Non-cowboy

Well, just another day for middle-class Canada. ‘Canadian housing peers over the edge’ said a story in the Globe. Hours later it was replaced by, ‘Year-over-year home sales plunge 15.1% in September.’ Hours after that the wires buzzed with news Canadians have so much debt they make Americans look anorexic.

“Overall, this supports our bearish view that Canada’s housing boom is unsustainable and the eventual correction, which we think is already underway, is likely to have a material negative implications for growth,” said Capital Economic’s David Madani. He’s right, of course. The Canadian middle class is trodding merrily down the same path that the Yanks forged. It ends in a cliff.

With the bulk of their net worth trapped inside easily-illiquid real estate, most of the people you know are substantially at risk, yet blissfully unaware. The latest numbers prove we’re in a debt orgy, with no real income gains and an anemic job market. It’s a massive exercise in borrowing from the future, which looks to me just like today, but swaddled in deflation.

Given that, this pathetic blog has been urging you for the past two years to love liquidity, balance and diversification. I’ve written often about the Rule of 90 – to keep your real estate within reason.  (Deduct your age from 90 to get the proportion of your wealth that should be in your house equity.) I’ve also urged you to have a balance of assets, and dissed the metalheads who are 100% in gold and silver the same way I’ve trashed those with every dime in real estate. Both are high-risk strategies with doubtful outcomes.

So, you need balance. We all do. In what proportion is a function of your age, the amount you have to invest, your stomach for risk and how much your spouse trusts you. I’ve told you often that for many folks, having about 40% in safe stuff (called ‘fixed income’) and 60% in growth-oriented assets is a good model for the volatile times we inhabit.

I’ve also told you I don’t like direct equity investing, nor mutual funds. Individual stocks – even the bluest of the blue chips – can easily swing in price by 3% a day. Unless you have big bucks to put into a portfolio, such volatility can wipe out the benefit of collecting dividends, and keep you wide awake at night. As for funds, many are lacklustre performers, with traditional active-managed equity finds costing too damn much. Why pay some guy you’ll never meet 2.5% to run a fund when you can have an advisor at 1% who builds you a personal portfolio? Besides the advisor’s fees are tax-deductible, unlike the fund’s MER.

So, ETFs are a better way to go. Exchange-traded funds are more liquid than mutual funds (they trade on stock markets), more diversified than holding equities, less volatile because of it, while still passing through dividends. This is my choice for the growth component of a balanced portfolio. A nice mix might be 20% in Canadian assets (large cap, small cap and REITs), 15% in US (large, mid, small and micro cap), 20% international (large cap, some emerging markets and small cap) and 5% in alternative strategies (this is where a little gold might go).

As for the fixed stuff, I will repeat past suggestions: half in a mix of bond ETFs (government, corporate, inflation indexed and a small amount in high-yield) and half in the preferreds of banks and insurers. Bonds pay little these days, but add a lot of stability and balance. Bank preferreds pay over 5% and serve you up that juicy dividend tax credit – meaning they rival GICs at more than 6%. When was the last time you saw one of those?

This is a reasonably sedate, non-cowboy, conservatively-aggressive portfolio which has done well over the last eight years – which included the disaster of 2008-9. In fact my own investments (which follow this model) yielded an average of 6.46% over that time. So, given the fact 2008 is not going to happen again in the next eight years, expecting 7% is no stretch.

But remember, this is not 7% a year, every year, year after year. In 2008, for example, this portfolio lost 23%. The next year it recovered all that lost ground. The year after it returned almost 15%. Last year it was flat. This year it’s robust. The point is to get it built, have it tweaked as necessary, and stick with the plan.

Of course, there are thousands of funds, preferreds, REITs and bonds to choose from. No one size fits all. This blog has never recommended individual securities, and never will. The best advice is to get some advice. But never forget the three kings: Balance. Diversity. Liquidity.

***

I’ll have more to say about this in person next Tuesday night in Toronto, plus an analysis of the GTA housing market and I might try out a few new dance routines, since the Amazons have graciously consented to appear in their little sailor outfits. No sidearms this time, thank goodness.

Those who signed up to attend should receive a confirmation email in the next day or two. You can frame it, of course, bring it with you next week, or just look hot when you arrive. Since a whack of people want to come, best arrive a little early at the DoubleTree Hilton Hotel. There will be special seating for realtors.

200 comments ↓

#1 Doom on 10.15.12 at 9:50 pm

I cheer for the bear!

#2 tisparro on 10.15.12 at 9:50 pm

furst!!!!!!!

#3 Martin G on 10.15.12 at 9:51 pm

Interesting picture :)

#4 Soylent Green is People on 10.15.12 at 9:52 pm

Dats how you prorogue

Remember how mike harris destroyed ontario?
.
.
.

#5 Rainman on 10.15.12 at 9:53 pm

The Rainman is first!!!

#6 Awesome on 10.15.12 at 9:55 pm

Can’t wait for next week!

#7 KG on 10.15.12 at 9:55 pm

Sorry, First !

#8 Marko on 10.15.12 at 9:56 pm

What about McGuinty? Did he leave because he fears Ontario is toast?

#9 Derek R on 10.15.12 at 9:57 pm

Gotta love that liquidity!

#10 Gypsy Kid on 10.15.12 at 9:59 pm

Thank you Garth, once again. Loved the posting tonite. Saw the CBC segment on housing/household debt. OMG! When did this happen to us? I think Canadians became too cocky during the last three years when we thought we were better then our southern cousins…

#11 GTA Girl on 10.15.12 at 10:01 pm

Costumes mandatory?

Then I will drag out my construction helmet a miniskirt, expensive heels, Kardashian makeup..

and go as a condo sales office staff

All I need is a Aston Martin and a baggy of flour.

This outfit may even gain me a free drink at the annual BILD dinner!

#12 Sherwood Park on 10.15.12 at 10:02 pm

Lots of headlines for Mr Turner to write about today and I bet tonights blog was going to be all about Canadian household debt to disposable income hitting 163.4 %. So much to choose from .. so little time!

#13 Smoking Man on 10.15.12 at 10:02 pm

I’ll have more to say about this in person next Tuesday night in Toronto, plus an analysis of the GTA housing market and I might try out a few new dance routines
…………………………………………………………..
Gartho

Go with psy’s, gangnam style.

#14 Smoking Man on 10.15.12 at 10:08 pm

So Dalton’s off

Kids you can learn from the pinocio

He will
Look forward to being on the boards, of all the companies he helped inrich via laws.

Insurance Industry
Greens Climate Change freeks
Energy
and who knows what other little favours he’s owed by others.

That’s how it’s done grass hoppers, he wasent even a good lier.

My prediction, his net worth will be 10 times what it is today in a few short years

#15 Paul on 10.15.12 at 10:09 pm

I think this needs reposting on todays blog.

Land for Sale. $10.

http://www.ctvnews.ca/canada/manitoba-town-revives-fortunes-after-selling-land-for-10-1.995772

#16 Editor on 10.15.12 at 10:09 pm

Will some expert in the human psyche explain how it was possible for Canadians to watch the American housing bubble and repeat the experience in slightly different terms? (IE their liar loans = our stated income and so on) One part denial, one part cognitive dissonance, one part deeply entrenched feelings of superiority?

#17 T.O. Bubble Boy on 10.15.12 at 10:09 pm

nah – 7% is for suckers… put it all in Tyler’s Markham townhouse! (I’ve heard that it’s up $200k in 3 years)

#18 Nick on 10.15.12 at 10:10 pm

“A short quiz: If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef? Likewise, if you are going to buy a car from time to time but are not an auto manufacturer, should you prefer higher or lower car prices? These questions, of course, answer themselves.

But now for the final exam: If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. In effect, they rejoice because prices have risen for the “hamburgers” they will soon be buying. This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.”

– Warren E. Buffet, February 1998.

#19 ClaudiusEmperor on 10.15.12 at 10:12 pm

>>What about McGuinty? Did he leave because he >>fears Ontario is toast?

Yep, expect soon F to anounce retirement…

#20 Victor on 10.15.12 at 10:15 pm

How to buy a house when your credit rating’s been trashed

http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/how-to-buy-a-house-when-your-credit-ratings-been-trashed/article4607893/

More than one in eight adult Canadians will declare bankruptcy or negotiate a debt settlement – consumer proposal – with creditors. That’s a lot of people with devastated credit.

The majority of those people will want a mortgage at some point, but they’ll find their options are limited. Following the credit crisis, funding shrank for high-risk mortgages, causing more than a dozen subprime lenders to close their doors in Canada.

Nowadays, riskier home buyers with subprime (aka. non-prime) credit make up less than 5 per cent of borrowers. And with a shaky housing landscape and nervous regulators, lenders are more careful than ever.

#21 Victor on 10.15.12 at 10:16 pm

http://www.theglobeandmail.com/report-on-business/economy/housing/year-over-year-home-sales-plunge-151-per-cent-in-september/article4612858/

Canada’s housing market is slowing markedly, and rapidly, but not to the extent that some observers had feared.

Canadian home sales plunged 15.1 per cent in September from a year earlier, with more than half of the country’s markets down by at least 10 per cent, according to data from the Canadian Real Estate Association.

#22 ClaudiusEmperor on 10.15.12 at 10:18 pm

Yep, expect soon F to anounce retirement…

As greenspan did…

#23 Tim on 10.15.12 at 10:20 pm

Hi Garth.

Very much appreciate the comments and your appearances.

The financial advice is good also, balanced and anyone following it should be ok.

Keep up the good work.

Tim.

#24 Awesome on 10.15.12 at 10:20 pm

Mcguilty stepping down sure makes you wonder what’s really going on…

#25 Jay Currie on 10.15.12 at 10:26 pm

Garth, you make too much sense.

The question is how you communicate your particular truths to kids who want it all right now? To some degree you can’t. But if you can steer them away from high leverage real estate and buying food on a credit card some progress is being made.

#26 disciple on 10.15.12 at 10:31 pm

Sorry G-man, I can’t make it… Jack Black… er, I mean Jason Brock of X-factor might be gunning for me…

#27 Gerry B on 10.15.12 at 10:35 pm

>> Bank preferreds pay over 5%
Can you name any specific ones?

I’ve seen some paying 5%, but they often trade above par *and* the bank has the option to redeem them at par on some date – often not very far in the future.

Here’s an example: BMO’s “Preferred Class B Series 5” BMO.PR.H:
http://www.bmo.com/home/about/banking/investor-relations/shareholder-information/preferred-shares#b5
http://tmx.quotemedia.com/quote.php?qm_symbol=BMO.PR.H&locale=EN

Face/par value is $25. Pays a quaterly dividend of $0.33125, or 5.3% pa. Great! It’s currently trading at $25.790, 3.2% over par, but after a year of dividends one would still be 2% ahead.

