Really?

BIGGER

Catherine and her geriatric but frisky squeeze are on the move. “We’re seniors from Alberta,” she says, “considering downsizing and moving to BC.” As you might expect, they not only follow the news about housing, but have been Googling up a storm.

“Who are these realtors trying to kid?  Obviously people who have not read your blog or checked MLS listings!!,” she says. “I have researched the Kelowna area and Parksville/Qualicum Beach and I cannot believe the number of listings and the prices!  There is so much to choose from it’s making our heads spin – and prices keep falling. When we mention this to friends, especially Kelowna they get a dumbfounded look on their faces and say “really?”.  Uh yes REALLY.”

Really. It’s true. There are gorgeous, virtually new, West Coast beauties that have been on the market in upscale hoods north of Nanaimo for 250 days or more. Where once the wrinkly refugees from Alberta paid $900,000 for luxury digs, they can now grab them for seven. Wait six months, and the price will be less.

The theme of this pathetic blog this week has been ‘down’. As in prices, expectations, profits, wages and jobs. It’s time to get serious about deflation. I told you that in earnest a couple of days ago, after months of warning you it was coming. Catherine’s experiencing this first hand. And this week the Big Dog made it official.

It’s been longer than many can remember since the D-word crossed the lips of a central banker in Canada, but on Thursday Bank of Canada boss Stephen Poloz let it slip. We’re at risk of it, he said, and the economy won’t be repaired for at least two more years, during which time prices could fall, and a ‘sharp correction’ hit the housing market.

Inflation now barely registers at 0.7%, so Poloz worries. “Of course, when we are already below target, as we are today, we care more about downside risks than upside ones,” he said in a Montreal speech. “There is a risk that household imbalances could keep building and set the stage for a sharp correction down the road.”

To make the point crystal – that we are eight-tenths of one per cent away from deflation – the BD reminded what a downward spiral in prices can do to people. Like Catherine. As prices fall, they wait, expecting even lower ones in the future. That keeps money in the orange guy’s shorts instead of moving through the economy. Demand falls, jobs wither, wages and profits decline as a negative cycle takes hold. Poloz talked about the Depression (in Canada prices fell by 25%, the economy shed 40% and unemployment hit a stunning 30%), and the malaise now gripping Japan. He also expressed his fear: “a deflationary trap.”

Holy crap. So where does Helmut Pastrick get off? The credit union economist has just tried to out-BS Remax with a report predicting real estate will rise at 4% every 12 months for years to come, with Toronto housing prices doubling in a couple of decades. Yup, that would put the average property at $1.1 million, and the average detached 416 house at $1.7 million. Of course, Pastrick gets the headlines. The Bank Credit Analyst doesn’t. But major corporations pay a lot of money to get BCA insights. Right now it’s warning Canadian real estate is a time bomb.

“It is always difficult to spot a speculative bubble in advance,” says the journal this week, “but in the case of Canadian housing the weight of evidence is clear in our view.” That includes intense over-valuation compared to incomes and rents, residential investment at 7% of the GDP, “above the peak in the US and far outpacing population growth”, porcine household debt and a piggy appetite for more. “The readiness of Canadian households to take on new debt by using their homes as collateral has fueled the consumption binge. Outstanding balances on home equity lines of credit amount to about 13% of GDP, eclipsing the U.S. where it peaked at 8% of GDP at the height of the bubble.”

Canada-Housing

If you can breath and find you butt in the shower, you should figure out this is not good. The herd blindly snorfles borrowed money and shovels it into inflated houses while the Big Dog opening muses about the Dirty Thirties. So do you believe the guys who score commissions selling mortgages and bungalows, or the dude in charge of money?

Catherine’s right. Houses in Wrinkly Acres will cost less in May. And that’s not the half of it.

Tomorrow: how to invest in a deflating world.

199 comments ↓

#1 i love deflation on 12.12.13 at 8:24 pm

When 2008-09 was the best year of the decade. My money was worth more money. Oh ya bankers say that is bad. I love deflation and hope it hits the world harder then the 30’s depression . I wish for hard core deflation but my money being worth more and able to buy more goods and services is somehow bad which bankers claim. I loved the 2008-09 market crash and imo the best year in the last decade or two.

#2 T.O. Bubble Boy on 12.12.13 at 8:24 pm

“The readiness of Canadian households to take on new debt by using their homes as collateral has fueled the consumption binge. Outstanding balances on home equity lines of credit amount to about 13% of GDP, eclipsing the U.S. where it peaked at 8% of GDP at the height of the bubble.”

That aligns with my opinion that this is a “home reno” housing bubble, as opposed to true demand.

The lack of a Case-Schiller type of measure in Canada means that we’re constantly comparing the average price of a SFH, but not factoring in what the average (HELOC-fueled) Canadian did to that home.

I look on the market in Toronto, and virtually EVERY home has a new kitchen, new bathrooms, new floors, landscaping, etc… and then there are the dissapearing bungalows which have been demolished and replaced with skinny McMansions.

So – I bet if you look at HELOC balances vs. Canadian Net Worth “increases” over the past 5-10 years, they’d correlate pretty closely… in other words, Canadians are putting up serious debt to reno/buy/sell houses.

(Canadian Watchdog – do you have these stats?)

#3 simplyput7 on 12.12.13 at 8:24 pm

Good post! I have been waiting for a couple of years for people to admit the risk of deflation was a real threat to our economy. I am looking forward to hear about how to invest in something other than cash in a deflationary economy.

#4 Steven on 12.12.13 at 8:26 pm

Google this article about Long Island NY housing, and for the preview of what may come to Canada.

Household Net Worth: The “Real” Story (Advisor Perspectives)

#5 Chopper on 12.12.13 at 8:28 pm

Do you think the fools will listen Garth?, the urge to splurge is greater than reason. People want to spend money they don’t have, to buy things they don’t NEED, to IMPRESS preople they don’t like.

That will never end it is called greed and envy and show off.

#6 8102 on 12.12.13 at 8:29 pm

Along with the job losses in the Private Sector and the movement of manufacturing to areas with lower labor costs the Feds are also slowly turning off the tap in the Federal System – No hiring and less money to buy goods – all in the name of balancing the budget in time for the election.

It will be interesting to see what that looks like in a couple of years.

And the sad part is it may already be unstoppable.

#7 i love deflation on 12.12.13 at 8:31 pm

I highly doubt that we will have deflation as the criminal bankers can not profit (steal) in deflationary times. Did I mention I love deflation and had an amazing 2008-09 where everyone was broke and I had money to buy. Deflation = freedom = wealth = good times. If deflation is so bad why did I enjoy it so much? Why was I some of the few in the malls spending like crazy not having to compete with other who have no money. Yeah deflation is so bad….. then why do I wish for a deflationary depression worse then the 30th depression?

Because you’re a myopic moron? — Garth

#8 the jaguar on 12.12.13 at 8:32 pm

Yes, please Garth. I need advice on how to invest in a deflationary environment. Too much cash in the bank from the sale of my house.

#9 ZED on 12.12.13 at 8:34 pm

Deflation.

Cash will be even more king as time goes by. Prices will come down on those beautiful houses just as the extra labour from China helped prices to come down in the last 20 years on basicly everything we buy.

The bad thing is that if people wait to buy, then no products need to be manufactured so no jobs.

Cash flow and cash to invest will be worth even more.

Garth has warned eveybody here about those facts for the last few years.

#10 Victoria Real Estate Update on 12.12.13 at 8:37 pm

. . . . . Total Yearly Single Family Home Sales. . .
. . . . . . . . . . . . . Greater Victoria. . . . . . . . . . .
. . . . . . (Percentage below 25 Year Average). . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 0%. . . .**. . . . . . . .*. . . . . . . . . . . . . . . . . .
. . . . . . . **. . . . . . . .* . . . . . . . . . . . . . . . . .
– 5%. . . .**. . . . . . . .*. . . . . . . . . . . . . . . . . .
. . . . . . . **. . . . . . . .*. . . . . . . . . . . . . . . . . .
– 10%. . .**. . . . . . . .*. . . . . . . . . . . . . . . . . .
. . . . . . . **. . . . . . . .*. . . . . . . . . . . . . . . . . .
– 15%. . .**. . . . . . . .* . . . . . . . . . . . . . . . . . .
. . . . . . . **. . . . . . . .* . . . . . . . . . . . . . . . . . .
– 20%. . .**. . . . *. . . *. . . . . . . . . . . . . . . . . .
. . . . . . . **. . . . *. . . *. . . *. . . . . . . . . . . . . .
– 25%. . .**. . . . *. . . *. . . *. . . *. . . . . . .*. . .
. . . . . . . **. . . . *. . . *. . . *. . . *. . . . . . .* . .
– 30%. . .**. . . . *. . . *. . . *. . . *. . . *. . . *. . .
. . . . . . . **. . . . *. . . *. . . *. . . *. . ..*. . . *. . .
– 35%. . .**. . . . *. . . *. . . *. . . *. . . *. . . *. . .
————————————————————————–
. . . . . . 25 yr. . . 08. . 09. .10. . 11. . 12. . 13 . . .
. . . . . . .avg . . . . . . . . . . . . . . . . . . . . . .(proj.).

Sales are simply weak in Victoria and have been for 4 years. This chart makes that clear. You can find this data here.

Total (projected) single family home sales across Greater Victoria for 2013 will most likely be 25% below the 25 year average. If we were to adjust for population growth it would make 2013’s total look much weaker.

Single family home prices are down significantly from 2010 (peak) values. SFH prices at the upper end of the market are down 10.5% and SFH prices at the bottom end of the SFH market are down 14%. This is based on the reliable method of using 3-month median data. This 10-15% SFH price decline from peak is supported by the 10% SFH price decline from peak of the MLS HPI data. The MLS HPI data is put together by realtors, so we know that SFH prices across Greater Victoria have declined at least 10% from peak since we have definite and recent proof that the numbers released by some Canadian real estate boards have been manipulated and made to look stronger.

Where are prices headed? Lower. Much lower.

Victoria’s housing market is the second most overvalued in Canada behind Vancouver. Vancouver’s housing market is the second least-affordable in the world . We know at all housing bubbles burst. We also know that all bubble housing markets go through major, multi-year, price corrections after the bubble bursts. This process is well underway in Victoria.

House prices in Victoria crashed 52% from 1981 to 1986 (scroll down to Victoria’s chart). Victoria’s housing market definitely has a history of crashing.

