Good thinking

walmart greeter

Some days ago a whiny little princess came here saying she wanted to buy a $700,000 house in mid-town Toronto because that would be cheaper than renting an apartment for $2,500 a month. Of course she was wrong. Even over five years, with annual appreciation in house prices (not that likely), renting’s cheaper.

Some things, like real estate these days, or children, or a new Audi, can’t be justified financially. People do stuff because they want to. That’s cool. Just stop trying to rationalize it.

Of course my post last week raised the usual howls. Jake Abramowicz, who makes his living  getting people mortgages in Toronto, was one of the aggrieved and almost tweeted himself into a terminal frenzy as well as blogging about my shortcomings. One of his statements is interesting:

I love how Garth thinks that people have the capacity to earn 7% year over year in a “balanced” portfolio. Wrong. More like 4-5%.

Hmm. Let’s compare for Broker Boy. He needs help.

In the last 12 months the average Toronto house has increased in value (according to the suspect numbers of the local real estate board) from $502,155 to $532,102. That’s 5.6%. At the same time, though, sales have dropped by double-digit levels – never a good sign.

Nationally, house prices plateaued a year ago and have fallen since. The average is now $368,895, down half a point. Soon almost all markets will be softer, given that sales are declining month after month.

Over this period, gold has lost 3.1% of its value, and so far in 2013 (despite Cyprus and all the faux hysteria surrounding bank theft) is a loser by 4.6%.

Stock markets? In the last 12 months the Dow added 10.94%. The more meaningful S&P 500 is up 11.4%. The Toronto market, a laggard now for several years, has increased 2.5%. In Germany the DAX is ahead 13% and Britain’s FTSE higher by 9.2%. The Nikkei in Japan has gained 23.2%.

This all reflects the reality in front of us. The world economy has stabilized, while the US grows stronger monthly. Corporate profits remain robust and ahead of expectations. More profoundly, sales are up substantially for two-thirds of all large cap US companies – which means they’re making money selling more, not just cutting overhead.

To summarize, financial assets are gaining in value as we continue to put distance between ourselves and the mess of 2008-9. Real assets, like gold and real estate, are underperforming amid falling sales and waning interest. As for a balanced portfolio, like one that is 60% based on growth assets and 40% on fixed income, the numbers speak for themselves.

If you simply bought the global equity index and the Canadian bond index in those proportions, then last year you made 9.25%. If you had a smart advisor who mixed in some preferreds and REITs and reasonable timing, then a double-digit return was yours.

Why do so many people believe a nice, diversified, balanced portfolio of financial assets means earning 4-5%, or half of current returns? Simple. They don’t have one. Or it’s in their interests to lie. Usually both.

Most Canadians, as you know, have most of their money in real estate or cash equivalents, like GICs and savings accounts. The average total household savings in Canada is now $122,300. The average debt (not including a mortgage) is $27,485. If houses simply maintain their value (the best-case scenario nationally) and GIC rates stay sub-3% for a few years, then we have a momma of a problem.

Avoiding risk is not a strategy when the greatest risk is running out of money. And ‘investing’ doesn’t mean buying a bunch of stocks and hoping for the best. This is why God created ETFs, global equities and the bond market. Balance (between growth assets and safe stuff) and diversification (by country, market cap and sector) keep volatility in check. Add in liquidity and rebalancing, and you now have a plan.

Most people will ignore me, which is fine. They’ll do what worked for their parents in the Eighties, when we had inflation, growth and buzz. But all that changed almost a decade ago, and it will stay that way for another one. As lots of surprised Boomers are now discovering, just buying a house ain’t good enough.

Invest or regret.

189 comments ↓

#1 T5>myT4 on 03.24.13 at 5:28 pm

Boomers are super stubborn and feel entitled to what they believe is “fair market value”

Deluded boomers will have a shock once they list. Stock up on depends and collect those shoppers drug mart points while youre at it.

#2 History on 03.24.13 at 5:28 pm

History always repeats itself…question is are you leading or following?

#3 Old Man on 03.24.13 at 5:30 pm

The last time I went to the TD my teller said omg you just have $28.00 for the rest of the month, as said just watch in a few days when I make a new deposit from the RBC with a counter check deposit to get me some green, as am living month to month on a depression budget, as am a poor old man leaving from day to day.

#4 First on 03.24.13 at 5:30 pm

FIRST!!!!

#5 TurnerNation on 03.24.13 at 5:32 pm

Attn. new blog dogs. The following usernames are still available; reserve yours today.

Newly Available: Devil’s Advocate

Flaherty’s Mixture

CanadianSwatchdog (You want a piece of me?)

Sock Drawer Mypoic

Allen CodeSmithee

Gee I See-er

Mattamy_Swooner

Stephan Who?

Never Used Yellow Highlighters

In Soviet Kanada, loan calls you

Chancellor Rebalancer

Last train to Clarkson

Reserved:

Sir Blog Dog Carney

#6 blase on 03.24.13 at 5:32 pm

Garth,

Just a quick question that I know you’ve touched on before, but I still don’t quite “get”. I think you would advise a 62 year old to start collecting Canada Pension, but the longer she waits, the more she gets. So, why again, would it be better for her to start collecting at the earlier age? In her case, does it matter that her mother and father lived to well into their 80s?

(a) Whenever the government gives you money, take it. (b) Pension policy can change at any time, but will always be grandfathered. (c) Invest the money from age 60 and far exceed the premium for waiting. — Garth

#7 CrowdedElevatorfartz on 03.24.13 at 5:40 pm

Garth, when did you take my picture at WalMart?

#8 Sebee on 03.24.13 at 5:42 pm

What’s going to happen to all that debt?

I don’t mean consumer or mortgage. I mean US, EU, etc.

Growth. — Garth

#9 CrowdedElevatorfartz on 03.24.13 at 5:42 pm

@#5 TurnerNation
You forgot BPOE ;)

#10 blase on 03.24.13 at 5:47 pm

Thanks Garth, now I get it :)

#11 Nostradamus Le Mad Vlad on 03.24.13 at 6:01 pm

#224 Frizzzz on 03.23.13 at 11:03 pm — “Where is Nosty? Buried on top of the Coquihalla?”

Hi Frizzz, SMan and a few others — Currently there are too many things happening in our lives — life is really speeding along. Barely have time to read Garth’s post, a brief look over the ‘net and that’s about all. so taking a timeout for the foreseeable future. Cheers!

#12 Adam on 03.24.13 at 6:07 pm

Hey Garth, even after reading the G&M today, do you still think Cyprus is all just “faux-hysteria”?

I don’t think it matters in terms of global financial markets, but the precedent they’re about to set really REALLY bothers me.

Meaningless to your life. — Garth

#13 [email protected] on 03.24.13 at 6:11 pm

lol @TurnerNation

In Soviet Kanada, loan calls you

I couldnn’t think of another one at the momet.

#14 Chester on 03.24.13 at 6:12 pm

What do you expect from people that buy granite counter tops and paint their driveways black. Owning all of a 1200 ft house is alot smarter than owning half a 2400 ft house but people won’t figure that one out until its too late.

#15 Good authority on 03.24.13 at 6:17 pm

Past performance is no guarantee of future performance. For that reason, I will wait and see what your 3 year performance is.

We all remember 2008. Now, the banksters are out to get all gains Garth and your savings as well per Cyprus “stick-em-up” plans.

2008 will not re-occur. — Garth

#16 Old Man on 03.24.13 at 6:20 pm

Met many a Princess in Toronto, and picked her up for this date one night, as her daddy was a Senior Partner in a huge accounting firm, and when I was walking out the the door her dog attacked me biting me at the back of my foot. Ok said our date for the night is going for a pizza, and she said no way as we must go Carmens.

I looked at the back of my foot and it was bleeding, and she was laughing, so said ok am taking you back to daddy, and she said you cannot do this on me, and dropped her off. I went to the hospital, and the doc on staff gave me a booster shot, and asked me about the dog, and said it was a chow wow, and he said that figures.

He asked me for her name and address, as according to law the dog would be picked up for 10 days, so got my revenge on this Princess who laughed at me; no more dates from her.

#17 mark on 03.24.13 at 6:26 pm

lol @ old mortgagejake. Howling that Garth won’t reply to him, yet won’t allow comments on his blog.

#18 Waterloo Resident on 03.24.13 at 6:32 pm

Don’t worry, Canada has a massive shorage of workers, and as soon as we can immigrate all those 23 million highly skilled workers that we need to fill all of those unfilled jobs, our real estate market will shoot to the moon!

#19 Turtle on 03.24.13 at 6:33 pm

Garth, do you think that TSX has a better chance to get to double digits in next 12 months, as it only scored 2.5% in the last 12 months?

#20 ange on 03.24.13 at 6:34 pm

Mr. Turner,

I just sold my condo. I really hope I’m doing the right thing considering the only reason I bought was to get into the housing market. How long do you think I will be renting for?

#21 The Prophet Elijah on 03.24.13 at 6:40 pm

Garth are you picking another fight with the gold bugs? You’re going down brotha!

#22 salonist on 03.24.13 at 6:42 pm

om,
do you want me to come visit you?

#23 Weenerman on 03.24.13 at 6:52 pm

Garth,

If you add REITs and preferreds, how does that impact your 60/40 ratio?

It doesn’t. — Garth

#24 Ralph Cramdown Ⓤ on 03.24.13 at 6:53 pm

#12 Adam — “I don’t think it matters in terms of global financial markets, but the precedent [Cyprus is] about to set really REALLY bothers me.”

What precedent? Depositors in a failed bank not getting all their money back? Used to happen all the time. If you think it’s so inconceivable, just google “Northern Rock,” click on Images, and marvel at all the examples of proper English queueing — in 2007. Why were they all queued up? To get their money out? Why? Because they thought that if they waited, there might not be any left.

#25 Bob Copeland on 03.24.13 at 6:54 pm

I listens to you and I’m glad I did. Thank you. When do you think would be a good time to get back into gold? This run up in stocks is due to the US fed pumping in $85 billion a month in phony money. This bubble will pop too. Please help with a answer. I hate cash!

#26 Frustrated Kiwi on 03.24.13 at 6:54 pm

One more data point – have been investing since ’95 and have averaged just a hair less than 7% over that time (which included the dotcom run up and crash and of course the 2008 crash). Haven’t been as diligent about rebalancing as could have been though – our loss. What’s most interesting about looking at our personal portfolio graph (yes, we are nerds) is how volalite its been in the last few years. Best piece of advice ever received – your home is not an investment because chances are when you move you’ll want something at least as expensive.

#27 PierreMontreal on 03.24.13 at 6:55 pm

Garth, I know selling the real estate is what you recommend but, either for my home or my renting properties, I am thinking of borrowing back some equity on those (up to 75% aty low rate) and invest the money in your balanced portfolio . Then when rates go up, pay back those loans?

#28 periwinkles on 03.24.13 at 7:03 pm

Saw some article G&M I think “Lottery Houses Sell For Below Market.”

HAM welcome to the Toronto Zoo and the Harpers. Lets hope the RCAF can get the elephants out.

#29 Humpty Dumpty on 03.24.13 at 7:10 pm

#299 Ralph Cramdown Ⓤ on 03.24.13 at 5:47 pm

DELETED

#30 Historian on 03.24.13 at 7:10 pm

Bought a house in 2011, probably overpaid but I’ll be here for the foreseable future. We have nice job stability so the 2.25% mortgage is not a worry. Since buying the house I’ve discovered this blog though and when I was lucky enough to get a significant inheritance from my grand mother, I went against my folks advice to nuke the mortage and instead invested it all in a balanced portfolio (couch potato ETFs). Now I’m doing great by the rule of 90 and feeling much less stressed than my house-poor brother with the mucho expansive mansion.

