listen here Saggy Balls. What was your intention regarding that remark. You should be very careful or I might hunt you down in that dismal watering hole of yours. And given your own personal description you might not be too HARD to find. I am quite sure you resemble that remark.

#42 DonDWest

When you whine and whinge, I get wet over your unhappiness. Sometimes life is hard and takes out its big whanger and hits you in the face. Grown up or grow a set. Or share some of Saggy Ball Smoking Mans.

You remind me of a kid at Christmas who gets 99% of what they want and cry all day over the 1 thing that was overlooked.

Regarding the trailer lifestyle, was a weekend guest at one. Doesn’t look too bad to me. I did visit Sherkston Shores on Lake Erie for a weekend and enjoyed the amenities. Bar was great.

Could care less about the younger generation, will enjoy my old age listening to all their perceived Bullshit.

The flame has not run off yet, but has mentioned that I frighten him. But he said it is exhilarating in the way of the praying mantis, or some other insect. I think he is F***ed.

#125 Kip on 02.01.12 at 12:33 pm

#98
“How is ending up on government assistance ‘winning’? — Garth”

They are not on government assistance. Nearest I can tell, they never have been.

Their only sources of income are CPP and OAS. That is public money. — Garth

#126 zeeman1 on 02.01.12 at 12:36 pm

Garth, thank you once again for running one of the only blogs I care about.

Smoking Man, Disciple Truthhammer,and others – Thanks.

#127 Arshes on 02.01.12 at 12:41 pm

#33 Sue
So, here’s a somewhat related question:

Hubby is 60. Still working (mostly self employed, gradually cutting back). Should he take out his CPP now, or wait? Pros vs. cons? We need some help here, people, thanks!
———————————————————

Whether or not you should be taking CPP early, depends on your financial situation. I wouldn’t recommend taking it early unless you DONT need the money. Remember if you take it early, you get a reduced benefit. And that reduced CPP is for the rest of your retirement, there is no re-do for CPP.

My dad took his CPP at 65, but still continued to work. But now he pays high tax on that CPP because he still works, and he loses that extra 7% increase, per year, in his CPP, which he would have received if he had waited till he actually retired to claim his CPP. He loses approx. $ 100 per month, which would have been indexed for inflation.

It’s not much, but considering most retirees run the risk of outliving thier money, its better than not having that extra $100.

#128 Pr on 02.01.12 at 12:45 pm

The roof is on fire! Real estate sales in Quebec are 3% higher than the same month last year! This gouvernement is out of control!

#129 Arshes on 02.01.12 at 12:46 pm

#57 Debtfree

Used to think alot of seniors complained alot because they were just old, or bitter, or sad. But now I understand they’re that way cause alot of them are brok, living month to month. CPP cheque to CPP cheque.

#130 Preciousss on 02.01.12 at 12:53 pm

Here is an excerpt I plucked out of this article:

http://www.alt-market.com/articles/540-baltic-dry-index-signals-renewed-market-collapse

“Global demand is waning, yet prices are holding at considerably high levels or are rising (a blatant sign of monetary devaluation). Indeed, the most practical conclusion would be that the monster of stagflation has been brought to life through the dark alchemy of criminal debt creation and uncontrolled fiat stimulus”.

Wow. That sounds objective. — Garth

#131 The American on 02.01.12 at 1:02 pm

At #90: BINGO! Mark is actually considered the WORST central banker in the world. He’s a laughing stock internal to banking circles. He has done nothing more than copy cat what every other Central Bank had done already. Not an ounce of creativity or ingenuity in his body (not surprised). But it’s even worse, because that moron already had a glimpse of what to expect, and he did it anyway. Maybe the devil made him do it. Now, you figure out who that devil is. I already have that answer. ;-). The first person who gets the answer right, I will pay off her/his mortgage (soon to have negative equity), or send a warm congratulations – my choice.

#132 Kip on 02.01.12 at 1:09 pm

#123
“Their only sources of income are CPP and OAS. That is public money. — Garth”

Your ass is sucking air Garth. CPP and OAS is a fund they paid into their entire lives. Of course they will draw out of it now. The government had no issue taking the premiums from their pay every week.

CPP premiums never come close to covering the benefits paid. OAS is a government income supplement for which no premiums are collected. Hence, these folks are living off government largesse. Try to respond in a professional manner or you will not be on this blog much longer. — Garth

#133 Arshes on 02.01.12 at 1:14 pm

#100 truth hammer

I think you missed tha part about the $400,000 being used to pay off debts. That $400,000 they dont have anymore.

#134 John G. Young on 02.01.12 at 1:16 pm

#83 Devil’s Advocate

I wouldn’t even know where to start.

I’m done with you.

#135 Gregor Samsa on 02.01.12 at 1:21 pm

Here’s something I don’t get about new condo developments: they seem to be usually made of WOOD! I drive by one every day that is going up in Calgary off Edmonton Trail and it reminds me of a big pile of toothpicks. What exactly is the life expectancy of such a structure?

#136 jess on 02.01.12 at 1:40 pm

a prairie dawg
how about this wealth transfer. I believe the ten individuals made over 16m. selling these through their “educational” seminars etc etc.

One of the most volatile and risky CMO tranches is the “inverse floater CMO,” a thinly traded mortgage-backed security which is typically highly leveraged and vulnerable to a high degree of price volatility. Rising interest rates reduce the interest earned and
also may decrease the principal payments to the investor. The reduction in the repayment of principal extends the maturity date,potentially for as much as 30 years.
Furthermore, since each inverse floater is uniquely structured and thinly traded, prices used for valuation purposes are determined using theoretical pricing models. These prices are strictly best estimates of value and can vary substantially from prices obtained through actual bidding or market offerings. As a result, buying inverse floaters on margin further heightens the risk of investing in the product.

…”from at least 2004 to 2007, Defendants heavily margined their CMO Program customers’
margin accounts, which were concentrated in lOs, Inverse Floaters, and Inverse lOs, and this use
of margin exposed the customers to the risk of a substantial or total loss of equity.
http://www.sec.gov/litigation/complaints/2009/comp21061.pdf

#137 Kip on 02.01.12 at 1:44 pm

#130
“Try to respond in a professional manner or you will not be on this blog much longer. — Garth”

I’ll do my best and I have read your rules to post. You should enforce the second one about staying on topic as I find many posts here rambling off topic and have nothing to do with the blog post.

Just an observation and sorry if I find it hard to tow the line on the thinking here.

#138 fancy_pants on 02.01.12 at 1:48 pm

#129 The American on 02.01.12 at 1:02 pm
Now, you figure out who that devil is…

He may not have red horns but does he have golden sacs

#139 Canadian Watchdog on 02.01.12 at 1:53 pm

#133 Gregor Samsa

Funny you mentioned that as I’ve recently been analyzing building expenditures. Your question can be answered in this chart http://i44.tinypic.com/10z2xd2.png

#140 new_era on 02.01.12 at 1:53 pm

Its BS that the tax payers are on the hook for CMHC’s bad debts.

The only taxes they should be raising is Property taxes. Or introduce a new tax on home owners.
Nothing else.

They should leave all other taxes alone. Just like the bridge tow fees, gas taxes they only hit the people who are users of the bridge and roads.