Unfortunately there’s a catch: BMO can redeem these shares at par starting 25 Feb 2013. If they do, investors buying now would pay $25.79 per share, get 2 dividend payments of $0.33 each totaling $0.66, plus $25 in Feb 2013. Net return would be slightly negative.

Am I missing something?

#28 mid-Ontario on 10.15.12 at 10:38 pm

Marko
McGuinty has no clue of the poor state that he is leaving Ontario in.
The man has been totally clueless since day 1.

Ontario will start to look like Greece, Spain and Portugal after the housing “correction”.

The Liberal faithful of course will not see that payments on the debt are a bad thing until they surpass Health care costs which by the way is only a notch or two interest rate increases away.

Arrangements are underway to leave this sinking ship of a Province, thanks in no part to the excuse we have had for leadership.

#29 Ralph Cramdown on 10.15.12 at 10:39 pm

What about McGuinty? Did he leave because he fears Ontario is toast?

It’s like what they teach you at the yacht club: If you’re thinking about abandoning ship, but you’d have to step DOWN into the dinghy, you’re too early. You’re doing it right if you have to step UP into the dinghy.

#30 Hugh Jasz on 10.15.12 at 10:46 pm

With the good ship real estate teetering on the edge, maybe Canadians will stop being so smug about the things that make us “better” (different) than our neighbours to the South.

That said, I figure we’ll only turn off the smug for long enough to somehow blame those “Yank Bastards” for the pickle we’re in!

Great post. Looking forward to anything our host has to say about Ontario politics in the near future. She’s about to get interesting for the first time in a while.

#31 Victor on 10.15.12 at 10:46 pm

http://business.financialpost.com/2012/10/15/canadians-deeper-in-debt-than-thought/

Household debt is viewed as the biggest threat to the Canadian economy. Mr. Carney and Finance Minister Jim Flaherty have repeatedly warned consumers to pay down their debt loads — much of that acquired through low mortgages rates.

The Bank of Canada’s key lending rate has been at a near-historic low of 1% for two years, and policymakers have maintained that rates will eventually have to rise.

“For example, if we were to lean against emerging imbalances in household debt, we would clearly declare we are doing so and indicate how long we expect it would take for inflation to return to the 2% target,” Mr. Carney said in Monday’s speech.

He later told reporters that the federal government “has taken actions on four occasions . . . to address some issues in mortgage finance.”

“Those actions have been both timely and prudent,” he said. “We . . . are watching with great interest the sum of those policies and the effect on the evolution of household debt.”

#32 Priced Out in Toronto on 10.15.12 at 10:47 pm

Wanted to post this yesterday, but couldn’t.
Markham condos are not moving at all – sellers refuse to lower prices and buyers are nowhere to be found. As for townhouses, viewings still happening (so not as bad as condos), but not much in the way of sales. Houses still are moving however. No bidding wars mind you, but still strong.
As for me, with my slightly above average salary, can’t afford anything around Markham or Toronto. (well, not anywhere I’d like to live anyway)
Can’t wait for next week!

#33 City Slicker on 10.15.12 at 10:48 pm

With debt at 166% this exceeds the yanks at their peak no? Maybe it is different in Canada.

#34 MC on 10.15.12 at 10:53 pm

Are all products in Canadian dollars, otherwise how do you hedge for currency fluctuations in the portfolio?

Always maintain US$ positions. — Garth

#35 Not 1st on 10.15.12 at 10:57 pm

Don’t you want to have all your dividends coming from domestic ETFs so you can get the dividend tax credit and gross up calculation? U.S. dividends are taxed at a higher rate than Canada are they not?

#36 wwwStratege on 10.15.12 at 10:58 pm

Garth, are you going to visit the belle province anytime soon? You still have the right to speak english you know?

#37 Victor on 10.15.12 at 11:00 pm

#16 Editor on 10.15.12 at 10:09 pm

Will some expert in the human psyche explain how it was possible for Canadians to watch the American housing bubble and repeat the experience in slightly different terms? (IE their liar loans = our stated income and so on) One part denial, one part cognitive dissonance, one part deeply entrenched feelings of superiority?

===========================

Same answer as always. It’s different here.

#38 Realtors are in an all out panic on 10.15.12 at 11:05 pm

The debt-to-income ratio continued to rise to 163.4%

Canada’s housing Market and debt bubble is set to CRASH and CRASH hARD. 163% debt to income? WTF . Like i have been saying for years is that epople will borrow until they are bankrupt.

http://www.cbc.ca/news/business/story/2012/10/15/carney-rates.html

http://www.edmontonjournal.com/business/Canadians+deeper+debt+than+thought/7391652/story.html

http://www.reuters.com/article/2012/10/15/canada-economy-idUSL1E8LFC6220121015

#39 US STYLE HOUSING CRASH TO HIT CANADA HARD! on 10.15.12 at 11:08 pm

The debt-to-income ratio rose to 163.4% in the second quarter of this year from 161.8% in the previous quarter, which was revised from 152.0%.

Capital Economist, in a report Monday, pointed out that at the peak of the U.S. housing bubble, U.S. household debt-to-income was close to 170%.

Debt growth dynamics over the last decade look eerily similar to the U.S. experience, just before their dramatic housing bust

http://business.financialpost.com/2012/10/15/canadians-deeper-in-debt-than-thought/

#40 THE CELIAC HUSBAND on 10.15.12 at 11:10 pm

Balance. Check
Liquidity. Check.
Diversity. Need to work on it.

I am starting to miss Calgary. Nah, too cold. Europe is just fine.

http://theceliachusband.blogspot.fr/2012/07/moving-overseas.html

#41 Canadian Watchdog on 10.15.12 at 11:14 pm

#35 Realtors are in an all out panic

Actually it’s 166%. 163% is credit market debt to disposable income, not total debt to disposable income like the old measurement. StatsCan and MSM totally spun it.

@Garth

That was for you. You have too much faith in the system. Watch out.

#42 DonDWest on 10.15.12 at 11:16 pm

Garth, I have news for you. Your ETFs are bound to crash soon due to two reasons:

A) The stimulus pumped into ETFs by governments will soon run out.

B) The baby boomers will soon start to retire. When they retire there will be a mass withdrawal from all the ETFs they hold in order to fund their retirement. This will lower the values of ETFs considerably.

C) Not truly much to invest in Canada right now. Everything is overvalued. You can’t even wait it out by holding cash because our dollar is overvalued as well. This “investor paralysis,” as I like to call it, will eventually bring everything to a correction, including your ETFs.

Now maybe you want to make an argument that there’s deflation on the horizon and your ETFs will lose less money than gold/silver, real estate, equities, bonds, mutual funds, GICs, cash, etc. but I’m sorry, I’m not seeing 7% plus gains every year. . . Just not seeing it. . .

I have news for you. (a) Unlikely. (b) The opposite is true. (c) The paralysis is yours. — Garth

#43 Mike on 10.15.12 at 11:20 pm

‘It’s a massive exercise in borrowing from the future’

Indeed. All day long the same thought was running through my head. Steal from tomorrow to feed today. It’s a classic sales tactic. Of course in good times the opposite is called sand-bagging.

Not surprising that consumer debt in Canada is worse than previously reported. We have been stealing from tomorrow for a long time now. Only it’s not a secret anymore.

Thanks for another bit of insight Mr Turner.

#44 Paully on 10.15.12 at 11:25 pm

It would seem that Ontario is in dire need of a financially savvy leader.

How about Garth for Premier?

#45 Vangrrl on 10.15.12 at 11:34 pm

The CBC link Gypsy King is referring to:

http://www.cbc.ca/player/Shows/Shows/The+National/ID/2291776105/

#46 DON on 10.15.12 at 11:36 pm

WTF – now the housing decline is self evident.

I remember Amanda Lang CBC and the rest of them, saying there is no bubble. F is still saying that – now he is taking credit as he got rid of the 0/40 etc which he brought in. Geezus – I must be dreaming or the twilight zone is real.

#47 TEMPLE on 10.15.12 at 11:52 pm

“…have an advisor at 1% who builds you a personal portfolio?…So, ETFs are a better way to go.”

Hi Garth, I have a problem with this. First, a client would be paying you to pick ETFs, which also have annual fees (albeit lower than typical mutual funds). The end result is that there isn’t much savings compared to index funds sold by [email protected]

At a certain point, it makes a lot more sense for a passive investor to replicate an index and then pay virtually nothing in fees year after year. Besides, most ETFs (i.e., cap-weighted ETFs) have too much money in too few blue chips.

My point is, why pay for an ETF when it is easy to own enough stocks to be equivalently diversified?

TEMPLE

ETF fees are generally miniscule, and an advisor’s fee is tax-deductible. This is a cheap way to be taken care of, with an advisor continuously managing a portfolio to rebalance holdings as conditions demand, as well as doing what good advisors do – helping you avoid taxes, income-split and craft family strategies. As for stocks, you need seven figures to duplicate the diversification that a collection of ETFs provides. If that’s you, good luck. — Garth

#48 Loan money to anyone on 10.15.12 at 11:58 pm

The debt situation in Canada is much worse than it ever was in the US even though our debt-to-income ratio is slightly lower than the American peak (163.4% vs 170%). You have to consider that mortgage payments are tax deductible in the US while they are not here.

#49 TRT on 10.16.12 at 12:03 am

Carney just said if household debt gets out of control, he will forewarn of potential interest rate hikes! So approx 166% debt t income ratio is fine with him.

We get an advanced warning of rate hikes. Yayyyyy!!

No rate hikes anytime soon. You crazy to believe anyone else?

This is the man that calls the shots. His Boss is the counterpart in the USA. F doesn’t care.

http://www.theglobeandmail.com/report-on-business/economy/interest-rates/carney-pledges-clear-signal-if-household-debts-warrant-rate-hike/article4613694/

So buy, buy, buy. Inflation is the only way out!!!

#50 Grim Reaper/Crypt Speculator on 10.16.12 at 12:03 am

I don’t know about the rest of ya…but I would kick that bear’s ass…even with both sickles tied behind my back….sort of Klahanie infill excerpts for NFB

However, I know any amateur video of the scenes would end up as CBC Porn video for Quebecois

Tabernac !!!!

#51 house burden on 10.16.12 at 12:10 am

How (excuse my language) SHIT!!!. How did that happen debt to income from 152 to 163.4 …. Cmon Carney you know what has to be done, protect Canada from these debt speculators and raise the rates before the world shuts down and stops buying your treasuries

http://www.theglobeandmail.com/report-on-business/economy/interest-rates/carney-pledges-clear-signal-if-household-debts-warrant-rate-hike/article4613694/

#52 Grim Reeper on 10.16.12 at 12:11 am

Uncovering the truth about what liars TREB are!