Index funds without constant rebalancing is not a good idea. — Garth

#31 detalumis on 03.24.13 at 7:13 pm

#6 Pension rules aren’t always grandfathered. People who were already collecting early CPP and were under age 65 must now contribute once again (mandatory) to the PRB (post retirement benefit) until they hit age 65 if they go back to work. Grandfathering only comes into play when it suits the government in power at the time.

Benefits are always grandfathered. — Garth

#32 BenF on 03.24.13 at 7:14 pm

Alberta man accepting bitcoins for home:

http://www.cbc.ca/news/yourcommunity/2013/03/alberta-man-accepting-bitcoins-in-exchange-for-home.html?cmp=fbtl

Thought you’d get a small smile on this Garth…

#33 Blobby on 03.24.13 at 7:18 pm

2008 will not re-occur.

This got me thinking (always a dangerous thing). The rest of the world seems to be recovering from the bombshell which was 2008…

.. However, here in Canada – it looks likely that our property market is going to go south… And whereas it might not “crash”, with so many Canadians ONLY having their wealth in property, I wonder what even a small correction will do to our economy – especially if at the same time all other countries bouncing back.

After all, when America starts returning their interest rates back to normal – we’d be pretty much forced to follow, regardless of what it’ll do to all those idiots renewing their 2% mortgages they thought they could afford.

Would the government jump in if this happens in order to try to boost the property market again to keep the country afloat?

It’s a scenario which seems likely to me, and Im interested what the government would be likely to do if this happens?

#34 BenF on 03.24.13 at 7:20 pm

Be careful about comparing the FTSE – GBP is 8% down against the USD since January so FX risk wipes out your gains. Of course if you are a domestic investor you could argue it’s fine, or you could say “don’t invest in the UK full stop!”

#35 Austrian school on 03.24.13 at 7:28 pm

Garth is absolutely right, 2008 will not happen again. Our next crisis will be much, much, worse.

Not in this lifetime. — Garth

#36 Humpty Dumpty on 03.24.13 at 7:29 pm

#298 Shawn Allen on 03.24.13 at 5:19 pm

“I don’t think inflation due to money printing or any other reason is a big problem”

I’m willing to bet you have more degrees than friends.

http://www.shadowstats.com/article/no-414-hyperinflation-special-report-2012.pdf

#37 AK on 03.24.13 at 7:31 pm

#25 Bob Copeland on 03.24.13 at 6:54 pm

“When do you think would be a good time to get back into gold? ”
——————————————————————–
Not anytime soon.

——————————————————————–
“This run up in stocks is due to the US fed pumping in $85 billion a month in phony money. This bubble will pop too.”
——————————————————————–
Says who??

#38 johnnny on 03.24.13 at 7:34 pm

#11 nostradamus-you are missed-big time chapeau!

#39 Daisy Mae on 03.24.13 at 7:39 pm

“This is why God created ETFs, global equities and the bond market….”

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

LOL So funny! ‘God’ is on top of things?

#40 The Affluent Boomer on 03.24.13 at 7:43 pm

What most Boomers don’t realize is that real estate has been the net beneficiary of the baby boomer bulge. As they went from buying their first homes to moving up to their bloated dream homes they caused house prices to inflate beyond historical averages. In the last decade fueled by historically low interest rates Boomers were able to purchase more real estate them they would otherwise have been able to do. As this artificial bubble started to inflate people began to pile into real estate and frowned owning stock. Now real estate in Canada is at a historical high and crashing, while stocks are at a historical low. Pay attention to what Garth is telling you. Real estate is dead for at least a decade as it will trend down to its historical average, while stocks are at a generational low and will out-perform real estate for the next decade or more. Boomers expecting to cash in their real estate to fund their retirement are in for a rude awakening. Sell High, Buy Low.

#41 Tom Vu on 03.24.13 at 7:45 pm

Benefits are always grandfathered. — Garth

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

How about MILF’ed ?

#42 Good thinking — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate | The Affluent Boomer™ on 03.24.13 at 7:47 pm

[...] via Good thinking — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate. [...]

#43 rosie "moving backwards" on 03.24.13 at 7:49 pm

Lord Black of Crossharbour has a take on the state of the economy with an eye on past experiences. Growth, or exhaling into a new bubble? He’s a Lord, that’s gotta mean something. http://fullcomment.nationalpost.com/2013/03/23/conrad-black-the-economics-of-bubbles-in-cyprus-and-here-at-home/

#44 Van guy on 03.24.13 at 7:57 pm

Garth,

Does your 60/40 strategy apply for investors of all ages? My folks just sold their home and looking for advice.

#45 BabyBoober on 03.24.13 at 8:00 pm

Garth is the only boomer who doesn’t look down on anyone that has not purchased a house/condo.

#46 Old Man on 03.24.13 at 8:10 pm

#41 Tom Vu – have this gal from Hong Kong that lives in Toronto who texted me about who is this guy that is blowing smoke called Tom, as she is laughing at you, and tells this is a man that needs to be trained.

#47 Canadian Watchdog on 03.24.13 at 8:15 pm

TO Condos Sold: Google PDF

Condo Listing Count: 1283
Average Condo Price: $341,185
Median Condo Price: $312,000
Average List Price: $349,071
Median List Price: $319,900
Average SP-LP $: -$7,886
Average SP/LP %: 98%
Average DOM: 32

For those who missed it:  TO Detached Sold: Google PDF Willowdale Price History

Enjoy.

#48 Ralph Cramdown Ⓤ on 03.24.13 at 8:16 pm

#36 Humpty Dumpty

Now Humpty, how can you recommend someone start with Hyperinflation Special Report 2012? That’s like starting by watching The Godfather Part III!

One should really start with Hyperinflation Special Report 2006, then 2008, 2010 and 2011 before tackling 2012. It’s like Dogs Annual, but for goldbugs. INSANE IN THE BRAIN!

#49 NoName on 03.24.13 at 8:17 pm

This is kind of funy, I always say if I pay my house down, I can be greeter in Walmart and maintain my current lifestyle. I guess I live boring life…

#50 hoser on 03.24.13 at 8:34 pm

Can anyone explain how Cyprus can just freeze all accounts worth over $100,000? Are these just bonds they are freezing? I bet the Russian depositers aren’t too happy with this draft proposal.

#51 habbit on 03.24.13 at 8:36 pm

Another good post Garth. Enough said. Hey I need a plan! Best wishes

#52 T5>myT4 on 03.24.13 at 8:43 pm

Index funds without constant rebalancing is not a good idea. — Garth

How often is “constant” rebalancing and if Index funds are not a good idea what the hell is ?

If you mean when your allocation goes out of whack 3-5% I get it, otherwise enlighten me please as you are making me nervous.

#53 T.C. on 03.24.13 at 8:48 pm

Well, the Nikkei is up, but the yen is down. So if you made that bet, you are actually kind of even…

Better bet is shorting the yen. If you think Cyprus is fun, wait till Japan starts to stoke inflation.

Maybe 2008 won’t happen again, but right now I’m shorting the Euro, the Dow, and the S&P. For seasonal/technical reasons more than anything else. But perhaps these shorts will turn into something bigger? The year ain’t over yet. Stay tuned.

#54 Historian on 03.24.13 at 9:12 pm

@ Garth, re-comment 30. For sure, the plan is to rebalance. I appreciate the advice though, and the blog. Just now had another relative berate me for not nuking the mortgage. That idea is deeply entrenched.

Get new relatives. — Garth

#55 The Man From Nantucket on 03.24.13 at 9:17 pm

#240 gus, yesterday
With introduction of 10 years mortgage for around 3%rate.This means the insane house prices will become a permenant reality.

You do realize the fact that 10 year money is 3% today, does not mean it will stay that way for 10 years.

Two years from now, it might easily be 4%. Two more years it might be 5%……which by itself kicks the affordability factor in the nuts, let alone what else might happen to real estate!

#56 george on 03.24.13 at 9:32 pm

Overall, there is about 190 trillion dollars of total debt on the planet. But global GDP is only about 70 trillion dollars. And the total notional value of all derivatives around the globe is somewhere between 600 trillion and 1500 trillion dollars. So we have a gigantic problem on our hands. The global financial system is a very shaky house of cards that has been constructed on a foundation of debt, leverage and incredibly risky derivatives. We are living in the greatest financial bubble in world history, and it isn’t going to take much to topple the entire thing. And when it falls, it is going to be the largest financial disaster in the history of the planet.

The Global Financial Pyramid Scheme By The Numbers

Oh, you mean like you buying a house with $100,000 down and a $500,000 mortgage? Does that mean you will have a financial disaster? — Garth

#57 not 1st on 03.24.13 at 9:41 pm

Garth, respectfully, capital gains cannot be relied on as annual returns because they are highly variable.

Only dividends really count, and in that case 4-6% is all you are going to find out there.

Maybe on your planet. — Garth

#58 The Prophet Elijah on 03.24.13 at 9:43 pm

Brief video on the pump n dump aka US housing” recovery”:

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

A prop film about ‘banksters.’ What a joke. — Garth

#59 Alyce in Wonderland on 03.24.13 at 9:52 pm

Real assets, like gold and real estate……..
————————-
We have credit crunch. Real estate is credit driven that’s why it crashes.

Real assets are commodities – food, oil, farmland, water, they have been up significantly even with the grossly understated inflation. Gold seems bad idea to invest lately.

#60 Old Man on 03.24.13 at 9:58 pm

I want to hear the fat lady sing, but the markets in asia are looking strong, and the spot price for the Euro is going up, so something may have happened, and have no idea about this all.

#61 Alyce in Wonderland on 03.24.13 at 9:58 pm

53 hoser

Can anyone explain how Cyprus can just freeze all accounts worth over $100,000? Are these just bonds they are freezing? I bet the Russian depositers aren’t too happy with this draft proposal.
—————————————–
governments are trying to represent depositors as investors. If you have 200 k euro and give it to bank for safekeeping you are treated as investor and will take a haircut in Cyprus.

Bondholders that are investors are NOT taking haircut that I am aware of. I guess they are the right people while the depositors are deemed to be the Russian Mafia.
Guess how a doctor with his life savings in the bank feels on the proposed hair cut of 20 -25 % on his deposit of over 100 k euro,

#62 JohnMtl on 03.24.13 at 10:02 pm

“2008 will not re-occur. ” — Garth

Maybe not… it may be far worse!

Sigh. — Garth

#63 Waterloo Resident on 03.24.13 at 10:03 pm

THIS IS TRUE! :

taken from this web site: http://www.cbc.ca/doczone/episode/generation-jobless.html#socialcomments

Quote:

“Vancouver has the worst economy in Canada…..low wages, dismal job opportunity, no big companies, no industry

you need major connections to get a job in Vancouver…just sending resume’s doesnt work

vancouver is a pitiful disgrace of a city.”

(yes, that’s true)

#64 Smoking Man on 03.24.13 at 10:06 pm

Can’t believe I got out of my GBP/USD trade with only an -88.00 dollar slap in the face….Not 1 minute after my market get out now, click button

Europe Fixed

Nothing to see Cyprus fixed, Europe fixed, Move along. lmao.

Oh those Russians are going to be pissed….Had a vision, spontaneous suicides and sudden death syndrome of high level Euro politicians and bankers.

#65 not 1st on 03.24.13 at 10:23 pm

Guaranteed annual capital returns was the same message the mutual fund propaganda machine was shucking about 15 years ago. “So and so emerging market fund has done better than 5% in the last 3 years”.. until you buy it and then its -5%.

