Of men & bonds

girl1

Days ago I told you that five-year, fixed rate closed bank mortgages would be going up. That’s just happened. The hike ain’t much – about a tenth of a point – but rest assured there’s more to come. You can imagine the result, coming as this does during the biggest real estate slow-walking event since we all nearly croaked in 2009.

This has nothing to do with the Bank of Canada. However, dudes Poloz and Carney made it clear this week the next rate move by the Big Bank will be up, not down. That may not happen for a year (at the outside), but when it does, those people left with variable-rate loans will wish they’d spent less time watching Global.

That this would occur was never in doubt. First, the feds are appalled at the debt orgy which their low rates unleashed. The notion of conservative little beavers eschewing carnal pleasures so they could store their nuts (I’m now strangely aroused) was always at the core of monetary policy. These guys actually thought families would employ the cheapest money ever to pay off high-rate debt, or trash mortgages.

Instead, we’ve pigged out on the stuff. The credit bubble is now way more worrisome than the housing bubble, simply because it takes a lot longer to get out of debt than sell a house. And households devoting more and more of their income to servicing loans have less to spend on important things, like cheap TVs from China and Korean Imitation Automobiles. So the more credit’s extended, the longer the GDP numbers will suck.

So, the Bank of Canada will never lower its rate. Period.

However, this has nothing to do with five-year mortgages sprouting. For that, blame bonds. As mentioned earlier this week, US 10-year Treasuries (the global benchmark bonds) are having the worst time in two years with prices falling and yields spiking to 2013 highs. The same is happening in Canada. The 5-year GoC bond yield has pushed through a three-month high, and is up about a third of a point.

Why? Because of the stuff I’ve just detailed (which doomers hate me for). The US economy is steadily resurging; equity markets have been on a tear; the American housing market is making a sustained comeback; and investors are no longer happy hiding their cash in bonds where yields are lower than Mike Duffy’s credibility. So heaps of money are moving out of bonds and into stocks. As the world improves, appetite for risk (and return) grows.

To hold bonds, conversely, investors demand higher yields. So, up they go.

This is not a temporary event. Of course, yields and prices will fluctuate continuously (like stock markets), but the trends are clear. America recovers. Corporate profits satisfy. Global growth staggers back. Consumers spend more. The storm abates. Equities rise. Bonds fall.

And because banks finance five-year mortgages with five-year bonds, there’ll be a steady drum beat of little rate hikes over the months to come. Nothing dramatic. But the outcome is clear. Come August you will really, really, really wish you’d listed that condo in April.

Speaking of market timing and death by home, let’s revisit GTA-area realtor Ross Kay, whose bold prediction that house horniness has just died got a lot of people excited. You may recall that he has a ‘real estate engagement’ index that pinpointed May 19th as the day the market expired, and that interest has now declined 73% from its peak last April.

If he’s correct (and he claims a 200% five-year record of accuracy), this will show up in MLS sales number in July and August. You can just imagine the impact that will have on an already-wobbly situation. It’d undoubtedly set the scene for a dive in prices.

But what is the ‘engagement’ index? “Here’s a partial list,” he tells me. “It includes an inventory of homes for sale, open house attendance, home showing statistics, MLS (online) listing views, national media headlines, plus blog traffic.”

“My only interest in going public with the index was because I had to assist clients through the 1990 to 1995 market after the great run of the late 80’s.  It is a learning experience when a grown man is crying at a kitchen table and all you can do is save his family from losing another $10,000 if he waits another month.

“Today after 13 years of good market and the rash influx of the majority of real estate agents, who have no experience going from a runaway market to an absolute collapse, there is simply too much unethical advice being spouted by groups/individuals that Canadians believe protecting them.”

As this blog has shown many times, real estate boards lie. They revise sales stats without disclosure, for example, then create Frankenumbers to mask market changes. Corporate media outlets are untrustworthy. They do little research or fact-checking, and run ads as editorial. Banks deceive. They tell borrowers how to miss mortgage payments then punish them, and create false ads. Is it any wonder people are cynical?

“Interesting aside.” Adds Kay. “I was shocked to see the number of views coming from IPs attached to financial services corporations viewing my site in the last 24 hours.  It appears any claims the industry does not read Greater Fool are unsubstantiated as you were the first place the index was ever publicly released.”

Don’t say that. Makes me feel so… mainstream. Yuck.

160 comments ↓

#1 dave on 05.30.13 at 8:18 pm

Are Mike Duffy and Rob Ford twins?

#2 Randy on 05.30.13 at 8:22 pm

Canada….More Socialist than I thought !!

#3 TurnerNation on 05.30.13 at 8:23 pm

Who’s in the pic?

#4 Interested on 05.30.13 at 8:25 pm

Can’t wait to see the Hocus Pocus Index for the lower mainland in a couple of days.

#5 George on 05.30.13 at 8:30 pm

The amount of insurance that Canada Mortgage and Housing Corp. is selling has fallen dramatically, a sign that the federal government is succeeding in its efforts to reduce taxpayer exposure to the residential real estate market.

Ottawa’s retreat from mortgage market sends CMHC insurance sales tumbling

#6 Mocha on 05.30.13 at 8:39 pm

They usually wear black when they are feeling self conscious.

And Garth, you’re not mainstream just yet. My Mom and all of her friends strongly dislike you :)

My Dad likes you though. He’s the one that guided me to this site originally.

#7 TurnerNation on 05.30.13 at 8:43 pm

Well I don’t know if any blog dogs were at the ‘Duke’ past two nites for their annual BBQ & cover band. Perfect patio weather.
Even Garth would be welcomed – for a drink with us Proles.

(Has he much choice after ‘Suits’, and ‘Stocks’ both banned cowboy boots (“Our Floors!”)?)

“Yer hard sol’d boots n’er welcome here;
Scuff’d our marble floors so dear.”

#8 Kessel on 05.30.13 at 8:44 pm

According to Ed Yardeni the Fed may peg the 10 year bond at 2% Another tool the fed ha to keep rates low.

#9 CantRememberMyName on 05.30.13 at 8:45 pm

Nice Pic. Humma Mumma come to Daddy. :) People are idiots. Those who want to get it, get it. Those who don’t, ce la vie. Free country the last time I checked… Who cares who lives and who dies? Whatever. God gave everyone a brain. You don’t want to use it then your gain or loss. Have a great weekend.

Do you write bumper stickers? — Garth

#10 K on 05.30.13 at 8:46 pm

Hey Garth Not so strange ! Beavers and nuts ! I know…I know ! Keep it comin’ !

#11 T.O. & GTA bidding wars debunked May 30 on 05.30.13 at 8:48 pm

http://recharts.blogspot.ca/2013/05/to-sfh-bidding-wars-debunked-may-30.html

http://recharts.blogspot.ca/2013/05/gta-sfh-bidding-wars-debunked-may-30.html

#12 brunette on 05.30.13 at 8:49 pm

Coming from a woman, Kate Beckinsale is just beautiful!!

#13 A Nightmare on Bay Street on 05.30.13 at 8:50 pm

Im affraid there been enough talking on the coming correction and that all the people who could change or at least tweak there mindset already had.

The people who are heavily exposed to a major correction and who still sip their koolaid in their spa just cannot be reached. They are out of distance, somewhere between the moon and their own self-projection of a successful, genius buisiness man. Its over for them. You cant talk em out of their beliefs. Its similar to a religious debate at this point.

Its over. The game is already played.

You, Garth and several readers like us tried to bring some reality into the incredibly biased discussions around tables with our friends and family. Its enough now. For me it is.

I wont feel guilty. I told my friends the best arguments I could possibly bring.

Its already 5 past midnight.

#14 brunette on 05.30.13 at 8:53 pm

not Elizabeth Hurley….who the picture is of.

#15 Gladiator on 05.30.13 at 8:55 pm

Ewww, Garth, you are becoming so un-contrarian… Mainstream, that is, as you mentioned.
That’s gross.

#16 Grantmi on 05.30.13 at 8:56 pm

#1 dave on 05.30.13 at 8:18 pm

Are Mike Duffy and Rob Ford twins?

No! Just Tweedle Ford & Tweedle Duffy!

http://bit.ly/18AvAtZ

#17 prairie dog on 05.30.13 at 8:57 pm

Banks are still giving good deals on mortgages Garth, you need only ask.

I just completed an early renewal today with Scotia. 5 year fixed @2.79%. Apparently 2.74 and even 2.69 is still being offered but I was pleased enough with 2.79 and didnt try pushing any further than that.

http://www.ratehub.ca/
http://www.ratesupermarket.ca/mortgages/

I really appreciate this blog by the way. I had been making huge pre-payments on the mortgage but now I am going to try to fatten up the kids RESPs and our TFSAs (which are self-directed). Mortgage will still be paid off in around 10 years but I feel it will be better to be more diversified with other investments.