416 alone has 14773 properties for sale current, sales just 416 last month 2000 roughly, that is 7 months of inventory at the current rate of last month sales, new listings up 4%, active listings up 15%, and a sales plunge of more than 20%’ YOY in September, now heading into the softer season in the real estate game, they will not be able to hide the truth much longer and anyone that buys a townhouse for $700k in Markham is well an moron? I think everyone Garth included is underestimating how big the correction will be, Brother Carney knows he has to act to save people from themselves, cutting amorts to 25 years helps, but it is not enough, you have to get rates up just 1% will do it, and watch what happens to prices in 416,905,604, 403, and right across the entire country, I’m going with 30% as the overall average decline, more in 604, less in a few hoods as Garth would put it, but the overall lust and greed, stupidty is equal to or greater than the Yanks!
Last time we saw this in Toronto 1989 it took 13 years to sort itself out and just be back where you started.

#53 Smoking Man on 10.16.12 at 12:36 am

Bubble heads I’m in mega pain kiled a bottle of rye . My son is coming to the Gartho show. Any bubble heads wana take a shot. Go for it. My kids are not victims of bulling. Bullying they kill bullies. Did my job.

We wear just talking about how the machine bent them over and demanded a tank you sir. Not my kids.

Diploma toting. Cube dwellers. An education at the Gartho show hopefully will let you see the light. My oldest will set the tone. And you can come hug me at the bar. For threw them, you will see the light.

Diploma is a ball and chain. Vlad are goal is the same. You are direct with links. Me I make em look inside. Who the fk is thomsem. My son. Says you are him.

I’m the smoking man

#54 Smoking Man on 10.16.12 at 12:42 am

37 laughingcon I wana help you man. You are the most liklley to eat a bullet by your own hand. Hang in till next week . I will introduce you to my kids. I will replace your hate with love. You will make it.

#55 happy renter on 10.16.12 at 12:48 am

Its funny,I was talking to a investor in Florida and he couldn”t believe the houses prices in Canada.I told him,I don’t know how people can afford it but they all must have great jobs to pay the mortgage.I guess theres so many rich foriegners buying up property that the average person has to work full time and a part time job to make it.I wonder what would be like to have affordable houseing like the Americans.Oh well I assume its for the best for Canadians to be in high debt so we can keep up with the Jones.

#56 house burden on 10.16.12 at 12:57 am

Hey garth-o mabey your wife can dress up as a scary Real-estate agent and you and dress up as a Repo Man. And hand out Chocolate Court orders to the kids this Halloween.

#57 Nostradamus Le Mad Vlad on 10.16.12 at 12:58 am


“The Canadian middle class is trodding merrily down the same path that the Yanks forged. It ends in a cliff.” — Well, shit happens and the piper has this annoyingly cruel habit of changing the tune when no one expects it. Too bad, but that’s life.

“The point is to get it built, have it tweaked as necessary, and stick with the plan.” — A good analogy here are sports team’s coaches. Although coaches are hired to be fired, there are a few outstanding coaches (usually with one or two teams) who stick to their game plan year after year and usually winning trophies to boot. How much rope does management give a coach before pulling the trigger? Not much, nowadays.
*
Seems with all the BC Libs fleeing a sinking ship and handing the reins to the NDP, who will subsequently be blamed for mismanagement when the Libs put it in place, Dalton McRib conveniently quitting (probably for a plum job somewhere), Canada’s economy is about to implode on to the world stage.

What chance do I have at winning a lottery?
*
Wells Fargo sued Warren Buffett may be part of this; Obomba Good business or conflict of interest? China Not bothering with IMF diclwads; A real job = tyranny; John Mauldin Economic singularity and other stuff; Hard Landiing for university endowments; Bad Reasons for not saving, a.k.a. excuses; Big Pharma and Banks push DOW; Quebec may just have kissed its ass buh bye; Vegillionaire! Eat and grow rich; Secret Plan for Romney and Ryan — they’re gay. Not! Currency Wars, Bernanke and the third world; Greece isn’t poor, but their resources (like Libya) have been taken by TPTB; Radical Idea Requires critical thinking skillls, then apply to Canada; Starbucks Should it be said ‘This Is Not Fair?’; Live or Die? Depends on how cold it is in winter.

IMF’s Lagarde She may be on to something here; China Waving a red flag at a bull; Soros Probably has a vested interest in The Fourth Reich; Reverse Mortgages are not a smart move, esp. in the States; Two opinions, two politicians. Opinions are meaningless; Canceling Debt It would be nicer if sheeple were included, but New Energy Problem; The Euranic is still floating; Dichotomy Consumers spending, businesses not and French businesses blow up at Hollande.
*
The Hypocrisy of Govt. in one pic; Non GMO Shopping Guides Free downloads, English or Spanish; The Smashing Pumpkins return; The Mouse That Roared a.k.a. Dangermouse, trained to sniff out landmines; Mini Me? No. Mini Flame, another Pentagon-sponsored computer virus; Finding the Switch for starting volcanic eruptions; States Legalizing Dope will have run-ins with the feds.; Strange Domes Not UFOs by Texas coast; US-backed Syrian opposition backed by TPTB (BdBs, Soros etc.); War Games Japan and US vs, China re: Islands; Curious Secret chamber found behind / in great pyramids. Is this where politicos go to die? 16 Foods that will re-grow from kitchen scraps.

#58 Mel on 10.16.12 at 1:15 am

Wait a minute, ” Mr. Carney and Jim Flaherty have repeatedly warned consumers to pay down debt”.

Exactly who was in charge when all that debt was accumulated ? Let’s see, Mr. Carney and Jim Flaherty.

Now, that was not so hard to figure it out. What happened to the ‘ economic action plan’? Where do you think the money came from? Who do you think encouraged more debt?

Yup, the men above.

#59 The Value of Advice : The Retiring Boomer on 10.16.12 at 1:31 am

[…] “With the bulk of their net worth trapped inside easily-illiquid real estate, most of the people you know are substantially at risk, yet blissfully unaware. The latest numbers prove we’re in a debt orgy, with no real income gains and an anemic job market. It’s a massive exercise in borrowing from the future, which looks to me just like today, but swaddled in deflation,” said Garth Turner, author and former Member of Parliament. […]

#60 martin9999 on 10.16.12 at 1:34 am

Always maintain US$ positions. — Garth

You are never disapointing, that’s why I read this blog.

#61 martin9999 on 10.16.12 at 1:35 am

So, given the fact 2008 is not going to happen again in the next eight years–

why 8 years and not on the fiscal cliff issue?!

#62 Freedom First on 10.16.12 at 1:37 am

Thank you again Garth!

It is such a blessing to come to your blog after listening to so many of my fellow Canadians spout off on the Canadian economy/RE……showing their ignorance of what is happening, and even more frightful, how many Canadians are still ignoring/ignorant of what is happening world wide, or , if they do know, still believe “we are different”. balance, diversity, liquidity…….so simple…….yet so ignored.

#63 Canadians Surpass the Danger Zone : The Retiring Boomer on 10.16.12 at 1:42 am

[…] “With the bulk of their net worth trapped inside easily-illiquid real estate, most of the people you know are substantially at risk, yet blissfully unaware. The latest numbers prove we’re in a debt orgy, with no real income gains and an anemic job market. It’s a massive exercise in borrowing from the future, which looks to me just like today, but swaddled in deflation,” said Garth Turner, author and former Member of Parliament. […]

#64 peter on 10.16.12 at 1:48 am

Question; If housing does plop as we expect, what will happen to the value of bank stocks and bank preferred shares?

#65 Mic D'angelo on 10.16.12 at 2:01 am

#27 Marko I do not know what you do for a living but be careful what you wish for because the stock market will get crushed and every other investment if Ontario gets what you say. Ontario was always the economic leader in Canada because of conservative financially respective governments and not populous social governments like Mcguinty’s Liberal party.Greece,Spain,Portugal are all economies based on socialistic governments that tax and spend too much. You can not spend and borrow your way to prosperity. Mcguinty is the first liberal leader to win three liberal governments in Ontario’s history and look at the result,a financial irresponsible of change is his legacy.

#66 Mic D'angelo on 10.16.12 at 2:05 am

#27 Marko Mid-Ontario A correction on the my last post is a financial irresponsibility of change is his legacy.

#67 Aaron - Melbourne on 10.16.12 at 3:02 am

More on the Aussie sub-prime….

http://www.macrobusiness.com.au/2012/10/pre-gfc-low-doc-frenzy/

#68 Cid on 10.16.12 at 4:16 am

Hahahaha….on the same day I got the news about record Canadian debt levels, as well, I watched an episode of “Property Virgins” on Home & Garden channel where property virgins in Toronto had $60,000 down and got pre-approved for $800,000…Holy Crap!! Start whistling “The Battle Hyme of the Republic”….

#69 JackMac on 10.16.12 at 4:24 am

Really, really would love to hire some buxom cuties to show up in sailor outfits. Just in case the Amazons don’t show.

#70 Buy? Curious? on 10.16.12 at 5:27 am

Garth, Dalton resigns? I didn’t see that coming. I always thought it was women and children first but I guess that’s some outdated maritime unwritten rule. What does your gossipy politician friends make of such a move? I hope it was because of some sort of Elliot Spitzer type of scandal because if it isn’t, oooh, there’s tsunami heading Ontario’s way. If Dalton jumping ship isn’t a canary in the coal mine signal for everyone to sell their houses, I don’t know what else is. I just hope old people start selling their houses soon before it cuts into anyone’s inheritance. Gen X’ers start convincing your parents to sell their houses NOW! Start with the family cottage, then the home. Now!!!!

#71 Buy? Curious? on 10.16.12 at 5:41 am

Oh, I forgot to post the comparison between Dalton McGuinty and Captain Francesco Schettino.

http://www.youtube.com/watch?v=hz4M0JCznAc

#72 Picasso on 10.16.12 at 5:45 am

I like doing this…

http://www.realtor.com/realestateandhomes-detail/641-Stevenson-Dr_Fate_TX_75087_M74229-04253

#73 The real Kip on 10.16.12 at 5:59 am

Today you mention anemic job growth here in Canada yet we consistently outperform other countries to the chagrin of many, yourself included.

People with jobs are unlikely to lose their houses as happened in the US when 8-million lost their jobs precipitating the housing mess there.

Have fun in Toronto dissing real estate.

#74 Rob now in Nova Scotia on 10.16.12 at 6:21 am

Although you’ve pushed out most metal heads from the forum I remind you that the printing of money creates inflation and furthermore that THE BEST hedges against inflation are gold and silver. A 100% weighting will therefore give one the best hedge against the coming inflation tsunami.

Absurb. You should worry about deflation. Especially in NS. — Garth

#75 Picasso on 10.16.12 at 6:22 am

#69 The real Kip on 10.16.12 at 5:59 am

Oh…. so if you have a $60,000 a year job you should pay $600,000 for that townhouse?

The Canadian real estate market has been nothing more then a pyramid scheme, you know it, I know it and everybody knows it.