#141 coastal on 02.01.12 at 1:54 pm

This is “The Big Short” but done right under our noses instead of Wall St back rooms. This generation of Canadians have to be the most clueless, dumbest, and selfish bunch in history. You just watch your neighbor’s house get torched by an arsonist, then you invite the arsonist in for coffee.

#142 Bill Gable on 02.01.12 at 1:55 pm

Tremendous post. This blog gets better every day. One poster asked who “F” is – that is a Turnerism for our mentally imcompetent Finance Minister.
Jim Sinclair has actually predicted the Top 5 American banks, lumbeted with 95% of tge World’s CDS business are technically in default.
The next while, tighten your chin strap – this is starting to get weirder and more dangerous. Greek debt at 30 cents on the dollar has started a nasty waterfall.

CHMC tries to force prudent Canadians to bail out idiots, Ottawa will find the wrath will be earth scorching.

Reading some posters saying get out. Move to Malaysia or Borneo. Trouble is, it ain’t all fun and sun. You stick out like sore thumb, and after spending time in Asia, I will take Canada just about every time.

#143 Carlyle on 02.01.12 at 2:01 pm

#87 kip “But this isn’t about fool Boomers who blew six decades, putting it all in a house, saving diddly and now must retire to a trailer surrounded by losers.”

Surrounded by losers? If I had to pick between people I’ve met at trailer parks and idiots I’ve come across in forums like this, I’d pick them, hands down!”

I agree. Alot of the trailer parks up north (and many in the US) are actually really nice. My folks trailer is lakefront, neighbors all seem to be well off. The myth of every trailer park being filled with trailer park trash is just that — a myth. As a boomer why pay thousands in rent or mortgage when you can summer in muskoka/Georgian bay, and winter in Flordia. Flordia trailer rentals are ridiculously cheap … Under 10k a year for resort like living. And the trailers themselves are gigantic (“lot size”) with all the amenities one could need. It’s easily doable on only cpp and OAS for a couple to live. Sure they won’t be balling but they’ll be living better than an apartment rental in Barrie.

#144 Cato on 02.01.12 at 2:06 pm

I think with the CMHC we are going to open the cupboards and find them bare. The untouchable agency is in dire need of an independent audit and I doubt Canadians will be pleased with the results.

The generational wealth transfer over last several years has long term consequences. The younger generations were suckers for walking into the debt trap but I would argue the boomers will be the ones paying the most in the end.

To stall an inevitable unwinding interest rates will be need to be artificially suppressed. The few boomers who actually saved for retirement will need to chop investment income expectations in half.

OAS as we know it will disappear. The age limit will need to be eventually raised to 70 and will be means tested. In other words OAS becomes welfare, you’ll need to be destitute to collect it. Don’t expect much sympathy from younger generations who will be dealing with cutbacks in education & health care. If a generation is going to be sacrificed we’ll fight to ensure it’ll be our parents and not our kids.

Unfortunately we’ve run out of road to do anything about it. It aint going to be pretty.

#145 Bottoms_Up on 02.01.12 at 2:11 pm

Just ask yourself what side of the balance sheet you want to be on:

+$400,000

or,

-$400,000

#146 kilby on 02.01.12 at 2:11 pm

#133 Gregor.

Ever seen a fire in a 4 story wooden condo? They go up in minutes….But, they are better for profit margins for developers. We own a 34 year old wood condo unit in Victoria, you hear every cough and footstep in all the surrounding units. I would never again buy anything other than a full concrete building…..And thinking about condos and strata councils in general make a SFH sound like a good idea (as a place to live, not investment)

#147 pjwlk on 02.01.12 at 2:20 pm

“CMHC has reserves so small they’d be wiped out if only a small fraction of its high-risk mortgage debtors defaulted.”

No insurance is ever created to rescue the majority. Disaster relief as an example comes from the tax payer and not insurance.
~~~~~~~~
“If things tank, the bank gets the house, the taxpayers get gored.”

So if the CHMC is there to insure the homeowner, why does the bank get the house? Shouldn’t the bank get the money?
~~~~~~~~
“If Ottawa doesn’t increase CMHC’s ceiling…”

They will. Remember, “The Status Quo shall be maintained at all costs…” — Chris Martenson

#148 888realtor on 02.01.12 at 2:22 pm

The government doesn’t have other choice but to increase CMHC’s ceiling.
And the landing standards will not be tightened either.
The problem is not in the system. This problem is with the system. Allegorically – the system is racing down the slope. In order to prevent the crush – the principals on which the system is operating have to be changed. Instead of “wheels” – the “wings” should be given to the system. It requires structural changes. Who is going to make those changes or at least propose any? The dudes who are regularly gathering for the Summits in Davos? They can’t even make a decision with the regards to poor Greece.
This is a very serious problem we are facing now. Even base social values will be impacted. The society can not function normally with the present level of greed and corruption. In fact there is an obvious crisis of the social value base. Better to say – it is a part of the overall crisis.

In the mathematical theory of management such situation described as a conflict between managing part of the system and the managed one. The managing module of the system does not correspond with
the complexity of the managed object anymore.

#149 Carlyle on 02.01.12 at 2:25 pm

I also really want to stress again that my folks did alot of things right in terms of their kids and providing for us … Private schooling, working overtime, hockey on weekends, piano lessons, instilling values of working hard, etc …. I always thought their financial issues were in a part a result of providing the best they could for us.

They lived beyond their means supplementing with home equity and consumer debt but the end product was successful offspring, grand kids … Some things to be proud of. They aren’t bad people.

They still work btw, feel they “can’t” retire. I’ve been trying to show them the can live on OAS and CPP. It won’t be a grand living by any means but they can be comfortable. They don’t have to work themselves to the grave.

#150 Bill on 02.01.12 at 2:26 pm

Mr Turner

You mentioned that a “fee based” financial planner would typically charge 1% of the portfolio value as a fee. Is this fee charged each and every time that the portfolio is re-balanced?

How often do you think a portfolio should be re-balanced in order to maintain the asset allocation structure as designed?

A fee-based advisor charging 1% to look after you will charge exactly that – the equivalent of 1% of the assets under management per year (or one-twelfth of one per cent per month), with no additional charges for building or re-balancing. Portfolios should only have trading done within them when market conditions warrant – these days that might be two or three times a year, if the asset allocation was properly set up. — Garth

#151 Van guy on 02.01.12 at 2:37 pm

Brad in van:

Kits sales have basically stalled. Townhomes and condos are at most risk. Sfh isn’t much better. I’m not sure what you own but you need a price reduction if you’re really a motivated seller. If you give me a description of your property, I could give you a price that it would likely sell for.

#152 disciple on 02.01.12 at 2:38 pm

Beach Girl Smoking Girl?
Smoking Man Beach Boy?

Anyway, Facebook will probably be priced around $80 (roughly), but the problem for me would be that its real value has already been sold to insiders. And the revenues are mostly associated with those insiders. So the public offering would simply be profit-taking in a way for these exclusive club members. Considering all this, the IPO could very well be priced way above $150 if they really want to squeeze you. Sure, there will probably be some upside potential (comparisons with Google are implied) but there are too many big IFs for me. Like copycat upstarts…

Is anyone else considering a buy-in?