Garth, I would love to see what your top 10 or 20 stock picks would be (though I know you don’t care for individual stocks). Top 10 favorite ETFs, preferreds, REITs, etc.?

#18 Mocha on 05.30.13 at 8:57 pm

@#3

Looks a like elizibeth hurley.

#19 Real Estate Engagement Index- I would love to be able to compile something like that on 05.30.13 at 8:59 pm

“It includes an inventory of homes for sale, open house attendance, home showing statistics, MLS (online) listing views, national media headlines, plus blog traffic.”

Guys if you have ideas about what could be included in such a index I would love to make it publicly available on a daily basis on my blog (unless Ross agrees to publish his)

That seems to be an interesting idea although I have no clue how the traffic of a single blog becomes relevant

Actually there is way to measure many sites:

http://www.alexa.com/siteinfo/realtor.ca

http://www.alexa.com/siteinfo/greaterfool.ca

http://www.alexa.com/siteinfo/zoocasa.com

Please if you have ideas like the above post them in the wish list of my site (recharts.blogspot.ca) and I will try collect and publish the information. This is really a new angle. Thanks Ross and Garth

#20 Nemesis on 05.30.13 at 9:00 pm

Spectacular LeaderIllustration… outstanding prose.

Don’t you just love the English.

Thank you, OldPol.

PS – That CheekyChappy’s gesticulations didn’t really have anything to do the fabled GreatRotation out of bonds did it?

#21 blade on 05.30.13 at 9:01 pm

kessel,

the fed can peg it at 2% all it likes, but they won’t have anyone to sell treasuries to, except itself. by the end of the year, tapering off buying its own bonds will be in full effect, and rates will be 100 basis points higher.

#22 Gladiator on 05.30.13 at 9:02 pm

That is not a pic of a famous woman. Yes, she’s aging well, but she’s not famous.

#23 Fried chicken on 05.30.13 at 9:02 pm

Nice pic *motor boat* bbbbbbbbbrrrrrrr

#24 Patient in Richmond on 05.30.13 at 9:11 pm

advice from my aging friend given to me about 30 years ago : ” No matter how hot the woman, somewhere in the world there is a guy tired of sleeping with her ……”

#25 blokexistentialist on 05.30.13 at 9:13 pm

From wing nut to mainstream: Garth Turner.
From mainstream to wing nut: Toronto’s mayor.
Why do Americans think we’re boring?

#26 The Affluent Boomer™ on 05.30.13 at 9:14 pm

While many realtors have no clue what is really happening and just trust the Real Estate Boards and their firms for guidance for what to say, many seasoned realtors that have gone through a market correction and fully understands the tipping point we are at will be in big demand helping their clients sell their homes for top dollar in a slowing market. Their clients will be grateful for their insight and advice.

#27 CantRememberMyName on 05.30.13 at 9:14 pm

“Do you write bumper stickers? — Garth”

No one has given me the opportunity yet. :)

#28 Of men & bonds — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate – The Affluent Boomer on 05.30.13 at 9:15 pm

[…] via Of men & bonds — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Est…. […]

#29 Real Estate Engagement Index- I would love to be able to compile something like that on 05.30.13 at 9:15 pm

Yet another indicator to include in that index

http://www.google.ca/trends/explore#q=real%20estate&geo=CA&cmpt=q

#30 T.O. Bubble Boy on 05.30.13 at 9:16 pm

@ #5 George on 05.30.13 at 8:30 pm
The amount of insurance that Canada Mortgage and Housing Corp. is selling has fallen dramatically, a sign that the federal government is succeeding in its efforts to reduce taxpayer exposure to the residential real estate market.

Ottawa’s retreat from mortgage market sends CMHC insurance sales tumbling
_________________________________

Let’s be clear here… the CMHC is still very close to the ceiling of $600B of mortgage insurance. Yes, they are selling less new insurance, but the amount of insurance outstanding is about where it has been for the past several months.

#31 Real Estate Engagement Index- I would love to be able to compile something like that on 05.30.13 at 9:17 pm

Sorry for kind of spamming Garth but I could not resist,check this out

http://www.google.ca/trends/explore#q=kijiji%20condos&geo=CA&cmpt=q

#32 Pr on 05.30.13 at 9:18 pm

…, real estate boards lie…

Real estate board protects their own jobs. I am so glad their is a place, where millions, can see their lies.

#33 Dean Mason on 05.30.13 at 9:20 pm

So I guess savers will be back in the deposit money in a bank and get 10% days. Wait,this is not 1992 it’s 2013 we still have 2.50% GIC’s.All this talk of rising bond yields, longer term interest rates in the last 3 weeks is a big hype.

Rates are still at at crappy at time lows.So what is a 5 year mortgage goes to 3.50% or 3.75% it’s still ridiculous. The only thing there in government bonds that reached above 4.00% is a strip bond Quebec Hydro 2035,Feb-15 $41.97 4.04% yield.This happened 15 months ago and then July-2012 hit with record low bond yields again.Big deal.

#34 blokexistentialist on 05.30.13 at 9:21 pm

… and great — but most especially GUTSY — writing today considering a beaver recently killed a man. Still wondering if it was a boy beaver or a girl beaver.

#35 CantRememberMyName on 05.30.13 at 9:23 pm

You know, everyone has their own destiny. The world needs suckers and smoking men. It is not our responsibility to help others. There is no law that we need to do that. This isn’t Seinfeld with the “good samaritan law”. I want all these people who don’t know that they are screwed to get screwed. Wish we could fast forward 5 years but unfortunately we will have to go in slow mo… this blog will guide us. I rent. I don’t want to own another piece of property as long as I live. 95 to 11 was enough. No car either. Thinking about a CLS 65 AMG V12 Bi-Turbo but staying away from the car porn. That car’s hotter than the chick in the pic. But maybe not as warm though :)

#36 East Van on 05.30.13 at 9:44 pm

http://www.condopedia.com/wiki/Category:Buildings_in_Vancouver

#37 george soros on 05.30.13 at 9:45 pm

The 17% correction seen in the Nikkei in the last week alone, looks likely in the coming months in other markets which are increasingly being driven by liquidity, debt and margined speculation rather than value investing.
if this news eventuallly makes its way to the dow,S&P500 etc…
i wouldn’t even be surprised ,perhaps a precursor for the rest of the world .If printing money aint working there it aint gonna work here either but of course none of this really matters lets all just jump in to the stock markets here …….NOT

#38 Quebec is Great on 05.30.13 at 9:59 pm

Wow, haven’t found any racist jibes or poorly spelled doomer comments yet for todays post… perhaps they have all given up and left. :) Good riddance, I say!

Thank you for the blog Garth, it has been a great education.

#39 Sideline Sitter on 05.30.13 at 10:01 pm

I especially love the quote that the rash of new agents are spouting bad/unethical advice… people love to hate real estate agents, but that’s because they’ve only dealt with the bad ones.

One poster here has a blog and they said that a crash has NEVER happened overnight – to which I brought to his attention 1991 when rates went from 11% to 16% OVERNIGHT – what do you think that did to the market?

Now, I’m in my mid 30s so I was just a teenager then – but I come from family of Real Estate developers/brokers so I lived through that hell, and I remember (I especially remember thinking I am never going into R.E.)

My family is still in R.E. – my brother has been a broker for over 25 years (he’s older than I) and he has told me to wait… hopefully, this is the turn of the tide we’ve been waiting for.

#40 Yellow Rox Rock on 05.30.13 at 10:05 pm

Garth quote of the day : “Banks deceive.”

You’re right on the money regarding west coast media being bush league. Watching the awkard banter between the female and male anchors on Global tonight was painful.

#41 Piccaso on 05.30.13 at 10:07 pm

Something debt dogs might want to note is that bond yields are up 31 basis points over the past 4 weeks and 14 bps in the last two days alone.

http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us

For a little history comparison, in my mortgage era the average rate was 8.5 to 12%

In my father’s era (who’s 90 years old) it was 6.5%

So you can see this 2.5% isn’t the norm.

#42 Millionaire Machinist on 05.30.13 at 10:10 pm

Yuk! That girl looks just about as “authentic” as current real-estate prices….You NEVER want to go for girls looking like that. The shy-looking one in the back of the room though….Yeeee Hawww!!!

@35, get the CLS 65 AMG, MUCH warmer, I’m sure, at least you get heated seats for those cold nights which is more than you can expect from that chick!