#76 maxx on 10.16.12 at 7:02 am

#16 Editor on 10.15.12 at 10:09 pm

You’re far too kind: I see 1 part conviction that “it’s different here”; 1 part meta-stupidity (ongoing) and 1 part super-arrogance, which resulted in tptb in finance sashaying around and about the globe preaching “how it’s done”. Glory be.

As if.

The circus has left town and Canada is about to learn where it’s situated on the retard scale.

#77 jaywalker2 on 10.16.12 at 7:16 am

ETFs are derivatives with counterparty risk. What precautions do you take?

Long ETFs are collections of indices. Less risk than an equivalent mutual fund. — Garth

#78 TurnerNation on 10.16.12 at 7:38 am

Condo developers just killed a popular Bay St hangout (located behind the Scotia tower). I heard, it’s closing soon for a condo’s development.

http://www.yelp.ca/biz/south-of-temperance-toronto

#79 TurnerNation on 10.16.12 at 7:46 am

Today’s picture is deep.
Man about to be savaged by a Bear market.
The only safe place is inside the bear trap! Yes, if he hops inside and locks himself in he’ll be safe but trapped. To wither away.
The Bear Trap is [email protected]’s GIC! S

Tomorrow: my book report.

#80 maxx on 10.16.12 at 7:50 am

#67 Buy? Curious? on 10.16.12 at 5:41 am

Booyeah!

Do not pass “GO”- move straight to the head of the class.
Good job.

#81 Bigrider on 10.16.12 at 7:59 am

#181- yesterday smokingman to bigrider response #158.

Well ,seems I agree with you as well. When put that way, maybe illiquidity IS a good thing.

#82 Ralph Cramdown on 10.16.12 at 8:04 am

People with jobs are unlikely to lose their houses as happened in the US when 8-million lost their jobs precipitating the housing mess there.

You can sit around the campfire telling yourself stories, or you can check the facts. http://www.macrobusiness.com.au/2011/05/unemployment-and-house-prices/
Falling house prices led rising unemployment.

#83 Victor on 10.16.12 at 8:08 am

http://www.thestar.com/business/article/1271657–vancouver-slump-hits-national-home-sales

Veteran Mississauga realtor Mike Donia has been through two housing downturns and he’s been seeing the same telltale signs across the GTA since May.

Inquiries to his office from buyers are down at least 65 per cent, bidding wars are going bust and he’s seeing a growing number of power of sale properties — including a $13.9 million Bridle Path mansion — popping up on the MLS.

At the same time, he’s got over a dozen clients trying to get out of pre-construction condo deals penned more than a year ago because they now find themselves overextended and fearful the condo boom is about to go bust.

“My geiger counter has been going off for four or five months now,” says the 25-year veteran of the GTA real estate business. “I can’t tell you when the epicentre of the earthquake is going to hit, but the picture on my wall is shaking.”

#84 Timbo on 10.16.12 at 8:12 am

http://www.bbc.co.uk/news/business-19958512

“Cars are the ultimate discretionary purchase, in that you can hold on to it for five or six years and hold off buying a new one,” he said. “We’re nearing the bottom, I think, but the problem for carmakers is that there is no sign of recovery.

“You can’t say that next year is going to be better than this year. In some parts of southern Europe, there is no car market anymore.”

No light at the end of the tunnel….

http://www.guardian.co.uk/business/2012/oct/16/austerity-uk-economic-growth-obr

Austerity may have hurt UK growth more than expected, OBR admits

Say isn’t so..are you listening North America?

#85 Fred on 10.16.12 at 8:22 am

Something to keep in mind with the bank preferreds: yield-to-worst return is often significantly less than the 5% you might be getting at the moment. See http://www.ritceyteam.com/pdf/guide_to_preferred_shares.pdf. The safer bank preferred with call dates farther out tend to be offering less than 5%.

‘Safer’ bank preferreds? What Canadian bank preferreds are unsafe? I have yet to encounter one. — Garth

#86 Daisy Mae on 10.16.12 at 9:06 am

#16 Editor: “One part denial, one part cognitive dissonance, one part deeply entrenched feelings of superiority?”

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

And one part, stupid government….

#87 texpat on 10.16.12 at 9:08 am

Garth, I like your site. You’ve awoken a lot of people to the Canadian real estate bubble, your writing is witty, and you generally dispense good advice.

But on gold, you’re blinkered to suggest that it be part of a 5% allocation to weird things. I’d recommend at least 20% given what every central bank in the world is doing.

I’m currently in 25% cash/income (including bank preferred shares, which now have an *effective* yield of 5% that you often mention), 10% real estate, 30% equities (mostly precious metals miners, which have performed horribly over the past year and are consequently way undervalued), and 35% bullion.

No, I’m not a gold bug. But I’ve been a gold bull since 1999, given the Fed’s serial bubble blowing. Gold may become a bubble sometime in the next 5 years. But for now, it’s still climbing the wall of worry.

3-year CAGR = 10.01%. 10-year CAGR = 8.57%.

Gold’s ‘climb’ yesterday was negative $20. — Garth

#88 texpat on 10.16.12 at 9:13 am

Hmm, part of my post disappeared when I hit “Submit”.

I originally wrote that bank preferred shares now have an *effective* yield of less than 2%, not over 5%. My text apparently got messed up because I used angle brackets for “less than” and “greater than”, and everything between those brackets disappeared.

Don’t worry about how you submitted it. You’re wrong anyway. — Garth

#89 Sisko on 10.16.12 at 9:18 am

Garth, thanks for this, very useful post. One question, should all consumer debt be dealt with (paid off) before embarking on building a portfolio such as this?

Yup. Pay off non-deductible debt. — Garth

#90 Daisy Mae on 10.16.12 at 9:26 am

#30 Victor: “He later told reporters that the federal government “has taken actions on four occasions . . . to address some issues in mortgage finance.”

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

And would those ‘actions’ be by raising the amortization period from the ridiculous high of 0/40….reducing them to 0/35….and when that didn’t work, reduced them further to 0/30….and when that didn’t work finally, back to 25-year amortizations periods, which worked for decades and should never have been tampered with?

Does Carney means THOSE four changes?

#91 Daisy Mae on 10.16.12 at 9:27 am

Should be ‘to’ not ‘from’ but you get my drift…

#92 Smoking Man on 10.16.12 at 9:27 am

Note to self

Bring Garth some Windex for crystal ball

What is this I read C not going with rate cuts.

National post

#93 Smoking Man on 10.16.12 at 9:28 am

Rate hikes these touch screens are tricky

#94 OlderbutWiser on 10.16.12 at 9:32 am

Fred – #83 – great resource on preferreds… thanks for posting the link. Now I wonder…how many people will read all 61 pages before they invest in preferreds? I think not many. This is why most people need an advisor. Investing is not easy …. well it is easy if you just want to gamble …. not so easy if you want to do it right.

#95 OlderbutWiser on 10.16.12 at 9:38 am

Cid – # 66 – property virgins with $60k down qualify for a mortgage of $800,000? You have got to be kidding me. What the he!! will these people do if interest rates move up when their term is up? I make more than $500k per year and there is no way I would take on a mortgage of that amount. I would rather rent. Talk about living in a fantasy land…no worries…nothing bad will happen to me…la la la la…

#96 Buy? Curious? on 10.16.12 at 9:54 am

First Dalton McGuinty resigns unexpectedly, now Vikram Pandit, CEO of Citi Group resigns unexpectedly too? Oh God, this is how it happens in Ayn Rand’s Atlas Shrugged!!! The dominos are starting to fall!!!! We need a sexy heroine to come to the rescue. Does any know if Rita MacNeil has any train experience?

http://www.youtube.com/watch?v=-uKy1iku5ig

#97 Gunboat denier on 10.16.12 at 10:03 am

56 Mad Vlad – about 1 in almost 14M for 6/49 and 1 in
86M for lottomax (if I’m doing it right).

But it’s wasted effort anyways cuz I’M GONNA WIN. It’s
part of my retirement plan.

#98 Luc on 10.16.12 at 10:13 am

Garth when you talk about deflation and inflation, do you mean deflation in RE and is inflation going up for goods and services?

Also on the debt to income ratio at 163%, I still don’t get it. Does it mean that people on average are in debt 163 dollars for every 100 dollars they make after tax?

Thank you.

Worry about asset deflation more thna price inflation. It is the silent killer in a society where 70% own houses. — Garth

#99 kreditanstalt on 10.16.12 at 10:15 am

Those who try to avoid risk shall (and SHOULD) pay! The RISK-TAKER shall inherit the earth!

#100 Trapi on 10.16.12 at 10:35 am

Just like Chretien, McGuinty threw the towel. Had enough of the strings being pulled on his back by the puppet masters. By by McGuinty you spineless politician. He reminds me Mr. Burns in the Simpsons.

#101 MarcFromOttawa on 10.16.12 at 10:46 am

#96

Luc you are correct. People owe 1.63$ for every dollar of “disposable income”. That’s including mortgages, credit cards, HELOCs, overdraft etc…

#102 Daisy Mae on 10.16.12 at 10:49 am

“He later told reporters that the federal government “has taken actions on four occasions . . . to address some issues in mortgage finance.”

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

I know Carney is referring to OSFI guideline changes, among others…but these changes wouldn’t have needed to be implemented if the feds hadn’t tampered with the amortization periods. So, that is still the bottom line. His changes are simply damage control.

#103 Fred on 10.16.12 at 10:52 am

#83

‘Safer’ bank preferreds? What Canadian bank preferreds are unsafe? I have yet to encounter one. — Garth

I’m not saying any Canadian bank preferreds are unsafe as in “the bank may go bust or may stop paying your dividends”. When I wrote “safer” I meant that the call risk is lower with preferreds which have a call date farther into the future.

E.g. see this example from the guide I linked to (note: these numbers are from December 2011 and are no longer current):

Issuer: BMO 5.30% Ser. 5
TSE symbol: BMO.PR.H
Price (Dec 31 2011): $26.14
Dividend: $1.325
Current Yield: 5.07%
Worst call date: 25-Feb-13
Call price: $25.00
Yield to worst: 1.78%

This is saying that (as of end 2011) you could get 5.07% on this BMO preferred issue, but if BMO decides to call the shares in Feb 2013 and gives you $25 per share then you’ll only effectively be getting 1.78%; because you would have paid $26.14 for each share.

From what I can see, the higher yield preferred dividends from banks were a response to the 2008 financial crisis. Gradually those are being called and are being replaced by lower yielding offerings.

Just something to keep in mind. I’m sure any good financial adviser would ensure his/her clients are properly risk adjusted. So the only tricky part is to know whether your financial adviser is good!

#104 45north on 10.16.12 at 10:54 am

Victor: “My geiger counter has been going off for four or five months now,” says the 25-year veteran of the GTA real estate business. “I can’t tell you when the epicentre of the earthquake is going to hit, but the picture on my wall is shaking.”

that got my attention Victor

#105 Ronaldo on 10.16.12 at 11:28 am

#73 Picasso –

”Oh…. so if you have a $60,000 a year job you should pay $600,000 for that townhouse?”