#153 UVZ on 02.01.12 at 2:40 pm

http://www.vancouversun.com/business/Housing+bubble+Canada+really+balloon+Sherry+Cooper/6073335/story.html

If you do the valuation math on the affordability numbers in the article:

Vancouver: 1 – 1/2 = 50% drop

Toronto: 1 – 4.3/6.7 = 36% drop

Canada: 1 – 3.2/4.9 = 35% drop

How long does it take a balloon to lose 30%+ of its air? Anyone here with young kids?

#154 TorontoS on 02.01.12 at 2:51 pm

From my understanding, the CMHC insurance premium is not a real premium. Correct me if I’m wrong, but can’t it get rolled into a 30 year mortgage? Then when defaults happen, they will have happened before the premium was even paid, so the benefit of the insurance is received before the premium is paid. At least that is my understanding of it. Am I wrong?

#155 disciple on 02.01.12 at 3:04 pm

Everyone needs some bonds. Doesn’t matter your age. You want a lot more of them in your golden years as you live off the virtually-guaranteed returns while leaving the capital portions as an inheritance for your descendants. Bonds are money like cash without the liquidity while equities are more of a gamble on that money. But life itself is a gamble, except in those golden years when it’s more cherished as a gift gone under-appreciated over the decades.

But even at my tender young age, I realize that a balanced, negatively-correlated mix of equities and fixed-income is like a reverse crankshaft. It translates the up and down rotation of the stock and bond markets into linear motion in terms of yield. Like an absolute value (for you mathematicians). Just let it turn and remember to share the booty.

Some good utilities to look at: ATP yields almost 8%, JE yields 10% both with good distribution histories. CSE is clocking in at 15% but the market cap is diddly right now which is either good or bad depending on how you look at it. BMO seems to be bullish on it featured as 9% in ZUT.

#156 sam.i.am on 02.01.12 at 3:36 pm

- Props to whoever mentioned the baltic dry index a few days ago, you were ahead of the curve.

- FB IPO – I do not use facebook and have no interest in it. It is a gigantic time waster (unlike this blog). A lot of people stupidly post personal stuff on there that they really shouldn’t. There’s a risk bosses, cops, immigration, IRS/CRA, insurance co’s and lawyers could use it against you, so why bother?

- The EMD lockout is interesting. Do EMD management actions indicate a coming trend as production shifts from .ca to .us?

- Trailer parks are cool, right Mr. Lahey?

#157 Tiny Bottoms on 02.01.12 at 3:40 pm

Canada Mortgage lending tightens

http://ca.finance.yahoo.com/news/mortgage-lending-tightens-for-self-employed–immigrants.html

#158 Canadian Watchdog on 02.01.12 at 3:40 pm

#151 TorontoS

It’s a bilateral premium where the issuer (banks) pay a premium to insure the mortgages bundled in MBS. Being a bilateral premium means that in the event of a default or payments in arrears, CMHC must pay the issuer the net premium spread in return for their loss.
—–

CMHC’s limit will indeed be hiked, but not without a cost. Increasing the limit would require the government to issue more bonds which now stands at $600+ billion. http://i43.tinypic.com/k0sww3.png This could hurt the government and banks’ credit rating like Australia’s big four banks a few days ago http://www.perthnow.com.au/business/business-old/big-four-warned-about-ratings-fitch/story-e6frg2qu-1226257636270

But never fear, because it didn’t stop our socialist government from being pro-active in an attempt to avoid a similar outcome from unfolding—even though the bond market is way ahead of them.

“Securities regulators to impose code of conduct on credit rating agencies”
http://www.canadianbusiness.com/article/68053–securities-regulators-to-impose-code-of-conduct-on-credit-rating-agencies

And that’s how they roll and continue to extend the road to serfdom. Get use to it, or get out.

#159 Cowpoke on 02.01.12 at 3:42 pm

Like I said before, too many fingers in our drawers.
Cut them off!
75% tax rate coming folks. It won’t be long before we are living on less than 25% of our incomes, if we are even that lucky.
The USA sent the queen and her generals packing at 4%.
Get ready for it. It is really going to be a good show.

#160 Form Man on 02.01.12 at 3:45 pm

The CMHC predicament is an interesting one. There is no question about the involvement of Harper and Flaherty in this mess. Almost immediately after winning the 2006 election, H and F relaxed the mortgage rules and installed a handpicked puppet to run CMHC. Initially these moves were driven by ideology. By 2008 it was obvious from the situation in the U.S. that this ideology was very wrong. In spite of this evidence, H and F kept the party going. Either they were incredibly stupid or incredibly cynical. It was obvious that housing was juicing the Canadian economy, and they were on the hunt for a majority government. Harper brags that he is a ‘trained economist’. So we have a prime minister who either is clueless, or deliberately sabotaged the economy in order to win power. And posters like eaglebay figure Harper is the best man for the job…………?

On another note, a single family home in our development ( in Kelowna ) that we sold in 2008, just sold again ( after being on the market for 2 years )……..for almost 25% less. There is something very fishy about OMREB’s price tracking………

#161 harden on 02.01.12 at 3:55 pm

The shell game in Vancouver continues! – in fact it looks like we’ll have to endure more realtor/year of the dragon MSM spin this week…due to a misleading January avg price increase over December, thanks to two isolated monster home sales skewing SFH avg price. Sales are slowing, listings are growing, and offers are wanting…………… zzzzzzzzzzzzzzzzzzz

#162 Kip on 02.01.12 at 3:56 pm

#147 Carlyle

I have a 30 foot Airstrem under restoration with the same line of thought. Sell it all at end and live that gypsy lifestyle. It’s a far better plan than any Bay St. advisors can come up with!

I’ll park beside your parents anytime so tell them to watch for a park for me. I meet the nicest people in the strangest places, this forum.

#163 DonDWest on 02.01.12 at 3:56 pm

“CPP premiums never come close to covering the benefits paid. OAS is a government income supplement for which no premiums are collected. Hence, these folks are living off government largesse. Try to respond in a professional manner or you will not be on this blog much longer. — Garth”

Garth agrees with me?! *shock*

#164 DonDWest on 02.01.12 at 3:59 pm

#122 Beach Girl

You’re a jerk.

#165 Sue on 02.01.12 at 4:12 pm

Thanks for all your helpful comments and links, everyone! Lots to think about. I’d love to see a blog post that helps novice investors better understand the current CPP/OAS configurations plus proposed changes. For what it’s worth, there are nearly two decades age difference between hubby and me; our modest house is paid for and we intend to stay (we use it in part for our self-employed business); we have modest, defined contribution pension plans and modest savings, and we live – well – modestly. He has good genetics – dad is over 90 with many living sibs – and I hope to keep him around for many decades. He intends to keep working, gradually scaling back, as long as his health allows, though our gross income, combined, is already substantially less than 6 figures. We’re conservative investors, and not savvy when it comes to all the financial products described here. I appreciate the opportunity to learn from Garth and others on this site, but still have trouble moving forward beyond the dreaded purple guy’s shorts (we *did* make a move from the orange guy, thought that was at least a baby step).

#166 DonDWest on 02.01.12 at 4:17 pm

#78 Devore

Devore is confused, he believes the banks are public institutions rather than private institutions. Peter Schiff often makes the same mistake. And I have much more respect for Peter Schiff than you. . .