Housing market booms and busts have been a common occurrence all over the world for decades. House prices in Victoria climbed into bubble territory as a result of federal policy that created an environment of cheap and easy credit as a result of lax lending standards and emergency level interest rates. There is nothing unique about Victoria that made house prices climb into bubble territory as prices in all Canadian cities climbed into bubble territory for the exact same reason. Indeed, house prices in the US entered bubble territory for the same reason. It isn’t different in Victoria.

Victoria’s housing market faces a deep, multi-year price correction. The extent of Victoria’s price run-up is right up there with some of the most bubbly US cities at the peak of the 2006 US housing bubble. This is what happened to house prices in those cities (click on the chart and scroll down).

Despite recent price gains, house prices in the US are still far below current bubble prices in Canada. Let’s compare condo prices between Victoria and Phoenix. The criteria will be 2 beds, 2 baths, 2005 and newer with a pool.

In Victoria, the lowest priced condo that satisfies the above criteria is valued at $510 K.

In Phoenix, the lowest priced condo that satisfies the same criteria is valued at $106 K.

Girls and guys, do not buy a property in Victoria right now. Much lower prices are just around the corner. Let the market correct a lot more before you take on all of that debt.

Once prices correct a lot more, you should not feel anxious about getting in before prices begin to move higher. After house prices crashed in the US, , they remained within 5 – 10% of the bottom for at least 3 to 4 years before they began to move higher again. The same will happen in Victoria.

Until next time – Cheers!

#11 Eleanor on 12.12.13 at 8:39 pm

It’s getting hard to track of everyone who’s been calling the situation here a bubble lately … Goldman Sachs, Deutsche Bank, IMF, The Economist, The WSJ, & Nouriel Roubini, spring to mind … who else has been piling on?

#12 coastal on 12.12.13 at 8:40 pm

“The readiness of Canadian households to take on new debt by using their homes as collateral has fueled the consumption binge. Outstanding balances on home equity lines of credit amount to about 13% of GDP, eclipsing the U.S. where it peaked at 8% of GDP at the height of the bubble.”

Same old story that the masses deny, it’s over folks, shut out the lights. Worst ones are the new home owners who haunt the house blogs like rabid dogs attacking posters spelling mistakes. Wait til they soon see they made a lifetime mistake.

#13 Ralph Cramdown on 12.12.13 at 8:41 pm

#2 T.O. Bubble Boy — “So – I bet if you look at HELOC balances vs. Canadian Net Worth “increases” over the past 5-10 years, they’d correlate pretty closely… in other words, Canadians are putting up serious debt to reno/buy/sell houses.”

You’re only 45% right.
http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2013/05/caamps-spring-mortgage-report-2013.html

#14 r on 12.12.13 at 8:44 pm

Waiting for December 13

#15 GUY GADBOIS on 12.12.13 at 8:45 pm

now, i’m getting very afraid…
how to invest in a deflating world? don’t buy anything except food…or, invest in campbell’s soup!

#16 heineken on 12.12.13 at 8:47 pm

garth
have you decided to victimize my threads

They are not posts, but bullion commercials. — Garth

#17 espressobob on 12.12.13 at 8:55 pm

Why do I feel like where living in the tail end of the ‘roaring twenties’?

#18 eddy on 12.12.13 at 8:56 pm

Re: Toronto Land Transfer Tax

I have mentioned here that this tax is the most overpriced data entry on planet earth.
I was wrong.
It has nothing to do with data entry.
The house I bought closed in November, the previous owner paid the tax year in full, my lawyer did an adjustment. A few weeks after closing I get a tax bill in my name for $25 past due. That’s right, it’s for the transferring of names, in other words ‘data entry’. The Land Transfer Tax (I paid just under 13K to the city) does not cover that. Can you believe it?

#19 oceanside on 12.12.13 at 8:58 pm

Catherine has nailed the Kelowna and Qualicum markets. The Okanagan has a lot of vendors that are still trying to sell their homes at what they thought they were worth in 2010…Lots of 400 days on market and they won’t lower their prices. Homes priced below $500,000 that are perceived as being a good value are selling in Parksville and Qualicum. The “hot” sellers are priced around $400,000.

She is right about the high end homes, those that were $900k a few years ago are now $689k and still not moving.

#20 Entrepreneur on 12.12.13 at 8:58 pm

Debt is good for only a short while but not for a long time like in real estate. Long time debt in real estate only ties the money down to the banks not to other resources. Brakes to the economy.

Something to think about: Most of the population are the baby boomers but the gdp growth for small business is down on the chart. Excuse me, but small business should be encouraged and developed. Obviously, the leaders of the government were not thinking ahead…just followed the gravy train mentallity. We need the business leaders to show the way…time to give small business breaks and benefits.

Looking forward to tomorrow’s blog.

#21 Ross on 12.12.13 at 8:58 pm

A general decline in prices (as opposed to just housing) would imply a strengthening CAD, no? Who’s gonna be clamoring for loonies while the RE market implodes, China slows, and consumers are stacked to the gills with debt?

Seems to me a weakening CAD is more likely, with the corresponding higher prices for imported goods.

#22 Tri-Guy on 12.12.13 at 8:59 pm

I’ll have what Helmuts drinking.

#23 Freedom First on 12.12.13 at 8:59 pm

Well Garth, now the BD is singing your tune too. I believe that the people who are balanced (as per your asset%’s/age allocation formula), liquid(as per your asset%/age allocation formula), diversified(as per your asset%/age allocation formula), and my personal choice favorite/debt free at all times(with a little higher cash % than your formula/personal comfort level:), well, these times happening world wide right now, are going to be extremely difficult for the people stuck with huge debts and depreciating asset(s). Of course, much of the world has already been financially creamed by this, as they never saw it coming(close example:look south), same as the Canadians about to get financially flogged for their not paying attention(translation:not reading Garth’s blog and following his wise free advice). However, and I look forward to reading your blog tomorrow Garth, in asset price falling/deflationary times, people who are liquid/balanced/diversified/with cash and no debt, (Gee, WB holding 50 Billion in cash, go figure:) are going to get the deals. Go figure, the rich always get richer, and the poor always get poorer. No exception. You cannot borrow wealth. Leverage is not to be used by people going all in on one asset, ever, eg, RE. No exception.

#24 allan on 12.12.13 at 9:01 pm

The truth is that lots of people (mostly immigrants) work like horses to get their mortgages paid off. Perhaps an adverse effect of a major financial crisis can put some of late comers underwater but most will dig in and cut down spending. Who cares what they paid: they own a house and most learned the hard way that money in a bank can depreciate overnight. As long as they getting paid they will continue to pay. House prices will CONTINUE TO INCREASE until they become out of reach of an average Canadian. That is a global reality. Middle class is an utopian dream, it is a “Paradise Lost”. Buy now or never. Garth owns a house, most of readers here are not and that is how it will remain, perhaps forever. Garth, with all the respect, you are a one-eyed prophet. One eyed because the only country you know is Canada, while most people around you are from everywhere else. Global reality does not tolerate nonsense of relative equality. I think that your blog is rather harmful, because a lot of people are seeking guidance to complex questions and you offer them your easy one sided advice.

#25 ryan on 12.12.13 at 9:04 pm

Is that Smoking Man dressed up as Santa Claus? He’s smirking because his granddaughter in that pic is giving the finger to the man, putting into practice all she has learned from her great old wise grandpa.

#26 recharts on 12.12.13 at 9:07 pm

TO.Bubbleboy
So – I bet if you look at HELOC balances vs. Canadian Net Worth “increases” over the past 5-10 years, they’d correlate pretty closely… in other words, Canadians are putting up serious debt to reno/buy/sell houses.

(Canadian Watchdog – do you have these stats?)

That should not inflate our household debt to the current level
I do see lots of renovated homes but I have also seen homes renovated and sold in 2008-9 and sold again with no renos after 2-3 years with a good profit.
Actually the guys who sold in the last round made more money than the ones who renovated.

I could probably look at the data that I collect and see if in the description of the listing I see:
-renovated
-new this, new that , year 2010-2013

but that is a lot of work
Actually you could do it yourself, just check the active MLS listings and see how many have the above

#27 2CntsCdn on 12.12.13 at 9:10 pm

#20 Entrepreneur

“Debt is good for only a short while but not for a long time like in real estate. Long time debt in real estate only ties the money down to the banks not to other resources. Brakes to the economy. ”

Right you are …. Dept is only good when you can write of the interest and/or the borrowed money can be made to make MORE money than the cost of borrowing. When growth ends or the potential (to make more money than the cost of borrowing) ends …. off load the dept. Dept can be a great tool when used right. But gnaws you to the bones when used wrong.

#28 mark on 12.12.13 at 9:11 pm

I’m sure they’ll just come out with 50 year mortgages or some madness to ‘fix’ all this.

#29 The Krug Men on 12.12.13 at 9:14 pm

So,,,,

If deflation sets in, the Governments will do what they do to let it get to 4% for a period and if that doesn’t work they’ll do a bit more & then a bit more.

The US Fed is preparing for this and if or when they see INFLATION present itself Yellin & Co will not touch it until they see the white of its eyes and then (& only then) they’ll look to see that the unemployment rate has gone below their 6% marker.

Canada will simply follow which should be measures that are good for home-ownership!!!

The world is beginning to accept that deflation is here and all the quacks preaching austerity have been preaching quackery. No models to prove their quackery just fear. Right wing fear & the suckers went for it.

The world is ready to change and so we are entering a world where governments will introduce policy to encourage INFLATION.

What ever measures are applied will finally be the correct measures that have been required all along.

IF IT IS NOT TOO LATE?????

#30 Shawn on 12.12.13 at 9:14 pm

HOW TO MISLEAD WITH CHARTS

AND HOW TO DRAW THE WRONG CONCLUSION FROM A CHART

The graph or chart in the article is highly misleading for the following reason.

It uses that standard tactic of not starting the Y axis scales at zero. A close look shows that the price to income ratio in Canada rose only about 25% since 1990.

By using a scale that starts at 75 instead of zero, the slope of the growth is much exaggerated. Rent to price in Canada rose about 75% on the bottom of the chart. That’s a lot. But it’s far less than the 300% or so which is suggested visually on the chart. (The line starts about 25% of the way up the scale and rises to the top of the scale implying a 3 times rise. Totally misleading.

Everyone drawing a chart has an Agenda BCA authors included.