If you go back to the traditional ratio, probably only $180,000….not worth any more.

#106 AprilNewwest on 10.16.12 at 11:35 am

#71 The Real Kip
Outperforming other countries doesn’t mean we’re doing all that well. Growth here, as well as globally, is very slow from what I’ve been listening to. Glacial is how Garth refers to it. Also there are people in the US who still have their jobs but who did lose their houses. Check it out.
Garth is not “dissing” RE. He’s giving us the facts. Like it or lump it.

#107 NorthOf45 on 10.16.12 at 11:38 am

Garth, word on the street is that Tridel may delay (cancel??) construction of 10 York St. in downtown T.O. If so, I’m told this would be the bellweather event that would see smaller condo developers re-evaluate their future planned projects. Have you heard any similar rumbings?

#108 Bigrider on 10.16.12 at 11:42 am

Garth, what are you going do if you get bum rushed by a cohort of zombie like house humpers infected with the
RE-101 Gottahumpahoma virus next Tuesday?

The GTA is most infected.

Have you fortified the conference room?

#109 TRT on 10.16.12 at 11:51 am

Carney opens his stupid mouth and Billions lost as Canadian dollars goes down more than half cent. Idiot.

Yes, your wealth. He is going to punish our currency at the expense of interest rate hikes for a very long time. In the meantime, print,print,print!

Coordinated currency debasement leads to price inflation.

#110 Ralph Cramdown on 10.16.12 at 12:08 pm

TREB mid-month sales numbers for the 416 are out:
Detached price up 2.7% YoY, sales down 10%*
Semis price up 5.0% YoY sales down 24%*
Townhouses price down 5.5% YoY sales down 23%*
Condos price down 3.6% YoY sales down 20%*

TREB is thus happy to report that the average selling price in the 416 increased 2.4% to $537,296. Party on, dudes! Aren’t sales mix changes grand?

* these numbers obtained by comparing this year’s release with last year’s. You may notice that TREB’s numbers contains some enhancements, much as XL Foods’ beef products do, and of the same origin.

#111 Victor on 10.16.12 at 12:08 pm

Toronto condo sales plunge, prices stagnate

http://www.theglobeandmail.com/report-on-business/top-business-stories/toronto-condo-sales-plunge-prices-stagnate/article4615396/

The latest numbers from the Toronto Real Estate Board are not encouraging, particularly where the city’s condo market is concerned.

According to new statistics released today, condo sales plunged 20.5 per cent in the third quarter of the year, to 4,541, from a year earlier.

#112 joe on 10.16.12 at 12:23 pm

All my friends in Calgary in late 20’s / early 30’s live this way. They think Im crazy to rent, they couldnt come up with $2000 while I sit on 200large. Im throwing money away renting they say, when I mention interest charges, maintanance, prop tax, etc. they glaze over. Even a friend that bought in 08 says hes already made $100K on his house because he saw a house down the street for sale (not sold) at that price. They keep repeating “its different here OIL”. And I just ignore and avoid the conversations now.

#113 PoorgEoisie on 10.16.12 at 12:24 pm

Buy, curious? Nice sausagefest link.
Rita doesn’t need to know about trains, Ayn Rand didn’t and people think she is a railroad genius.
Go Rita!

#114 Timbo on 10.16.12 at 12:48 pm

http://www.nakedcapitalism.com/2012/10/no-virginia-consumers-delevering-via-default-is-not-a-reason-for-economic-cheerleading.html

“Consumers aren’t paying down their debts, they are simply defaulting. And here’s another way to look at the problem. One in seven Americans is being pursued by a debt collector. And the average amount of that debt pursued has increased by about 8% in just six months.”

run Billy run!……….

http://seekingalpha.com/article/926831-2-banks-to-short-on-canadian-housing-market-slowdown

“The red hot Canadian housing markets have lost their upward momentum. Helped by more stringent rules on home lending, which went into effect since June of this year, Canadian home sales are now plunging fast. Regulators are busy making a soft landing effective. We believe that even if a soft landing were possible, banks like the Royal Bank of Canada (RY) and Toronto Dominion Bank (TD) are bound to take a hit.”

He wears short shorts……….

#115 Just Park It on 10.16.12 at 12:52 pm

I am assuming that once buyers realize that “they” are on the hook finanically for any shortfalls or deficiencies – people with limited income buying $800K homes won’t be ending soon.

What gives – our first home we did our own internal 3 step approval system.
1) could one of us carry the mortgage if the other had limited or no income
2) if rates hit 11% – would we be able to continue to service the debt
3) was the home a long term view – flipping was not part of our view.

Our present home met all the criteria and thankfully we are just under 3 years from paying this bad boy off – that’s a 12 year mortgage –

I guess fiscal responsiblity is worth trying –

#116 Ronaldo on 10.16.12 at 12:55 pm

http://inventorspot.com/articles/used_adult_diapers_fuel_tomorrow_today_41087

This is what we have to look forward to as boomers. Maybe ”Depends” are a good investment in a retirement portfolio.

#117 Sebee on 10.16.12 at 1:03 pm

Just came back from Oregon. Portland is one heck of a beautiful place.

Houses? $250-$300 for lovely home.
Coast. Fishing. Skiing. Hiking. Hunting. Motorcycling. All close. Drive south to CA for beach long weekends. Drive up to Vancouver, pay 5x more for a house. Makes perfect sense, right?

#118 Bottoms_Up on 10.16.12 at 1:21 pm

#66 Cid on 10.16.12 at 4:16 am
——————————-
Well if the couple was comprised of a surgeon and lawyer they should be able to handle an $800,000 mortgage? ; )

#119 abraxas on 10.16.12 at 1:28 pm

Garth,
The portfolio you mention sounds like it’s very heavy on dividend and interest payments. Does it not carry a lot of interest risk (i.e. significant loss of principal in the event of a sudden rise in interest rates)?

I know you don’t anticipate interest rates rising but nobody really knows how the bond market could react to the debt troubles brewing in Canada.

How do you hedge this portfolio against the risk of a sudden rise in interest rates?

There will be no sudden rise in interest rates. — Garth

#120 Bottoms_Up on 10.16.12 at 1:28 pm

#103 Ronaldo on 10.16.12 at 11:28 am
——————————————–
People must be making mortgage payments (and ends meet) with debt. Our mortgage to household income stands at a ratio of 1.89 (or 3.65 based on one salary). And with that it is STILL difficult to make ends meet (living what I would call an average lifestyle).

#121 Bottoms_Up on 10.16.12 at 1:33 pm

#99 MarcFromOttawa on 10.16.12 at 10:46 am
—————————————–
I guess that’s an interesting metric as an aggregate indicator, but on an individual basis it is not useful (i.e., for comparison purposes).

A young family could easily have a debt-to-income ratio of 300% (yet they have all their earning years ahead of them) whereas a boomer that has accumulated assets and wealth could be at a 50% ratio, or not have any debt at all.

#122 texpat on 10.16.12 at 1:37 pm

“Don’t worry about how you submitted it. You’re wrong anyway. — Garth”

On what? The effective yield on bank preferreds being less than 2%, or that gold should be at least a 20% allocation? The latter is a matter of opinion. As to the former, the ones I bought were RY.PR.X and TD.PR.K. Maybe some preferreds yield more. After all, there are a pile of the things. But arbitrage suggests otherwise.

As for those two, they were floated at $25, yielding 6.25%. If the banks want to roll them over in 2014, they have to do so at prime plus something like 130 bps. With the promise of ZIRP as far as the eye can see, the likelihood of that is low. So they’ll buy them back at $25. Right now RY.PR.X is $26.96 and TD.PR.K, already ex-dividend for its next payout, is $26.70. If you run the numbers, the effective yields are currently 1.63% and 1.41% if they get closed out at $25.

#123 CP on 10.16.12 at 1:37 pm

Look out belooooooooowwww!!!

http://www.theglobeandmail.com/report-on-business/top-business-stories/toronto-condo-sales-plunge-prices-stagnate/article4615396/

#124 CP on 10.16.12 at 1:38 pm

Shit, Victor #109 beat me to it. *hangs head in shame*

#125 Mister Obvious on 10.16.12 at 1:43 pm

#86 texpat

Everything you put between a left and right angle bracket is interpreted by a web browser as piece of HTML code.

In your case, whatever you put between those brackets was seen by the browser as gibberish and thus ignored.

It seems like Garth viewed it the same way.

#126 Editor on 10.16.12 at 1:44 pm

It would be good for one and all if the CAD went down and interest rates went up. Price inflation is happening either way. There’s going to be pain either way, in fact, but continuing with low rates and high CAD is going to make the pain unbearable.

#127 Editor on 10.16.12 at 1:46 pm

”Oh…. so if you have a $60,000 a year job you should pay $600,000 for that townhouse?”

Is there some kind of formula that mandates what you have to buy relative to income? Isn’t that like the ‘rule’ for buying diamond engagement rings? Pure marketing. You could earn a million bucks a year and live in a trailer if you want.

#128 luke8929 on 10.16.12 at 1:52 pm

Flippers are back in action in Arizona.

http://online.wsj.com/article/SB126022588878780861.html?mod=e2tw

Low rates worked out so well for housing the last time, even lower rates are guaranteed to work this time right? The entire consumer economy is running on zero down, cheap credit, not going to last forever. 2-3 years before this works its way through and we get another crash in housing in the US. No chance we escape the next downturn in Canada.

#129 Bigrider on 10.16.12 at 2:03 pm

#125 Editor -” Is there some kind of formula that mandates you have to buy relative to income..you could earn a million bucks a year and live in a trailer”

I loved your post !

I make 300k and live in Garth’s tool shed for free and uninvited.

Shhhh..don’t say nutin to him…

#130 Yuri on 10.16.12 at 2:09 pm

I’m just back from sunny Naples, Florida. Lots of Real Estate offices on 5th South OPEN even at night. Decent homes 3bdr/2wr go for 155k and even cheaper. Real Estate agents try and lure passer-byes by balloons and bubbly. Got free Real Estate for Sale magazine. Could not believe what you can there for $350K. Houses like that would cost more than a million in GTA. This town of 26,000 people filled with Mazeratti, Porsche and Bentley dealerships. Average income – more than $100K.