#167 Preciousss on 02.01.12 at 4:23 pm

Great read today. I am now retiring to the crawlspace to bang up some high-priced reflective insulation in order to reduce the ever-increasing heating costs of this wood and concrete liquidity trap.

#168 Arshes on 02.01.12 at 4:32 pm

#151 TorontoS

From my understanding, the premiums are added to the cost of the house, the mortgage company pays everyone. Ie the seller, the CMHC etc. Then you, the buyer, pays back the bank.

#169 Waterloo Resident on 02.01.12 at 4:34 pm

Don’t worry, we all know that 20 year old are earning $150,000 EACH in their government jobs, RIGHT?

Lets do the math here: 2 young 20-year-olds, each earn $150,000 , that’s $300,000 per year income. HECK, they will be able to pay off the house in under 2 years — NO PROBLEM !!

#170 Canadian Watchdog on 02.01.12 at 4:51 pm

It’s becoming more evident who the sub-primers are:

“The mortgages, typically granted to the self-employed and recent immigrants, “have some similarities to non-prime loans in the U.S. retail lending market,” the documents show. ”

Bloomberg Obtains OSFI FOI Documents: http://www.bloomberg.com/news/2012-01-30/canada-s-subprime-crisis-seen-with-u-s-styled-loans-mortgages.html

#171 Blacksheep on 02.01.12 at 5:02 pm

Kip # 130,

“CPP premiums never come close to covering the benefits paid. OAS is a government income supplement for which no premiums are collected. Hence, these folks are living off government largesse. ”

Understood Garth. Please correct me if I’m wrong.

Being a sovereign in control of it’s currency, the Can. Gov. can print. Beyond that, it collects ongoing revenue from the un washed masses and distributes it, as it sees fit.

So..I think in this situation, we should avoid the idea that one is receiving “gifts” from the government, because unless theses people are new immigrants, or have spent life on welfare, he/they’ve been contributing heavily to our glorious system, for decades.

Garth, I know you’ve got the inside track on this one.
Of the current 600 billion in Canadian debt, how many billion is/was “principally” borrowed?
I’m going to guess 100 billion.
I suggest as a nation, we stop paying interest to private parties.

These average sounding people, may of actually been able to save for their retirement if they were not forced to carry, an unnecessary tax burden, created by the system.

take care,
Blacksheep

We are increasing our debt by about $30 billion a year lately, 100% of it borrowed. My comments about these people living off government handouts were intended to show they flunked financially after more than 60 years of life, and must now eke out an existence on federal crumbs. This is hardly ‘winning’ as was originally suggested. It is abject failure. — Garth

#172 GTA House Hunter on 02.01.12 at 5:05 pm

So what does this mean.
Will this orgy continue eternally?
Why would Ottawa not increase that limit again and again?
and keep the bubble going incessantly.

#173 AlexanderTheGreat on 02.01.12 at 5:10 pm

January numbers coming in and sales are way down. They are down 16% in Vancouver YOY (Jan 11 vs Jan 12). Meanwhile, prices are DEAD flat…. for detached homes, 1.144m Jan 11….. 1.145m Jan 12. And in a real estate market, FLAT means a LOSS. Because realtor fees alone eat up the profit margin, but frankly, having money in a 2% ally savings account would have far exceeded owning a home throughout 2011. Oh and the best part is, I keep hearing about the “Year of the dragon”. Meanwhile, prices in Hong Kong are expected to drop 25% this year. There was actually an article yesterday about how “The dragon won’t save hong kong this year”. Search it on google news and see how hilarious it is. People are really serious though, dellusional, they think the dragon will fly down and save all of Vancouver, combined with BMO’s 2.99%. You can’t make this stuff up. To anyone in Vancouver, I’m sorry, but it may be too late to sell your property. Things are already collapsing.

#174 I'll do anything for a listing on 02.01.12 at 5:44 pm

Kool aid!!
Kool aid here
Kool aid!!!
Come and get your ice cold cool aid!!!

Hmmmm
Realturds and CHMC board comprised of Realturds – say it isn’t so!

Wealth transfer – BC Kevin Falcon says “don’t tax the rich, as that’ll leave no incentive to want to be rich”
WTF?!!!?????
Audio here:
http://www.cbc.ca/onthecoast/episodes/2012/01/31/income-gap/

Ice cold cool aid –
“they ain’t making any more land”

Population distribution in Canada map:
http://www12.statcan.ca/census-recensement/2006/as-sa/97-550/vignettes/m1-eng.htm

#175 Beagle on 02.01.12 at 6:23 pm

I’ve been travelling in Florida the last two months and most of the RV/Trailer parks aren’t full of losers, that is an old stereotype. I see tons of fancy Class A RVs worth hundreds of thousands of dollars and big fifth wheel trailers coming in a hundred grand plus another 60 for the big diesel truck. These RVs are nicer that 90 present of the condos. People in these so called trailer parks are loaded with cash.

#176 Junius on 02.01.12 at 6:49 pm

#164 DonDWest,

The banks are private institutions until they run into trouble. In which case they are publicly insured and bailed out. Then they are privatized again so they can repeat the cycle to the benefit of their senior management, shareholders and bondholders.

#177 poco on 02.01.12 at 7:26 pm

#163 Sue on 02.01.12 at 4:12 pm
we have modest, defined contribution pension plans and modest savings, and we live – well – modestly.
____________________________________________

you didn’t say if you are receiving these pensions now, but from the age difference i assume not. all pensions are extremely difficult to figure out–there are hundreds of variables to consider when planning future payments from a pension plan
–one point for your partners defined pension plan is your age difference–if you are considering a last survivor type pension,(you out living him) then your payout from his pension will be extremely less than taking a guaranteed term
–another important point for many defined pension plans (gov’t) is what is known as an “offset” or a “bridging”—–upon retirement (if less than 65)you receive your pension–whatever option you choose–plus an amount that is comparable to what you would receive at 65 from CPP—everyones offset is different–but the main point is upon reaching the age of 65 you lose that offset—your CPP is then suppose to make up this bridging amount or loss of income
considering this bridging loss at age 65, if you took CPP at 60(a reduced amount), your intake at 65 will be less than at 60
—now that i’ve totally confused you and myself, i can only say read everything you can about it and if it’s gov’t pensions, try their website and remember–once you choose–you have 30 days to change your mind and then it’s final

#178 P & T S on 02.01.12 at 7:28 pm

#174Beagle on 02.01.12 at 6:23 pm

Dead right there! And the “smart elderlies” are the ones driving the “Mansions on Wheels” – 40 foot monsters from the likes of American Eagle, Prevost, Winnebago etc! Mind you our “old” Monaco is hardly a slum with all we need (including the dishwasher), costs less to own (all costs included) than the equivalent sized “house” or Condo, and has the great advantage of allowing us to move once we tire of any particular location (or the neighbours). Used to think that we’ll outlast it, but not so sure at all now (and we are both very healthy!) A true credit to US Manufacturing from the 1980′s – absolutely NO regrets having chosen this lifestyle!

Still “reviewing” the boat situation though . . . .