#43 Piccaso on 05.30.13 at 10:16 pm

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#44 rosie "moving forward" on 05.30.13 at 10:20 pm

Hey, financial institutions reading this blog. Nothing to worry about. We’ve got your back. http://www.toobighasfailed.org/wp-content/uploads/2013/05/roubini-quote-too-big-to-fail.png

#45 Walter Safety on 05.30.13 at 10:26 pm

Speaking of bumper stickers saw one today- girl in a pickup truck.

“Are you going to cowboy up or just lie there and bleed”?

#46 An Enlightener on 05.30.13 at 10:28 pm

It is indeed Elizabeth Hurley in the photo; more photos from the set can be seen here: http://hq-celebrity.com/elizabeth-hurley-has-seen-better-days/

I found this by using http://tineye.com/ (created by a Toronto company). Any time you see a photo and wonder about it, there’s a good chance that TinEye will be able to find its location(s) on the Web for you (even if the photo’s been cropped or otherwise altered).

#47 Piccaso on 05.30.13 at 10:32 pm

#41 Piccaso on 05.30.13 at 10:16 pm
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DELETED AGAIN

#48 Ralph Cramdown on 05.30.13 at 10:32 pm

JAWBONING

The BoC has been threatening higher rates, in a finger-wagging sort of way, for what seems like eons. Inflation, however, is outside of their target range on the LOW side, unemployment remains stubbornly high in almost every province, manufacturing exports suck, and if US oil production coupled with a bumper corn crop keep a lid on energy and food, inflation could start to print negative. The new Governor is the old export hand, so he knows what a high dollar does. If the stock market burps, people will go right back into bonds. And what are the chances that it won’t sooner or later?

#49 Basil Fawlty on 05.30.13 at 10:35 pm

Garth in regards to your ongoing assertion that the US is on the mend, allow me to present the following figures.
Per the World Bank, from 2001 to 2011 the US % of world economic activity shrunk from 31.8 to 21.6%,
Since 2001 56,000 US manufacturing facilities have closed.
Per the Economic Policy Institute, the US is losing 500,000 jobs to China annually.
Finally, in Miami 45% of children live in poverty.
Does this make me a hater?

Just a typical Canadian. — Garth

#50 David W on 05.30.13 at 10:37 pm

Isn’t S.H. a big supporter of Ford and didn’t the two of them go on a fishing trip together? Makes me wonder if fishing is all they did…(sniff sniff).

Seems like everything conservative is toxic, corrupt ans deceitful. Seems like the cons are living up to their name, “criminal”. Vote these scumbags out in 2015.

#51 Big Bear on 05.30.13 at 10:39 pm

Garth, are you the only credible conservative left?

You have my vote should you pull enough credible lightworkers along for the ride and start a new party to save us from ourselves (and the banksters)

#52 Ralph Cramdown on 05.30.13 at 10:41 pm

Yes, Shawn, the bank will make money on my loan. But Basel III says they’ll have to allocate mucho capital to do it, and it won’t pay the ROIC that they expect to earn from capital allocated to the credit card division. So I’m helping them miss their earnings target.

#53 Ralph Cramdown on 05.30.13 at 10:52 pm

Good grief… government bond yields have spiked! Now they’re at levels we haven’t seen since… February 21st.

Featured video at my broker: “Is Japan the New Frontier in Investing?”

#54 Piccaso on 05.30.13 at 10:53 pm

Why House Flippers Might Get Hosed

http://finance.yahoo.com/blogs/the-exchange/why-house-flippers-might-hosed-200844091.html

#55 Cory on 05.30.13 at 10:54 pm

I can clearly see what is happening, however, what I am unclear on is why REITS are taking such a beating this week? bond yields have not gone up “that” much to make carrying debt that much more expensive where it will crush REIT’s profits unless people are afraid this is merely a start and we have a long way to go.

Most REIT’s have rolled their debt into the lower rates over the last few years anyways so it must be an overreaction such is this markets. Recession will hurt REIT’s, that!! I can understand but not with a simple minor jump in interest rates. Seems odd but even many REIT insiders are dumping their own shares.

Profit-taking. This separates the pros from the amateurs. — Garth

#56 Shawn on 05.30.13 at 11:01 pm

FAULTY LOGIC?

Basil Fawlty at 49 said:

Per the World Bank, from 2001 to 2011 the US % of world economic activity shrunk from 31.8 to 21.6%

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

Well, there two ways that could happen 1. (the incorrect explanation), the U.S. GDP is down since 2001. or, 2. (the correct explanation) while the U.S. GDP is now a LOT larger than it was in 2001, the rest of the world (read China) grew much faster.

Buffett says U.S. recovery is slow but steady. Doomers (and I use the term inclusively) say there is no recovery. Believe whomever you wish.

#57 Piccaso on 05.30.13 at 11:05 pm

Short Supply Has Home Sales ‘Squeaking’ Out Gains

http://finance.yahoo.com/news/short-supply-home-sales-squeaking-140032857.html

#58 coastal on 05.30.13 at 11:13 pm

The Victoria crash indicator alarm just went off, the local house blog webmaster jumped off the fence, pen in hand,and signed his life away because the new baby needs a yard . Yikes. No more unbiased info on that blog now,but was there ever when the resident agent know-it-all gets his ass kissed day in and out ? Greater fools alive and well in V-town.

#59 D.D. Corkum on 05.30.13 at 11:31 pm

“Yet another indicator to include in that index: [[link to Google trends for searches of ‘real estate’]]”

——–

Be careful, searches of the keywords real estate don’t mean that times are good. Those words could also pop up when times are bad. Perhaps the terms “realtor” or “buying real estate” would be more useful. In fact, having a basket of different terms would make for a much better statistic anyways.

#60 raider on 05.30.13 at 11:31 pm

“The notion of conservative little beavers eschewing carnal pleasures so they could store their nuts (I’m now strangely aroused) was always at the core of monetary policy.”

Brilliant! Garth, how do you come up with that every time?

#61 Guy_in_Regina on 05.30.13 at 11:35 pm

Great post; but I don’t think anything is lower than Mike Duffy’s credibility! The Cons are cooked.

#62 Tom Vu on 05.30.13 at 11:35 pm

Good move Garth !

Once switch back to soft porn…ratings go up !

Guy in background ?

Just shaved his hairy palms..(in Ontario, part of metro sexual Health Care)

#63 Cici on 05.30.13 at 11:50 pm

Elizabeth Hurley? Really? If so, I don’t know how you guys got that, because she doesn’t look like herself at all there. It must be the sunglasses; Elizabeth H’s beauty is all about the eyes.

#64 Suede on 05.30.13 at 11:54 pm

“These guys actually thought families would employ the cheapest money ever to pay off high-rate debt, or trash mortgages.”

I can’t fathom with all their degrees, Aquafina on the meeting room tables, spreadsheets, forecasts and on and on…that the BoC and the FinMinistry actually thought that people would pay off debt by them cutting rates.

We, the people, all have various forms of ADD. Twitter doesn’t help tone it down and typical reactions to rate cuts are as follows:

“Hey Uncle Ted, you hear that interest rates were cut?”
“Well golly Ned, that means i can buy a house cheap!”

#65 Min In Mission on 05.30.13 at 11:54 pm

(I’m now strangely aroused), just “ordinary” aroused for me! But, then I am older.

Where the heck do you get these pictures??

Once again, a great post. I am continually amazed at the way that so many people still abuse credit.

A co-worker is under the impression that he is doing OK, all he manages is his ordinary living expenses and minimum payments on his cards. WTF??

#66 Mel on 05.30.13 at 11:58 pm

Again, I do not agree with your assessment of the economy. I don’t care if the Dow goes up some more, the fact USA is a very sick economy with the rest of the world.

Let me say this; higher the highs on the Dow, the lower it will go. It will eventually be below the 2009 low.

As for interest rates, they go up as they always do before the next recession will hit the economy. I am a buyer of Government bonds, not stocks of any kind.

Buy bonds, sell equities, houses, commodities….and wait for the crash. Keep cash on hands.

Every time stocks are peaking, there are those who say everything is honky dory, well, it isn’t!

Watch out, the more people go against Bonds and cheer for equities, you know what you as investor should do. You should go against the majority. Period!

#67 New on 05.31.13 at 12:28 am

As Garth says, the point is not about never to own a house, or to sell at whatever costs; it’s about freedom first. Well, some people just can’t let go….

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

#68 Tom from Mississauga on 05.31.13 at 12:37 am

So when would a contrarian consider switching back to bonds? The ZHY’s yield is back up to a tasty 6.5%.