Dividends are like your wages and capital gains are like your bonus. You can count on your wages, but you never know about the bonus. If you miss your bonus, the company still is viable, it just didn’t have any extra juice that year. If they stop paying your wages, you know they are in deep trouble and time to run.

Stop making things up. There has never been a reference here to ‘guaranteed’ capital gains. — Garth

#66 Shawn Allen on 03.24.13 at 10:24 pm

I’m Scared of the Bubble (NOT!)

George at 59 said:

We are living in the greatest financial bubble in world history, and it isn’t going to take much to topple the entire thing.

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

So how DOES it work George? Are all the houses, cars, roads, buildings of all sorts, and incredible abundance of food all sort of fake? Also the natural gas, electricity, and communications networks, fake too? Perhaps financed with money borrowed from Martians? Have we just fooled ourselves into thinking that our food, clothing and shelter needs are well taken care of so that huge amounts can now be spent on entertainment.

Who will own all this wonderful stuff when the collapse comes? Will the Martians be along to repossess it?

#67 Devore on 03.24.13 at 10:24 pm

#12 Adam

I don’t think it matters in terms of global financial markets, but the precedent they’re about to set really REALLY bothers me.

Why? When a country goes tits up, whether it’s Greece, Iceland, Zimbabwe, or Cyprus, its citizens are about to become collectively impoverished. The method is a matter of optics. Would you prefer a smile and a reacharound?

#68 Mark on 03.24.13 at 10:26 pm

Garth where will all of this magic “growth” come from? The Austrians correctly called 2008 well ahead of time, while all the talking head economists on TV were calling them “doomers.”

The Austrian School got it right. They’re saying the exact opposite of you right now. Yes, the Nasdaq and Dow currently look good, as did real estate in Las Vegas in 2006. In truth, the fundamentals of this economy are terrible.

The markets are making their pre-2008 highs to be sure, but priced in gold it’s pathetic. Yes PM’s have been hammered hard the last two years, still $1600 seems to be the floor for gold, double it’s pre-2008 crisis high.

Calling me a “doomer” or “metalhead” is dismissive, and does nothing to address the real concerns I and many others have.

How are all these “wrinkly boomers” with declining house values possibly going to help grow this economy?

How does more debt solve a debt problem?

Why does Europe need a new solution every few months?

Seriously Garth, let’s get you on the phone with Peter Schiff, that would be epic.

#69 Mike Leblond on 03.24.13 at 10:27 pm

Garth, I have been a reader for the past four years (or maybe longer) and much appreciate your blog. Today you said prices (nationally) have plateaud one year ago. Well, the story is more dire in Ottawa-Gatineau: contrary to what the CREA wants us to believe, prices here peaked two years ago and have been dropping ever since. I have MLS printouts to prove that many houses have been sitting on the market unsold, and even sometimes vacant, for over two years! Some have lowered their asking price (others not) but still no takers….

#70 Roy Stacey on 03.24.13 at 10:31 pm

Great tonight Garth.

Yes, you tell ‘em. A diversified portfolio stocks, bonds, REIT’s…and I own some great dividend paying individual stocks (why? because I’m nuts, and think owning about 120K worth of those can mimic an annuity over time), but that’s MY problem….

My best friend disclosed something to me last week that made me shudder. This guy, professionally employed as a computer programmer for the better part of 40 years has no debt, and a nice wad of savings. He has 100% of his tax deferred money in a stable value fund earning dirt squat crapola. Furthermore, he and his wife have ROTH accounts (no taxes -ever) in the hands of an idiot advisor who has 80% of it in cash earning .40 a year while it costs them .80 a year for this privilege! He did buy them some half decent stocks, but no mutual funds.

See, Garth people who HAVE money, and don’t know what the hell to do with it can still eat dog food later in life as inflation chews up their savings.

First, fire that adviser, or at a minimum explain to him that this is 10yr money- invest it FULLY as you see fit, monitor him, if you don’t like what you see in 6 months then fire his butt!!
I interviewed over a dozen before selecting one, of only TWO I felt were competent, based on what they demonstrated for me to manage a portion of my holdings (100K) at present.

My friend picked his based on friends advice, and his low fees. Not the way I prefer to select an adviser.

I’m watching my adviser and comparing him to my own selection of investments. Last year we were within 2% of each other after his fees were accounted. Based on this year, it will determine if he gets to handle more, or gets fired. Choices, don’t we all love to make them!

PS he has access to many more investment choices than I do.

Bottom line, whether you choose to do it yourself, and have a fool for a client, or pay a pro about 1.5% a year its better than doing nothing, and saving nothing. Retirement should be about enjoying life, not worrying that you can’t live the life you desire, and worked hard to achieve.

#71 Devore on 03.24.13 at 10:42 pm

#57 Historian

Let them flap their gums. Are they paying your mortgage? I sure hope you’re just smiling and nodding your head, and not arguing about it pointlessly, like some other people here.

#72 John on 03.24.13 at 10:52 pm

Just repeating another poster’s question:

Where to preferred shares and REITs fit on the equity/fixed income spectrum?

#73 [email protected] on 03.24.13 at 10:55 pm

#2 History on 03.24.13 at 5:28 pm

History always repeats itself…question is are you leading or following?
========================

Funny you should mention that. Britain is now attempting to imitate Canada’s downhill slide with government-backed mortgages:

http://www.dailymail.co.uk/news/article-2296897/BUDGET-2013-Could-great-state-mortgage-scheme-hijacked-rich.html

#74 Jo in TO on 03.24.13 at 11:27 pm

Hi Garth it seems in the radius of Toronto that Hamilton tries not to be a bedroom city for TO compared to Ajax or Pickering. What do you think of a renter in downtown TO buying an average priced house in Hamilton and commuting to TO for work? I like the fact a house in Hamilton has a price which could be paid off with a locked in 10 year mortgage and consider early retirement.
Thanks
Jo in TO

#75 Tom Vu on 03.24.13 at 11:32 pm

This site not have the usual quota of soft porn

Want renewFoUNlanD!

#76 HAWK on 03.24.13 at 11:33 pm

#53 hoser on 03.24.13 at 8:34 pm
========================

I hope that the Russian oligarchs make their displeasure felt.

For good measure, it might be wonderful if, on the off chance, there were a few Somalese pirates, or Colombian Cartel chiefs amongst the depositors. It’s way way way past time that bankers needed to pay for their crimes.

#77 Scott in Gibsons on 03.24.13 at 11:48 pm

What’s going to happen to all that debt?

I don’t mean consumer or mortgage. I mean US, EU, etc.

Growth. — Garth

Your math doesn’t work Garth

#78 As Is Old Man on 03.24.13 at 11:49 pm

British budget introduces “Help To Buy” housing scheme to “help” people buy houses:

According to The Telegraph:

http://bit.ly/YIeNvc


“Help to Buy will come in two forms, although further details are yet to be ironed out.
The first version, available immediately, will give anyone who wishes to buy a newbuild property worth up to £600,000 an interest free loan worth up to 20pc of the purchase price. An incredible amount – £130bn – has been made available for this.
The purchaser must provide a five per cent deposit. After five years, interest will be payable at 1.75pc and will rise in line with inflation, based on the retail prices index (RPI), but the loans can be paid back at any time.
The second part of the scheme will be available in January next year. This will give those who wish to buy any property, whether newbuild or period, a Government-backed guarantee on 20pc of the mortgage. This effectively means that mortgage companies shoulder less of the risk of possible default, so should provide better mortgage deals. The Government will offer £12 billion of guarantees, intended to help an estimated 644,000 people.
Details of the schemes, particularly the second one, are yet to be ironed out. It is not yet clear what sort of rates will be available on mortgages on the secone element because the Government has not yet said what it will charge lenders to use the guarantee.”

#79 Storefront Sam on 03.25.13 at 12:02 am

What’s with the picture of the Wal Mart greeter? If there’s a joke there I don’t get it.

#80 aggie on 03.25.13 at 12:03 am

36 Austrian school on 03.24.13 at 7:28 pm

Garth is absolutely right, 2008 will not happen again. Our next crisis will be much, much, worse.

Not in this lifetime. — Garth

How do you define ‘this’? Yours and mine, not that many years left in it. How about my brood of grandkidlets, not yet in school? How far does your crystal ball (of common sense, of course) look into the future? What can we grandparents be doing for the wee ones now, if their parents don’t want to hear about you?

If I manage to catch up on the learnings, I’ll try my darndest to teach them, and to start them on the right money roads before my time is up. I still have a few decades, I hope. No guarantees, of course.

With my natural tendency to dwell on delightful subjects such as the punctuation at the end of a complete clause, Garth, I hope you’re grooming someone to continue your legacy ad infinitum.

Better yet, I hope you’re training a troop of friendly Amazons to go forth, penetrate our public school system, reach out to those young minds while they’re still receptive, teach them basic financial self-responsibility, give them the ability to comprehend the changing nature of how money and monetary systems work.

Lol, team up with SM while you’re at it, to help ensure they learn to think for themselves, to develop an eye that sees things for what they are!

Just keep this blog rolling, please, for a looong, looong time… wishing you many happy ellipses :)

#81 Tommy on 03.25.13 at 12:13 am

Read this article in today’s Toronto Star:

“I have always maintained that, when you’re looking at those glass towers there, you’re basically looking at the slums of the future,” insists Kesik.

ttp://www.thestar.com/news/gta/2013/03/24/growing_up_are_torontos_new_condos_built_to_last.html

#82 Tommy on 03.25.13 at 12:14 am

Growing Up: Are Toronto’s new condos built to last?
Building experts worry too many condos are going up with window walls because they’re cheaper and faster to erect. They say they’re doomed to fail.