#179 Smoking Man on 02.01.12 at 7:35 pm

#105 TurnerNation on 02.01.12 at 9:40 am
Duke of Devon

#180 Beach Girl on 02.01.12 at 7:46 pm

DELETED

#181 a prairie dawg on 02.01.12 at 7:49 pm

#117 maxx

The list of worried parties in paragraph 4 makes no mention of bankers. Only the bankers laugh….for now.

- — -

Yes they do mention bankers. “Central banks and lenders.”

Banks, Trust Companies, and Credit Unions would be the “lenders”.

just fyi

#182 Devore on 02.01.12 at 7:53 pm

#176 Junius

They don’t even need to run into trouble. CMHC and CDIC explicitly backstop a massive chunk of bank assets and liabilities and misprice risk. Banks take full advantage of this fact putting deposits to work for them, and to hand out credit blowing up credit bubbles.

#183 Devil's Advocate on 02.01.12 at 7:54 pm

“On another note, a single family home in our development ( in Kelowna ) that we sold in 2008, just sold again ( after being on the market for 2 years )……..for almost 25% less. There is something very fishy about OMREB’s price tracking………” – Form Man

One single property does not a whole market market.

Think I’ve got it figured out though who you are or at least which development and developer you work for. The property you must be referring to MLS 10015##3 located West Kelowna, B.C. which sold for $218,000 on a list last list price of $224,900 after 431 days on the market. That property was on First Nations leased land. It was a 2 bedroom one level home of 1,066 square feet and a single car garage in a 45+ community.

Native Leased land homes are ALWAYS the first to capitulate in a down market just as they are the last to lift in a rising one. It’s just the nature of the beast. That it sold for what it sold for should come as no surprise. Without getting into facts you night rather I not disclose your observation has little relevance to the general state of the market in West Kelowna (Westbank) let alone Kelowna proper.

”A fee-based advisor charging 1% to look after you will charge exactly that – the equivalent of 1% of the assets under management per year (or one-twelfth of one per cent per month), with no additional charges for building or re-balancing. Portfolios should only have trading done within them when market conditions warrant – these days that might be two or three times a year, if the asset allocation was properly set up”. — Garth

If I was guaranteed such fee regardless of my performance and for just my time and not the marketing costs associated directly to the property or that fee which I pay the buyers agent, I too would charge only that.

You sell stuff. There is no comparison. — Garth

#184 TurnerNation on 02.01.12 at 7:58 pm

US unemployment chart. 1981 all over again? Then the markets rallied in early 80s. But interest rates spiked?
Gold dropped! History. Fun.

http://www.zacks.com/images/upload_dir/1318006946.jpg

#185 a prairie dawg on 02.01.12 at 8:07 pm

#136 jess

how about this wealth transfer. I believe the ten individuals made over 16m. selling these through their “educational” seminars etc etc.

- — -

And the rich get richer. Any way possible. And usually on the backs of the weak. lol But it’s the US too, so different rules and different markets.

Let’s just hope nobody is trying that here. Or our rules are better, or both.

Good link though. :)

#186 Nostradamus Le Mad Vlad on 02.01.12 at 8:07 pm

-
The Royal Family has graciously welcomed Garth, Assistants, Amazons and Blog Dogs to have a sneak peek at the inner workings of life for the elite.
*
Prince Charles decided to take up walking every day. At the same street corner he passed a hooker standing there every day.

He learned to brace himself as he approached her for what was almost certain to follow.

“One hundred and fifty pounds!” she’d shout.

“No! Five pounds!” He said from the side of his mouth, just to shut her up.

This ritual between the hooker and him became a daily occurrence.

One day, Camilla decided to accompany her husband. As the couple neared the hooker’s corner, Prince Charles realized she’d bark her £150 offer and Camilla would wonder what he’d really been doing on all his past outings.

He figured he’d better have a good explanation for his wife.

As they neared the hooker’s corner, he became even more apprehensive than usual.

Sure enough, there she stood. He tried to avoid eye contact as she watched the pair pass.

Then, the hooker yelled:

“See what you get for five pounds, you tight bastard!”
*
Petrodollar rhetoric Beginning to backfire? Bondholders GS involved again; 6:45 clip Dishwasher dangers; How to make a billion or so the easy way; China buying gold like cheap cabbage.
*
Russia and China (surprisingly) have opted out of working with the UN; SKorea Jail for retweeting; CC Europe freezes; ObL There is the new FF, carried out by the US govt. against its own people; Tyranny “And FEMA camps are prepared for impudent citizenry — with prison guard towers, barbed and razor wire.”

#187 live within your means on 02.01.12 at 8:11 pm

#143 Carlyle on 02.01.12 at 2:01 pm

A sis’s PIL’s sold their home years ago and rented. They bought a used trailer in Florida to spend their winters. Sis said the Trailer Park was really nice. PIL’s are now gone and trailer was sold. A yr. or 2 ago their daughter bought one in the same park. She sold her home in PQ several years ago, rents and now spends her winters there and loves it. She has lots of old friends in the park. Good for your parents.

#188 disciple on 02.01.12 at 8:13 pm

#175… Beagle… Interesting… It’s like a return to a past period in North American history. Imagine a land full of natives; instead, this time we see RV’s in place of tents and horses. But missing the communion with the supernatural and devoid of ancestral wisdom.

There is no intrinsic value to a house or land on which a property is situated. Natives all over the world do not presume “ownership” of any part of the Earth. Property rights are an illusion foisted upon you to keep you greedy and thus, enslaved…

These are all Crown lands upon which you pay taxes like serfs. Unless you are a member of one of these exclusive clubs within the Canadian Establishment, don’t for a minute be a fool and think you own anything. Boundaries on any map anywhere in the world indicate divisions of claims on your future labour and ideas.

Ideas. They attempt to convince you also that your ideas are taxable. Don’t let them. Your ideas belong to you and God. Never fear what anyone thinks of your opinions or ideas. Only in the last 200 hundred years and by much bloodshed of innocents did they let you think freely for yourselves in any sphere of society; heck, in some countries you will to this day be shot if you criticize the government.

Oh, are women and children considered “persons” under the law, yet? Ha! They teach you this event in school without nay a peep of how stupid the law was… and still is… I neither respect nor fear any man-made and decrepit degenerate law except out of survival…. Be free – disciple.

#189 a prairie dawg on 02.01.12 at 8:25 pm

#165 Sue

- — -

The plot thickens. And more details help too. lol

If you plan to keep the home biz running, and he is officially retiring, your options are a bit simpler. But if he plans on staying at work part time, find out how much he can earn working part time while still collecting CCP. (unless that’s part of the new proposed changes, I didn’t look it up. just winging it here from memory)

Another option is income splitting, if one spouse works and one doesn’t. It reduces tax payable.

Another option is to Incorporate the home biz, if it isn’t already. You pay lower dividend taxes as shareholders, instead of income taxes as wage earners. This can be split any way you like to better suit your personal tax situation. Your goal is to keep his income below clawback thresholds of CPP and OAS, when applicable. You take the rest with a larger portion of the income.

Sounds like you could really use some professional advice here. Hire Garth, or phone a good tax accountant and discuss your options.

Good luck.