#69 Vlad on 05.31.13 at 12:57 am

I’m surprised that no one knows who the babe in the picture is. Why that’s Garth’s mistress of course. There are a lot of good miles left in her I’m sure.

#70 Mark on 05.31.13 at 1:13 am

Not a chance that rates are going up even within the next year or two. Downward moves are more likely as the Canadian economy continues into a deepening deflation (CPI increases are pretty much dead, and the trend is accelerating as the RE industry, some 27% of Canada’s GDP, decelerates). In the absence of a new growth driver/demand driver, there’s little else for the BoC to do other than lower the rates.

Don’t know where you get the idea that the BoC’s next move will be a hike, or that the timeframe will be within a year. However, this won’t stop spreads from expanding against residential mortgages as the collateral is viewed as increasingly of poor quality.

#71 souvereigninternational on 05.31.13 at 1:37 am

Drove a lot of side streets in Toronto today. More for sale signs still on the same houses. Some sold signs. None over asking. Excellent post yesterday, also could not agree more with Claude. Many houses I passed by today were worth 1.5 mil. and well above. good half of them without luxury car in a driveway, only minivans and kias.

#56 Shawn on 05.30.13 at 11:01 pm

“Buffett says U.S. recovery is slow but steady. Doomers (and I use the term inclusively) say there is no recovery. Believe whomever you wish.”

Shawn don’t tempt me. Ahhh…… Buffett, Buffett, Doomers, Buffett, Doomers, Buffett, Buffett, Buffett, Doomers, Buffett, Doomers, Buffett….STFU

#72 Peter on 05.31.13 at 1:37 am

Hi Garth, how is it different when realtors and mortgage brokers are interviewed by the Star advising to “buy, buy, buy” and a realtor using his home index (which I am sure has merit) to advise his clients to “sell, sell, sell” …doesn’t he also stand to gain from this and it is self serving since he says he knows how to limit his clients losses …kinda smells like the star article, from here anyway

#73 Joe on 05.31.13 at 2:04 am

Hi Garth,

Just returned from a popular high end holiday beach area in Mexico.
For 230k you can buy a place that historically has rented out for 5k a month for six months of the year and for 2k for the other six.
With taxes, strata, management fees in plus a one month holiday there is still over 25k to be made.
What do you think of that amigo?

#74 Been There, Done That on 05.31.13 at 2:09 am

@58 coastal

The Victoria blog is good, but the landlords in there are a bit defensive and grumpy lately. They argued for days that:

– Victoria has a Mediterranean climate

– It doesn’t rain much in Victoria

– 50-80 year old houses like the ones they bought hold up better than newer ones

That’s just in the last week! And they get mad if they hear of real estate fraud being reported. Not mad at the fraud happening but mad that it was being reported in the media. That’s the permabull mentality for you. See no evil, hear no evil, right? I’m guessing a lot of people have gone all in on real estate and don’t have a Plan B.

#75 mac on 05.31.13 at 2:13 am

By the way, that chick is Liz Hurley. Hope you have the rights to publish her pic online.

#76 Wondering on the Island on 05.31.13 at 2:15 am

Great post again

But

If he’s correct (and he claims a 200% five-year record of accuracy)

Wouldn’t that be 100%?

#77 a prairie dawg on 05.31.13 at 5:04 am

#17 prairie dog

Pick a different name. I’ve been using this one here for a couple years already.

#78 dan danger on 05.31.13 at 7:15 am

“It includes an inventory of homes for sale, open house attendance, home showing statistics, MLS (online) listing views, national media headlines, plus blog traffic.”

Inventory? Sure. That’s a real stat.
All the rest is purely speculative or anecdotal. Since his traffic spiked (and he counts what is surely measly traffic numbers) then clearly we’re headed for a boom, no?

This guy reminds me of that other realtor who told everyone to sell in the GTA last year. He got on this blog and other news outlets. Where is he now?

Note to realtors reading this: if you want to see huge traffic growth on your blog and lots of free media exposure but absolutely NO increase in your business (and possibly the death of your own personal business) then write Garth and media about how and why you think the market will crash. Yes, you can follow in the footsteps of other unsuccessful realtor a just like this guy, and that other guy in Vancouver, and that other guy whose name I forget also in Vancouver! Be famous just like them!

Or be a realtor like you? — Garth

#79 mortgagebrokeron on 05.31.13 at 7:35 am

CMHC 1Q13 refinance volumes down 69%
CMHC purchase volumes are down 23%

#80 Angie on 05.31.13 at 7:43 am

Don’t worry Garth, I doubt you will ever be mainstream. You are definitely an independent thinker .

#81 Robert on 05.31.13 at 8:16 am

Wow is all I can say. The smugness of so many posters. Finally after missing the biggest boom ever they feel justified! What a laugh. Even if the mkt drops 25% you guys are still way behind. Garth you have been so wrong in your interest rate calls lately. Unless the economy drastically improves rates will not be going much higher anytime soon.

My ‘call’ on rates is that increasing bond yields will force fixed-term lending costs up. Already happening. — Garth

#82 drydock on 05.31.13 at 8:19 am

New stream not main stream bro.

#83 Min In Mission on 05.31.13 at 8:24 am

Who the heck is Liz Hurley?

I guess my head has been stuck in the sand, or somewhere else, for the last little while!!!!

#84 Skiffy on 05.31.13 at 9:04 am

A recent census in Germany shows that:

“On home ownership, the census put the national figure at 45.8%, with Berlin right at the bottom. Only 15.6% of people in the capital are homeowners.”

In Canada we are at 70%? Hmm, They manage to carry the EU on their back, and we can barely pay our own bills. Who’s doing it right?

#85 T.O. Bubble Boy on 05.31.13 at 9:11 am

BMO misses on earnings:
http://www.cbc.ca/news/business/story/2013/05/29/business-bmo-earnings.html

Then, comes out with this fluff piece the next day:

“More Calgarians plan to buy condos in the next five years: BMO. Intentions increase in Toronto as well”

http://www.calgaryherald.com/business/More+Calgarians+plan+condos+next+five+years/8457335/story.html

Ya, nice headline… the article then goes on to state that while condo buying intentions are up 8% in Calgary, SFH purchase plans declined 13%.

#86 Piccaso on 05.31.13 at 9:14 am

Real GDP growth hit annual rate of 2.5 per cent in Q1, says StatsCan

OTTAWA – Statistics Canada says the economy grew at an annualized rate of 2.5 per cent in the first quarter, the fastest in more than a year.

That was better than already optimistic private-sector estimates and the fastest in six quarters, according to Statistics Canada.

The agency says on a monthly basis, real GDP by industry grew 0.2 per cent in March.

It says exports were the largest contributor to growth in the quarter.

Export volumes increased 1.5 per cent after a gain of 0.2 per cent in the fourth quarter of 2012 and declines in the previous three quarters.

Imports were up slightly by 0.3 per cent after falling 0.8 per cent in the previous quarter.

Consumer spending was up 0.2 per cent, sustained by higher spending on services.

Now do you understand what the Bank of Canada was hinting at? — Garth

#87 Piccaso on 05.31.13 at 9:21 am

Now do you understand what the Bank of Canada was hinting at? — Garth
……………………………………………………………………..

Yup… got to wait for cheaper prices, but that’s nothing new.

#88 Kaganovich on 05.31.13 at 9:24 am

American renaissance? Perhaps…but the new economic landscape may not be too appealing for a large segment of the population.

http://www.nakedcapitalism.com/2013/05/so-who-is-the-dumb-money-ruining-the-housing-rental-market.html

http://www.guardian.co.uk/commentisfree/2013/may/29/economic-recovery-not-real

#89 Daisy Mae on 05.31.13 at 9:27 am

“First, the feds are appalled at the debt orgy which their low rates unleashed. These guys actually thought families would employ the cheapest money ever to pay off high-rate debt, or trash mortgages.”

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

The feds are ‘appalled’ at the debt orgy created because of their low rates?

I’m appalled at their stupidity…..to consider for even one moment, any other outcome.

#90 Daisy Mae on 05.31.13 at 9:34 am

#5 George: “….a sign that the federal government is succeeding in its efforts to reduce taxpayer exposure to the residential real estate market.”

***********

The feds get credit for nothing. They caused this fiasco and are now merely implementing damage control.

#91 question on 05.31.13 at 9:35 am

With interest rate going up, bonds and other fixed income would take a hit for sure. Is there any reason why we should still have a portion of our investment assets in fixed income portfolio?