And the narrative seems to suggest that we consider Canada the anomaly. U.S. house price to rent ratios and house price to income ratios FELL after 2005 while the ratios in Canada continued to rise.

Well why should we assume the U.S. got it right?

In fact with interest rates continuing to decline it was perfectly rational for the ratios to continue to rise as they did in Canada. It is the U.S. that has some ‘splaining to do.

And the explanation was a financial crisis in the U.S. that caused house prices to fall. There never was a house price bubble in the U.S. At least there is no proof of it. Instead house prices were about where they should be (maybe a little high) and then a financial crisis torpedoed them. The financial crisis was caused by idiot bankers and deadbeat borrowers not by high house prices. Now U.S house prices are climbing back to where they should be. And see the U.S. curves turning up to catch back up to Canada where they would have been absent a financial crisis.

So the score is Canada 1, U.S. zero. We got it right and they failed.

So there!

The financial crisis did not cause US house prices to fall. They fell far before a crisis emerged, and helped precipitate it. Stop trying to always be the smartest guy in the room. It’s not working. — Garth

#31 Marco Polo on 12.12.13 at 9:17 pm

Wow. I did some research, I had never heard of the ‘VISA Home Equity Line of Credit’ before.

M: “Hey honey, want to take a vacation to the Maldives”
F: “Who’s paying for it?”
M: “The future inflated value of our townhouse”

This won’t end well, and is very reminiscent of the debt and stock bubble before the great depression.

I spoke to a realtor today about a specific property, I felt to be priced about 30% more than I wanted to pay, and felt my offer would be too low to be considered. I discussed this with him, and was told these home prices come from past comparables, market information, etc.

Really, I thought. I’d sure like to sell RIM stock for what it was worth LAST year. While I’m at it, i’d like to sell my five year old truck for what other five year old trucks have sold for last year. If it takes me a year to sell, so be it, no discount.

Investments, electronics, machinery, commodities; all these markets have been changed massively by the communications and real time pricing available via the internet. Housing, so far, is far behind, pricing at newspaper, or magazine speed, and not yet reactive.

#32 Smoking Man on 12.12.13 at 9:23 pm

#25 ryan on 12.12.13 at 9:04 pmIs that Smoking Man dressed up as Santa Claus? He’s smirking because his granddaughter in that pic is giving the finger to the man, putting into practice all she has learned from her great old wise grandpa.
………

No Ryan I am the man, she pointing it at the Toronto tree huggers, I was going to say Herb, but the old fellow is a bit sensitive.

Friday 13 tomorrow Oh Seneca let’s rock.

#33 Cici on 12.12.13 at 9:27 pm

#11 Eleanor,

The Bank Credit Analyst…

#34 pinstripe on 12.12.13 at 9:28 pm

Tomorrow: how to invest in a deflating world.

———————————————————-

To date too many people are heavy in debt to get any benefit from the information.

The information will be beneficial only to those with NO debt and a lot of money stashed away.

The rich will get Richer.

Include you? — Garth

#35 not 1st on 12.12.13 at 9:29 pm

Garth, what scenario can you envision that will bring people’s wages up so that they can afford the inflationary growth being injected into the economy?

Right… there isn’t anyway people can make more money or save more or cut costs more, ergo prices must fall.

And this is taught right in basic econ 101 classes so its not the devastating scenario you think it is. Its actually a healthy correction of excesses. Embrace it. You will be able to buy your next Harley a lot cheaper.

#36 recharts on 12.12.13 at 9:31 pm

http://strategis.ic.gc.ca/eic/site/bsf-osb.nsf/eng/h_br03177.html#tbl2

What is the meaning of bankruptcies down and consumer proposals up?

Canada wide up 4% YoY

#37 not 1st on 12.12.13 at 9:31 pm

Tomorrow: how to invest in a deflating world.

Hope this won’t be a pitch for 30 yr govt bonds yielding 2%.

Only one asset… productive land.

That’s funny. Know what happened in the Thirties? — Garth

#38 Paul on 12.12.13 at 9:33 pm

7 i love deflation on 12.12.13 at 8:31 pm

I highly doubt that we will have deflation as the criminal bankers can not profit (steal) in deflationary times. Did I mention I love deflation and had an amazing 2008-09 where everyone was broke and I had money to buy. Deflation = freedom = wealth = good times. If deflation is so bad why did I enjoy it so much? Why was I some of the few in the malls spending like crazy not having to compete with other who have no money. Yeah deflation is so bad….. then why do I wish for a deflationary depression worse then the 30th depression?

Because you’re a myopic moron? — Garth
———————————————————-
PERFECT
I just sprayed my screen with my last shot of Johnnie walker blue wwwaaaaaaaaaaaa

#39 Infused with Opiates on 12.12.13 at 9:39 pm

10 VRE

“Vancouvers housing market is the second least affordable in the world”

You live in a very small world

http://www.numbeo.com/property-investment/rankings.jsp

#40 Unknown Marketer on 12.12.13 at 9:39 pm

Good Call On Deflation As A Post.

There is only a few books on ever written on Deflation and the impact it will have on a country. Looking forward to coming posts. It is already gripping real estate in the Lower Mainland. I was with a networking group this AM and there were both Mortgage Brokers and Real Estate Agents in the group. They are beat up and giving up. Many know it and don’t want to deal with it. Other business in the self employed market are also in trouble. Many have relied on their HELOC and that is being tap. If not at the max they are afraid that the underlying asset is going to be in trouble. As usual what is happening on the ground is not being discussed in an meaningful way in the media. We are already in it… It does not get better from here.

#41 not 1st on 12.12.13 at 9:41 pm

“The depression of the 1930s and the GFC of 2008 will never be repeated in our lifetimes”

Your words Garth…and always hammered home on any poster who chose to differ with you.

So why are you worried now? You didn’t actually think that housing would correct all on its own without spilling over into the larger economy?

My words stand. I’m only worried for you. — Garth

#42 Nemesis on 12.12.13 at 9:44 pm

“In regione caecorum rex est luscus.” – Desiderius Erasmus

#43 Squatter on 12.12.13 at 9:50 pm

The girl in the picture says:
‘Are you finished BS-ing me? I know you’re the one who buys my Christmas presents!’

#44 Pipeline on 12.12.13 at 9:54 pm

No one seems to be talking about the BC interior. The crash is here. My property assessment in the Nelson area has dropped by 25% since 2010. Most properties are selling below assessed values.

#45 Goldie on 12.12.13 at 10:01 pm

From bloomberg (sorry no link):

“German police arrested two suspects in a fraud probe into illegally-generated Bitcoins worth 700,000 euros ($963,000)…”

this is why goldies are offended when we get lumped in with the virtual currency crowd. I’d rather own fiat than bitcoin!

#46 raider on 12.12.13 at 10:12 pm

“Tomorrow: how to invest in a deflating world.”

Can’t wait for that!!!!

Let me guess, banks, preferreds, financial assets, …, maybe REITs? Anything that throws off cash-flow?

I’m particularly curious about what you have to say about REITs.

#47 heineken on 12.12.13 at 10:12 pm

okay garth, I didn’t realize how sensitive you were to precious metals. from now on, I will keep pm comments to a minimum.

lets discuss deflation.
I thought yesterdays threads clearly proved that deflation does not exist and that inflation was present.
I don’t believe the gov’t propaganda to tell me that deflation is here. all my expenses have been going up.

here’s my question for all you blog economists; if we are in deflation , then you are suggesting that the cdn dollar is going to be worth more, in the long run, than it is now. Do you really believe that?

#48 greaterfool2013 on 12.12.13 at 10:16 pm

The inflation numbers are ABSOLUTE crap! Been to a store lately? Bought groceries? What about your heating bill?

This is just BS fear mongering so the bastard can keep rates low, keep our stupid housing market inflated, and lower our dollar so we can try to export our shit to “recovering Europe” as the Asians try to fix their “ghost town” country.

Meanwhile, our unionized, government employed elite, from dishwashers to prime ministers, will continue to enjoy yearly pay increase 4 times that of inflation, golden early retirement benefits, all the while raising taxes and laughing at the private sector peasants.

Deflation will be good for a lot of people, bad for a bunch more. Correctly playing the trend will make a few more millionaires.

#49 omg on 12.12.13 at 10:18 pm

Catherine DO NOT come to the coast

It always amazes me that people leave the city and family and friends that they have been part of for 30 or 40 years to come to the soggy coast.

Yes, I know you don’t have to shovel rain, but day after day of overcast skys in November, December and Januray sure can get monotonous.

Plus you get to try to break into cliques of friends that have known each other for the past 30 years.

Not to mention the economy killing wacko socialists that get into power every 10 to 15 years.

People come out here in the summer and yes it is glorious, absolutely glorious. But the reality of living here year round is a lot different.

Catherine, keep your money, stay in Alberta and just plan on going south for 4 weeks every January.

#50 Don't Believe The Hype on 12.12.13 at 10:20 pm

girl on the left in the pic…… Eery resemblance to Karla Homolka

#51 george soros on 12.12.13 at 10:23 pm

Tomorrow: how to invest in a deflating world.
—————————–
Deflating? what is deflating?
Food? Gas? Education? Health Care? Insurance?

The price of all basic necessitates only goes up. Whatever you don’t need deflates. How many Chinese TVs or jeans can one buy?

On the contrary: There is rampant inflation, That cupcake from Loblow was 99 cents 2 years ago, now is 1.99, that cheese string was half the price 2.5 years ago, look at the food courts of every mall, price increases of 20 % annually lately, that chocolate box (pot of gold) was 4.99 for 400 grams now is 10 dollars for 280 grams.

Good luck with that deflation scare. What is wrong with things that cost less in a more productive economy?

I understand that the current credit system is flawed and to protect the profits of the banks (somebody has to pay that interest baby) inflation is needed.

I am thinking more on the coming in 2-4 years huge commodities boom and stock, bond market and real estate crash.

Any thought Garth?

Price inflation can easily co-exist with asset deflation. Is your income also inflating? — Garth

#52 raincouver on 12.12.13 at 10:24 pm

…”Holy crap. So where does Helmut Pastrick get off? The credit union economist has just tried to out-BS Remax with a report predicting real estate will rise at 4% every 12 months for years to come…”

Is that guy still at it? We’ve been listening to his BS for years; and still he gets quoted in spite of being so consistently wrong.

No wonder people are being taken for fools.