#190 dd on 02.01.12 at 8:33 pm

Bill Gross of Pimco: Warning to the investing public today-

“Where else can one go, however? We can’t put $100 trillion of credit in a system-wide mattress, can we? Of course not, but we can move in that direction by delevering and refusing to extend maturities and duration. Recent central bank behavior, including that of the U.S. Fed, provides assurances that short and intermediate yields will not change, and therefore bond prices are not likely threatened on the downside. Still, zero-bound money may kill as opposed to create credit. Developed economies where these low yields reside may suffer accordingly. It may as well, induce inflationary distortions that give a rise to commodities and gold as store of value alternatives when there is little value left in paper.”

#191 Ret on 02.01.12 at 8:44 pm

Re: OAS “They paid into it all their lives…’

Maybe they paid taxes in Canada. But what if just maybe they didn’t pay anything or just a little. No politician wants to go there.

Lots of Canadians are spending more of their lives out of Canada than in Canada but they all line up for the same OAS check. Why isn’t OAS a percentage based on your number of working years living and paying taxes in Canada? Why do we all automatically get the same OAS payment when our circumstances are so greatly different? Automatically handing everyone the same amount of free money at 65 or at 67 doesn’t make any rational sense.

Any thoughtful discussion about reforming OAS to actually benefit those will spend their lives working and paying taxes in Canada? Not a chance. Kicking the can down the road 20 years is a whole lot easier.

Nobody pays directly for OAS. — Garth

#192 X on 02.01.12 at 8:46 pm

http://www40.statcan.ca/l01/cst01/famil05a-eng.htm

Family salaries…interesting to compare with house prices the past few years.

#193 Pr on 02.01.12 at 8:50 pm

It’s only after we’ve lost everything, that we are free to do anything. Canadians, get ready!

#194 Arshes on 02.01.12 at 8:56 pm

#165 Sue

Looks like your husband has a good chance of living to 100, considering your FIL is still alive and kicking. Your major concern should be not to outlive your money. Your husband should consider maybe taking CPP after 65, even maybe waiting til his 70, after that there is no benefit to waiting. Were talking approx 30 years of CPP payments, you’ll need.

Someone mentioned incorporating and taking money from the business as dividends instead of wages, which is nice, but no wages taken from the company mean you aren’t contributing to CPP and that will reduce your CPP payouts.

OAS Clawbacks should be taken into consideration but that only applys if have more than 65,000 in income when your 65. When you turn 65, your OAS would be reduce by any income over 65,000. So when your both retired thats 65,000 x 2.

And you mention a Defined Contribution Plan, which is different from a Defined Benefit Plane. I hope you understand the difference and aren’t confusing the two.

#195 jess on 02.01.12 at 9:13 pm

35 Tony

…the “rich” /wealth left long ago to reside in the offshore secrecy jurisdictions

#196 jess on 02.01.12 at 9:17 pm

Audit only?

Loaning, assigning, or “seconding” tax or any “bookkeeping” staff to an audit client is prohibited by the Sarbanes-Oxley Act of 2002 and by regulations that precede Sarbanes-Oxley.

http://retheauditors.com/2012/01/26/kpmg-nixes-ge-loaned-tax-staff-engagement/

KPMG No Longer Loaning Tax Staff To GE

The PCAOB was created by the Sarbanes-Oxley Act of 2002 to police public auditors in the wake of accounting scandals at Enron and WorldCom. The board registers, inspects and disciplines auditors for public companies and broker-dealers.

http://www.nakedcapitalism.com/2012/02/quelle-surprise-feds-dust-off-old-rogue-traders-cdo-case-to-burnish-tough-on-mortgage-crime-credentials.html#comments
http://www.nysscpa.org/cpajournal/2007/307/essentials/p32.htm

Definition of ‘American Depositary Receipt – ADR’
A negotiable certificate issued by a U.S. bank representing a specified number of shares (or one share) in a foreign stock that is traded on a U.S. exchange. ADRs are denominated in U.S. dollars, with the underlying security held by a U.S. financial institution overseas. ADRs help to reduce administration and duty costs that would otherwise be levied on each transaction.

Read more: http://www.investopedia.com/terms/a/adr.asp#ixzz1lAU5PjMS

#197 Junius on 02.01.12 at 9:30 pm

#182 Devore,

Agree. Too Big to Fail and we are too stupid to stop it.

#198 Ballingsford on 02.01.12 at 9:32 pm

Carlyle, I agree totally with you! Life’s not about living it impress family, friends, and co-workers. It’s about enjoying life with people you enjoy being around with. If you can mingle with the neighbor folks during the day and mingle during the evening and maybe share a glass of wine and a few stories and then sleep well and then start all over again, it sounds perfect.

Life is not about who has the most toys wins! Life is about the happiness we have while we exist and still make a conscious attitude to do well unto others less unfortunate.

Who can enjoy life living in a trailer on CPP? Get a grip. — Garth

#199 Devil's Advocate on 02.01.12 at 9:38 pm

You sell stuff. There is no comparison. — Garth

And it is exactly that misinformation where you are wrong. A good agent provides a service no different than you Garth – helping their client figure out and determine for themselves which is the best path for them in whatever it is they choose to do. A good agent does not “sell” anything except maybe for the promotion of their services to a suspect client and then more specifically packaged to a prospective client that the prospective client might choose to hire them over another.

There has been a lot of banter over the years on this blog about the form of remuneration a real estate agent should be compensated for their services. Given the above what makes those services any different than those of your own and given that why not acquiesce to one of the more prevalent suggestions on this blog by its readers that the providers of such service should be paid in such a manner for their time.

If real estate agents were paid as above those successful sellers would not be burdened with paying such an amount that might compensate the agent for the unpaid loss of their time devoted to those sellers with such lofty price expectations that their property never sells.

I am honestly surprised that one with such insight as you doesn’t get this simple fact.

Again, a good “agent” doesn’t sell as that is in direct contradiction and violation of their role as deemed by the courts as having a “fiduciary” duty to their principal. I know you know this stuff Garth. You should want your readers to know it too that they hold their agents accountable.

Blog dogs do your research, look up the law of agency and learn for yourself.

#200 Kip on 02.01.12 at 9:39 pm

#171 Blacksheep

“We are increasing our debt by about $30 billion a year lately, 100% of it borrowed. My comments about these people living off government handouts were intended to show they flunked financially after more than 60 years of life, and must now eke out an existence on federal crumbs. This is hardly ‘winning’ as was originally suggested. It is abject failure. — Garth”

I guess I am going to join the abject failures that are the subject of your blog today as I fully intend to collect my OAS and CPP when my day comes and I think most people posting here are in the same boat. What a sad bunch of failures we’ve become!

If that is your only income, quite so. — Garth

#201 Daisy Mae on 02.01.12 at 9:42 pm

#141 CATOOAS as we know it will disappear. The age limit will need to be eventually raised to 70 and will be means tested. In other words OAS becomes welfare, you’ll need to be destitute to collect it.