#131 Click Here, its different on 10.16.12 at 2:09 pm

On the 163.4% debt-to-income ratio, I just read this excellent comment on a forum :

sudburyguy • 23 hours ago

“I didn’t realize that my wife’s spending habits would make the news. Sorry Canada! I tried to stop her but she needs a new kitchen she says. My reply of “but you don’t spend any time there!” falls on deaf ears”.

lol
Made my day …

#132 Ralph Cramdown on 10.16.12 at 2:11 pm

#119 Bottoms_Up I guess that’s an interesting metric as an aggregate indicator, but on an individual basis it is not useful […] A young family could easily have a debt-to-income ratio of 300% […] whereas a boomer […] could be at a 50% ratio

Which is why the trend is key. If you look at a chart of Canada’s population by age, the boomers are a great big hump, “the pig in the python” as it were, slowly moving through life, with the first of them just hitting 65, and all of them in their peak earning years. Overall, our population is old-ish, getting older, and the biggest cohort is in its peak earning years. And average household debt is very high and rising.

#133 IM in C on 10.16.12 at 2:11 pm

I copied this from an article titled “5 reasons why you still shouldn’t buy a (American) House”

Home prices plummeted after 2008. Many people who paid boom-era prices for their homes now find themselves deep underwater, and many are refusing to sell. Those houses tend to be precisely the kind of smaller, less-expensive starter homes that first-time buyers want to purchase, says Lawrence Yun, chief economist for the National Association of Realtors.

For all you ‘vultures’ out there that think you will be able to pick up a house on the cheap once the dust settles. Just as Garth has said that different locales in Canada will correct at different rates, so also will different house sectors also correct at different rates. In other words, 2 years from now you may be able to pick up a $3 million house for $1 million- but you will not likely buy a $300 thousand house for $100 thousand!

“There are notable shortages in the lower price ranges which are limiting opportunities for first-time buyers,”

#134 Herethere on 10.16.12 at 2:12 pm

Re North of 45 about delay canceling 10 York St. development. It could be good news for comuters on that corner there are approvals for two other

#135 patiently waiting on 10.16.12 at 2:13 pm

# 30 Victor
Household debt is viewed as the biggest threat to the Canadian economy. Mr. Carney and Finance Minister Jim Flaherty have repeatedly warned consumers to pay down their debt loads — much of that acquired through low mortgages rates.
—————————————————————–
I have looked at properties in my hood yesterday and checked their mortgage debt levels through my BCOnline account.

This is what I found:

Property # 1) two mortgages. Both for $1,000,000. Interest rate on 1st mortgage at prime plus 7%. 2nd Mortgage at 20%. Total mortgage payments $13,271 monthly. There was also a pending litigation notice on title.

Property #2) Mortgage was $1,550,000 and property is listed for sale at $1,695,000 (been on the market for almost 4 months now with very little interest). He is lucky if he can sell it for $1,400,000.

Property #3) Mortgage is $1,300,000 at prime plus 7%. The owner is a drywaller, is divorced and has child support and alimony payments of $4,800 per month on top of the mortgage payments. Oh and there is a pending litigation filed on title (by his ex wife) . . . guess he’s missed a few alimony payments lately . . .

The housing market has been allowed to become a bubble because of loose monetary policy, loose lending standards, and enabled by CMHC loan guarantees courtesy of the Canadian tax payer.

IMHO the correction is going to be worse than expected because of all the hidden issues that are lying under the bed . . .

pw

#136 Ralph Cramdown on 10.16.12 at 2:15 pm

It would be good for one and all if the CAD went down and interest rates went up.

You’re not very well read, are you? I’ve read a lot of kooky things on this board, but this the first time I’ve seen someone wishing for a currency crisis.

#137 john on 10.16.12 at 2:18 pm

Garth, do you think the housing market will tie Carney’s hands in terms of rates? If we start seeing 20%+ drops across the board, he might have no choice but to delay a return to normal rates well beyond 2014, no?

#138 Herethere on 10.16.12 at 2:32 pm

Re North of 45 about delay cancelling 10 York St. development. It could be good news for commuters, on that corner there are approvals for two other condo towers plus the ongoing new office buildings on the corner of York and Queens Quay. York St. can not handle actual volume of traffic, imagine when they build all that. Do we have a planning dept? They are incompetents or something smells in Denmark. And now we have Mr. Hudak going into city hall, to talk tough about grid lock. Yeah, he is talking to the right people, they are experts on creating conditions fertile for grid lock. Pathetic, trying to hit all the right notes for the coming elections.

#139 Old Man on 10.16.12 at 2:36 pm

#128 Yuri know Naples well, and it is the Miami version on the West Coast; the beach is not the best, so for entertainment just hold up a bit of food, and a seagull will be fed quickly.

#140 Victor on 10.16.12 at 2:41 pm

Hi Garth,
I thought Ben(FED)’s job is to take care of deflation. Aren’t they? why do we worry about it?

#141 Mike the realtor on 10.16.12 at 2:56 pm

You blog dogs want a recession? Well you are going to get a recession now as the RE market is done. Don’t you blog idiots get it? RE is a huge employment factor and without that what does Canada have? Nothing that’s what. You think us realtors are going to suffer? Nope we won’t as we made enough money from you sheeps to last a lifetime. Yes we realtor agents laugh at people’s stupidity . Thanks for the 5% for doing no work. Time to retire from all that easy money. Enjoy the RE crash suckers.

#142 };-) aka D.A. on 10.16.12 at 3:16 pm

#139Mike the realtor on 10.16.12 at 2:56 pm
You blog dogs want a recession? Well you are going to get a recession now as the RE market is done. Don’t you blog idiots get it? RE is a huge employment factor and without that what does Canada have? Nothing that’s what. You think us realtors are going to suffer? Nope we won’t as we made enough money from you sheeps to last a lifetime. Yes we realtor agents laugh at people’s stupidity . Thanks for the 5% for doing no work. Time to retire from all that easy money. Enjoy the RE crash suckers.

And you all thought I was a prick.

#143 CalgaryRocks on 10.16.12 at 3:20 pm

#137 Old Man on 10.16.12 at 2:36 pm
#128 Yuri know Naples well, and it is the Miami version on the West Coast; the beach is not the best, so for entertainment just hold up a bit of food, and a seagull will be fed quickly.

Naples is like Miami but without all the hot topless chicks on the beach, the Latin flavor (yard management crew excluded) or the night-life. Otherwise, yeah, just about the same.

Everyone goes to bed at 9 pm. I once got stopped by a cop because I was driving through a side street around 10 pm, which he found suspicious. He let me go after he made sure that there weren’t any dead bodies in my car, but not before calling in for reinforcement. LOL. My one and only adventure in Naples.

I’ve lived in Naples but it’s really just a retirement/vacation community for rich people from all over the US. The high average income does not represent the jobs available there.

#144 Old Man on 10.16.12 at 3:27 pm

#139 Mike the realtor – hey in your own words as the RE market is done, so saddle up cowboy and ride into the sunset, as you are done too. Now you laugh at the people’s stupidity for doing no work; kind of says you were a conman, and are proud of it all.

Shame on you, and your entire so-called profession, as when the dust settles with lawsuits flying into court over fraud which occurred the last time, you might just be there with a few others who appraised properties to be over mortgaged. Time will tell!

#145 tkid on 10.16.12 at 3:27 pm

#134, a lower valued Canadian dollar to the US dollar would mean a good many manufacturing jobs would return to Canada. As long as it is cheaper to make a widget in the US than to make a widget in Canada, the widgets will be made in the US and Americans will get those jobs.

I’m pretty sure that is what the original poster meant. Besides, we are already in a currency war, and we are losing.

#146 TEMPLE on 10.16.12 at 3:28 pm

#102 45north on 10.16.12 at 10:54 am

“My geiger counter has been going off for four or five months now,” says the 25-year veteran of the GTA real estate business. “I can’t tell you when the epicentre of the earthquake is going to hit, but the picture on my wall is shaking.”

that got my attention Victor

It got my attention, too, but for all the wrong reasons. That agent quoted by Victor really has no idea what a Geiger counter measures (it isn’t seismic energy) or that an epicenter doesn’t “hit,” but is rather the point directly above the origin of an earthquake.

I get his point, though…my radar has been humming for a while, too, and though I don’t know when the sonic boom is going to hit, my microwave has stopped working.

TEMPLE

#147 Yuri on 10.16.12 at 3:28 pm

Hooray! Revival in the land!

“September shows revival in Canadian housing sales but numbers still down from year ago”
http://www.globaltoronto.com/september+shows+revival+in+canadian+housing+sales+but+numbers+still+down+from+year+ago/6442733946/story.html

#148 Franke le Skank on 10.16.12 at 3:35 pm

#131 IM in C on 10.16.12 at 2:11 pm
Who does Lawrence Yun work for again? It must be true!

#149 Franke le Skank on 10.16.12 at 3:40 pm

#139 Mike the realtor on 10.16.12 at 2:56 pm
I doubt your that smart. I run a company that picks up dog shit in peoples back yards, you need a job yet?

#150 };-) aka D.A. on 10.16.12 at 3:43 pm

Worry about asset deflation more than price inflation. It is the silent killer in a society where 70% own houses. — Garth

House have always and will always depreciate.

Think ‘shelter’. It is the price of shelter, like all life’s necessities, of which the cost can be expected to go up over time. Sure it may hit some peaks and valleys along the way just like the price of wheat and grain, or oil for that matter, as supply and demand is influenced by external factors such as drought and war. But the long term trajectory for the price of shelter can be quite safely assumed to be headed higher as it maintains a relative parity with life’s other necessities.

We are all faced with a cost of maintaining a roof over our heads. Be you an owner or and renter there is an ongoing cost of maintaining that shelter. If you own your home free and clear there are property taxes, maintenance costs and even the opportunity cost of having the cash tied up in the home instead of something else. If you are a renter you pay a landlord a monthly fee to cover those associated costs which as they rise you can expect those increases will be passed along to you – count on it. No landlord is in the business to subsidize your life indefinitely if for a month. If they are now your days of them continuing to do so are numbered – bank on it.

The cost of shelter is going up along with all of life’s other necessities. When that changes you will have a whole lot more to worry about than the cost of maintaining a roof over your head.

Buy land, they’re not making it anymore – Mark Twain

#151 Inglorious Investor on 10.16.12 at 3:47 pm

#139 Mike the realtor on 10.16.12 at 2:56 pm

Are you really a realtor or someone trying make people hate realtors even more than they already do? I’ve known a lot of realtors in my time. None of them were intellectual powerhouses, but, by the same token, none of them have ever said anything as idiotic as what you said in your comment.

Sounds to me like you are getting pretty desperate. A smart person NEVER shows his hand the way you just did, or brags about how much money they make, or so poorly and unprofessionally represents their profession.

As for the content of your actual comment, you have it ass backward, like so many realtors and their representatives. A strong housing market results from a strong economy, not the other way around. The economy does not expand because the price of oil goes up or because we find more oil. The price of oil goes up, which spurs more exploration, because of a strong economy.

The caveat to that is cheap money. When money is debased and lending standards deteriorate, prices for things like homes and oil can rise faster than economic growth. But an economy that grows primarily on debt eventually must correct to reflect actual real wealth at some point. Housing is an example of a sector where debt (fuelled by cheap money) caused prices to rise beyond economic fundamentals. In other words, it’s largely fake.