#53 Paul on 12.12.13 at 10:26 pm

Thanks Garth,
Kelowna and the Island have been on the radar for awhile. Its the people in the lower mainland that are in denial. Everywhere in Surrey there is new construction and the prices are a nose bleed. Richmond and Vancouver think its different there and everyone in the world wants to move in. The tri-cities are no different. The correction will be local but I cant see but a huge correction coming since prices have climbed too steep in the Lower Mainland. Taxes are up, tolls on bridges, gas prices and Hydro rates increasing by 25%. Yet people keep buying, nothing but crap on the market to rent. I don’t get it, why the delusional thinking in my hood?
Sincerely,
Social outcast renter

Looking forward to your blog tomorrow, anything on Inverse Etf??

#54 george soros on 12.12.13 at 10:28 pm

And be ready to pay more into the CPP, apparently they would like to increase the contributions (more taxes for you) to pay more benefits to the old fart that lives in a million dollar home while you rent in order to support his/her lifestyle.

#55 A Yank in BC on 12.12.13 at 10:28 pm

Renting an 8 yr. old Ocean view house here on Van Island for $1,200/mo that the home’s owner turned down an offer for of 540k in 2010. He’d be just delighted to get 450k now. In fact, he’d run to the bank with the check.

#56 george soros on 12.12.13 at 10:31 pm

Price inflation can easily co-exist with asset deflation. Is your income also inflating? — Garth
————————-
yes, in the last 15 years, I make 2.2 times more now and live worse.

Asset deflation – yes, absolutely, For stocks, bonds, real estate.

But inflation of necessities…
And how to protect your savings when every asset is in a bubble…

#57 X on 12.12.13 at 10:34 pm

Most people will continue to buy houses as a wise investment until the headlines scream that RE is sinking.

And with the money that RE is pouring into media that won’t be for awhile.

#58 not 1st on 12.12.13 at 10:35 pm

Here in Regina, everyone and their dog is driving around a jacked up half ton with a logo on the side of their window pretending to be a contractor.

On top of that, I see a lot of young punks and oldies stretched on housing and luxury cars.

I wouldn’t mind seeing a few less of those types come the new deflation era.

#59 dienekes on 12.12.13 at 10:41 pm

@#28 mark
They could make 1000 year mortgages. It will change nothing.
Everyone’s money gets soaked up by mortgages, leaving nothing for the economy. People will just borrow to the limit.
They need to be re-educated and feel some pain by falling asset prices.

#60 Canadian Watchdog on 12.12.13 at 10:45 pm

#13 Ralph Cramdown

CAAMP's survey is not very reliable because it's based on 2000 respondents.

#2 T.O. Bubble Boy

Estimating renovation spending is very difficult due to Canada's growing underground economy. Read CHBA's paper: Tackling the Underground 'Cash' Economy In Home Renovations

If prices were being driven by renovation spending, then Rona wouldn't be closing stores.

The main reasons why prices are holding is due to increasing activity in subprime lending (more insurance and guarantees provided by government. Yes F lied), foreign inflows and the fact that lenders are offering distressed homeowners 'workout deals' to avoid defaulting on their mortgage. For the latter, foreclosures in the short term are likely to be subdued as lenders and insurers do whatever possible to avoid borrowers from defaulting.

Despite whatever proactive measures are taken, where you will see bad data increasing is in consumer proposals, personal loan plans (debt consolidations), banks' impaired loans and declining retail sales (due to more consumers under debt consolations committing to fixed monthly payments).

Moody's stated it best in a report on Canada's consumer delinquencies earlier this year, to paraphrase: distressed homeowners are likely to default or walk away when they realize that throwing good money and bad money isn't worth it.

This is already happening. It's just not being reported by MSM.

BTW, Vancouver's New Home Price Index posted its twenty-first consecutive year-on-year decline in October. Chart  One has to wonder what's really going on behind Canada's shadow presale market.

#61 sciencemonkey on 12.12.13 at 10:46 pm

I think waiting to buy something in deflationary times depends on the magnitude of the cost. For example, consider tech items, one of the things that nobody needs and is naturally deflationary. I wanted a tablet recently, and I assumed that in 8 more months there will be the next generation of Nexus 7, even better than the 2013 version. However, I wanted a tablet, so I bought the current one. What no sane person would do is to buy RE when waiting a year can save 10s or 100s of thousands of dollars.

Regarding the CPP, like #54 george soros, I would be incensed if I was subjected to inter-generational theft by boomers, in their large houses, and holding their large investment portfolios built up during decades of economic growth.

I’m on an email list for an organization called leadnow. Tell me the link below doesn’t sound like inter-generational theft:
http://www.leadnow.ca/pensions

#62 experienced.optimist on 12.12.13 at 10:48 pm

It may seem that I am flogging the subject of deflation again, but as Garth has stated, the theme of his blog this week is “down”.

I have been following articles of interest on deflation since the crash of 2008/2009. Some of these earlier articles 2010/2011/2012 usually referred back to Bernake and the worries of deflation creeping in. Thus the on going QE that has been occurring in the US. Although there are now reports of QE tapering beginning in December or January. Apparently there are reports coming in of a strengthening US economy. We will see.

One just has to Google “deflation” and the results go on for pages. So of course I have included some I enjoyed today. Just glancing over the headline can cover most of it. But the last two may be of interest and fun. Hopefully I did not step on anyone’s toes for tomorrow’s blog. I had also come across some articles on the idea that you can have inflation along with deflation, but did not mark, so cannot share. That is one concept that is even scarier.

http://www.thefinancialist.com/europe-beware-of-falling-prices/
http://www.theguardian.com/business/deflation
http://www.telegraph.co.uk/finance/economics/10481773/Eurozone-M3-money-plunge-flashes-deflation-alert-for-2014.html
http://money.usnews.com/money/business-economy/slideshows/how-to-prepare-for-deflation
http://www.businessweek.com/articles/2013-12-12/the-bitcoin-consumer-price-index-shows-massive-deflation

As for the Potash Corp layoffs in my area, the reports are that about 212 hourly workers were let go and about 40 salaried employees will be let go in the New Year. It is estimated that of the hourly workers, 70 or so were from Lanigan (pop 1500) and area, another 70 from Humboldt and area ( a small city of about 6500, 50KM from the mine and another 70 or so that had commuted out from Saskatoon and area. My numbers may be a bit off , but it gives you the general idea. Saskatoon has been doing exceptionally well these past few years as had most of the rural areas around here. But I imagine if there is an outflow of people moving on, the rural ares will be hit the hardest. It is usually easier to find employment in the large urban centres.
BHP Billiton is building a new potash mine about 15 miles NE of Lanigan, but will not be in an operational mode for quite a few years. I guess they are taking the long view on potash prices.

Sorry for the long post, but sometimes one just has to rant. For the record I am not tied into the potash scene at all, but do live in the area.

#63 raisemyrent on 12.12.13 at 10:51 pm

@ #30 Shawn
you don’t understand the slope of a curve. you could use your same argument on the American curve and say there was no real estate crisis there a few years ago.

#64 Drill Baby Drill on 12.12.13 at 10:56 pm

When you boil it all down, the majority of consumer spending is going to the banks as mortgage payments. So this tells me that the banks are where to invest.

#65 West Vanner on 12.12.13 at 10:57 pm

I look forward to the advice regarding investing in a deflationary economy Garth, not having much fun with it so far. All the picks I had when I had no money have gone to 7 or 8 times the value at the time I was looking at them. Some may be still good bets, others I wouldn’t bet on. I wait with baited breath…

#66 Retired Boomer - WI on 12.12.13 at 11:01 pm

DEFLATION -Careful what you wish for…… sure your mortgaged home might lose value, your car might depreciate even faster with slack demand for used junkers
you may even experience a wage, or benefit cut, as companies will be “repricing” your skills vs. what they pay for your equivalent worker anywhere else in the world.

If you have DEBT you will find those payments much harder to “make” month after month.

If you have CASH you might delay a purchase in the hopes that the “price” will fall in the future.

If you have investments, stocks, bonds, gold, commodities
REIT’s I have NO idea where those “values” will go.

After 62 years on this gas bag I have seen inflation, but never experienced an actual, sustained “DEFLATION.”

Tomorrows’ blog should prove quite incisive. Garth, should one brace themselves with a bit of Brandy prior to reading it ??

#67 Walter Safety on 12.12.13 at 11:07 pm

Garth -Why don’t you write a book and call it “How to invest your money wisely and profit from Deflation. ?

#68 Mark on 12.12.13 at 11:13 pm

“And with the money that RE is pouring into media that won’t be for awhile.”

Except that most Canadian cities are into significant price declines already. Only the changing sales mix, with the low end dropping off, has managed to keep the headlines stats from looking horrific.

#69 Valyrian_Steel on 12.12.13 at 11:14 pm

I hope those who say “cash will be king” are right. Wife and I save about 80% of our income, about 9k every month. Some is used to buy income producing investments – REIT’s have been too tempting to resist of late in particular. But I like to keep a cash amount in the low six figures on hand… sleep well at night factor and all that. ;)

#70 Ralph Cramdown on 12.12.13 at 11:15 pm

#30 Shawn — “And the explanation was a financial crisis in the U.S. that caused house prices to fall.”

EXCUSE ME? The Case-Shiller National Index was already 20% off the peak when Lehman filed BK.

#71 Smoking Man on 12.12.13 at 11:18 pm

I hate my wife, I really do. Blog dogs in the archives said I write like Hunter S Thompson. Never knew who that was.

Then I did, Wow amazing I can so connect with the dude fear and loathing in Las Vegas is on,never saw it. She takes control of the channel changer, won’t let me have a 3rd wine and forcing me to watch a stupid show. Elementary.

If the damn TV wasn’t so heavy it would be out the window, if I could find the little blue pill me and my computer would be cheating on her right now.

I’m a caged animal, scratching at the walls knowing if I ever made out. I wouldn’t last long. Or at leased she’s brain washed me to believe that.

I live in the city, she’s gone tree hugger on me.

I plotting my revenge, she’s not voting for Ford, I’m going book a trip for Vegas next year departing on election day. I will vote, promise to let her vote but will be home late, just enough time to make the airport.

Ah.

#72 Nemesis on 12.12.13 at 11:29 pm

@SmokingMan&WithABow&CurtsyToKnosty…

HunterS.? Guess who he used to write for?…

Sure. Everybody knows that title. They’ve even got a PrettyGood tune… something about, “On The Cover of The….”

But what about this one?

http://www.cycleworld.com/2012/11/21/hunter-s-thompson-going-gonzo-revisited/

[NoteToGT: EatYourHeartOut. TeeHee!]