GALIT RODAN / FOR THE TORONTO STAR
Pedestrians walk north toward Front St. West along the Puente de Luz bridge near Bathurst St.
By: Antonia Zerbisias Feature Writer, Published on Sun Mar 24 2013
One in an occasional series on the GTA’s growing density and its effects on life in the city.
Toronto needs its glass consciousness raised.
Building experts say resiliency and energy efficiency are going out the window with all those floor-to-ceiling glass walls being installed in the city’s towering condos.
“There’s only one reason why all these buildings have floor-to-ceiling windows: it’s because architects and builders are lazy,” maintains retired architect and developer Lloyd Alter, who now writes for Treehugger.com and teaches sustainable design at Ryerson University.
“If you have a building that’s brick and glass, you’ve got to hire a mason, you’ve got to hire a window guy and you’ve got to co-ordinate them. When you’re dealing with floor-to-ceiling glass, you’re just dealing with one trade.”
Ted Kesik, a professor of building science at the University of Toronto and an outspoken critic of the condo development industry, says he, too, worries that condo developers care more about profits than ensuring their buildings last.
“I feel sorry for people in buildings like that, because those windows are going to fall out in an extreme weather event. There will be water damage. It’s just going to be a mess.”
Even Toronto’s new chief planner, Jennifer Keesmaat, allows there’s a problem with the windows’ efficiency.
“I share those concerns,” she says. “We need to be talking about this more as a city: how do we ensure that we do build buildings that have resiliency over the long term?”
It’s understandable, almost desirable, that developers want to move as quickly as possible. Keeping city roads blocked requires permits and frustrates the public. Logistics are a headache, especially for some of the newer guys on the building block who lack experience. And “window walls,” the system most developers are using, are not as pricey, durable or difficult to put up as “curtain walls,” which is how Toronto’s commercial towers were built.
Time is money.
But how fast is too fast?
For Alter, the main problem is energy efficiency. The glass has almost no insulation capacity.
“When you look at the size of the little window that opens — because the building code says you have to have a little window in there — it’s a little slot that’s the size of an ice-cream stand pass-through,” he bristles. “There’s no cross-ventilation. So they’re constantly fighting to generate air conditioning, to generate heat, all because they’ve built these incredible dense buildings and they’ve given them these terrible, terrible skins.”
However, Arash Beheshti, vice-president of construction for Concord Adex, which is behind CityPlace, says it has to be a marketable product.
“People want glass because they want to look outside,” he says, adding there are many “misconceptions” about floor-to-ceiling windows in condos.
“Brick doesn’t necessarily have a higher insulating value than glass,” he says, pointing out that usually only one side of a condo is exposed to the outside while the floor, ceiling and sides are not.
“When you look at the heat loss per unit of a condominium, you’re looking at way less than at a house.”
For Kesik, it’s also an insurance issue.
“Premiums are already rising because of climate change,” says Kesik, who predicts that condo owners will see increases of 500 per cent over the years.
Beheshti rejects charges that glass walls are more vulnerable to weather: “The exterior building envelope is actually more watertight, weather-tight, when you actually don’t have multiple segments of different products. If it’s all glass, it’s actually more sustainable to the exterior weather than if you have brick-block-glass-concrete-wood.”
But when it comes to claims that glass towers use less energy, Alter is totally dismissive.
“When you take the entire population of that glass building, and divide it by the entire consumption of that building, they will say this is green; we’re using less energy per capita,” he says. “It’s a fallacy.
“If you look at the building as a whole rather than per capita, it’s using a huge amount of energy that wouldn’t have to be used heating and cooling because of all that glass.”
Kesik, an authority on retrofitting older buildings, also says you can’t just tear them down and start over because, as experts agree, the concrete structures underneath these blue-green glass exteriors are built to last.
“I have always maintained that, when you’re looking at those glass towers there, you’re basically looking at the slums of the future,” insists Kesik.
“No one will want to buy them because people will look at them and say, ‘Are you crazy? I don’t want to buy something that leaks, that will cost a fortune to retrofit.’ So when they can’t get sold, they’ll get rented. And they’re not of a high quality, so they can’t get rented for a lot of money. So who do you think is going to live there? I tell people, this is where your grandchildren are going to come to buy crack.
“No one wants to talk about these things because it gets people scared,” he warns. “The guys in the condos don’t want to talk about it because they’re sitting there saying, ‘You can’t talk like that, you’re going to devalue my condo and, if you devalue my condo, I am going to sue you for having devalued my real-estate investment.’
“This is how bad it has gotten. It’s that cruel a joke.”

#83 Christopher Lackey on 03.25.13 at 12:43 am

You know what’s funny? Go on cbc.ca and read the comments under the cyprus article – canadians literally bragging in public about stashing cash under their mattresses.

I wish everyone would stop taking themselves so seriously – there is NO SECURITY in this world. bank accounts, real estate, gold coins, apple stock. It doesn’t matter. You’re taking risks. Cash under your mattress is great until your house is robbed, or burns down.

Live your life and like grandma told you, don’t put all your eggs in one basket.

And given the financial intelligence of the average Canadian, you can count on our banks and telcos to pump out healthy dividends for years to come, since he hands them both billions every month

#84 stockboy on 03.25.13 at 12:47 am

Garth i couldn’t agree more that home prices are overvalued in Canada but I wholeheartedly DO NOT agree with your view of the state of the global economies. Stocks are up because of the huge printing press known as the Federal Reserve. What happens when the bond buying programs end? Also corporate profits are benefitting from higher worker productivity so the growth is not organic. Read this to open you eyes to what is happening south of the border.

http://www.businessinsider.com/corporate-profits-hit-new-record-high-2012-11

Also a consistent 7% real rate of return is amazing and as someone else mentioned not possible for most retailer traders/investors.

#85 observer on 03.25.13 at 1:05 am

Check out the new Craigslist streetview rental

http://vancouver.en.craigslist.ca/search/apa/van?useMap=1&zoomToPosting=&query=&srchType=A&minAsk=&maxAsk=&bedrooms=

Was just having some fun with this, when I notice the amount of empty rental units in downtown vancouver. Just in Yale town and Coal Harbour there is 1000 empty suite.

Its getting interesting out there

#86 Brunette on 03.25.13 at 1:11 am

I enjoyed reading about how Mila Kunis invests her money this weekend. And the daughter from Desperate Housewives too. ( http://foxonstocks.com/ ) She’s giving investing advice to the young generation. Looking for a young Canadian celebrity to give investing advice too.

Old Man, I like your posts but I didn’t really understand #3 and 16 tonight. Or was it just me?

#87 TEMPLE on 03.25.13 at 1:12 am

Index funds without constant rebalancing is not a good idea. — Garth

That’s a definite meme in financial planning circles right now, but it comes from an incorrect interpretation of the Brinson et al. article “Determinants of Portfolio Performance” in 1986.

Re-balancing isn’t automatically a bad idea, but automatic rebalancing is. Why neuter future returns from stocks just to top up asset classes that are doomed to underperformance? It’s just an arbitrary decision. You wouldn’t robotically re-balance within a stock portfolio, so why do it between asset classes? Cognition counts.

I concede that re-balancing in the way you suggest can reduce volatility. I guess that is important for some people.

TEMPLE

#88 willworkforpickles on 03.25.13 at 1:30 am

DELETED

#89 Geeks on 03.25.13 at 1:36 am

[To summarize, financial assets are gaining in value as we continue to put distance between ourselves and the mess of 2008-9]

Well said.

My 401K dropped by half in 2009 when the Dow Jones plunged from 14093 to 6700 and my portfolio is well balanced. It was like hell but I left the entire mix as is. Guess what? By the end of 2012 the balance was well above the 2007 level when the market was at its highest before the RE collapse. In December 2012 I re-mixed the portfolio and was really surprised that by the end of February (just 60 days) it had increased by 6%!!!

Your statement is not theory, it’s what I see here in the US right now.

#90 earlybird on 03.25.13 at 1:42 am

Good point #41…its the size of that boomer cohort that has created all that demand for Real Estate, as well as women entering the workforce. That generation is in the saving year, having bought all the ‘stuff’ they need. Interesting to note that Canada is about 5/7 years behind the US in the Age Bloat through the economy. Real Estate demand would slow down naturally no matter what the rates/employment/economic performance were. Would not buy unless you plan to live there for at the very least 10 years…

#91 cynically on 03.25.13 at 1:53 am

#44 rosie etc. re Connie(lord Black) – it does mean something – he’s a felon.

#92 Humpty Dumpty on 03.25.13 at 2:38 am

50 Ralph Cramdown Ⓤ on 03.24.13 at 8:16 pm

“Ralph” !

You talkin to me

http://www.youtube.com/watch?v=X5QGr6ZzX6c
Robert De Niro

Do you feel empowered every time you “cram down” someones opinion or position…

I willing to make a bet, you have more VHS tapes than friends…

#93 Richard and Zeus on 03.25.13 at 3:47 am

#261 Blacksheep on 03.24.13 at 1:15 pm
Blacksheep 230,

“Banks do not create money. — Garth”
—————————–
Thanks for your opinion Garth.

Fact. But, believe what you wish. — Garth
—————————————————–

Garth you have said this at least a dozen times in the last couple of months……yet I don’t recall you telling us “where” money comes from.

#94 Small Town Steve on 03.25.13 at 5:01 am

#73
Great post!

#95 Smoking Man on 03.25.13 at 6:29 am

Usd dropping like a rock.. Wish I was up 1/2 hour a go…

Huge miss….

#96 mark on 03.25.13 at 6:44 am

You boy Jake is still tooting about a 7% return. It’s not that hard, go and find various portfolio calculators amongst equity, debt and liquid RE markets around the world and check the historical results. Over the long term the 2008s are significantly balanced out and higher than 7% returns are the norm.

Jake is as dumb and whiny as your MiL. No wonder most people are brow beaten into exorbitant debt and endlessly refer to once in 20 year market events as their justification to own nothing but a house.

#97 Chickenlittle on 03.25.13 at 7:26 am

I guess the PTL Club isn’t looking too bad now. They were promising a ten-fold return plus a mansion.

What is Garth Promising? A measly 7%….

It was hard not to say “Yes” to Tammy Faye back in the day.

There are no promises or guarantees, just track records and the application of non-emotional logic. — Garth

#98 NOTHING SURPRISES on 03.25.13 at 7:30 am

Respectful, wide-ranging discussion on the topic of the posting is encouraged, and will not be censored.

You have not posted my comment and you post in your helpful reminders the above??

What in my posting did not pass inspection?

Language. — Garth

#99 Aussie Roy on 03.25.13 at 7:57 am

Aussie Update

Aussie house porn “The Block”

“No real world profit made”

The total profit for this season came to $815,000. But while the contestants are all leaving with tidy sums of cash, local real estate experts said “technically little to no real world profit has been made”.

http://www.couriermail.com.au/realestate/investing/block-winner-rewarded-for-hard-labour/story-fndboir2-1226602089233

After the construction boom comes?.

Unit boom to squeeze city

A record number of new apartments in some of Melbourne’s most popular inner suburbs will put further pressure on the city’s infrastructure and services, although tenants are set to enjoy cheaper rents.

It is a sharp reversal of conditions in 2007-08, when a shortage of affordable inner-city properties saw long lines, rental ”auctions” and steep rental rises lead to a wide perception of a ”rental crisis”.

So much for it’s different here

http://www.theage.com.au/victoria/unit-boom-to-squeeze-city-20130323-2gn6v.html

#100 Humble on 03.25.13 at 8:41 am

Paradigm Shift

I totally agree that housing is a short and long term loser in Canada for the reasons you mentioned. But I fully understand that people are resisting to give up their comfortable and historically true(housing has been a big winner for some time) ideas. It takes discipline and emotional control to break free of a old paradigm.

I am new to the blog so I my be totally of base. I don’t want to simplify your argument too much but I gather that people should sell their homes and put the money into various financial assets. The new paradigm you speak of means that people should be long term bulls on financial assets. The fundamentals you speak of are 1) the US economy is improving and US corps. are highly profitable. I would mostly agree with these points. 2) you give examples of global stock markets that have had impressive returns over the last year. Booming equity markets are nice but they don’t mean that the underlying economy is booming. It could be just specs with cheap money. Plus the bond markets are still highly valued. We talking 1.8% on a government ten year bond in Canada. In the US 1.9%, Germany 1.4%, Japan less than 1%. I would be more bullish if that bond money was moving into equity markets.

Being a bull now could mean serious riches in the future but it could a tragic mistake. If I had any money to speak of I would be in cash until the world economy works itself out. The opportunity cost is a killer but I am no bull now.

Cheers People

Buy things that go up. Fear things that are cheap. Yes, good thinking. — Garth

#101 Gotthardbahn on 03.25.13 at 8:45 am

Hey Garth – The US equity indices are all rising because the Fed is printing 85 billion US dollars every month, and most, if not all, of it is finding its way into the bond, equity and, to a lesser degree, commodity markets. These funds certainly aren’t finding their way into the real economy! As long as Barack Obama remains in the White House, Washington will continue to run outlandish annual deficits and Ben Bernanke – at the behest of his boss, the aforementioned Obama – will continue printing money to finanace it all. Ask yourself why 30-year Treasurys are trading around 3.20 % – thirty years! The Fed is monetizing the debt and equity traders are engaging in ‘irrational exuberance’ – now where have I heard that before? It was different back then, too.