Yield and stability. — Garth

#92 Chickenlittle on 05.31.13 at 9:55 am

“Don’t say that. Makes me feel so… mainstream. Yuck.” -Garth

Garth has gone hipster on us. I should have known! The “ironic” beard and big glasses should have tipped me off.

#74 Been There, Done That on 05.31.13 at 2:09 am

“Victoria has a Mediterranean climate.” LOL!!! Victoria is in BC, which in turn is in the great northern country of CANADA. Do those landlords know where they live? I have been to Victoria in both the winter and the summer so I do know what it is like. I unfortunately lived in Chilliwack for 8 years and used to escape to the island often to get away from the smell of cow patties.

Maybe sub-Mediterranean would be a better word.

That is SO funny!

#93 Ethical my... on 05.31.13 at 10:00 am

Ross Kay is so ethical…I can see it now…for the last 10 years he must have turned down so many forst time buyers…”so you want to buy a $500k home with 5% down and you make about $2500 a month”…”sure we can help” sign here…
Ethical…my you know what!

Love you realtors. So consistent. — Garth

#94 TOLurker on 05.31.13 at 10:03 am

Garth…what IP’s are reading your site, now Ross as me curious!

No idea. Never looked. — Garth

#95 Rob Stang on 05.31.13 at 10:07 am

I am a Realtor and I encourage my (both Buyers and Sellers – Residential, Commercial and Recreational) clients to read this blog.

How am I going to retain their business long term if I don’t tell them the truth?

#96 thiscountryis going down the toilet on 05.31.13 at 10:11 am

Hmmmmm…we still have a tsunami of immigrants from the PRC falling down the escaltor to get into Richmond…….daily. As has been reported they are buying in droves…….they can get a cheapo CHMC mortgage with minimum to no qualifications where many locals might not qualify.

Wouldn’t that indicate that the immigrany ghetto markets will continue to froth and bubble? Evidenced by zero price reductions in these area’s.

I have suggested that the same phenomena in high end areas where richly paid civil servants pops will also beat the bear with their gusher of monthly juice.

Every cycle doesn’t repeat itself….but it rhymes……ask yourself what area of the market these two uneffected groups are dominant in………look elsewhere for a change in the market.

There is no ‘drove’ buying in Richmond, by immigrants or anyone else. Your comments are no longer welcome on this blog. Once again, good bye. — Garth

#97 Does anybody know why these condo listings have no address ? on 05.31.13 at 10:12 am

The condos listed on the page indicated below are for sale and they all have one thing in common. They do not have the address listed on MLS

http://pastebin.com/8mWQp1zz

Does anybody know why ?

#98 blase on 05.31.13 at 10:33 am

I’ve said it before and I’ll say it again. Asian countries like China, Korea and Japan are highly xenophobic and protectionist. They would never allow a city, let alone a world-famous one like Vancouver, to be sold out to a foreigners. Canada has a price, and the Hong Kong 1997s and then the mainlanders were pleased as punch to use their laundered money to buy out Vancouver, and hollow out the city. Short term gain for Vancouver and for the government coffers, but long term pain. The politically-correct call it racist to say what has gone on. But no Asian would question the stupidity and short-term nature of this decision. Vancouver is well on it’s way to becoming a pseudo-Asian country.

Van has not been ‘bought out’. ‘hollowed-out’ nor is it a ‘pseudo-Asian country.’ This blog is starting to read like an Aryan Nation clubhouse washroom wall. Shame on you. — Garth

#99 Grantmi on 05.31.13 at 10:34 am

#96 thiscountryis going down the toilet on 05.31.13 at 10:11 am

….they can get a cheapo CHMC mortgage with minimum to no qualifications where many locals might not qualify.

I was going to say LINK please to this info.. but you’ve been voted off the island by Gartho!

#100 Grantmi on 05.31.13 at 10:38 am

#83 Min In Mission on 05.31.13 at 8:24 am

Who the heck is Liz Hurley?

I guess my head has been stuck in the sand, or somewhere else, for the last little while!!!!

Dude! Are you kidding!

Only the best Austin Powers babe EVER!!

http://img.mylot.com/1776365.jpg

Shawiiinggggg.

#101 Ray Skunk on 05.31.13 at 10:42 am

Wow, my REIT ETFs have taken a big dump this week.

What’s the outlook for REITs? Worth hanging on to or time to let go?

Insight appreciated!

If you bought for yield, buy more. — Garth

#102 Counter Punch! on 05.31.13 at 10:48 am

The U.S. Bureau of Economic Analysis (BEA) has issued the following news release today:

“Personal income decreased $5.6 billion… and disposable personal income (DPI) decreased $16.1…, in April.”

http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm

Try telling the whole story. Real disposal income is up. “Personal income decreased $5.6 billion, or less than 0.1 percent, and disposable personal income (DPI) decreased $16.1 billion, or 0.1 percent, in April, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) decreased $20.5 billion, or 0.2 percent. In March, personal income increased $36.2 billion, or 0.3 percent, DPI increased $25.4 billion, or 0.2 percent, and PCE increased
$14.2 billion, or 0.1 percent, based on revised estimates. Real disposable income increased 0.1 percent in April, compared with an increase of 0.3 percent
in March. Real PCE increased 0.1 percent, compared with an increase of 0.2 percent.” — Garth

#103 Ray Skunk on 05.31.13 at 10:50 am

If you bought for yield, buy more. — Garth
—-

I did. My ETF strategy isn’t growth, just dividends (they’re in my non-reg acct).
I’m not concerned if they don’t go up in value, I just don’t want to see them go down in value.

Cheers Garth :)

#104 Spiltbongwater on 05.31.13 at 11:02 am

I notice the teachers want job security in their contract. What the hell is job security? If your job is not needed, then you are told to stay home. If my job has no work, my employer does not pay me to sit. What planet do civil servants live on. We have decling student population, but somehow we need to maintain current level of teachers or hire more. Ya, when they spend other peoples money it is easy to insist on job security.

#105 Future Expatriate on 05.31.13 at 11:16 am

#2 “Socialist” is just a word that long ago lost all meaning because fascists use it to describe everyone else.

#106 Robbie on 05.31.13 at 11:18 am

re #92 Chicken Little
Victoria and the Gulf Islands have a “warm summer Mediterranean climate” (classification Csb)….and we are definitely in Canada.

#107 Josh in Calgary on 05.31.13 at 11:20 am

CantRememberMyName

“You know, everyone has their own destiny. The world needs suckers and smoking men. It is not our responsibility to help others. There is no law that we need to do that. This isn’t Seinfeld with the “good samaritan law”.”

While I agree with the sentiment the reality of the situation is that if too many idiots get smoked at once it brings the entire economy down with it. While this may present buying opportunities it’s still a heck of a lot nicer if we don’t have this problem to begin with.

#108 Josh in Calgary on 05.31.13 at 11:30 am

#103Ray Skunk,
REITS have performed really well lately. I’m also concerned about a price correction. Not necessarily related to any real estate crash, as Garth has repeatedly refuted that a real estate crash would not hit REITs hard, but simply due to the fact that they seem over bought. We live in a yield starved world. So people pile into things like REITs which drive the price up. Then speculators take on leverage to buy even more REITs so they go up even higher. It may be a solid asset type, but over bought is over bought.

As Garth points out if you like a stock, you should be happy to buy it on sale after the price has dropped considerably (buy low). So the reverse should be true as well. If a stock has had an incredible run it doesn’t matter how much you like it you should sell it at a price that may not be sustainable (sell high).

If you’re on the fence you could at least take some of your profits off the table, which is essentially what you do when you rebalance your portfolio. Garth has repeatedly stated that REITs may be fine and good, but shouldn’t make up more than 5% of your portfolio (much like any asset type shouldn’t).

#109 John on 05.31.13 at 11:37 am

While I do believe the RE market has peaked there are still some areas where bidding wars exist. My wife and I have been looking for a townhouse in Richmond Hill for the past six months. We finally found one we liked and decided to place an offer but we lost out to another bidder. Perhaps a good thing. I did not care for the notion of chasing and our agent kept warning that if we did not remove all conditions and also offer more money that we would lose out.

WTF is going on? Where are people planning on getting th money to pay these ridiculous mortgages? Interest rates may be low at present but principal still has to be repaid and prices have reached nosebleed levels.

Where do Carney and Flaherty see inflation as non existent? Grocery costs are soaring, gasoline is higher every day and home ownership cost and maintenance is ever higher. Is there a parallel universe that politicians use to measure?

Interest rates must move sharply higher to end this borrowing mania or Canada will face a long and painful period of unwinding.