#73 what bubble? on 12.12.13 at 11:33 pm

Peoples education is the least government concern, neither the government cares much about the level of households debt level. They are only worried that that debt level cannot be increased anymore, by objective reasons.
How the government will explain the young and easy to be aroused people that those consume by at least 25% more then they earn? How this noble and caring government will be able to come out to the nation saying “starting from tomorrow, our dear citizens, you have to learn how to live within your modest means”? Within what means? Our means are limitless – that’s what our banks keep telling us – We are reacher then you think, government, understood? Go and make the prime rate negative and don’t forget about 1000 year mortgage as well… otherwise…beware!

#74 The Mayor of Transcona on 12.12.13 at 11:35 pm

#56 george soros

WHAT? I’m in the exact same boat – make about 2.4 times what I did 15 years ago and I live better by any and every metric. Bigger house, better car, better recreation, better vacation, better non-house NW. Plus I’ve had two kids since then (and they ain’t cheap!).

You either are “mis-remembering” or need to seriously seperate wants from needs and re-evaluate.

#75 Andrew Woburn on 12.12.13 at 11:43 pm

#49 omg on 12.12.13 at 10:18 pm
Catherine DO NOT come to the coast

People come out here in the summer and yes it is glorious, absolutely glorious. But the reality of living here year round is a lot different.

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

He’s probably right, Catherine. I get so stricken with Seasonal Affective Disorder that I can’t take any pleasure in seeing deer play in my back yard or sea lions swimming off my deck not to mention the tedium of having to watch eagles fly over the boring grey water of the Straits of Georgia. Some days it is so rainy I can’t even see the mountains over on the Mainland. Don’t get me started on the people here who are so insensitive to my grief that they insist on saying hello and smiling at perfect strangers. No sane and decent Toronto rules here.

Obviously we’d much rather enjoy the blizzards and heatwaves of Alberta with its endless views of grass but we are too short to look good in cowboy hats.

#76 Herb on 12.12.13 at 11:46 pm

#32 SM,

“… the old fellow is a bit sensitive.”

Only to BS, Dear Boy, only to BS.

#77 not 1st on 12.12.13 at 11:46 pm

Garth, little ol Transalta yielding almost 9%…tempting, non?

#78 Garth is not God on 12.12.13 at 11:49 pm

Deflation really makes sense because for the GDP to grow we need access to credit and it will be restricted due to falling house price and jobs. I am eager to hear about your investing idea in deflationary world other than CASH ( the king )

#79 Infused with Opiates on 12.12.13 at 11:59 pm

75 Andrew – I will meet Cahterine half way and tell her to move to the island – she can still go south for four weeks every winter if she wants.

#80 bdry sktrn on 12.13.13 at 12:00 am

Not everyone drives a Kia or an old bucket of bolts
I’m sure you could have fixed it even thou you don’t have a clue what kind a car I drive
,,,,,,,,,,,,,,,,,,,,,,,,
What car???

I,m sure ALL cars, from a kia to bently, use the same type of system for windows. Ie. Switch,relay,motor,crank mechanism

i would have picked up a motor at a wrecker for 40bux , and installed it for free. If you have no car skills youtu.be. Will show you how.

#81 recharts on 12.13.13 at 12:00 am

#45 Goldie on 12.12.13 at 10:01 pm
From bloomberg (sorry no link):

“German police arrested two suspects in a fraud probe into illegally-generated Bitcoins worth 700,000 euros ($963,000)…”

this is why goldies are offended when we get lumped in with the virtual currency crowd. I’d rather own fiat than bitcoin!

Goldie you are an idiot!
The whole idea of bitcoins is that they can not be illegally generated.
They can be mined (illegally or not) which has nothing to do with the e-currency but with the incommensurable amount of stupidity, like yours, that surround us. The guys were arrested for hijacking computers which were later used to for bitcoin mining.

#82 Smoking Man on 12.13.13 at 12:03 am

#76 Herb on 12.12.13 at 11:46 pm“… the old fellow is a bit sensitive.”

Only to BS, Dear Boy, only to BS.
…………

Why, the whole world is based on bull shit, as the biggest bull shitter on this blog, there are more truths in my bull shot than the biggest propagandist pumping his wishful bias.

Love you herb, oxox

#83 Shawn on 12.13.13 at 12:05 am

#30 Shawn — “And the explanation was a financial crisis in the U.S. that caused house prices to fall.”

EXCUSE ME? The Case-Shiller National Index was already 20% off the peak when Lehman filed BK.

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

I checked and 20% is correct.

But Lehman was not THE financial crisis. It’s bankruptcy was caused as was the house price decline by rotten loans.

When the janitor was approved for the $600k McMansion, it was not that the house was not worth $600k, it was that the borrower could not afford it.

Point is, the chart is misleading and can be read two ways.

So far the idea that Canada house prices would follow the U.S. down has not proven correct after five years. Instead the U.S. is moving back towards where Canada is.

#84 Tony from Calgary on 12.13.13 at 12:08 am

“Price inflation can easily co-exist with asset deflation”

Or in other words, prices can change. I wish you’d just dispense with the modern-day economic mumbo jumbo and just explain what inflation and deflation really are – monetary events. Saying prices can “inflate” or “deflate” is just as stupid as saying a cough is a cold – changes in price are a symptom, not the cause.

Deflation as a monetary event is simple – less money in the system chasing the same amount of goods. At an aggregate level, prices fall, as does ones ability to get their hands on money.

Thus cash is king, so you better find some quick. And as far as investing in deflation – don’t. The market’s time is almost up – get out now before you get rehypothecated back to the stone age.

Getting closer to the Automatic Earth style collapse, Garth.

Not in this lifetime. — Garth

#85 Ronaldo on 12.13.13 at 12:11 am

If the Bank Credit Analyst is giving the warning signals people had better take notice. They are the same people that predicted the Oct. 19, 1987 stock market crash several weeks in advance.

#86 Victoria Real Estate Update on 12.13.13 at 12:20 am

#39 Infused with Opiates

The methodology that Numbeo uses to calculate their version of price to income ratio assumes many things (see their methodology) and it uses their version of net disposable family income, which is full of even more assumptions.

Their calculations and conclusions are based on one big pile of assumptions.

Most legitimate and reliable studies that are used by governments around the world use gross before-tax annual median household income when calculating price to income ratio.

While I’m posting this, I might as well mention that 244 King George Terrace, a house located in south Oak Bay, recently sold for $980 K. It sold for $1.35 M in 2011. That is a loss of 27% in about 2 years. House prices in all areas of Greater Victoria are definitely heading downward.

#87 Ayn Rand Army on 12.13.13 at 12:31 am

That’s funny. Know what happened in the Thirties? — Garth
——-
Yes, but money was back by gold back then and credit actually contracted, that is not going to happen this time. The credit expansion is what was responsible for the rise in prices and just like the usa, our central bank will print like crazy to try to maintain the bid under houses, meaning more inflation to come, even while prices fall, just like the usa now. prices should be much much lower than they are. You know this!

#88 TEMPLE on 12.13.13 at 12:36 am

#77 not 1st on 12.12.13 at 11:46 pm

Garth, little ol Transalta yielding almost 9%…tempting, non?

Maybe if you ignore that the dividend payment is over 2X the EPS. Think that is sustainable? Buy some shares. They are a steal at a price to earnings ratio of 92. Stick them in your value portfolio…along with Tesla.

TEMPLE

#89 Ronaldo on 12.13.13 at 12:37 am

”Only one asset… productive land.

That’s funny. Know what happened in the Thirties? — Garth”

That is funny when I think of the stories my mother used to tell us about the drought and the dust storms on the prairies and the soil being blown away and sand banks covering the barbed wire fences. The land was no longer productive and they had to move further north. That was in 1930. We better hope we don’t see those days again from the stories I was told.

#90 Dean Mason on 12.13.13 at 12:39 am

In the Financial Post today, they have an article titled, Toronto housing prices to double over next 25 years, study predicts.

Even if this turns out to be accurate, it seems like a big deal but really it is a bad rate of return.

A doubling in 25 years is a 2.81% compounded rate over 25 years which turns out to be 4.00% annually after compounding is taken into account.

Take into account all the property taxes, utilities, insurance, repairs and maintenance, condo fees if their condos, land transfer taxes, H.S.T., lawyer fees etc. and all these things rising every year with at least 4% or more average increases then you are actually losing money.

In 25 years, that 4.00% a year that your house price increased will be wiped out completely but more likely even costing you 1.0% a year out of your own pocket from all these escalating property taxes, utilities, repairs and maintenance, insurance etc. plus upfront H.S.T, lawyer fees, land transfer taxes etc.

If you actually rent out a place, you will be luck to make 2.5% to 3.00% a year net and you will need to have no problems with tenants for 25 years like non payment of rent, only partial payment of rent, property damage etc.

Also, your house will always have to be rented 12 months a year with never a vacancy, good luck with that.

Also, all the net rent you make is fully 100% taxable and a principal residence is only capital gains tax free when sold and never never rented.

The space of your house, condo that is rented is now a rental property and is subject to capital gains taxes and all net rental income is 100% fully taxable.

TFSA’s for 2013 are $5,500 or TFSA’s for all of 2009 to 2013 never contributed are $25,500 per adult person.

An adult person is 18 years and older plus a resident and taxpayer of Canada.

TFSA’s with Provincial strip bonds are yielding as high as net 4.35%.

In 25 years, this is a 290% increase or 2.90 times, almost triple the amount invested and is all income tax free plus you are not paying all those property taxes, insurance, repairs and maintenance, utilities, H.S.T., lawyer fees, land transfer taxes etc. every year with big increases.

This is with a cash purchase or a house that is paid off completely, 100% equity and no mortgage.

If the house is paid off in 25 years, many people have 30 and 35 year amortization mortgages still today.

If you have a mortgage then mortgage interest costs and rising mortgage interest costs at renewal, CMHC insurance if your down payment is less than 20% or equity is less than 20%.

This makes everything much worse.

This report by the credit union guy is not impressive at all but is just smoke and mirrors by the real estate industry like builders, real estate agents, lawyers, mortgage brokers, banks, mortgage lenders, government and everyone else that depends on pushing home ownership.

Even worse, buying rental properties at these historically overvalued Toronto and Canadian housing prices which net rental income is 100% fully taxable and subject to capital gains taxes, real estate commissions, H.S.T., lawyer fees etc. as well.