Your comments make no sense. Stimulus money does not flow to corporations who, by the way, are ‘the real economy’ since they pay wages to workers who buy cars and flat-screen TVs. Keep your day job. — Garth

#102 CrowdedElevatorfartz on 03.25.13 at 9:01 am

@#82 Storefront Sam
Your query,
“What’s with the picture of the Wal Mart greeter? If there’s a joke there I don’t get it…..”

Despite the obvious fact that the Wal Mart greeter is old.
Despite the obvious fact that this is a blog focusing on investment …. ie retirement.
Despite the obvious fact that the majority of people havent prepared for their retirement in any way, shape or form….

You dont get what?

Does “Storefront Sam” mean your a brainless mannequin on display?
Or an outraged Wal Mart greeter………..

#103 Shawn Allen on 03.25.13 at 9:05 am

Preffered and REITS on the Spectrum?

John at 75 asked:

Where to preferred shares and REITs fit on the equity/fixed income spectrum?

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

Preferred shares are in substance between debt and equity. To a debt investor they look like equity ans they get paid after the debt interest and rank lower in priority. To the common equity investor they look like debt since they must be paid before common dividends.

To investors they have features mostly like fixed income but also some features like equity (such as often being perpetual). There are many types of preferred with vastly different risks.

REITs are NOT fixed income. They are high dividend equities. Their distributions or dividends may be reliable for years but not always. REIT distributions would be cut before interest payments would ever be cut by the same entity. Tons of different varieties and risks and really gross categorizations like this are not that helpful.

#104 Daisy Mae on 03.25.13 at 9:32 am

“….have most of their money in real estate or cash equivalents, like GICs and savings accounts.”

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

Then, when a GIC matures they use the proceeds to pay down the mortgage, as my neighbour did recently. So ‘old school’….but can’t teach an old dog new tricks.

#105 earlybird on 03.25.13 at 9:38 am

Corporations/banks and big biz are the only ones making money, thats the place to be for sure! No brainer…

#106 jess on 03.25.13 at 9:38 am

70% employment in financial sector cyprus and 20% tourism according to uk telegraph
since 1982 People have described Cyprus as a tax haven for 35 years: it hasn’t changed now (25 Mar 2013) .

Monday, March 25, 2013
Cyprus: what the world’s media has missed
http://taxjustice.blogspot.ca/2013/03/cyprus.html

#107 afraidit allmightend on 03.25.13 at 9:49 am

People buy real estate and cars in Canada to temporarily bolster their sadly hellish lives. Stats show that Canadians are living lives of desperation…whether they work or not…..that they feel beaten down by government taxation and persoanal debt….the country leads all others in mental illness…..which the government explains away as ‘lack of sunshine and immigration’……….that doesn’t begin to explain it.

What Canadians have to learn is that they can not sustain a country without a culture…social or national. In most Canadian cities you will find no museums, galleries, festivals, music scene, cafe culture etc ad nauseum……the country is dead from the neck up.

Cars and houses leave the belly hollow….is it any wonder that there are so many murders, suicides, violence stats that put Canadian cities as more dangerous per capita than any US city?

#108 rosie "moving backwards" on 03.25.13 at 10:21 am

People that live in glass houses do have better views, for what that’s worth. Could be quite a lot, moving forwards. http://www.thestar.com/news/gta/2013/03/24/growing_up_are_torontos_new_condos_built_to_last.html

#109 jess on 03.25.13 at 10:22 am

European Parliament President Martin Schulz made the following statement on the situation in Cyprus:

“I welcome the deal for Cyprus, although the details must be fully examined. It has brought us back from the edge. This agreement should allow for Cyprus’ public finances and economy to enter a sustainable path. It is especially encouraging that small savers will be protected. I welcome the fact that the deal takes on board the European Parliament’s clear call that deposits of less than €100 000 should be excluded from any levy. Cyprus has avoided a catastrophe and financial meltdown and the euro zone has avoided further turmoil.

Yet the case of Cyprus offers lessons: First, we need a banking union for the euro zone in place as soon as possible. Second, the Cypriot case show that is high time to tackle tax coordination. Third, the way the Cyprus case was handled is no way to do business in the EU. Negotiations lacked transparency, democratic accountability and were badly communicated.”

http://www.europarl.europa.eu/the-president/en/press/press_release_speeches/press_release/2013/2013-march/press_release-2013-march-14.html

#110 IM in C on 03.25.13 at 10:30 am

Slums of the future. The best line in the aticle is todays glass lined condos are where your grandchildren will be coming to buy crack !!

http://www.thestar.com/news/gta/2013/03/24/growing_up_are_torontos_new_condos_built_to_last.html

#111 IM in C on 03.25.13 at 10:34 am

@Tommy
I’m not sure why you needed to cut and paste the entire article in your comment #85 when you referenced it in you comment #84

#112 NOTHING SURPRISES on 03.25.13 at 10:52 am

Language. — Garth

I do not understand your answer – Language?

My posting contained no inappropriate language.
I would appreciate an explanation.

Your answer reminds me of an answer Flaherty would use.

Contact me by my email if you prefer.

No thanks. — Garth

#113 happy renter on 03.25.13 at 10:56 am

Garth’s right not in our life time.Many countries in Europe are living in a deppression but In the U.S, they can keep printing money and everything will be o.k.

#114 pbrasseur on 03.25.13 at 11:00 am

@Gotthardbahn 104

“The US equity indices are all rising because the Fed is printing 85 billion US dollars every month, and most, if not all, of it is finding its way into the bond, equity and, to a lesser degree, commodity markets.”

Actually you’re flat wrong, the vast majority of the FED’s printing ends up as bank reserve. As show here:

http://scottgrannis.blogspot.ca/2013/03/the-fed-is-not-printing-money.html

This could become a problem if/when that money begin to circulate through credit. But so far it is not and the case and the recovery is real

#115 maxx on 03.25.13 at 11:00 am

#11 Nostradamus Le Mad Vlad on 03.24.13 at 6:01 pm

Hope all is OK Nosty, cheers.

#116 Tony on 03.25.13 at 11:17 am

Re: #118 pbrasseur on 03.25.13 at 11:00 am

There is no recovery in America they’ll be back in recession/depression this year.

You said that last year. Fail. — Garth

#117 Humble on 03.25.13 at 11:18 am

Buy things that go up. Fear things that are cheap. Yes, good thinking. — Garth

I gather you think equities are cheap and bond are expensive. Lets have a look at the financial activity of Japan today. According to Bloomberg the 10 year government bond was at .55% a rate not seen since 2003. At the same time the Nikkei was up 1.7 % (208). Clearly someone is making a bad trade. The bond market signaling no inflation and poor economic outlook. While the equity market is bullish. If had 2 choices between purchase bonds or buy the equity market. I would buy equity. Now I remember when Japan crashed they actually had negative bond rate for short term debt. So it not impossible that bond prices can still rise but potential upside gains are minimal. To buy western world government bonds these days you have to be sadistic. Now the Nikkei has more potential upside and arguably it my be cheap compared to where it was at the 80′s. If I had 2 choices, equity is the choice. But there is a 3rd choice and that is not invest in Japan at all. Clearly market signals are mixed, why risk it? Opportunity cost is a consideration but so is capital risk.

So don’t invest. Good luck with that. — Garth

#118 rosie "moving backwards" on 03.25.13 at 12:17 pm

It looks like the ECB has decided to take a different path. Good luck with that. Still, there are deals to be had in Europe. http://www.alibaba.com/product-gs/745684240/money_printing_machine_for_sale.html

#119 The Prophet Elijah on 03.25.13 at 12:25 pm

I just bought my first home here in Calgary. 405K after talking them down 5K, so good start. It’s close by a school so I assume the value will hold for now before moving up in a few years. Plus I might rent a bedroom in the basement. Le the good times roll!

#120 AK on 03.25.13 at 12:35 pm

#120 Tony on 03.25.13 at 11:17 am
“Re: #118 pbrasseur on 03.25.13 at 11:00 am

There is no recovery in America they’ll be back in recession/depression this year.

You said that last year. Fail. — Garth”
——————————————————————-

LOL, he has been saying that every day.

I have April 08, 2013 marked on the calendar. They day the DOW will crash by 70%?? :-)

#121 Herb on 03.25.13 at 12:39 pm

#111 afraidit allmightend,

what is this shit? (Sorry, Garth.)

#122 AK on 03.25.13 at 12:46 pm

#107 mayhem in markham on 03.25.13 at 9:22 am

“you do realize that money supply in that calculation is the denominator, and so, since it’s been exploding higher, with the economy going nowhere, that’s why velocity keeps collapsing… your arguments get weaker and weaker all the time.”
——————————————————————–

Do you even know what money supply is?

I will believe Paul van Eeden before I will believe your bullshit.

http://www.paulvaneeden.com/Actual.Money.Supply

#123 TEMPLE on 03.25.13 at 12:55 pm

#111 afraidit allmightend on 03.25.13 at 9:49 am

What Canadians have to learn is that they can not sustain a country without a culture…social or national. In most Canadian cities you will find no museums, galleries, festivals, music scene, cafe culture etc ad nauseum……the country is dead from the neck up.

What on earth are you talking about? Do you ever go outside? That thing you were banging away on to produce that comment (you might call it a “‘puter”) is actually very useful for dialling into Canadian culture.

TEMPLE

#124 Men Who Stare At Sheeple on 03.25.13 at 12:57 pm

In response to The Patient from Garth’s post of March 21st . Sorry, I didn’t have time to investigate this sooner.

This is right from the Bank of Canada’s own paper, dated April 1997. http://www.bankofcanada.ca/wp-content/uploads/2010/05/wp97-8.pdf

From the paper entitled “Implementation of Monetary Policy in a Regime with Zero Reserve Requirements”

“Monetary policy can be implemented effectively with zero reserve requirements. A number of countries now have no requirement, such as Australia, Belgium, Canada, Sweden and the United Kingdom. In others, including the United States and France, the level of minimum deposits at the central bank has fallen to very low levels, in large part because banks have found ways to avoid reserve requirements.”

“This paper outlines a general framework for implementing monetary policy in a regime with zero reserve requirements, focussing on the case of Canada.”

“Reserve requirements were phased out over a two-year period starting June 1992. As of that month, fractional requirements applied to chartered bank deposits were abolished. The dollar amount of requirements was then reduced from the average level of the preceding 12 months by 3 per cent every 6 months until June 1994, when the remaining
requirement was entirely removed.”

As hard as it is to believe Canadian banks and many other banks around the world do not need to meet any reserve requirements.

So you are correct!

#125 Ronh on 03.25.13 at 1:20 pm

#96 Richard and Zeus

Search the web for the book Mystery of Banking by
Murray Rothbard.

#126 Humble on 03.25.13 at 1:22 pm

So don’t invest. Good luck with that. — Garth

I did not say never invest but I am much more bearish on the world economy than you are. I don’t want to put words in your mouth but I gather you are 100% in the market all the time. I just question that is the right strategy to an average retail investor to commit every cent to the market. You have experience in the market and have the skills to actively balance a portfolio. The average person is not in the same situation. Anyways I am off to school.

How many times do I have to write about balance and diversity, as well as rebalancing? Being ‘in the market’ is absolutely relative. — Garth

#127 gladiator on 03.25.13 at 1:33 pm

@111:

After living for 4 years in the American city of brotherly love (36th and Spring Garden, actually, which is relatively safe there), Jane and Finch in Toronto is so totally safe, you don’t even know.