Now, I know a few realtors who have made a lot of money in the bubble of the last decade. And who knows, maybe they will continue to make a lot more. Good for them. But just remember, the higher they go, the harder they fall. If the economic fundamentals don’t catch up to the housing market, the fall will be hard indeed. And all those people who became realtors because of low barriers to entry (let’s face it, it doesn’t take much) will find it that much harder to get a piece of the action. I’ve had realtors practically beg me to put my home on the market. I’m now awaiting the expected ramp up in cold calls.

So enjoy your windfall from the so-called stupid sheep. You got lucky. Just don’t be such a dick about it.

#152 Rob on 10.16.12 at 3:50 pm

Oh no doubt I will enjoy the crash with every passion in my body.

I don’t care about the contractors. Its no wonder they charge out the nose, there was so much work they could cherry pick. Good RIDDENS! Hello CRASH!
Back to reality.

=====================
You blog dogs want a recession? Well you are going to get a recession now as the RE market is done. Don’t you blog idiots get it? RE is a huge employment factor and without that what does Canada have? Nothing that’s what. You think us realtors are going to suffer? Nope we won’t as we made enough money from you sheeps to last a lifetime. Yes we realtor agents laugh at people’s stupidity . Thanks for the 5% for doing no work. Time to retire from all that easy money. Enjoy the RE crash suckers.

#153 Old Man on 10.16.12 at 3:51 pm

#135 john – let me put all my cards on the table about F, C, and the ring master who is running this three ring circus. None of them have a clue what the hell they are doing from week to week. The biggest mistake this country has ever made in history is not having a man with knowledge, intelligence, and integrity for the people. Should have been one Garth Turner in my opinion, but too late now.

#154 AprilNewwest on 10.16.12 at 3:53 pm

#139 Mike the realtor. Why so bitter if you’ve made so much “easy money”. Home prices can’t keep just going up forever. You realtors have had a great run at it and if your all not financially prepared for the down turn it’s no ones’ fault but your own. Don’t blame the bloggers.

#155 AprilNewwest on 10.16.12 at 4:02 pm

#115 Seebe – If only all of us who want could got to the US and buy those lovely much cheaper homes.

#156 DM in C on 10.16.12 at 4:10 pm

Mikey the Realtor;

Looks like a troll to me, but I’ll feed it.

– I frankly don’t give a darn if there’s a recession because RE is toast. No one in my family works or depends on RE for a living, not even peripherally. One’s a teacher, one’s an industrial mechanic, one’s a biologist, one’s in B2B software and one’s a bureaucrat. No one is looking to sell, nor cashing out HELOCs. We’re renting and not looking to buy.
So crash away.

Life is more than housing. Which we’ve taught our kids, so don’t expect them to become first time suckers any time soon.

Crash crash away. Be done with it already.

#157 zeman1 on 10.16.12 at 4:15 pm

#14 Smoking Man.

Sad but true. If we were less sheep-like we would disembowel McGuinty and hang him in front of Queens’s Park, but we like being screwed.

#158 Tony on 10.16.12 at 4:20 pm

Re: Peter on 10.16.12 at 1:48 am

Credit will dry up completely like what happened in America. Bank shares will plunge and at the same time the future outlook for stocks can only be negative so a double whammy for Canadian bank shares.

#159 spaceman on 10.16.12 at 4:21 pm

At one time Garth promoted Mutual funds, now its ETF’s, and its true, an ETF is the same as a Mutual fund, but a lower MER. Some Index funds also have very low MER’s and cost nothing to buy and sell. It all depends on your trading costs. Mine are high because I dont’ trade enough, and don’t have a discount broker account. The Royal is still $29 a trade, that is pricey if you are trying to balance every 6 month or so. You have to do your own math, since it cost $60 to do a transfer, you need to be moving $6000 to get your MER down to 1%. I can trade $1000 in a mutual fund for free.

For us poor people who don’t have millions invested, Mutual Funds are ok, simple, easy and cheap.

ETFs are a superior choice. — Garth

#160 Just Say No on 10.16.12 at 4:24 pm

the problem with real estate in Victoria bc…..same house 2 prices???http://www.realtor.ca/propertyDetails.aspx?propertyId=12143219&PidKey=-534809648 and the lower price for the less fortunate maybe???http://www.realtor.ca/propertyDetails.aspx?propertyId=12498453&PidKey=-641268401 It is a joke in Ego Town.

#161 Smoking Man on 10.16.12 at 4:25 pm

#139 mike

Don’t think it time to retire just yet .

Market is just slow . Spring will be on fire when the track6 realize ç will drop rates bax forwards pricing in a 1/4 point drop

#162 Don on 10.16.12 at 4:32 pm

Mike is not a realtor

#163 John S on 10.16.12 at 4:37 pm

Garth, I have a question on implications of a Romney win. Business as usual or austerity?

Thank you

#164 collective essence on 10.16.12 at 4:46 pm

Thank you very much for sharing your opinions. With so much liquidity around, a replay of 2008 is unlikely. The second worst possible outcome is we have a Japanese style deflation (the lost decade) or 5-15 years stagflation (high unemployment+inflation). Ask yourself. What is your risk tolerance ?

#165 WaterlooResident on 10.16.12 at 4:47 pm

So what’s wrong with 20-year olds haveing 70% of all of their assets in their house, after all, its following Garth’s rule

(As Garth said up above: “I’ve written often about the Rule of 90 – to keep your real estate within reason. (Deduct your age from 90 to get the proportion of your wealth that should be in your house equity.)”

So; 90 – minus 20 = 70%. And a 20 year old with a 100% down mortgage on a $2.4 million dollar house is perfectly normal, … right?

#166 Inglorious Investor on 10.16.12 at 5:04 pm

#158 spaceman on 10.16.12 at 4:21 pm

You don’t need a lot of money to have an online brokerage account. However, if you don’t have a minimum amount in your account, some brokers will charge you annual fees, and trading costs can be higher. Look into a broker with lower trading fees. $29 a trade is too much. Questrade is OK and their free web-based tools are pretty good. Just note that all accounts with Questrade, the last time I checked, are margin accounts. This means they hypothecate your funds, even if you don’t use margin (I believe). If you have a cash account they can’t do that.

ETFs are better than mutual funds (lower cost, more liquid, exchange traded). If you are going to buy and sell funds on your own, why use MFs and pay the higher fees?

#167 Devore on 10.16.12 at 5:11 pm

#42 Mike

Indeed. All day long the same thought was running through my head. Steal from tomorrow to feed today. It’s a classic sales tactic. Of course in good times the opposite is called sand-bagging.

Borrowing for consumption is always stealing from the future. Borrowing to invest is wise, if a) you don’t over-leverage, and b) the investment pays for the loan.

When it comes to borrowing, most Canadians borrow either from their house, or to buy their house.

When it comes to investing, most Canadians believe it means they buy another house or condo. This is called asset-based lending, something Carney has warned leads to asset price inflation (borrowing against an asset to buy more of it), is unsustainable, and must stop.

#168 Canadian Watchdog on 10.16.12 at 5:11 pm

This is what happens when the government socializes homeownership.

Americans now consider it socially acceptable to have a low credit score or strategically default on their outstanding mortgage balances

Being broke is the new cool.

#169 Devore on 10.16.12 at 5:15 pm

#42 Mike

Oh, following those rules, buying real estate, even buying your own house, CAN BE a good investment. You need 20+% down, and the house must pay for itself (ie, owning is cheaper than renting). Somehow, that part got lost, and it got generalized to “buying your house/a house is a good investment” and “mortgage is good debt”, to the point the average person doesn’t even count their mortgage as debt.

#170 Old Man on 10.16.12 at 5:23 pm

The crash is maturing for those that got horny to buy this pie in the sky over the past few years, and when you go under water, and on a renewal can no longer qualify – then what? It will be the divorce court, as the woes are endless because you will blame each other.

These words come to mind from the past: ” And it’s too late baby, now it’s too late. Though we really did try to make it. Something inside me has died, and I can’t hide, and just can’t fake it. Oh no no no no. ” – Carole King. Never too late, so sell now, and take a small hit, before it is too late.

Carole thanks for the memories, and the break in life that you gave me years ago, as we both had a blast, a bit of fun together, and will never forget it all. This was a woman who was no fool when it came to money.

#171 Canadian Watchdog on 10.16.12 at 5:26 pm

Craigslist Ad

One unit on hand for assignment, sell at original cost.
Deal was signed on APR 2010, more than two years ago. now sell at original price.

South facing, full lake view.
2+DEN, 885sqf, $389900
I have to let it go at the cost.
a parking is inclusve.

Let’s me know if interest. 416 671 2881
——

OK we’z gonna let you know if interest.

#172 The Non-Cowboy on 10.16.12 at 5:35 pm

Thank you for this post as I’m serious about getting my TFSAs out of the bank. I hope you can continue to hammer away at balanced portfolios at least once week, perhaps looking at ways to cope with interest rates that will eventually begin to rise.

Thanks again.

Interest will not surpass inflation for years yet. — Garth

#173 Snowboid on 10.16.12 at 5:35 pm

#126 luke8929 on 10.16.12 at 1:52 pm…

On the other hand…

http://phoenixflippers.blogspot.ca/

#131 IM in C on 10.16.12 at 2:11 pm…

“In other words, 2 years from now…but you will not likely buy a $300 thousand house for $100 thousand!”

But that is precisely what happened in most areas down south. In Phoenix, many decent homes that peaked above $ 350K sold in the last couple of years for around $100K.

#174 DM in C on 10.16.12 at 5:48 pm

And you all thought I was a prick.

***

No. Sanctimonious, but not a prick.
You probably take pride in self-proclaiming that.

Isn’t it time for your bi-annual flame out?

#175 cj on 10.16.12 at 5:49 pm

#158 spaceman
ETFs are the way to go. Check out ScotiaITrade, a discount broker. They give free trades on certain ETFs

#176 Ralph Cramdown on 10.16.12 at 6:04 pm

One unit on hand for assignment, sell at original cost.
Let’s me know if interest. 416 671 2881

Predictably, a real estate agent, illegally advertising in the FSBO section without disclosing his status. But you knew that from the spelling…

#177 espressobob on 10.16.12 at 6:04 pm

#158

You brought up a good point. RBC direct charges are quite high if your holdings are below 50K. That sucks. Maybe shop around to find a merciful discount broker. Most will absorb the transfer fee, but ask. If you find something decent, post it. Good luck.

#178 Devore on 10.16.12 at 6:12 pm

#71 The real Kip

People with jobs are unlikely to lose their houses as happened in the US when 8-million lost their jobs precipitating the housing mess there.

Still missing the big picture I see.

No one cares about the people who have jobs and the houses that are not for sale. It is the houses that are for sale that make the market, and it is the houses that sell that set prices.