#91 what bubble? on 12.13.13 at 12:45 am

one of the main functions of the government, by definition, should be protection of the citizens from themselves… without that protection people, very fast, become too greedy, too ignorant, too dishonest, too much attracted to abnormalities – people starting degrading too fast.
Christianity? Churches?- look at them, located along Bathurst street, – they are converted into theatres, museums, clubs… this is a post christian world after all… there is never too much tolerance in a society – that’s what government teaches us – be more tolerant , more uncritical, more permissive
Here, please, have a look where that attitude might take us all (scroll a little down to see the video) http://orthoview.ru/7000-lgbt-aktivistov-napali-na-1500-molodyx-katolikov-zashhishhayushhix-xram-v-argentine/
In argentina 1500 young catholics protecting their church from 7000 members of feminist organization demanding more tolerance and support for their feminist activities. Shocking! Police is standing on the side, apathetically watching.

#92 Ronaldo on 12.13.13 at 12:54 am

”Price inflation can easily co-exist with asset deflation. Is your income also inflating? — Garth”

Yep, anyone around back in the mid 70’s will confirm that. First we had runaway house prices followed by a crash in 74, followed by runaway inflation on goods and services. Lots of labour problems, strikes, walkouts, layoffs. The BC Railway for example shut down for 3 months in the winter of 74 because of worker demands. These were not good times for many.

#93 Jack on 12.13.13 at 12:57 am

@49 OMG…YOU HIT THE NAIL ON THE HEAD! Catherine don’t move here…you will regret it.

#94 Knickerbockers Knosty on 12.13.13 at 12:59 am

#71 Smoking Man on 12.12.13 at 11:18 pm — “Blog dogs in the archives said I write like Hunter S Thompson.”
— and —
#72 Nemesis on 12.12.13 at 11:29 pm — “@SmokingMan&WithABow&CurtsyToKnosty … HunterS.? Guess who he used to write for?…They’ve even got a PrettyGood tune… something about, “On The Cover of The….”

“…Bowling Strones”, c. 1275 AD (about the same time as some dude introduced a piece of parchment called The Maggot Carter. Remember it well, ‘tho I’m dating myself.

Furthermore, notwithstanding and further uproarious laughter, see the aforementioned notes — from wrh.com, then the clip.

“The UN funds yet another scary video about HUMAN-CAUSED GLOBAL WARMING!!!!!!!!

“By the way, the opening of this video, supposedly by scientific experts, has the Earth rotating in the wrong direction!” wrh.com.

All in all, a pointless block of wood would serve as an admirable debater, akin to Monty Python’s patch of liquid countering the British govt.’s argument that it would build a million billion houses for the middle class!

#95 Ronaldo on 12.13.13 at 1:06 am

#64 Drill Baby Drill – I would wait until a 15% correction on those before buying in. A bit frothy right now.

#96 raisemyrent on 12.13.13 at 1:10 am

Smoking Man
Wife made you so angry, you missed the fact that Garth said “herd”.

#97 Nemesis on 12.13.13 at 1:15 am

BonusZen of the LateNightVariety:

http://youtu.be/fJu6Up9w2Hc

[NoteToSmokingMan: OneDay. If you really want to.]

#98 Smartalox on 12.13.13 at 1:19 am

A story in the Globe and Mail December 12,

http://www.theglobeandmail.com/report-on-business/economy/disinflation-troubles-poloz-cites-retail-competition/article15758683/:

There’s a lot in this article about retailers discounting inventory, and how that can contribute to deflation. Now replace ‘retailers’ with ‘developers’ and “condos” instead of “inventory”, and you can see how the real estate crash is threatening our economy.

#99 willworkforpickles on 12.13.13 at 1:22 am

So let the numbers creep up. The more that buy at these unrealistic prices the greater the pandemonium when stagflation rears its ugly head. Some do take heed well in advance. Most of the pack just get caught in the snare and bleed out with the rest.
……but you already knew that.

#100 DR on 12.13.13 at 1:29 am

Dean Mason, get a grip man.
People make money with rental properties.
Are you arguing they don’t?
or no one has.

Get over it.

#101 Smartalox on 12.13.13 at 1:31 am

Further to my argument above, consider this: CONDO REALTOR Reitmans (Canada) Ltd. is also feeling the squeeze. “The REALTY environment remains challenging with increased competitive pressure for CONDO retailers,” the company said Tuesday after lacklustre nine-month results. Sales dropped 3 per cent at DEVELOPMENTS open a year or more, which is a key retail metric.

We’re closer to the cliff edge than you may think!

#102 JimH on 12.13.13 at 1:34 am

Re: #1 #7 I love deflation
You really do merit the asshat of the week award! Deflation in its mildest manifestation exhibits low prices for the things we want, while driving prices ever higher for things we need.
If you weren’t such an ignorant ass, you’d already be familiar with historical deflation and its debilitating effects on entire societies.
Get you head out of your ass!

#103 Christopher Lackey on 12.13.13 at 1:44 am

@24 Allan – Immigrants working like horses to pay mortgages?

http://www.theglobeandmail.com/life/home-and-garden/real-estate/neighbours-snap-up-humber-valley-home-in-short-order/article15913231/#dashboard/follows/Companies

Look at that. Looks like a nice middle class suburban home that it etched into our brains from four decades of north american pop culture that we all want to raise our families in. All yours for only $1855000 + 10k in property taxes annually. Ok maybe a little more high end. How many immigrant or Canadian families do you know netting 8 grand a month just for mortgage and property taxes (and that’s at a 2.6% variable)?After 371k down of course I got that lying around in my couch cushions. I guarantee you can find this same house in any state for under 400k. This Canadian hubris and delusion’s days are numbered.

#104 experienced.optimist on 12.13.13 at 2:09 am

Maybe we are premature in saying that the QE taps will turned off in the coming year. Perhaps a slight taper, and if things do not look good, can be quickly turned on again. Thus keeping deflation at bay a bit longer.That is for the US. Canada may be a bit worse off.

-“Westpac isn’t entirely ruling out a cut in the Fed’s US$85 billion a month bond-buying program at the FOMC’s meeting in January or March, but Mr. Clarke said such a move likely would be small and the process could end quickly later in the first half of 2014 if economic growth disappoints and momentum waivers.”

Just another way of saying disinflation to deflation is not yet dead.

-http://blogs.wsj.com/moneybeat/2013/12/13/westpac-sees-full-bore-fed-stimulus-through-2014/

-http://www.huffingtonpost.ca/2013/12/12/stephen-poloz-deflation_n_4433931.html

#105 Infused with Opiates on 12.13.13 at 2:14 am

86 Victoria – I cant vouch for the exact methedolgy used, though both numbeo and demographia come to very similar multiples for Vancouver. But you’ve made the
classic mistake that many have. The demographia study only surveys a few countries – anglophone at that, with the recent addition of Hong Kong. Hardly a world survey. The reality is in many countries, housing is far less affordable for the average person than in Canada, even
Vancouver.

But hey, it’s different here. And we are all entitled to own a house, right?

#106 Freedom First on 12.13.13 at 2:40 am

#24 allan

What you wrote is the same insane thinking nonsense that bankrupted millions worldwide in their housing collapses. RE troll allan.

#107 DON on 12.13.13 at 3:00 am

Dead on with Qualicum and Parksville. Wrinkles everywhere, funeral homes and graduated assisted livings complexes, houses with one spouse and few young people to buy your particle board houses, schools are closing down and the town of qual recognizes that the kids are the ones who spend money at lunch and after school keeping the doors in cash. The old don’t eat out that much, once or twice a year. Houses out side the urban areas loose power a lot due to rain and wind knocking down the trees, not abnormal for the power to go out for longer periods of time. I experience a full 7 days once not so long ago. Happens every year now the thing to do is have a house with a built in gen set. But these at not people in the prime of their lives. Kelowna is much better, more stable weather and closer to Alberta.

#108 The American on 12.13.13 at 3:10 am

At #30: Shawn, I don’t know if I’ve ever heard a more stupid/ridiculous/unfounded/uneducated/made up “argument” in my life. You have ZERO idea what you’re talking about. U.S. house prices fell long before the financial crisis arose. You have revisionist history to fit your completely insane theory that Canada has it right. If anything, Canada has it more wrong that any country on Earth in the last 8 years. Look at Canada’s reliance on the housing sector as a percentage of GDP. Look at HELOC percentages compared to American’s at peak. Look at overall expendable income compared to Americans. Look at overall savings rates. Canada is BEYOND SCREWED in the long haul. This is the fact you need to begin accepting. Also, just for the record, prices are falling across Canada even as we speak, sales are falling off a cliff, and sellers are panicking, whether you like it or not. Everyone knows it, except for Canadians in denial. The economy in Canada is suffering too. Again, everyone knows it, except for Canadians in denial. This does NOT mean all Canadians are in denial… just saying there are a hell of a lot of them that simply aren’t “getting it” right now. Canadians are holding on to the the Canada of yesteryear that was doing so well but for a brief moment in time. Get over it already.

#109 The American on 12.13.13 at 3:16 am

At #83: Shawn, you said, in reference to Americans, “When the janitor was approved for the $600k McMansion, it was not that the house was not worth $600k, it was that the borrower could not afford it.”

Well, how can you explain to me the taxi cab driver in Vancouver that was approved for not one, but TWO mortgages in excess of $500,000. Yeah… I’m not shi**ing you. This was his story, trying to tell me how easy it is to make a buck. I was like BEEN THERE, DONE THAT ALREAD BUDDY LIKE 8 YEARS AGO! Or, did you not get that memo? Geeeeezus! How dumb can people be? Do you not read the papers? Trying to educate an American how to make a buck against leveraging the least amount possible is like educating Socrates about the meaning of life. Unbelievable.

#110 TRT on 12.13.13 at 4:46 am

Post #39 Takes the Prize!!

Vancouver is the 98th most expensive city in the world.

If you pick and choose, and throw out the first 97, then yes Vancouver is #2. But why throw the other 97 cities out because they don’t speak English???

Confused.

#111 Tom from Mississauga on 12.13.13 at 4:53 am

Please include how foreign dividends are taxed in Canada in the deflation post. Thanks!