#110 blase on 05.31.13 at 11:37 am

Garth. Street after street full of non-English speaking Chinese? What would you call that?

And not to fill jobs, btw. To buy houses and flip them, or to launder money. While sparrow father (that’s an Asian term) toils away in China.

Chinese-born in Vancouver are laughing at Canada’s naivety. All we value is $, we sell our birthright for laundered money. And by the way, no one is talking about Winnipeg with Filipino’s who come to Canada to work hard and build a life. Or Indian or Pakistani’s who come to work and get a better life for their children, so don’t confuse this with an Aryan Nations diatribe. It’s about dirty money from China, and people with pseudo-ties to Canada contributing to making a city unaffordable to live in for people who actually work there.

Obviously the Canadian government finally saw the light and is trying to shut the barn door, but it’s quite late for those Canadians who were born and raised in their native land, Chinese-Canadians included.

#111 screwed on 05.31.13 at 11:40 am

#21 Fed is already buying all the paper with money from thin air. Who else is left? Interest gets paid back to UST. Nice gig, eh? Canada will have to do the same. ECB and Japan’s CB are doing it as well.

Rates are going down.

#112 gypsy kid on 05.31.13 at 11:53 am

#98 Blase

I think the comment about Vancouver becoming a pseudo-Asian country is racist and smacks of paranoia. HOWEVER, he is right in saying that Canada is way too liberal with foreigners, Asian and European, buying real-estate in Canada. I’m a Canadian of Euro-Asian descent. I put Canada first. If you live here, you should too. The government should demand that. This is an awesome country. But we cant sustain the awesomeness if people from ALL over the world come here to milk it’s goodness, without giving anything in return. I know this is simplistic as visible minority immigrants DO have to deal with racism and discrimination…but they/we should all try to protect canada. Clearly Harper’s cons dont give a s__t! And I say it again – don’t blame the foreigners…blame ourselves, our government for what is happening here.

#113 gypsy kid on 05.31.13 at 12:02 pm

Blase, can you imagine what the indigenous people thought back in the day when Europeans started invading their nations? Wow…fields after fields of white people. This is turning into a pseudo-white country!

Get real guy. It’s a changing world. Adapt or die…or you can follow Hitler’s ways.

#114 Old Man on 05.31.13 at 12:07 pm

#109 John – count yourself lucky, and park for a few years. Now conditions are mean’t to protect the buyer on an offer, so beware of agents who tell you otherwise, as he just wanted a commission. In a heated market for fools the herd rushes in like there is no tomorrow, and all must go in firm or lose out and this is a dangerous approach of investment, so in the end you won – park for a few years to win the prize.

#115 coastal on 05.31.13 at 12:15 pm

#74 Been there, done that,

The Victoria blog has a few good posters with unbiased opinions but is mainly dominated by landlords with anal attitudes, home owners, and new owners who bought at the top out to protect their investment and BS about the joys of ownership ad nauseum. It’s a limited read and a quick scan at best. Used to be a good blog.

The old home theories and weather are also getting boring. They are loaded with mold or asbestos and it’s rained every day for the last week of May and a good part of the month as well as April. When dodgy Fernwood is now selling for the same as Fairfield near the ocean then you know the party is over.

#116 CMHC Smackdown on 05.31.13 at 12:15 pm

Party is OVER…..

http://www.mortgagebrokernews.ca/news/cmhc-declines-raise-underwriting-questions-174130.aspx

#117 Piccaso on 05.31.13 at 12:30 pm

#111 screwed on 05.31.13 at 11:40 am

Rates are going down.
…………………………………….

LOL… Your living in debt dreamland son

#118 Tom Vu on 05.31.13 at 12:52 pm

This blog is starting to read like an Aryan Nation clubhouse washroom wall. Shame on you. — Garth

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

Good guys.
Helped me fix my Harley, lent me a Kia too.

#119 AK on 05.31.13 at 1:26 pm

The Real Reason Millennials Don’t Buy Cars and Homes

Millennials

#120 Cowpoke on 05.31.13 at 1:27 pm

Garth, I think you are like Kevin ‘the dragon’ and Brian ‘Mulroney’. I think you ‘would’ sell out Canada and its people for a higher return. You appear to talk out of both sides of your mouth. Something like forked tongue the Indians used to accuse the white man of.

I went to Parliament and tried. How about you? — Garth

#121 AK on 05.31.13 at 1:33 pm

#101 Ray Skunk on 05.31.13 at 10:42 am
“Wow, my REIT ETFs have taken a big dump this week.

What’s the outlook for REITs? Worth hanging on to or time to let go?

Insight appreciated!”

“If you bought for yield, buy more. — Garth”
——————————————————————–

I agree.

This is an overreaction with the bump on the 10 year Bond.
D.UN is now returning an incredible 6.56%. The only caveat to REITS, is a recession.

#122 AK on 05.31.13 at 1:38 pm

#55 Cory on 05.30.13 at 10:54 pm
“I can clearly see what is happening, however, what I am unclear on is why REITS are taking such a beating this week? bond yields have not gone up “that” much to make carrying debt that much more expensive where it will crush REIT’s profits unless people are afraid this is merely a start and we have a long way to go.

Most REIT’s have rolled their debt into the lower rates over the last few years anyways so it must be an overreaction such is this markets. Recession will hurt REIT’s, that!! I can understand but not with a simple minor jump in interest rates. Seems odd but even many REIT insiders are dumping their own shares.”

“Profit-taking. This separates the pros from the amateurs. — Garth”
——————————————————————–
A buying opportunity.

They don’t come around that often.

#123 Shawn on 05.31.13 at 2:01 pm

REITS and Yields and Returns

AK at 112 said:

D.UN is now returning an incredible 6.56%.

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

Okay, but technically that is a yield not a return. Annual return can be higher than or lower than the yield. Yellow pages would be an extreme case where an attractive yield turned into outrageous losses.

I have never quite trusted REITs because they always pay out more than their accounting earnings. This implies that their building never depreciate and that any capital costs are paid by the tenants. Maybe it is true. I just don’t quite trust it.

And of course ALL stocks should fall in value as interest rates rise, all else being equal. It’s basic financial math. Of course all else is Never equal. Stocks and REITS with rising distributions can continue to rise. But a REIT with a flat distribution should fall as interest rates rise. Interest rates act as a gravitational force on all financial assets. Higher interest is as higher gravity. Growth in earnings is a buoyancy force.

#124 Reasonfirst on 05.31.13 at 2:10 pm

#106 Robbie
re #92 Chicken Little
Victoria and the Gulf Islands have a “warm summer Mediterranean climate” (classification Csb)….and we are definitely in Canada.

Look how much of the med has that climate – 99% of the med is warmer.

#125 Cowpoke on 05.31.13 at 2:11 pm

Garth, approximately 237 years ago the people of the 13 colonies south of us sent the king packing, this being so, if I had a standing army ‘behind’ me and help from the French no doubt, I would send you and every other past and present politician in this country including the queen, packing. My ‘true’ feelings! Quit helping selling ‘us’ out!

Another brave, anonymous Internet cowboy. — Garth

#126 FATHER on 05.31.13 at 2:15 pm

to every body mocking garth, get a life. garth spends so much time and effort posting and trying to help you fools from becoming greater fools so respect or go to some other site.

#127 Suede on 05.31.13 at 2:41 pm

is today “Opposite News Day” or something?

http://finance.yahoo.com/blogs/the-exchange/real-reason-millennials-don-t-buy-cars-homes-153340750.html

#128 Dr. Hoof - Hearted on 05.31.13 at 2:50 pm

Re Condo ownership:

Friends of ours live in a (4) hi-rise complex in Richmond City Center. They have the old fashioned system of their name and apartment number posted at the entrance door.

At least 10 units have “OCCUPIED” where the names would normally be.

Now, I see the newer hi – rises have this hi -tech touch screen. There is no longer a list for one to peruse…, you have to punch in the proper information to call up the specific person..hence no “old school” way to identify who lives there.

Technology..or intentional incognito ?

More likely single female tenants or others who are uncomfortable with some anon dick named Dr. Hoof-Hearted hanging around the lobby pushing buttons. — Garth

#129 Mike T on 05.31.13 at 3:15 pm

#110 blase on 05.31.13 at 11:37 am
Garth. Street after street full of non-English speaking Chinese? What would you call that?
———–
RE chinese laundered money

I am in the Okanagan and Kootenays mostly. Do you know how much ‘hockey bag’ money the ‘farmers’ bring into Mexico?