And what do you think is happening to all those FIRE jobs as real estate begins to dip?

#179 Old Man on 10.16.12 at 6:15 pm

The last time this bubble burst was a small one; this is not, and my buddy is now the VP of a major Bank in Canada. This goes back to about 1990, more or less that he was pumping out personal funds into the mortgage market, and it crashed – big money! He is a pro, but had no time to check out the appraisal reports or the Real Estate agents in good faith.

Yep, he had a side corporation that held a mortgage brokers certification all in good standing, but when that small bubble crashed he was hooped for big money due to fraud, as he was too busy to do his homework, as much money was being made with fees and yields on his private capital. Now when all came down he took another look, and spent 5 years in court with law suits.

This next few years will be no different, but much bigger, and who needs it? I will tell you why, as you will not win in the end, as the lawyers will suck you dry, and in court my buddy had to compromise here there and everywhere for peanuts. There will be no winners for a loss in capital – none.

#180 Devore on 10.16.12 at 6:16 pm

#71 The real Kip

And your causality is busted. Real estate first, jobs after.

Many a wrong conclusion has been reached about the US bust as a result of mixing up chronology. Which is surprising, as it’s been documented in painstaking detail.

You’d think having access to the internet would mean people would at least get basic facts straight.

#181 Devore on 10.16.12 at 6:28 pm

#149 };-) aka D.A.

Buy land, they’re not making it anymore – Mark Twain

When you quote a known satirist to make a point, you may want to be sure of the context of the quote first, especially when it’s known to have been made during a famous 19th century land boom (which was followed by a crash).

#182 Ken R on 10.16.12 at 6:32 pm

#144 tkid on 10.16.12 at 3:27 pm

Losing jobs to the US? How about losing jobs to Mexico.

#183 Canadian Watchdog on 10.16.12 at 6:45 pm

RECO real estate revocations kicks into fifth gear in Q3. Link

#184 Victor on 10.16.12 at 6:50 pm

Forest Hill mansion has been sitting on the market for over a year. Seller finally drops price by $300k…more price drops to come?

http://themashcanada.blogspot.ca/2012/10/price-drop-444-russell-hill-road-forest.html

#185 syd on 10.16.12 at 6:57 pm

http://www.vancouversun.com/business/Canadian+families+debt+worse+than+expected+housing+bubble+burst+feared/7392384/story.html

#186 Nostradamus Le Mad Vlad on 10.16.12 at 7:19 pm

#52 Smoking Man — “Vlad are goal is the same. You are direct with links. Me I make em look inside. Who the fk is thomsem. My son. Says you are him.” — Good guess would be Hunter S. Thompson, who moved into the next worlds not so long ago. Don’t buy that suicide trash, it was someone else, but the feds. won’t admit it. Suicide is painless (not).

#55 house burden — “And hand out Chocolate Court orders to the kids this Halloween.” — A tasty but nasty treat?!

#74 maxx — “The circus has left town and Canada is about to learn where it’s situated on the retard scale.” — With H, F and C standing proudly on the stern of a sinking ship and smiling happily, I’d say the chances of us being in the top one are pretty damned good!

#95 Gunboat denier — ‘Owzaboud splitting $50 mln.? You invest your half your way, I’ll do the same with mine and we can enjoy a life of absolute luxury!

#107 TRT — “Coordinated currency debasement leads to price inflation.” — Interesting. Coordinated hyper / stagflation?

#125 Editor — “You could earn a million bucks a year and live in a trailer if you want.” — Not a bad idea, but I would invest that one mln. using Garth’s plan, then rent a condo. The less I own, the better off I am.

#164 WaterlooResident — “And a 20 year old with a 100% down mortgage on a $2.4 million dollar house is perfectly normal, … right?” — As long as they have a permanent backer (non-bank) who is more than happy to see the value of the house drop to $750K, they’re in good shape!

#167 Canadian Watchdog — “Being broke is the new cool.” — TPTB are winning the war. Sheeple have been dumbed down too far to care anymore. Watch how TPTB turn the screw here, until they have a nation of compliant simpletons, yes sir, no sir, three bags full sir.

#187 Old Man on 10.16.12 at 7:25 pm

Here is my take on interest rates as F has already pumped them up for about 1% with his faux adjustments on the mortgage market as he spends most of his time drinking at bars to take away the pain. Caesar is travelling all over the world telling all how great he is, and the Carnival Man is blowing smoke with doublespeak. I say up about 1/4% in the near future.

#188 Daisy Mae on 10.16.12 at 7:28 pm

#117 Ab: “How do you hedge this portfolio against the risk of a sudden rise in interest rates?”

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

“A sudden rise in interest rates” in Canada will solve nothing. It would simply compound the problem.

#189 Inglorious Investor on 10.16.12 at 7:30 pm

#167 Canadian Watchdog on 10.16.12 at 5:11 pm

Didn’t I say more than once that strategic bankruptcy would become a common component of many individuals’ ‘financial plans’?

#190 Ronaldo on 10.16.12 at 7:45 pm

#118 – Bottoms Up

”People must be making mortgage payments (and ends meet) with debt. Our mortgage to household income stands at a ratio of 1.89 (or 3.65 based on one salary). And with that it is STILL difficult to make ends meet (living what I would call an average lifestyle).”

To give you an idea where the purchasing power of our dollar has gone since I ventured into the market in 1970 and bought my first home in North Vancr when interest rates were 10%. Here is the unit that adjoined the one I bought:

http://www.theedgars.ca/935oldlillooet.html

At the time my annual salary was $8000 which was considered average. Today, that would be around $60000.

Assume a purchase price of $459,000 with 13% down and carrying $400,000 mortgage at 5% fixed for 5 years and 25 yr. amort.

Mtg. Pmt. $2326 plus $181 taxes and strata 328 for total of $2835 (not counting utilities, etc)

Assume your individual income is $60,000. The cost of the unit is 7.6 times your annual income. The cost to service (before tax) per month would be around $3400 which represents 68% of your monthly income. (at 5% interest rates) At 10% interest as it was when I bought, it would take your entire income to service the mortgage.

When I purchased the unit was $20,800 (2.7 times my annual salary) and I put $2800 down. Mortgage of $18000. 10% rate. 5 yr. fixed. 25 yr. amort.

Mortgage pmt. $160, taxes $20, strata $30 = $210 or about 245 before tax. This represented about 36% of my monthly salary. (and this at 10% mtg. rates)

So, as you can see from the above. A person today needs to earn twice what I did at a time when interest rates are half what they were to be able to afford to buy the same unit I did back then. The standard of living for those buying in todays market is far less what it was back then.

Something has seriously gone wrong since then.

I totally understand what you say when you say that even at the low ratio you are dealing with that its hard to makes ends meet. From what I can remember, it was not easy for us either with everything else thrown in an raising two children. For certain, people must be making ends meet with debt as you stated. Can’t see how can be done otherwise.

#191 patiently waiting on 10.16.12 at 7:54 pm

Ty on 10.16.12 at 3:24 pm
#133. – pw

How do you get that info? I’m in a different province but that would be useful to have
—————————————————————-
I get the info from a government run serice called BC Online through a paid subscription.

https://www.bconline.gov.bc.ca/

https://www.bconline.gov.bc.ca/land_titles.html

Not sure if other provinces have this service . . . though I can’t imagine why they would not? It is extremely valuable information if you are looking a buying a property, as it allows you to see the financial underware of the seller.

pw

#192 Daisy Mae on 10.16.12 at 8:01 pm

#150 Inglorious Investor: “Are you really a realtor or someone trying make people hate realtors even more than they already do?”

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

He’s just a jerk pulling our leg.

#193 Canadian Watchdog on 10.16.12 at 8:09 pm

Say, how about today’s auto manufacturing sales being up? One has to wonder who’s buying cars?

#194 Old Man on 10.16.12 at 8:13 pm

#183 Victor – there will certain areas in 416 that will go through a minor adjustment in property values, but Forest Hill, Rosedale, Leaside, and Moore Park areas will weather the storm; others will crash as the condos in the core will take a huge hit. I can name them all.

#195 };-) aka D.A. on 10.16.12 at 8:36 pm

And you all thought I was a prick.

***

#180 Devore on 10.16.12 at 6:28 pm
#149 };-) aka D.A.

Buy land, they’re not making it anymore – Mark Twain

When you quote a known satirist to make a point, you may want to be sure of the context of the quote first, especially when it’s known to have been made during a famous 19th century land boom (which was followed by a crash).

Yes Samuel Clemens surely must have intended only to jest when he made that comment. And of course the parallel between that 19th century land boom and subsequent crash must be a foreshadowing reminder of what one should expect in this more current one… and the next one and the next one and the next one…

I am quite sure Mr. Clemens was quite serious when he made that comment and his satire was in that it was directed at the fools who miss that simple fact of the matter.

Get your facts first, then you can distort them as you please. – Mark Twain

#173DM in C on 10.16.12 at 5:48 pm

And you all thought I was a prick. – D.A.

***

No. Sanctimonious, but not a prick.
You probably take pride in self-proclaiming that.

Isn’t it time for your bi-annual flame out?

Hard not to be a tad smug when faced with the likes of such comments as the preceding by Devore. Does he really need to twist the truth that much to try to make a trap for a fool?

Time for my bi-annual flame out? I’m thinking already long past.

#196 Inglorious Investor on 10.16.12 at 8:37 pm

#192 Canadian Watchdog on 10.16.12 at 8:09 pm

Yeah. Good stuff, CW. ‘Tyler Durden’ over at Zero Hedge has also been posting for months on the the car makers’–and GM’s in particular–increasing sales by way of channel stuffing. At the same time, Euro car sales are falling through the floor boards. http://www.zerohedge.com/news/2012-10-16/european-car-sales-crash-most-2-years-q4-earnings-hope-remains
This is recovery?

#197 TurnerNation on 10.16.12 at 9:30 pm

#133 patiently waiting

Those are the types of 2nd Mortgages into which Bigarider and Smoking man invest their money.
Pass the popcorn…

#198 Rob on 10.17.12 at 3:30 pm

I’m looking to sell one of my investment condos but don’t want to pay the high real estate commissions. Anyone have any reviews on these types of fsbo sites? I know of comfree and propertyguys but have found so many others now too. mycondolisting.ca seems most applicable. I’m just looking for some reviews and feedback. Thanks!!

#199 Enz on 10.18.12 at 3:33 am

Can you here that swishing sound of a million or so property owners heading for the exists. First wave will be frightening tsx drop 15 % independent of world events there will be the first price adjustment 15 % across all markets from here it will take 5 + years of slw erosion of prices ultimately readjusting down by 30-40 %. This is what will unfold. Short reits mortgage companies and yes the big 6 backs. Canadian dollar will plunge to 85 cents at the low. Buy us high dividend multinationals . You need to make these adjustments Now!!!!!!!