#112 Dan on 12.13.13 at 5:25 am

Hi Garth,

The talk of “tapering” is slowly making its way into the
media,(little on your blog),though.Ahh…remember the
much loved,”to hate” debt ceiling.I have a pretty good idea
where Canada is heading,especially here in Vancouver
But I’m at a loss as to how the United States can possibly ride this out. No disrespect intended,but
I have read that the real unemployment rate in the USA
is “conservitively” stated to be 18%.With all the funny-
money being produced, to support a dwindling supply of
of tax revenue, how long can corporate “profits” continue? The list of customers willing to gamble on risky debt is subsiding.It seems more QE is at least the only answer for the near term…its seems to be the only
game in town.The mere mention of a “taper” ,started a
pretty nervous reaction!Cannot get my head around it
no matter how many angles I look from…and if they suffer more,you know how additionally crappy it will be
for us!

Interesting times indeed!!

(Sorry to hi-jack thread, for the record, I sold my last
place (in Van) about 2 yrs ago,probably too soon, but
a good nights sleep is priceless…happily renting).

Dan

#113 my two cents on 12.13.13 at 6:51 am

#61 Sciencemonkey said: “Regarding the CPP, like #54 george soros, I would be incensed if I was subjected to inter-generational theft by boomers, in their large houses, and holding their large investment portfolios built up during decades of economic growth.

I’m on an email list for an organization called leadnow. Tell me the link below doesn’t sound like inter-generational theft:
http://www.leadnow.ca/pensions

I got that same email last night and took the time to write them back to explain that they were barking up the wrong tree – I feel as you do. My generation and the ones younger cannot do any more to support the Boomers and their parents. We’re stretched to the max and not to mention we are raising young kids and looking after elderly relatives, too.

Boomers and their parents, of course, are not all in identical positions financially or health wise, but they ARE all in identical positions in terms of having created the mess we are in and continuing to vote for leaders who perpetuate it.

I am not opposed to helping get pension reforms, of course, but like you said that particular leadnow.ca piece read like a stick-up from the future of my generation into the pockets of the Boomers. (again)

#114 Jck Sprat on 12.13.13 at 8:06 am

Have to hold my tongue with all the filthy garbage I read on these comments section.

I come to this site every weak or so just to remind myself that it was a good choice to ditch Canada for the tropics.

Sold my rat hole in The Greyest Place On Earth for a tidy profit and bought a beach side hut in Ta-Ta-Thailand for a song.

Now I eat a healthy breakfast every day for a song. Not that Kelloggz crapola either. And keep believeing the hype about the protests. That way more foreginers will stay away ; )

And why can Lotus Landers never admit that the perpetual grey makes you wanna jump in front of a SkyTrain.

‘But the views. The views…’

#115 maxx on 12.13.13 at 8:16 am

#19 oceanside on 12.12.13 at 8:58 pm

“…the Okanagan has a lot of vendors that are still trying to sell their homes at what they thought they were worth in 2010…Lots of 400 days on market and they won’t lower their prices.”

Won’t lower their prices…. This is a good thing for patient buyers, but devastating to sellers.

You’ll pay ever less as time goes on. Price reductions are here to stay. Increasing job instability and loss in a downward spiraling economy means RE risk is huge.

Greedy sellers will need to greatly lower their expectations for quality of life. Intransigence is expensive and they may never move that property.

Sell now or sell never.

#116 economictsunami on 12.13.13 at 8:20 am

Core economic data (minus “volatile” food/ energy) using various ‘deflators’ appears confusing at first glance; especially in the face of asset inflation/ price increases in many goods & services.

Add to this: distortion caused by contrived monetary stimulus & government/ sectoral induced incentives, producing juiced data.

This warped data is then religiously plotted onto charts and compared to unrelated past periods of dissimilar economic periods and voila; totally useless and unusable data that looks official because a so called authoritative entity said so.

For those who have followed the evolution of Basel III understand why internationally negotiated & agreed upon standards have been both watered down and delayed.

When reality becomes too painful to bear, we’ll just construct an alternate one…

#117 I'm stupid on 12.13.13 at 8:24 am

Hi Garth

Is that chart adjusted for inflation?

#118 I'm stupid on 12.13.13 at 8:25 am

Never mind last question.

#119 Raven on 12.13.13 at 8:43 am

The Other Half

Foreclosures are down in the US, less so in the non-recourse states concentrated mostly in Florida, California, and Arizona. This bottoming out has allowed them to see investment to growth. Sustainable at these levels? Probably not but we don’t wish 2007 total new builds as we know that to be unsustainable!

Much as the austerity mavens have forced the European “PIGS” to retrench and become more productive has allowed them to show the best Y.O.Y performances?
All this while the pump and prime Euro countries and US States that slow their processes down for forclosures or try to spend their way to prosperity awaiting a recovery are slower to “bottom” and slower to reemerge!

Market forces always look for the lowest entry point, to optimize returns on contrarian investments.

Is austerity to solvency, or a variation there of, the way to trump deflation? As no living politician can admit to seeing deflation first hand there are definite signposts.
More millionaires were made “during” the Great Depression than any other time in history. Deflation is caused by the restriction of lending and the slow down in the velocity of transactions.

Deflation will present itself and things will enivitably become cheaper. Don’t buy things that are just cheap! You need to buy with immediate cash flow with huge upside potential when things correct.

” The future has already arrived. It just not evenly distributed yet……”

#120 Inglorious Investor on 12.13.13 at 8:58 am

Debt-dependant asset prices may deflate because we have exceeded a sane level of debt and cannot afford to eat more of our future incomes. Jobs (especially those from obselete factories in Ontario) may move, causing higher unemployment and wage deflation.

But, alas, there will be no price deflation for all those elves in the gtha. With a losing loonie, a broken province with an insane energy regime, idiots running our transit system (it took years of “study” by Metrolink’s to say the way to fund transit expansion is by raising taxes—a retarded moose could have come up with the same solution) over-paid public sector pensioners, and overvalued housing… Taxes and many prices for goods and services will only go up, even if wages decline. It’s called stagflation, and it will bring lots of hurt.

#121 Steven on 12.13.13 at 9:33 am

Considering all things that have happened and are likely to happen either man made or natural I think the most accurate prediction for the future is that it will be nasty, gruesome and brutal and that’s the good news.

The bad news is that the Fukushima nuclear disaster, any kind of an ice age and a rise in interest rates will make countries in the northern hemisphere non viable entities. Imagine the movie the day after tomorrow, chernobyl , the great depression plus the weimar hyper inflation on steroids and you have a picture of the enevitable. Except for the ice age it is all caused by the idiots incharge who are breaking all the rules for the sake of power.
The only good thing that might come about is that the survivors if any will have the funny idea that the world as they knew it should never be allowed ever again.

#122 Ralph Cramdown on 12.13.13 at 9:55 am

#173 Paul on 12.12.13 at 9:21 pm — “Not everyone drives a Kia or an old bucket of bolts. I’m sure you could have fixed it even thou you don’t have a clue what kind a car”

Removing the door card on a Kia isn’t different from on a Mercedes. Even the Germans don’t bother putting torque specifications for the window switch mounting screws in the factory service manuals.

And, sorry, but if little electrical things that cost $700 to fix are starting to break on your car and its out of warranty, it’s a bucket of bolts.

#123 IM in C on 12.13.13 at 10:04 am

Today’s offering from Susan Pigg where she talks out of both sides of her mouth

http://www.thestar.com/business/real_estate/2013/12/12/2014_could_be_turnaround_year_for_toronto_house_market.html

#124 Ronaldo on 12.13.13 at 10:08 am

#114 Jck Spratt –

”‘But the views. The views…’”

Oh, and don’t forget. Everyone wants to move there and there’s a shortage of space to build. Last time I was there and looked up, I couldn’t see any shortage.

#125 Really? — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate | Blue Shed Inc. on 12.13.13 at 10:20 am

[…] Really? — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate. […]

#126 Daisy Mae on 12.13.13 at 10:28 am

#2 Bubble Boy: “So – I bet if you look at HELOC balances vs. Canadian Net Worth “increases” over the past 5-10 years, they’d correlate pretty closely… in other words, Canadians are putting up serious debt to reno/buy/sell houses.”

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

What they are really doing is plowing HELOC money into their very own depreciating asset.

#127 Ronaldo on 12.13.13 at 10:32 am

”The financial crisis did not cause US house prices to fall. They fell far before a crisis emerged, and helped precipitate it. Stop trying to always be the smartest guy in the room. It’s not working. — Garth”

Heed those words Shawn.

#128 Daisy Mae on 12.13.13 at 10:42 am

#8 the jaguar: “Yes, please Garth. I need advice on how to invest in a deflationary environment. Too much cash in the bank from the sale of my house.”

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

Like everyone else, you’re going to have to PAY for it…

#129 another company leaves Canada on 12.13.13 at 10:44 am

Yet another company has left demented Canada. Each and almost every day you read of a company leaving. The crazy conservatives will not be happy until every company in Canada is gone.

#130 Life's a supermartingale on 12.13.13 at 10:50 am

Garth, you’ve done it again! No only do you think that the permanent income hypothesis has nothing to say about reality, but you completely misunderstand the origins of inflation and deflation.

As Milton Friedman taught us, inflation is always and everywhere a monetary phenomenon. His work on the Great Depression (and later the work by Ben Bernanke) shows that the Federal Reserve turned a large but garden variety recession into a depression through aggressive monetary contraction. The money supply contracted by a third between 1929 to 1933 as part of the Fed’s program to punish speculation. The was the cause of the Great Depression, not the stock market crash of 1929.

The problem we have today is that central banks are asked to do much more than central banking and acting as the lender of last resort. Governments are turning central banks into giant macroprudential oversight bodies with diverse and competing objectives. This new role for central banking has moved the entire Western world off Taylor-like rules (look up Taylor rules if you are serious about understanding modern monetary policy) in favour of discretionary powers, which is leading to more volatile output. Notice how the US economy has yet to snap back to trend?

Inflation and deflation are monetary phenomena. What you are suggesting in your posts is economic contraction or a recession. This is not the same thing as deflation.

We live in the world, not an economics textbook. — Garth

#131 Daisy Mae on 12.13.13 at 10:55 am

#24 Allen: “One eyed because the only country you know is Canada, while most people around you are from everywhere else…”

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

Garth is about as worldly as you can get. Far too many of us are financial idiots…doesn’t matter where any of us used to live. LOL

#132 sciencemonkey on 12.13.13 at 10:56 am

@91 what bubble
While idealistically I’d like to believe people are intelligent enough to show proper stewardship of their lives, the evidence clearly shows most aren’t. So I suppose we do need the government to protect the unwashed herd from themselves.