#128 mayhem in markham on 03.25.13 at 2:07 pm

#126 AK on 03.25.13 at 12:46 pm

Do you even know what money supply is?

I will believe Paul van Eeden before I will believe your bullshit.

http://www.paulvaneeden.com/Actual.Money.Supply
________________________________________

did you even read his site? and what it says? he agrees with me 100%

learn to read first, before proving you’re an @ss

#129 Shawn Allen on 03.25.13 at 2:07 pm

Bank Cash Reserve Requirements

129 Men Who Stare at Sheeple Said:

As hard as it is to believe Canadian banks and many other banks around the world do not need to meet any reserve requirements.

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

So Canadian banks don’t have a regulator telling them to keep a certain amount of cash on hand in case depositors want it back. So what? The market itself imposes discipline on the banks.

Canadian banks DO need to have cash on hand to deal with withdrawals. They ALL keep cash on hand plus they ALL have cash on deposit at the central bank that they can access instantly. And they ALL invest in a certain amount of highly liquid treasury bills that they can turn into cash on no more than a day’s notice. And if that is not enough I suspect they can borrow from the bank of Canada.

It’s a fine system and only the mis-informed spend any time worrying about it.

And I gurantee that at least 99% of the people who worry about this have no deposits that are higher than the insured deposit limit in Canada.

If you want to worry about your bank worry about how much shareholder equity it has before you worry about its cash reserves. And if you are not over the insured limit then don’t worry at all. And if you are over the insured limit and you are with one of the larger banks in Canada, this should still be way down your list of things to worry about.

#130 blinded on 03.25.13 at 2:20 pm

Russian govt issues strong rec for russian folks and biz to pull all funds from European banks ASAP.

IMFnow says cyprus is plan for other euro banks.

#131 Ralph Cramdown Ⓤ on 03.25.13 at 2:21 pm

#129 Men Who Stare At Sheeple

(and others who talk about, horrors!, lack of reserve requirements)

Don’t confuse reserves which commercial banks need to have on deposit at the Central Bank with reserves which they need to keep for themselves (i.e. can’t lend out, need to keep in the vault, etc.)

Most countries, Canada included, have adopted as regulations the Basel Accords, which regulate bank reserves, lending and investment, risk weighted capital, risk management and controls.

#132 Shawn Allen on 03.25.13 at 2:22 pm

BANK DEPOSITOR HAIRCUTS

This business of haircuts and losses for uninsured large depositors in Cyprus will have repercussions. No disaster for North America at all but it will have some ripple affects.

Anyone in the world with deposits higher than the insured deposit limit is now looking at his bank and considering if it is safe.

This should mean that deposits will be withdrawn from hundreds of weaker banks around the world. Corporations with large cash balances will want to deal with stronger banks and place more of their excess cash into U.S. treasury bills and the treasury bills of other strong countries that issue their own currency.

Banks that get hit with withdrawals will face problems. As has been well documented, banks do not keep most of their deposits around in cash. They loan out most of their deposits. And in many cases they cannot quickly call in those loans.

But they can call in some loans and lines of credit and weak banks will have to do that. So expect many corporations and individuals to scramble for new loans as their existing loans at weaker banks are called in.

Some weak banks will face liquidity problems. If their central banks don’t flood them with cash by lending to them they could be nationalized at best and go bust at worse. Bank shareholders and bondholders would take haircuts if any banks go bust. Depositors in strong countries may or may not be protected at levels above the deposit guarantee level. Generally they will be protected.

We should see:

Lower interest rates, even negative interest rates on treasury bills of the strongest governments.

Lower interest rates on bonds of strong governments.

Higher loan interest rates paid by corporations and weak governments. Possible higher interest rates as weak banks try to retain deposits.

Certain countries with large banking industries catering to offshore business will see that business dry up.

Well, it’s all good entertainment at least.

#133 From Mississauga with Love on 03.25.13 at 2:26 pm

Just received a forward from my real estate agent on interest rates:
5-year fixed at 2.74% (as a matter of fact, the 5-year fixed was lower than the 4-year fixed; what does that mean???)

Here is the text:
“Get your deals in today. No mortgage is too difficult, good credit, low income, self-employed, we have all the answers..”

who said we are more prudent than the Americans? Here it is simply done through the broker channel instead of under a big bank name.

FYI, this is from a well-known Real Estate mortgage broker company in Mississauga. The owner’s son owns the mortgage brokerage firm.

#134 all_we_need_is_mortgage on 03.25.13 at 2:40 pm

It makes corporate profitability, more job growth and higher sales very real. — Garth

Job growth should be supported with the increased consumer consumption to be real. In the 70ties there were consumers who made IT modernization possible: computerization boom precisely coincide with the time when economy based on consumer credit stimulation was introduced. Who is going to finance technological innovations now. Consumers don’t have financial resources anymore – they are tied up, paying out their, still increasing, pile of debt. By that reason corporation won’t invest in innovative spheres. Why they should do that having such an uncertain perspective for their investments. It make more sense for them to buy real assets for those paper like, unsecured money.

#135 RenterSaverInvestor on 03.25.13 at 3:12 pm

“Index funds without constant rebalancing is not a good idea.” — Garth

As another commenter asked above, can you please clarify what you mean by this statement? Specifically, what is “constant rebalancing”? I’ve recently adopted the ‘couch potato’ strategy (70% global equity/30% bonds; rebalancing twice/yr) thinking it was a logical approach – now you’ve made me a bit nervous.

You should be. Index investing carries risk. I cannot comment on the rebalancing procedure you should follow without knowing the funds, the weightings or entry points. Sure hope you have adequate geographic distribution between ETFs, though, plus multi-sector exposure and asset diversification. — Garth

#136 jess on 03.25.13 at 3:21 pm

Senate Unanimously Votes Against Cuts to Social Security: Media Don’t Notice
Dean Baker

Senator Bernie Sanders that puts the Senate on record as opposing the switch to the chained CPI as the basis for the annual Social Security cost of living adjustment (COLA).
http://truth-out.org/news/item/15308-senate-unanimously-votes-against-cuts-to-social-security-media-dont-notice

=

“pay for delay” deals profit the drug companies but harm consumers by adding 3.5 billion annually to their drug bills….

http://truth-out.org/buzzflash/commentary/item/17879-because-big-pharma-pays-off-generic-drug-companies-americans-spend-billions-of-dollars-more-for-prescriptions

#137 My thoughts on 03.25.13 at 3:22 pm

Encountered the rudest agent this weekend. Selling high end homes and just incredibly rude. I look forward to that attitude changing in the future. When they beg you to buy the home instead of this attitude that they have. On my positive side… It keeps us following Garth’s advice and continuing to invest instead of moving out of our paid for house. So I should thank Garth for the double digits returns last year… And the agents who want even present our offers for making us more money. Oh and when those same properties are back on the market next year… Yeah… We will offer even less or not at all because this investing thing is working out quite well.

#138 My thoughts on 03.25.13 at 3:24 pm

Sorry for the spelling.. Stupid iPhone

#139 Richard on 03.25.13 at 3:27 pm

#130 Ronh on 03.25.13 at 1:20 pm

#96 Richard and Zeus

Search the web for the book Mystery of Banking by
Murray Rothbard.
——————————————————-

I have……why do you think Garth will not tell us “where” money comes from. It does not just “appear” from nowhere yet he says Govt does not create it. And Banks do not create it. So who does? I know the answer….just waiting for Garth to give us his explanation and put an end to this…..

#140 Post Haste on 03.25.13 at 3:29 pm

I give up on World News – Garth has balls of steel – didn’t flinch a second on the Cyprus thing – I was thinking this was the domino affect – it just takes 1 piece…

With my luck – I’ll shovel money in the market (in investments Garth has mentioned) and the day after the market will have a meltdown –

You the man G …

#141 Richard on 03.25.13 at 3:31 pm

As hard as it is to believe Canadian banks and many other banks around the world do not need to meet any reserve requirements.

So you are correct!
—————————————————-
Of course they don’t because they know that spineless loser Kanadians will do nothing about it when banks need to bailed out. Which is done by the same spineless loser Kanadians……

I engage in tax evasion and have no problem admitting it knowing the amount of corruption and theft the govt does to me……if everyone one would grow a pair and did this….maybe the govt would do wash itself clean of corruption. But knowing how lazy Kanadians are….I doubt it…..

You have admitted to tax evasion on a public blog, and provided me with your email address, web site, phone number and address. Good thing you sell weapons for a living. — Garth

#142 IM in C on 03.25.13 at 3:34 pm

@145 post haste
I know the feeling !!

#143 Devore on 03.25.13 at 3:38 pm

#129 Men Who Stare At Sheeple

As hard as it is to believe Canadian banks and many other banks around the world do not need to meet any reserve requirements.

Why is this so hard to believe? It’s just a rule, as arbitrary as any other rule. Why does this horrify you so much? What do you understand “no reserve requirements” to mean, and what impact do you believe it has on you or the economy?

#144 Richard on 03.25.13 at 3:41 pm

you do realize that money supply in that calculation is the denominator, and so, since it’s been exploding higher, with the economy going nowhere, that’s why velocity keeps collapsing… your arguments get weaker and weaker all the time.

No velocity. No inflation. It makes corporate profitability, more job growth and higher sales very real. — Garth
—————————————————–
What growth? In China? India? Where most of our crap is made? Mc jobs and Star Buck Jobs and Waljobs are NOT JOBS. And GOVT JOBS sure as hell do not count because they re just sucking money from the taxpayers like leaches…..so WHERE is this “job growth”? Must be hiding with the gnomes that create our money…….

I AM IN the manufacturing business. We manufacture a portion in Canada and a portion in the USA and I can tell you….there is NO JOB GROWTH in manufacturing in Canada right now…..manufacturing and resources are the only REAL jobs. Anything under that…..is service and govt (bridges, road construction, committee this and that, task forces this and that… Harpos ACTION PLAN…..all GOVT jobs which TAKE money from taxpayers and do not create wealth)

The reference was to US job growth. Try to keep up. — Garth

#145 TS on 03.25.13 at 3:51 pm

“As lots of surprised Boomers are now discovering, just buying a house ain’t good enough.”

Yes, so buy another one!

It will be still safer than new age so called ‘invest’ = Invest and regret.

#146 Richard on 03.25.13 at 3:55 pm

Of course they don’t because they know that spineless loser Kanadians will do nothing about it when banks need to bailed out. Which is done by the same spineless loser Kanadians……

I engage in tax evasion and have no problem admitting it knowing the amount of corruption and theft the govt does to me……if everyone one would grow a pair and did this….maybe the govt would do wash itself clean of corruption. But knowing how lazy Kanadians are….I doubt it…..

You have admitted to tax evasion on a public blog, and provided me with your email address, web site, phone number and address. Good thing you sell weapons for a living. — Garth
—————————————————
Unlike Govt at least I’m honest. Are am I? Did I make it up? Or was I just making a theoretical statement?

Kind of like not answering where money comes from….

And interesting you point out on a public blog what I do for a living…because the RCMP raided our shop the other day and left with nothing because the idiots did not even know the laws that they were trying to enforce. They also said we could have certain things which we have licenses and permits for. Going to be interesting to see how they respond to our public complaint……I’ll make sure to post it on a public blog. Your tax dollars hard at work folks….

#147 Richard and Zeus on 03.25.13 at 3:56 pm

I AM IN the manufacturing business. We manufacture a portion in Canada and a portion in the USA and I can tell you….there is NO JOB GROWTH in manufacturing in Canada right now…..manufacturing and resources are the only REAL jobs. Anything under that…..is service and govt (bridges, road construction, committee this and that, task forces this and that… Harpos ACTION PLAN…..all GOVT jobs which TAKE money from taxpayers and do not create wealth)

The reference was to US job growth. Try to keep up. — Garth
———————————————-

Its worse in Kanada…….