I have 2 points – either you don’t know enough about how the world works and can’t see the patterns

or you are too focused on your small corner of the world and have simply stopped enjoying your time here on Earth

either way, change is up to you, not everyone else – maybe you think that sucks and is un-fair, I wouldn’t have it any other way

cheers

#130 Piccaso on 05.31.13 at 3:20 pm

Take your Journeyman telecom wages and shove it where the sun don’t shine Canada.

http://www.workingincanada.gc.ca/jobposting.do?id=10414427&source=ja

but people to pay half a million for a shoebox?

#131 Edward on 05.31.13 at 3:24 pm

Wow, haters abound today. Hate the Asians, hate the civil servants, hate the teachers.

#104 Spiltbongwater – Your employer told you to stay home for obvious reasons. (See username.) Next time maybe you should try something with a little job security instead of a job any old stoner could do?

#132 AK on 05.31.13 at 3:25 pm

#123 Shawn on 05.31.13 at 2:01 pm
“Okay, but technically that is a yield not a return. Annual return can be higher than or lower than the yield. Yellow pages would be an extreme case where an attractive yield turned into outrageous losses.”

——————————————————————–
There is no comparison between Yellow Media and Dundee REIT, BPO, HR.UN, MRG.UN etc.

I am also not saying having ones entire portfolio in REITS either.

Having said that, I don’t believe that interest rates will skyrocket anytime soon. A point or 2 higher, will not have any impact on the REIT sector.

Also, remember that office buildings, malls, apartments and industrial warehouses will always be around.

#133 John on 05.31.13 at 3:37 pm

#114 thanks for the support old man…..we have been patiently waiting but it seems like there are still buyers willing to go full price so we will wait some more.

Very discouraging for people who simply want a home as a place to live. Rampant speculation and leverage has affected the price of everything and government keeps inisisting that there is no inflation evident. Pure baloney! Overpaid politicians don’t need worry about the daily cost of living.

This lot will be voted out of power for ignoring and refuting the existence of a BUBBLE that THEY created with the Canadian version of QE. Carney is a joke…..has contributed to this mess in equal measure.

Good riddance to Carney…..too bad the UK can’t take Flaherty and Harper too….enough damage done here.

#134 Dr. Hoof - Hearted on 05.31.13 at 3:53 pm

More likely single female tenants or others who are uncomfortable with some anon dick named Dr. Hoof-Hearted hanging around the lobby pushing buttons. — Garth

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

Yeah, you would be amazed at how that works , black book filled for 10 months.

PS I mention that I know you, otherwise be 12 months

#135 Shawn on 05.31.13 at 4:18 pm

AK at 132

A point or 2 higher (interest rate), will not have any impact on the REIT sector.

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

If you mean a basis point or two, no that will not have an measurable impact.

A 1 percentage point rise in interest however will pull REIT prices down. As well as the value of every financial asset in the world, all else equal.

The thing is just to let people understand that a 6.5% yield can easily turn into a negative return on the year. All it takes is a 7% price drop to wipe out the 6.5% yield.

I am not suggesting or predicting that will happen or that REITS are bad investments.

I merely mean to point out that a yield is not a return and that REIT prices and all stock prices are subject to decline.

Having said that I often run 90% in equities. I know the risk is there but I accept the risk.

#136 screwed on 05.31.13 at 4:19 pm

#117 Picasso “living in debt dream land”

if you haven’t noticed, debt is not our problem.

how does that saying go?

if you owe the bank a million, you have a problem
if you owe the bank hundreds of millions, the bank has a problem

the banks have a debt problem …

#137 Jonah on 05.31.13 at 4:21 pm

From John::
My wife and I have been looking for a townhouse in Richmond Hill for the past six months. We finally found one we liked and decided to place an offer but we lost out to another bidder

——————————————————

@John

I feel the pain, last week we offered on a house in Aurora and our agent informed us that someone else is also making an offer on the same day so we ended up bidding higher than what we had originally offered and 10K higher than the listed price. The first offer that was made astonishingly came from Seller’s Agent so I became suspicious and asked my agent to verify that this is not shill biding which my agent could not. Long story short, our offer was accepted by the Seller, however we noticed certain things with the newly built house that we had not noticed before hence we got out of the deal :). Plus I always felt that Seller’s was being greedy and wanted to make a kill. Trust me don’t ever listen to what agents say and never bid higher than the listed price NEVER!!!!

#138 factfreak911 on 05.31.13 at 4:27 pm

DELETED

#139 Jonah on 05.31.13 at 4:33 pm

@blase

I agree with you but it is common in all communites where few bad sheeps aka investors will make it hard for everyone else. I had mentioned earlier someone I know from India whose side business is to grab few homes from a builder and then sell it at a higher price or rent it out. He is currently doing very well but not sure how far he would be able to go.

#140 screwed on 05.31.13 at 4:36 pm

….markets are taking a crap

AAAAAAAAAAAAAAAAAAAAND its gone!

better luck next time …

Sealy Tempurpedic, the safest bank in Canada

#141 AK on 05.31.13 at 4:37 pm

#136 Shawn on 05.31.13 at 4:18 pm
“A 1 percentage point rise in interest however will pull REIT prices down. As well as the value of every financial asset in the world, all else equal.”
——————————————————————–
Not true.
Take a look at history.
A recession is the only impact on REITS.

Between 2000 and 2008, all REITS were thriving. They crashed during the GFC of 2009, but were the first asset class to recover after everybody realized that the world was not going to end.

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“Having said that I often run 90% in equities. I know the risk is there but I accept the risk.”
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80% equities for me. The remaining 20% is in REITS, Bond ETF’s and Preferred Share ETF’s.

#142 Piccaso on 05.31.13 at 4:46 pm

#137 screwed on 05.31.13 at 4:19 pm

if you haven’t noticed, debt is not our problem.

—————————————————–

No debt is not our banks problem if rates rise 2% points. It’s the debt dogs maxed out at todays rates and living in debt dreamland that will have a problem, when 2% points makes there mortgage payment double… but you know that already.

#143 screwed on 05.31.13 at 5:01 pm

bond yields are climbing just like they did in July 2012

will the climb past the highs of 2012 or make lower highs is the question

anything is possible but my prediction is for yields to come down and rates to go lower

otherwise we’re looking at DEFLATION and there’s no hedge against that other than cash

with trillion Dollar balance sheets.. I dunno

You think bond investors care about deflation? — Garth

#144 Shawn on 05.31.13 at 5:12 pm

INTEREST RATES ARE LIKE GRAVITY TO ALL FINANCIAL ASSETS

With apologies to those tired of references to Buffett, AK made me do it.

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

According to Buffett:

At all times, in all markets, in all parts of the world, the tiniest change in (interest) rates changes the value of every financial asset. You see that clearly with the fluctuating prices of bonds. But the rule applies as well to farmland, oil reserves, stocks, and every other financial asset. And the effects can be huge on values. If interest rates are, say, 13%, the present value of a dollar that you’re going to receive in the future from an investment is not nearly as high as the present value of a dollar if rates are 4%.

Source:

http://money.cnn.com/magazines/fortune/fortune_archive/2001/12/10/314691/

About five paragraphs into the article…

And he has said the same thing in many other places including his annual letters. Note he said “the tiniest change”

#145 Devore on 05.31.13 at 5:25 pm

#121 AK

I agree.

This is an overreaction with the bump on the 10 year Bond.

Total over reaction. I’ve fallen a bit too low on my income producing allocation, after the great growth runup this year in my portfolios, so I’ve gone shopping today. Good time to rebalance all around, including international/US exposure.

#146 Devore on 05.31.13 at 5:28 pm

Victoria and the Gulf Islands have a “warm summer Mediterranean climate” (classification Csb)

Who made this classification, and have they ever been to the Mediterranean and Victoria?

#147 screwed on 05.31.13 at 5:30 pm

You think bond investors care about deflation? — Garth

Nope. But CBs and governments do. Japan has been at it for 20 years. Bernanke’s hallmark is to fight deflation.
Why? Because balance sheets and budgets wouldn’t stand a chance in a deflationary environment.

#143 Piccaso
No debt is not our banks problem if rates rise 2% points. It’s the debt dogs maxed out at todays rates and living in debt dreamland that will have a problem, when 2% points makes there mortgage payment double… but you know that already.

Ouch double payments. That would hurt and homeowners upside down and underwater on their mortgage. Walking away in droves. Who or what is stopping them?

Also corporate debt, personal debts (excluding mortgages) AND public debt ROLLING OVER into a higher interest rate environment with federal debt at all time highs … not good at all.

Won’t happen. Not saying it can’t happen. It’s possible they let it happen but it would crash and collapse all balance sheets, personal, corporate and public.