#202 truth hammer on 02.01.12 at 9:44 pm

Cramer……right now there are plenty of very nice choices. Thailand and Malaysia are peppered with bright modern towns filled with every amenity. This is not your grandfathers Asia. In Malaysia ..where I am vacationing from my home in Bangkok ( $50 flight …1 hour fourty mins) there is Kuala Lumpur, Georgetown ( Penang Island) Kalang, Johor Bahru, Kota Kinabalu in Sarawak for starters….English is a primary lanquage ubiquitous throughout the country. Food is cheap and cheerful…tremendous variety. I have written about Bangkok before….but as I pointed out ..a nice new furnished room with all the tricks in a nice are starts at $200 per month…average meal of chicken and rice is $1.00. Ice coffee….50 cents. Sun shine everyday…free. Malays are top drawer..very respectful…moral…clean living…..no personal crime. You are far more likely to be shot by the RCMP than to have your bicycle stolen in Malaysia or Thailand.

BTW my med insurance premium is less tha $500 every six months. Water bill and electrical is around $40 p/m…..ADSL streaming video line $12 p/m…..cable tv with plenty of english news and movies…free in the bldg. Pool chair and suntan…..yup…freeeeeeeeeee !!!

There are plenty of nice places in Thailand for seniors….Chiang Rai…Chiang Mai…Hua Hin…Rayong….Phuket…and there are lots of ex pat euro’s here enjoying the stron pound and euro…..but I am a city guy and like the fact that I can have it all….or not….whenever I choose….

#203 Ballingsford on 02.01.12 at 9:49 pm

Ballingsford on 02.01.12 at 9:32 pm

Carlyle, I agree totally with you! Life’s not about living it impress family, friends, and co-workers. It’s about enjoying life with people you enjoy being around with. If you can mingle with the neighbor folks during the day and mingle during the evening and maybe share a glass of wine and a few stories and then sleep well and then start all over again, it sounds perfect.

Life is not about who has the most toys wins! Life is about the happiness we have while we exist and still make a conscious attitude to do well unto others less unfortunate.

Who can enjoy life living in a trailer on CPP? Get a grip. — Garth
*****************************

Garth, these folks might be happier living in a nice trailer with good neighbors, than some folks who might be alone sitting on their deck waiting to shoot some squirrels for their squirrel stew.

But, if you had the combination of great neighbors and friends, had more than enough money to pay your expenses even even by taking in CPP and OAS, one would be further ahead by enjoying an en joyous life.

Stress kills! Enjoy the lifestyle you like until you meet your maker! Being on CPP and OAS does not make you a failure as long when you have other cash to supplement it.

#204 Daisy Mae on 02.01.12 at 9:53 pm

#149 CARLYLE: “They lived beyond their means supplementing with home equity and consumer debt but the end product was successful offspring, grand kids … Some things to be proud of. They aren’t bad people.”

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

They did their best….and I wish them the best!

#205 DUI on Money Road on 02.01.12 at 9:56 pm

#154 TorontoS on 02.01.12 at 2:51 pm
——————————————–
My understanding is that the CMHC premium can be added to the mortgage, but once this is done, the premium is in the hands of CMHC (you are just spending 30 years paying back the bank that loaned you the premium).

#206 McLovin on 02.01.12 at 10:00 pm

DA the difference between you and Garth is that Garth is held accountable for his advice and will lose his fee paying clients if he is wrong long enough. He gets paid over time not an upfront sum. In fact with what you charge in one transaction would take Garth 4-5 years to earn .

You simply perform a transaction and get paid whether you are right or wrong. You provide next to no value. I can’t believe that you were telling your KMiami clients not to buy in 2007. Those clients are now down 20-30% but no one is holding you accountable for spinning the usual drivel “RE always goes up” “Not making any new land”

Face it, you are no different than a car salesman and in many cases less useful.

#207 Carlyle on 02.01.12 at 10:01 pm

Garth said:

Who can enjoy life living in a trailer on CPP? Get a grip. — Garth

Respectfully Garth my folks commute every day from their trailer in Georgian bay during the spring summer and fall. I’ve always thought this is insane given gas costs but it shows they LOVE living there.

The costs of trailer living is minimal easily doable on CPP and OAS. I’m just telling them to take the next logical step and do what they love in Flordia during the winter (rent a trailer down there), live at Georgian bay in the summer ….

Personally I couldn’t do it but I have to admit some lot size trailers are every bit as nice as an actual house with resort like amenities and lakeshore views. It’s my understanding this lifestyle is getting VERY popular with boomers …

#208 Daisy Mae on 02.01.12 at 10:14 pm

Daisy Mae on 02.01.12 at 9:42 pm
#141 CATOOAS as we know it will disappear. The age limit will need to be eventually raised to 70 and will be means tested. In other words OAS becomes welfare, you’ll need to be destitute to collect it.

Your comment is awaiting moderation.

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

Something happened there…I’m not sure what? Anyway, CATO may be right. OAS is ‘security’ income for those who need it…and it doesn’t include those making $67,000 plus annually while retired. I guess OAS rules have to be tightened.

#209 The Thing in the Basement on 02.01.12 at 10:14 pm

189 prairie dawg – you will find that the corp tax a small business pays + the personal tax on any dividends declared is very close to the tax if the entire amount had
been drawn as a wage. It’s designed that way.

I cant remember how small business dividends are
treated, but if grossed-up, and the amount is substantial,
it adds to total income and can effect the clawbacks.

Definitely accountant territory.

#210 a prairie dawg on 02.01.12 at 10:17 pm

#195 jess

…the “rich” /wealth left long ago to reside in the offshore secrecy jurisdictions

- — -

The ‘smart’ rich have their official residence in one of the few places left that has no income tax at all. The Principality of Monaco.

From mere multimillionaires right up to billionaire oil sheiks.

No poor people are allowed though. lol

#211 Canadian Watchdog on 02.01.12 at 10:24 pm

#199 Devil’s Advocate

“Blog dogs do your research, look up the law of agency and learn for yourself.”

Perhaps you haven’t noticed that rules and regulations don’t apply anymore.

#212 Calgary Car Guy on 02.01.12 at 10:46 pm

Who can enjoy life living in a trailer on CPP? Get a grip. — Garth

I can. There is a lot to be said for living a simple life. I don’t mind it at all. There has been several posters extolling the virtues of RV life and I agree 100%. You can live very comfortably in a decent sized RV and it is quite cost efficient too. A fully self-contained RV can be like a luxury condo on wheels totally off the grid. I plan on doing that in the future. At least for six months of the year anyway.

#213 Wake up on the wrong side of the bed? on 02.01.12 at 10:52 pm

Carlyle, I agree totally with you! Life’s not about living it impress family, friends, and co-workers. It’s about enjoying life with people you enjoy being around with. If you can mingle with the neighbor folks during the day and mingle during the evening and maybe share a glass of wine and a few stories and then sleep well and then start all over again, it sounds perfect.

Life is not about who has the most toys wins! Life is about the happiness we have while we exist and still make a conscious attitude to do well unto others less unfortunate.

Who can enjoy life living in a trailer on CPP? Get a grip. — Garth

*****************************************
Lots of people will do just that, be in the company of friends and family. Money isn’t everything. Life is not about money, yes it helps. When you loose family members to disease etc the last thing you pray for is a million dollars, but I would pay a million to have just one more conversation with a loved one. You don’t die rich. You just die. I guess your logic comes down to the typical boomer consumption and chasing the Jones. I would rather be around good people then a bunch of yuppy consumption driven boomers. “do what I say and not what I do” attitude. Like I have always said like-minded folks transcend all generations, just so happens that per capita the boomers have more of each, even the idiots. Gen x will have to deal with the mess, lucky we don’t listen to our parents.