#148 espressobob on 03.25.13 at 3:58 pm

#146 Richard

Kudos to you! That is by a nautical mile the most ridiculous comment I’ve ever seen on ‘Garth Turners’ blog.

I only wish to see the look on your face when the CRA gets done with your sorry ass, while the rest of us play by rules. I’m sure many here are tired of paying your fair share!

#149 Yngwie J. Malmsteen's Rising Force on 03.25.13 at 4:08 pm

@123 Prophet Elijah: “I just bought my first home here in Calgary. 405K after talking them down 5K, so good start. It’s close by a school so I assume the value will hold for now before moving up in a few years. Plus I might rent a bedroom in the basement. Le the good times roll!”

Yes in Calgary some starter homes are $400K that should be $180K. This is the new reality. Also new is the idea, buy the house that has the basics, live in it able to not be house poor, and invest a little bit. “Moving up”, right, buy the correct house in the first place.

There is nothing “good times” about a $400K mortgage on a house that in reality is $180K. Small lot, neighbors on top of you, and ridiculous payments. Still this is better than paying off the mortgage of some landlord schmuck, because rent in calgary is the same as a mortgage. Again, long term vs. renting, at what point will renting be more costly? Around 5 years, anything shorter than that, rent.

Housing hell can be summed up: “No way out”http://www.lyricsvip.com/Steeler/No-Way-Out-Lyrics.html

#150 Richard and Zeus on 03.25.13 at 4:09 pm

153 espressobob on 03.25.13 at 3:58 pm

#146 Richard

Kudos to you! That is by a nautical mile the most ridiculous comment I’ve ever seen on ‘Garth Turners’ blog.

I only wish to see the look on your face when the CRA gets done with your sorry ass, while the rest of us play by rules. I’m sure many here are tired of paying your fair share!
————————————————
You can thank Garth for admitting that the small guy pays his fair share and gets the screws put to him by CRA…….while large companies and banks steal billions engaging in theft and murder (HSBC gets a fine for laundering hundreds of billions of cartel money who murder 30 000 mexicans a year. HSBC is in Canada.)

And we don’t engage in tax evasion……I was just making a silly statement. If you want to ask Garth for my email address…..I will happily show you our quarterly remittances….the gun business is doing very well right now……no need to cheat.

Just retreat. — Garth

#151 NOTHING SURPRISES on 03.25.13 at 4:15 pm

Language. — Garth

I do not understand your answer – Language?

My posting contained no inappropriate language.
I would appreciate an explanation.

Your answer reminds me of an answer Flaherty would use.

Contact me by my email if you prefer.

No thanks. — Garth

My posting stated some facts about China and Germany and Gold.

There was absolutely no reason to not post my comments.
If there was, why not explain your language statement.

Now who needs to grow a set ????

#152 Ralph Cramdown Ⓤ on 03.25.13 at 4:16 pm

#142 My thoughts — “And the agents who want even present our offers for making us more money. “

There’s a law about that. Agents have to present all offers. If you’re in Ontario, just tell them you want an executed OREA Form 109 (“Offer presentation – Acknowledgement”). Call the agent’s broker, and if that doesn’t work, call RECO. Or track down the owners and explain to them that their agent is being a dick.

#153 AK on 03.25.13 at 4:34 pm

#133 mayhem in markham on 03.25.13 at 2:07 pm
“did you even read his site? and what it says? he agrees with me 100%

learn to read first, before proving you’re an @ss”
——————————————————————-
Show me where on his site that says “that’s why velocity keeps collapsing…”, or “the economy going nowhere.” Then we will see who the real A$$hole is.

#154 rosie "moving backwards" on 03.25.13 at 4:34 pm

#155

Now sit up straight and pay attention, you rude little boy, or girl, I’m not sure. http://smallbusiness.chron.com/guest-post-blogger-etiquette-27685.html

#155 QuietMan on 03.25.13 at 4:36 pm

From the 2013 budget:

“The Government proposes to implement a ―bail-in‖ regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada.

“Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants. Systemically important banks will continue to be subject to existing risk management requirements, including enhanced supervision and recovery and resolution plans.

“This risk management framework will limit the unfair advantage that could be gained by Canada’s systemically important banks through the mistaken belief by investors and other market participants that these institutions are―too big to fail.

So if you have money in banks, they will use it if they need it.

#156 Real Estate Tsunami on 03.25.13 at 4:55 pm

There are no more greeters at Walmarts in the States.
That’s a more powerful index than the Down Jones.

#157 Richard and Zeus on 03.25.13 at 5:04 pm

So if you have money in banks, they will use it if they need it.
—————————————–
I rest my case….(still waiting for Garth to tell us where money comes from).

(From the central bank). — Garth

#158 Gary M on 03.25.13 at 5:05 pm

Sure hope you have adequate geographic distribution between ETFs, though, plus multi-sector exposure and asset diversification. — Garth

———————————————————

How’s this for diversification in my bond portfolio:

40% Greek Sovereign Debt
25% Detroit Municipal Bonds
15% Cypriot Bank Preferreds
20% California Bonds (Tranche D)

If this returns anything less than 7%, I’d probably diversify into Zimbabwean “growth” equities.

#159 not 1st on 03.25.13 at 5:14 pm

#123 The Prophet Elijah

Congrats, you just bought at the top of the market. Before you bought you should have asked someone in the patch about the recent layoffs and the $40 discount Canadian crude is selling to the world price.

#160 Axxman on 03.25.13 at 5:19 pm

#160 Quiet Man – see my post a couple of days ago about “bail-in” regimes. While I agree the vague wording in the budget is concerning if you’re not up on this stuff (and who really wants to be an expert in bank resolution regimes!?!), it’s about orderly resolution – ensuring those who should take the hit, actually do take the hit before depositors are impacted. If you are concerned that banks/governments/aliens might get their hands on your money, there are some neat tricks you can do to get even more than the $100,000 CDIC coverage while still keeping your money in one bank. Read up on CDIC and you’ll see how to do that. Short answer – I’m a covered depositor, my wife is a covered depositor, and me and my wife jointly are a covered depositor. So we have $300,000 coverage between two of us. Trust accounts in my name for each of my kids are also covered as individual/distinct depositors.

#161 espressobob on 03.25.13 at 5:42 pm

#146 Richard & Zeus

That was convincing? Like maybe we should tell our governments to bite it?

Fortunately We live in a country full of opportunity for those willing to bust their butts.

Paying taxes is part of our system, think of it what you will. Be thankfull you live here!

#162 mayhem in markham on 03.25.13 at 5:52 pm

Show me where on his site that says “that’s why velocity keeps collapsing…”, or “the economy going nowhere.” Then we will see who the real A$$hole is.
________________________________________

maybe you can click on the link that says… “velocity of money”, which has been collapsing since 1998. or maybe you can take a look at the charts from the St. Louis FEd (http://research.stlouisfed.org/fred2/categories/32242) clearly showing money velocity collapsing…

or read the section on “the actual money supply”, and i quote:

“When the money supply increases (inflation) money loses value (prices rise). ”

or the section on “inflation” stating:

“The average annual inflation rate for the eight years from 2000 to 2007 is 8.20% and the inflation rate for 2007 is 7.92%. The average year-over-year inflation rate for the first five months of 2008 is 8.51%. The year-over-year inflation rate for May 2008 is 8.10%. So, as you can see, the money supply is still increasing.”

but going back to the original equation:

velocity = GNP / Money supply

since velocity is collapsing, (clearly shown by the St. Louis fed charts, and the Cranberry dude) , that means that

i. the numerator is falling, or
ii. the denominator is rising.

it’s obvious, the money supply, (denominator) is skyrocketing, hence, the collapse in velocity.

best of luck

#163 jess on 03.25.13 at 6:06 pm

bitcoins /virtual currencies
The U.S. is applying money-laundering rules to “virtual currencies,”

#164 Tom Vu on 03.25.13 at 6:08 pm

Some one intercepting my e-mails and putting on e-bay…

#165 Shawn Allen on 03.25.13 at 6:09 pm

WHERE MONEY COMES FROM? WHO CARES?

Look, you need to understand the mechanics of money creation at the country level to about the same extent as you need to truly understand how electricity works, how gravity works, how memory works, how digestion works. Which is to say NOT AT ALL.

Just get out of your basements and make money and invest money. Understand, money is very useful. Now go get some. (And when you do, deposit it in a real Canadian bank for a little bit but then invest any excess).

Do not deposit your money off-shore to avoid income taxes or get a few extra percentage points. Almost all off-shore investment schemes are frauds at worse and aid and abet tax evasion at best. Avoid especially any that get you riled up about paying income taxes.

(Ironically written from MY basement, but at least it’s not my Mom’s basement and I am on a day off today.)

#166 Bob Copeland on 03.25.13 at 6:19 pm

Oh, you mean like you buying a house with $100,000 down and a $500,000 mortgage? Does that mean you will have a financial disaster? — Garth

Wow. Great point!

#167 TurnerNation on 03.25.13 at 6:43 pm

Globe says TSX’s gold index down by a third in 2 years

The Globe and Mail reports in its Monday edition that despite a small uptick last week due to Cyprus jitters, the price of gold has been heading south in fits and starts since hitting a record near $1,900 an ounce in September, 2011. The Globe’s Martin Mittelstaedt writes gold-mining shares have been just about the worst investment on the stock market, with the Toronto Stock Exchange’s global gold index losing about a third of its value over the past two years. Being a gold bug has clearly become a painful exercise and investors are responding accordingly by yanking money from the sector. Holdings in the world’s biggest bullion-backed fund, the SPDR Gold Trust, have recently fallen to their lowest since mid-2011. Big-name investors, such as hedge fund operator George Soros, have been bailing from gold, too. Amid the despondency, John Hathaway, who runs the $1.8-billion Tocqueville Gold Fund, remains optimistic, arguing that the current downturn is just a pause that will refresh the long-term gold bull market. “If anything, it looks better than ever,” says Mr. Hathaway of the outlook. The negative mood, in his opinion, is “usually what happens before you make a big low.” He has a history of prescient timing.

© 2013 Canjex Publishing Ltd.

#168 ChickenLittle on 03.25.13 at 6:44 pm

There are no promises or guarantees, just track records and the application of non-emotional logic. — Garth

And A LOT less mascara!

#169 Macrath on 03.25.13 at 6:49 pm

Re: #146 Richard
Sure hope you have adequate geographic distribution between ETFs, though, plus multi-sector exposure and asset diversification. — Garth

Thanks for the clarification Garth.

A broad market index would have a beta of 1 = (the market) and other sectors or investments can have lower beta thus less volatile than the market (?)

#170 HAWK on 03.25.13 at 7:08 pm

#111 afraidit allmightend on 03.25.13 at 9:49 am

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

Agree with much of your post about the curse of “Big Government” in Canada, but the idea that Canadian Cities are way more dangerous than America is laughable………no American I have met, thinks that, leave alone Canadians.

#171 Smoking Man on 03.25.13 at 7:20 pm

Another 400 bucks today 2 trades on Forex….lalalala

Now made a rule only going to trade 2 units this week, but the gambler in my is saying screw it smoky..up it to 10 and add a zero to the the PNL.

If it wasent my own loot, I would go 100 units….

What to DO…….

Vlad hope all is good. hope your not gone for to long. I do no that with the links you have been posting your on the list…..