But you know that already.

Mortgage debt and rates are the least of their worries.

#148 coastal on 05.31.13 at 5:43 pm

Today’s Canadian economic numbers via the Globe and Mail tell the tale for the over-leveraged and newly fleeced. Weakest domestic demand growth since 2009 recession?? This ship’s goin down.

“Beneath the headline number, final domestic demand – basically, the sum of all consumer, business and government expenditures within Canada – grew at a paltry 0.6 per cent annualized in the first quarter. That’s the weakest domestic demand growth since the 2009 recession. Fixed capital spending by both government and business (which includes the housing sector) declined; household spending grew a tepid 0.9 per cent annualized; manufacturing growth remained in neutral.

In fact, if it weren’t for a rebound in exports, there wouldn’t have been much growth at all.”

#149 Mel on 05.31.13 at 5:55 pm

Dear Jonah:

You said” Never offer over asking price”. Where have you been lately son. Don’t you know that you should NEVER stand in a front of a falling knife?

The fact that I am hearing so many guys on this blog sharing with us that they have offered on a house is truly amazing to me.

Where is your patience and discipline? Don’t you think that house prices are still too high?

All the stuff that it is us ‘woman folk’ who need a nest to sleep in for her security is a bull …..

I think that most of you guys need a new set of balls, and act like you mean what you say. Otherwise, talk is cheap.

#150 Tom Vu on 05.31.13 at 5:58 pm

#129 Mike T on 05.31.13 at 3:15 pm

RE chinese laundered money

I am in the Okanagan and Kootenays mostly. Do you know how much ‘hockey bag’ money the ‘farmers’ bring into Mexico?

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

So, Mexico wants an NHL team….and good for them !
(funny ….so does Toronto)

PS
(i) what name we suggest ?
(ii) what division ?

#151 georgeit on 05.31.13 at 5:59 pm

In order to chase yield, since interest rates in the US are the lowest in recorded history, money is sloshing from bonds into equities. As a result the tail end of the long bond curve has begun to rise.

So the main reason the “US Economic Renaissance” has begun in the last few months is because of near ZERO interest rates which has made debt servicing easier.

But wait a minute, if interest rates are rising from their lowest level ever and continue to rise due to money chasing yield, then how can the “US Economic Renaissance” continue?

#152 screwed on 05.31.13 at 6:13 pm

We talk about interest rates, bonds and yield. Inflation or deflation.

The big game is commodities. The USD is a reserve currency because it is backed by oil. There would be no USD if it wasn’t for the trade in oil.

Rates go up. Deflation kicks in. Risk assets are being abandoned. Commodities tank. Oil goes down to what price? Really? Is that possible? Where would oil price be if USD kept rising along with interest rates?

It’s not going to happen. Deflation is not allowed to happen which was the point of this whole monetary experiment since 2008 with record low interest rates.

I don’t think deflation is a bad thing because it would allow true price discovery. But no market is allowing true price discovery anymore because of leverage, margins, yields and derivatives which are all interconnected.

The risk of a domino effect if one pillar falls is too big now. The CBs have only one way forward. Making money cheaper and further eroding the value of money with inflation. They will never admit to that.

Deflation is the worst-case scenario. You have no idea what you wish for. — Garth

#153 mel in victoria on 05.31.13 at 6:33 pm

Garth, Reits been weak lately….time to buy, ie BIP/UN?

#154 Lookoutbelow on 05.31.13 at 7:11 pm

Death by a thousand paper cuts. In the case of Real Estate, small increases in the yield of a 5 year bond.

Still time to Blend and extend that mortgage for a nice long term and hope that you don’t have to move and face that now famous Interest Rate Differential penalty.

Anyway you look at it, your equity in real estate is about to do a vanishing act. Especially in that epicenter of real estate excess, yup, the Lower Mainland.

Won’t be long now before the fast buck condo “investors” start to leave town!

#155 screwed on 05.31.13 at 7:26 pm

Deflation is the worst-case scenario. You have no idea what you wish for. — Garth

I thought you were in the deflation camp? Must have misunderstood that part.

Deflation is not allowed to happen which is why rates aren’t allowed to rise above a certain point.
Rates rise technically on fears of too much inflation. That is not happening at this point.

There’s more going on, Garth. OECD made comments and warning BOC to keep rates low.

#156 Shawn on 05.31.13 at 7:50 pm

Who’s Screwed?

Screwed at 153 said:

There would be no USD if it wasn’t for the trade in oil.

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

Yes you are screwed because you appear to have listened to some kind of doomer site.

Before it is too late go and read the last five of Warren Buffett’s annual letters and learn something from someone worth listening to.

Inflation…

The value of a cash dollar has gone down almost 90% in my lifetime. This has hurt me not at all.

My investments have earned FAR higher than inflation. My wages have FAR outpaced inflation.

Life has been very good.

Stop worrying about the FED or whatever and get on with getting rich!

#157 Shawn on 05.31.13 at 8:01 pm

U.S. DOLLAR BACKED BY OIL?

Screwed also said: The USD is a reserve currency because it is backed by oil.

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So much misinformation to deal with. Why do I bother?

The U.S. dollar is not “backed” by anything.

The FED tries to maintain inflation at a low level so that helps. But ultimately the U.S. dollar’s value in terms of goods and services is set in the market everyday.

The amount of candy or oil or gasoline or gum or whatever that a dollar will buy is not set or backed by anyone. Nor does it need to be.

The dollar is a unit of exchange and a SHORT term store of value. That’s it.

Your job is to earn ‘em then spend ‘em or invest ‘em. Only a fool keeps a ton of them in a mattress because they are NOT a long term store of value and that is not a problem.

Your investments are all measured in dollars. But you should keep only a minimal amount of long-term investments actually in dollars (long term bonds).

A reserve currency simply means that other countries central banks like to keep some U.S. dollars around.

A U.S. bond is backed by the full faith of the United States to repay you in dollars.

The value of a dollar is backed only by the faith of the market, domestically and internationally.

That has little or nothing to do with oil, and why would it when the U.S. has generally been a net importer of oil.

And anyhow what does ay of this nonsense have to do with the job of getting rich?

#158 screwed on 05.31.13 at 8:10 pm

#157Shawn
Dude, they call it “PetroDollar” for one reason and one reason only. Don’t need to read doomer sites to see the obvious correlation between oil and dollar.

The money lost 90% of its value in your lifetime. Wow, you must be old. But you say you did well in the process.

Excuse me. I think you’re the one being screwed with the most. I’m just pointing out the obvious how screwed up everything is and not only since 2008.

But if Unicorns and Skittles are your thing .. by all means. Have a nice time and keep taking the blue pill. Don’t ever take the red pill.

#159 Shawn on 05.31.13 at 8:26 pm

SIGH

157Shawn
Dude, they call it “PetroDollar” for one reason and one reason only. Don’t need to read doomer sites to see the obvious correlation between oil and dollar.

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

Actually it’s the Canadian dollar that has been called a petro dollar. The U.S dollar is seldom if ever called that.

The value of a U.S. dollar in terms of a basket of consumer goods has been remarkably stable over the past couple of decades losing value slowly and steadily.

In the 70’s its value shrank quickly.

The value of oil on the other hand in terms of how much stuff a barrel of oil could be traded for has been very volatile.

dude if the value of oil was correlated with the value of a U.S. dollar that would mean the price of oil was basically unchanged in U.S. dollars.

Listen to you elders, at least the smart ones.

#160 screwed on 05.31.13 at 11:26 pm

Shawn, the Elder. With all due respect.

You say that the value of the dollar has gone down 90% during the course of your lifetime.

So what is the value going to be during the course of my lifetime and my kids lifetime? Are we just going to lose most of the value of the dollar ad infinitum?

You must realize that the dollar without gold standard since 1971 has become basically toilet paper. Anything that devalues this much over the course of only 40+ is garbage. But that’s besides the point.

You also said that you did well during this time of inflation and currency devaluation. Well, it didn’t take rocket science to get rich in a paper market where money is printed against nothing. Creating wealth and status in that environment while living in a solid country with many privileges was easy.

But here is where it stops. The wealth creation that you enjoyed during this time of massive inflation is not going to continue and it cannot be repeated. It is a mathematically proven fact that our entire financial system is near insolvency and unsustainable.

You benefited from that. Coming generations will not. This is the end of the line, the end of growth as your generation has enjoyed it. Not your fault. It happened. But don’t gloat about it and think that we’re dumb for not being ignorant enough to see how unsustainable the future is.

Petrodollar
http://en.wikipedia.org/wiki/Petrodollar

Cheers,