Now I need to throw up. — Garth

#214 Devore on 02.01.12 at 10:58 pm

#166 DonDWest

Devore is confused, he believes the banks are public institutions rather than private institutions.

Nice putting words in my mouth. I never said banks are public institutions. I merely countered that there is no free market in banking, as you’re asserting. It’s not either-or. It’s not black and white. Not right and wrong. Not left and right. There are degrees. Drop the dogmatic false dichotomy, I’m not buying.

#215 Cowpoke on 02.01.12 at 11:09 pm

Make me your leader and there will be no foreign aid, no foreign subsidies, no gov’t debt at any level, no income tax, no special interest group lobbying, no bail outs, no refugees, no subsidized gov’t employee pension plans, no foreign ownership of any industry in this country, no export of unfinished goods, leadership roles not to be paid more than 5 times the average working man/womans wage, mandatory 8 years of military service for the lazy,
There will be royalties payable on all natural resource extraction, strict environmental standards, a minimum standard of living for all canadian citizens, a strong military to protect our borders only, every able man woman and child to work until 60 years of age, 40 hour work week, free health care, dental care, free education up to 30 years of age, trades education mandatory starting at age 12,… sounding good so far! See, there is something to be positive about. This country should have been bought and paid for a long time ago.

#216 Arshes on 02.01.12 at 11:14 pm

#213 Wake up on the wrong side of the bed?

Lots of people will do just that, be in the company of friends and family. Money isn’t everything. Life is not about money, yes it helps. When you loose family members to disease etc the last thing you pray for is a million dollars, but I would pay a million to have just one more conversation with a loved one.

——————————————————-
So if you had a family member who was dying, and you didnt have the money to fly out to see them one last time, that wouldn’t bother you?????

#217 a prairie dawg on 02.01.12 at 11:14 pm

#209 The Thing in the Basement

you will find that the corp tax a small business pays + the personal tax on any dividends declared is very close to the tax if the entire amount had
been drawn as a wage. It’s designed that way.

- — -

I don’t believe that to be true simply because I know people doing it. They use a good accountant and it’s all above board. It’s only part time, as he has private pension income too, and careful attention is paid to clawback amounts, etc.

Structure is important though. And professional territory for sure.

(you picked a great blog name too lol)

#218 The American on 02.01.12 at 11:44 pm

Fancy Pants is pretty close… Any other takers? Going one. Going twice…

#219 Devil's Advocate on 02.01.12 at 11:51 pm

#206McLovin on 02.01.12 at 10:00 pm
DA the difference between you and Garth is that Garth is held accountable for his advice and will lose his fee paying clients if he is wrong long enough. He gets paid over time not an upfront sum. In fact with what you charge in one transaction would take Garth 4-5 years to earn .

You simply perform a transaction and get paid whether you are right or wrong. You provide next to no value. I can’t believe that you were telling your KMiami clients not to buy in 2007. Those clients are now down 20-30% but no one is holding you accountable for spinning the usual drivel “RE always goes up” “Not making any new land”

Face it, you are no different than a car salesman and in many cases less useful.

1. How possibly do you think I managed to stay in business for two decades without providing good advice?

2. The premise of my post was to suggest that real estate agents NOT be paid such a large fee but rather just as Garth claims to be.

3. And you don’t think Garth is paid whether he is right or wrong? The true test for any good agent is the incidence of repeat and referral business. If you are wrong there is not much chance you are going to get any of either and certainly no chance you’ll be in business two years from now let alone two decades.

4. Next to no value? That is a matter of opinion which you could not possibly measure never having been a recipient of my services.

5. How could you possibly know if I was telling any of my clients to buy in 2007? How can you possibly know that I wasn’t so entirely disenfranchised with the whole state of the market at the peak of it then that I didn’t take the year off? How do you know that any of my clients are down 20-30% and not instead up that much or more?

6. Did I ever once say “RE always goes up” but I certainly will admit to saying they are “not making any new land”. And if you want to consider a condo 2nd or 102nd floor a creation of new land you might want to rethink yourself for you are indeed a Greater Fool.

7. If a car salesman has a head, two arms, ten fingers, two legs and ten toes then I am not any different and nor are you. I’ll not knock a car salesman, a ditch digger or a garbage collector any more than I would anyone else who puts in an honest day’s work for their principal be it a car dealership, a general contractor or a civic employer. But of course I’m sure your credentials place you above such kinds of work.

#211Canadian Watchdog on 02.01.12 at 10:24 pm
#199 Devil’s Advocate

“Blog dogs do your research, look up the law of agency and learn for yourself.”

Perhaps you haven’t noticed that rules and regulations don’t apply anymore.

Tell the courts that.

#220 Snowboid on 02.02.12 at 12:00 am

#212 Calgary Car Guy on 02.01.12 at 10:46 pm…

We are former RVers and thought this was a good option. We considered buying a 40′ diesel pusher setup for ‘off-the-grid’ travel.

But after looking at the costs over ten years, it was less expensive to buy a nice home in Arizona. I know that sounds crazy, but I recalculated the figures many times to be sure.

Of course, the disadvantage is we are on solid ground and can’t take our room with us.

But we can be in LA in about 6 hours, and 4.5 hours to the beaches at Puerto Peñasco.

Flights are inexpensive here as well. Also in winter there are direct flights from Kelowna to Phoenix once a week.

We have friends with a big class A and they drive every year from the Okanagan to Mexico to spend the winter.

They love it, but they stay at the same place every year! Plus they nearly lost everything in an accident on the way down last October.

If you really want to live off the grid, check out the ‘Earthships’ in New Mexico!

#221 Arshes on 02.02.12 at 12:26 am

#217 a prairie dawg

you will find that the corp tax a small business pays + the personal tax on any dividends declared is very close to the tax if the entire amount had
been drawn as a wage. It’s designed that way.

- — -

I don’t believe that to be true simply because I know people doing it. They use a good accountant and it’s all above board. It’s only part time, as he has private pension income too, and careful attention is paid to clawback amounts, etc.

Structure is important though. And professional territory for sure.

————————————————–

Actually your both correct, if your ONLY income is from the dividends you receive the company, you taxes are considerably lower, because you need to take into consideration personal credits and you can do income splitting. So your taxes can be essentially minimum.

But if you dont take wages from the company you lose, out on any CPP contributions to your CPP.

I used to work at a accounting firm. My boss used to have clients take a wage, so the would get CPP contributions but still stay in a low tax bracket. And any withdwals above a certain amount they would claim as dividends withdrawls.

#222 “What is Vancouver’s economy really based upon? For the answer, check out my newly devised ‘pickup truck index’.” on 02.02.12 at 8:14 am

[...] “I just left Vancouver, where every second vehicle on the road is a tradesman’s pickup truck, with the shiny metal tool box built into the box. All of these guys, I think, are driving off to their jobs building condo towers. I know it has often been wondered what Vancouver’s economy is really based upon? For the answer to that check out my newly devised ‘pickup truck index’.” – Heart of the World at greaterfool.ca 1 Feb 2012 11:37am [...]