Good news I’m much higher on the shit list than you…

Screw the Machine if they can’t take a joke…..

#172 Shawn Allen on 03.25.13 at 7:27 pm

STOP THE NONSENSE

Humble at 103 said: “I would be more bullish if that bond money was moving into equity markets.”

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

No matter who says it or how many times they say it, this notion that investors as a population can move money from one asset class to another is pure nonsense.

If I sell bonds to buy equities, someone else has to buy the bonds. Not net money has moved to equities.

What CAN happen is the market can push bond prices down (causing bond earth to evaporate into thin air) and Equity investors can push stock prices up causing stock wealth to increase from thin air. But no net money, not a dime, has MOVED from one market to the other in this process. As we saw in 2008 both markets can go down at the same time too. Or as in 2009, 2010, 2011, 2012, both markets can rise together.

Investors as a population are powerless to move net money from one market to another by trading with each other.

The corporations are more in control of how much new money flows to bonds or stocks when they issue NEW stocks or NEW bonds or buy back shares or allow bonds to mature and pay them off without borrowing on a new bond. That happens in the primary market. In the secondary market investors trade with each other (not the issuing corporations) and no net money flows from one market to another.

Talk of funds flow is nonsense too. So what if money flows into equity mutual funds? The only way it is getting into actual equities is if another investor sells shares. Net new money into equities in the process equals a big fat zero. (I will exclude IPOs here).

And THAT is the math of it.

#173 45north on 03.25.13 at 7:29 pm

Jo in TO: What do you think of a renter in downtown TO buying an average priced house in Hamilton and commuting to TO for work?

commute as in drive? A young person could do it for a year if he had to. The driving just wears on you – day after day, traffic, stress. Oh yeah and gas and car maintenance. How do you get to work when you take your car to the dealer?

if your work in TO is close to the GO train you could live in Burlington and take the GO train. What’s a monthly pass?

and what are you doing a work? If you are advancing your career, putting in an extra effort the last thing you need is 3 hours of commuting a day.

#174 Shawn Allen on 03.25.13 at 7:33 pm

SMOKING MAN

FX is a good way to lose money. Why bother investing ins a game where most players make money (stocks)? Money flows from the customers of the businesses to the owners. That’s no way to lose money in the long term.

Better to play FX like you which is a zero sum game before fees and negative after fees. It’s mathematical fact that the average investor in FX must lose money. That’s the way to lose money. And fast.

Lots of people think stocks are a zero sum game. They are dead wrong and will seldom end up wealthy with that kind of thinking. So be it.

#175 Men Who Stare At Sheeple on 03.25.13 at 7:39 pm

#148 Devore

First off nothing horrifies me! I understand that the world is being manipulated and played by the global central banking cartel!

Secondly, what impact would this have on me and the economy? I don’t know maybe taxpayer funded bank bailouts would be a start! http://money.cnn.com/news/specials/storysupplement/bankbailout/ and this is only the tip of the iceberg!

But we’re in Canada you say, it’s different here! We’re Canadian Eh! Our banks were more prudent! Canada has stricter bank regulations! yada, yada yada……… For the last 5 years Canadians have been sold a steady stream of government, bank and MSM propaganda! Do you really believe that all of the debt that Canadians have accumulated will bode well for the Canadian economy? Job loses and mortgage/loan defaults is the true indicator of the economy, not the stock markets. But as long as people’s stock portfolios are doing fine everything is A-okay and we are back on the road to recovery. Don’t be fooled! Thing are not as they seem!

Back in 2005 Bernake claimed that the US did not have a housing bubble. http://www.washingtonpost.com/wp-dyn/content/article/2005/10/26/AR2005102602255.html. What happened three year later? POP! With devastating consequences for the economy! The Fed policies have literally decimated the middle class! With 50 million Americans now on food stamps!

And now the people are expected to believe in the Fed, government and media recovery stories? How gullible can people be? I guess people will believe anything that the government and MSM report! Just keep swallowing the banker, government and M$M kool-aid and everything will be alright!

I think people like yourself, Shawn and Ralph are giving the bankers and the banks way to much credit. Pardon the pun!

But I guess time will tell! We will soon see how rock solid our Canadian banks really are!

#176 AK on 03.25.13 at 7:54 pm

#167 mayhem in markham on 03.25.13 at 5:52 pm
“or the section on “inflation” stating:

“The average annual inflation rate for the eight years from 2000 to 2007 is 8.20% and the inflation rate for 2007 is 7.92%. The average year-over-year inflation rate for the first five months of 2008 is 8.51%. The year-over-year inflation rate for May 2008 is 8.10%. So, as you can see, the money supply is still increasing.”
——————————————————————–
I am not arguing the inflation issue at all. I know it’s manipulated.
My point is that I don’t believe the Money Supply is causing any issues.
The economy(U.S) is in a much better state today than it was back in 2008.
The world has come a long way since the GFC of 2008 and I believe that we will survive and prosper.
Having said that, I am also from Markham. We may even be neighbours. :-)

#177 Macrath on 03.25.13 at 8:04 pm

That should have been re: #140 RenterSaverInvestor

I think there is an enhanced couch potato, some core indexes and satellite investments. I don`t think auto pilot is a good strategy. You have to stay focused and involved with your investments.

#178 Richard and Zeus on 03.25.13 at 8:04 pm

#146 Richard & Zeus

That was convincing? Like maybe we should tell our governments to bite it?

Fortunately We live in a country full of opportunity for those willing to bust their butts.

Paying taxes is part of our system, think of it what you will. Be thankfull you live here!
————————————————-
Believe me I do……..why do you think we go out of our way to manufacture here rather than lulu whore or crocwhore or Arctyrex whore ourselves out to China…..

#179 Richard and Zeus on 03.25.13 at 8:07 pm

#162 Richard and Zeus on 03.25.13 at 5:04 pm

So if you have money in banks, they will use it if they need it.
—————————————–
I rest my case….(still waiting for Garth to tell us where money comes from).

(From the central bank). — Garth
———————————————–
So if the Central Bank of Canada…..creates money out of nothing (using debt instruments or WHATEVER)…..why do we as taxpayers…..have to pay interest? Especially when the BOC is OWNED by Canadians? We are taxed….so we can pay interest…..to ourselves? How stupid is that?

#180 Smoking Man on 03.25.13 at 8:10 pm

This post dedicated to Vlad

2 days prior to 911, 2 trillion went missing from pentagon, fast forward today, Department of Homeland security arming to the teeth, Why? Perhaps the herd finally knows what’s going on

Years ago when us conspiracy theorist talked it was private machine didn’t know, now every key stroke and call is recorded and algos try and flag things of interest.

I saw this coming years ago, as I always do, that’s why I invented.

http://www.keys me.org

The machines algos go wtf? 90% of the downloads are from Russia, no idea why.

Now a good conspiracy theorist would speculate that I work for the machine, I would, but I don’t yet, but for the right price, I would switch teams, I’m a business man…….

But if any of you dogs have a copy, here is a secret message, the pin number to read 12345

123.339122.677122.983122.946122.860123.068122.677122.897122.872123.093122.995123.019122.958123.044122.677122.946122.958122.677122.934122.872122.897122.897122.824

#181 Devore on 03.25.13 at 8:52 pm

#180 Men Who Stare At Sheeple

I think people like yourself, Shawn and Ralph are giving the bankers and the banks way to much credit. Pardon the pun!

I didn’t mean to put words in your mouth, was just asking a question. Sometimes it’s hard to tell the difference.

I’m also not giving anyone any credit.

So how is 0% reserve from 3% or even 10%? If US banks had a 20% or 50% reserve, none of them would need a bailout and this whole mess could have been avoided?

Banks already carry reserves to cover their operations (how much? do you know?), and have various regulations governing their capitalization and lending, which are probably as effective as reserve requirements.

Is it a bank run? What would people do with all their money, go deposit it to another bank across the street?

There are only about $60B worth of bills in circulation. Much of it in cash registers and people’s wallets. That is not a lot of money. Less than $2000 per person. We’d run out of paper money pretty quickly.

So my question is then, once you go down the fractional reserve bank route, what roles do bank reserves play that cannot be accomplished some other way, and that is not irrelevant in a case where it matters anyways?

Finally, how does it matter to you, and shape your behaviour and choices?

#182 TurnerNation on 03.25.13 at 8:56 pm

111 afraidit allmightend

I’ve never seen so many newer BMWs/Mercedes/ Audis near downtown Toronto. Where I live on King West strip, the Downtown, and eastwards even along Queen E.
Of 40 co-workers of mine 8 own these marques.

Marks? Richer than they think?

#183 bill on 03.25.13 at 8:57 pm

on richard and zeus’s website it says :
‘Government inquiries are also welcome”
it looks like richard and zeus dont want to pay the government any taxes but dont mind taking money from them…

#184 TurnerNation on 03.25.13 at 8:59 pm

125 Herb

Your leftist leanings are affecting your spine.

#185 Ottawa Fisher on 03.25.13 at 9:21 pm

Prices will not fall because people cannot afford to sell for less. Most people would rather walk away then face a loss. But you cannot walk away in kanada without a bankruptcy. This leads to wage garnishes which makes you unemployable. You cannot even get a loan at this point to go back to school. In Ottawa there are layoffs like I have never seen and no Nortel to take people in this time. How many mortgage payments can be missed before they take the house away. And who pays for the damages at this point. The saving grace is that there are alot of old people leaving the work force and not selling their homes. Even rent in Ottawa is way too high for someone living on hourly wages. There is no industry here and no resources. If you don’t work for the government you work servicing for their wages or housing. The rest of kanada can expect an exodus of Ottawans. But you never know.

#186 Macrath on 03.25.13 at 9:49 pm

#185 Smoking Man

apply here
http://www.csiscareers.ca/en

Maybe Vlad just has a bad case of carpal tunnel form too many hours on the internet.

#187 mic on 03.26.13 at 3:24 am

What about the long term viability of Canadian Brokerage Houses?.

Some of their capital ratios(capital to Debt) are not pretty. If you ask the friendly brokerage rep on telephone, you won’t get a straight answer.

Long Term Capital Management(LTCM) in 1998, Sentinel, Lehman Bros and others,,. So far they all have been bailed out by the US Gov.

What will Canada do if there is a brankruptcy of one of these Canadian discount brokerages?. mic

#188 jess on 03.26.13 at 4:52 pm

..”On November 16, 2009 Sergei Magnitsky, a partner of the legal company Firestone Duncan, who was a representative and legal consultant for William Browder in Moscow, having been accused in tax fraud and imprisoned for 11 months, died in prison. In 2013 it was announced that Magnitsky will go on trial posthumously.” (wiki)
=========
By Tom Parfitt, Moscow
5:58PM GMT 22 Mar 2013

Sergei Magnitsky trial: ‘it’s not illegal to try a dead man’, says judge
A Moscow judge has refused calls to halt the posthumous prosecution of Sergei Magnitsky, ruling on the first day of the trial that it was not illegal to try a dead defendant
http://www.telegraph.co.uk/news/worldnews/europe/russia/9948961/Sergei-Magnitsky-trial-its-not-illegal-to-try-a-dead-man-says-judge.html

…is this the precedant?
Formosus (c. 816–896) was Pope of the Catholic Church from 891 to 896. His brief reign as Pope was troubled, and his remains were exhumed and put on trial in the notorious Cadaver Synod.
http://en.wikipedia.org/wiki/Pope_Formosus

#189 jess on 03.26.13 at 5:29 pm

swap/ switches?

http://www.huffingtonpost.com/janet-tavakoli/greece-and-credit-default_b_1318338.html