I agree, an attitude of tolerance for everything is bad, because many things people will want to do are bad. For example, female genital mutilation, for which I will always deeply respect (sarcasm alert) Justin Trudeau for suggesting that the new guide to Canadian immigrants should describe the act as totally unacceptable, as opposed to the current descriptor of barbaric.

However, some religious folk have a poor understanding about tolerance, thinking that just because something goes against their worldview, they shouldn’t have to tolerate the thought of it existing in the world, and no one should be free to do it. Oh the audacity, how dare those feminists demand the church stay out of their reproductive organs?!

So, how do we differentiate between truly bad things that shouldn’t be tolerated, and freedoms that people should have but some whiny nosy Nancys complain about? That’s a long discussion for another day…

@ 113 my two cents
Last night I used their email tool to email politicians to tell tham that I do NOT support the plan. I’ve calmed down a bit, so I also wrote back to tell leadnow that their plan is bold-faced inter-generational theft for a generation already facing particularly poor prospects.

#133 Daisy Mae on 12.13.13 at 11:13 am

#51 George: “On the contrary: There is rampant inflation, That cupcake from Loblow was 99 cents 2 years ago, now is 1.99, that cheese string was half the price 2.5 years ago, look at the food courts of every mall, price increases of 20 % annually lately, that chocolate box (pot of gold) was 4.99 for 400 grams now is 10 dollars for 280 grams.”

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

All junk food we CAN live without….

#134 45north on 12.13.13 at 11:14 am

what bubble: In argentina 1500 young catholics protecting their church from 7000 members of feminist organization demanding more tolerance and support for their feminist activities. Shocking! Police are standing on the side, apathetically watching.

I watched the video. The young catholics showed tremendous courage in the face of provocation.

Bdry Sktrn, Ralph Cramdown: I’m sure all cars use the same type of system for windows. Ie. Switch,relay,motor,crank mechanism

20 years or so I had a Buick station wagon in which an automatic window broke. Twice, I replaced the motor with a used one from a junk yard. You first have to grind the head of the rivets flat and then drill them out. Oh and it’s a good idea to have a couple of new plastic tabs that hold the inside door panel. I was spending a whole day repairing a part that probably took 10 minutes to install in a new car.

#135 Hicksville Alberta on 12.13.13 at 11:17 am

If you really want a sense of what happened during the last Great Deflation in Canada – i.e. 1929 – 1939 – you need to treat yourself to a copy of the great book ” Ten Lost Years 1929 – 1939 ” by Barry Broadfoot (Doubleday Canada Ltd. and Doubleday & Company Inc., 1973).

It has been reprinted several times so a copy ought to be available if you look around.

It is an exceptional collection of Canadian adult and childrens life experiences during the last Great Deflation in Canada ( and most of the world at that time as well).

It’s probably no coincidence that commodity prices including gold and silver are in retreat for now as they may be the canary in the coal mine as to what may happen to the rest of things going forward if TPTB lose control of their manipulative money and credit asset levitating operations as things progress over time.

The current “quantitative easing” and money and credit blowouts globally by Central Banks have both staved off liquidation of failed social and economic policies and horrendous previous malinvestments as well as promoted horrendous historical asset price increases unsupported by incomes and ” Good” banking and credit practices literally everywhere since the ” Great Financial Crash ” of 2008 – 2009 somewhat like the last Grea Deflation but different now in that this is truly now unprecedented with probably 7.3 billion on earth vs. lass than 2 billion back then and we have become so much more globalized and more modernized than ever enabling things to become much more volatile on a more immediate basis than ever before.

It’s no coincidence that the Canadian Government legislated the Bank “Bail In” provisions in its last omnibus budget bill and that all of Europe and the U.S. and many other countries have positioned themselves the same way to enable YOUR bank to be reliquified with YOUR savings in the event things get out of control like they did in Cyprus where depositors were said to have lost up to 47% of their savings overnight.

For those that think a little deflation is good, be careful what you wish for, as things have got so over blown and distorted that it is more likely than not that ultimately a little deflation now could well lead to a massive life and society changing deflation as the ultimate follow through.

Perhaps its somewhat like being a little pregnant.

There is no bank bail-in here, and never will a cent of depositors money be used to recapitalize banks. This is a myth. Stop repeating it. — Garth

#136 Daisy Mae on 12.13.13 at 11:24 am

#54 George: “….to pay more benefits to the old fart that lives in a million dollar home while you rent in order to support his/her lifestyle.”

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

He’s paid his share of CPP premiums and now collects benefits based on the total he contributed thruout his years in the workforce. Other than slight inflationary increases, that amount is fixed. You are not supporting him.

#137 Raj on 12.13.13 at 11:40 am

I do agree with a poster earlier who said you have to look at world prices apposed to just local. I was in Central London a few years ago and had a chance to buy a property for 300k which I thought was crazy for a 1 bedroom below ground apartment in the best part of London. Today the same property is worth 500K and everyone thought it was going to crash. I just bought a home with an income apartment which I get1500 as I completely remodeled it. My mortgage is 1320. You renters are crazy not buying something like that. I pay way less than you even with my taxes, utilities I’m under 600 per month. I couldn’t care less what happens with the market and once I pay off the mortgage, this property in my pension. You cant just look at the trees, look at the overall forest. I think you have to have a principal residence and even if you can find one with an income what’s wrong with that. I feel sorry for all you renters paying off your landlords mortgage…Think about it…No one knows what’s going to happen

#138 Mr Frugal on 12.13.13 at 12:04 pm

My plan for investing in deflationary times is pretty similar to any other time;
– Spend less
– Save more
– Hold equities (US, CDN and international)
– Invest carefully (diversify)
– Hold cash to buy any bargains
– Read Garth each and every day – for the advice and a few laughs

#139 Ralph Cramdown on 12.13.13 at 12:06 pm

#130 Life’s a supermartingale — “Garth, you’ve done it again! No only do you think that the permanent income hypothesis has nothing to say about reality, but you completely misunderstand the origins of inflation and deflation.”

The permanent income hypothesis? Really? A few things have happened since Uncle Milty penned that. 1) China. 2) Behavioural economics, which, if I may summarize in this case, says that Joe Taxpayer who has been shown to typically be unable to add together the food abd bar bill and calculate a tip, is unlikely to be able to estimate future inflation, earnings and tax rates so as to intertemporally optimize his consumption.

“This new role for central banking has moved the entire Western world off Taylor-like rules”

News flash: Even TAYLOR is off Taylor-like rules.
http://economicsone.com/2013/07/03/toward-a-rule-for-all-seasons/

I read Uncle Milty when I was young, and my then arch-conservative economic self nodded in agreement with much of what he presented, right up to his advocating abolishing the public school system. That struck me as such a breathtakingly stupid idea that I subsequently had a hard time taking anything else he said seriously. Even my teenage self could see that the parents with the most antipathy to the public school system were likely to make the poorest choices in educating their children, by accident or design, and that this would be bad for society as a whole. The dismal science progresses one funeral at a time.
http://rwer.wordpress.com/2010/02/22/greenspan-friedman-and-summers-win-dynamite-prize-in-economics/

#140 Bdry sktrn on 12.13.13 at 12:11 pm

The bad news is that the Fukushima nuclear disaster…
__________________
If one is largely ignorant of all things scientific/nuclear then maybe one should keep ones silly thoughts to oneself.
My yummy jap mandarins are juicy and tender, grown about 8000000m closer to fuku_daichi than the westcoast. They do not glow in the dark and i am fine with feeding them to kids because i am not a scientific moron.

#141 Pete on 12.13.13 at 12:19 pm

Have a look at this one. House on 294 Chartwell Road , Oakville

Asking $11M
Sold $7.5M (68%)

Frankly I think they were lucky to get rid of that mausoleum. Just in time…

#142 Macrath on 12.13.13 at 12:20 pm

Deflation to drag S&P below 500
Oct 2, 2013 : Russell Napier, stock market historian, predicted in 2009 that easy monetary policy would drive a long rally in stocks, followed by a crash taking the S&P 500 below its 2009 low. He tells John Authers he sticks by that, but now thinks it will be driven by deflation, not inflation

http://video.ft.com/2710096146001/Deflation-to-drag-S-P-below-500/Markets

Is this the other half of it?

#143 Enthalpy on 12.13.13 at 12:29 pm

oh wow just discovered this gem of a website.

http://fmlistings.tumblr.com/

this place is ridiculous

#144 brainsail on 12.13.13 at 12:49 pm

#134 45north on 12.13.13 at 11:14 am

#122 Ralph Cramdown on 12.13.13 at 9:55 am

Power Windows

It’s raining today here in Central Texas, so I’m stuck indoors without anything to do but rant.

Last year I took my wife’s car to get some cash from the ATM down the street for our cleaning lady. The window stopped half way down so I got out of the car to complete the transaction. When I got back in and closed the door the window went all the way down and would not close.

I went to the dealer (Lexus out of warranty) and got a quote of $1600 because they said both window regulators needed to be replaced. I said BS. Went home and Googled Club Lexus and an hour later found a possible solution.

The wiring harness that goes from the chassis to the door gets flexed every time you open and close the door. The ground wire that is shared by both windows maybe broken. Sure enough, an hour and half later after I spliced and soldered a new ground wire the windows worked. I wonder what the final bill would have been if I had let Lexus do the repair?

My wife still wants a new Lexus next year and doesn’t understand my reluctance!

#145 gladiator on 12.13.13 at 1:12 pm

In today’s Financial Post there’s an article about Ed Clark (TD Bank CEO) asking F and Co. “not to tinker with CMHC”. F “mused several times about privatizing CMHC” and Clark says that it is not a good move. He also acknowledges that, in case of a housing meltdown, the government will save the banks via CMHC’s mortgage insurance. He also says that Canada “currently is not in a housing bubble”. Very interesting indeed…
I am happy that F at least had thoughts about privatizing what could become the biggest liability on me as a taxpayer. Hope this happens asap.

#146 :):( Ying Yang on 12.13.13 at 1:14 pm

#71 Smoking Man on 12.12.13 at 11:18 pm
I hate my wife, I really do. Blog dogs in the archives said I write like Hunter S Thompson. Never knew who that was.
Then I did, Wow amazing I can so connect with the dude fear and loathing in Las Vegas is on,never saw it. She takes control of the channel changer, won’t let me have a 3rd wine and forcing me to watch a stupid show. Elementary.
If the damn TV wasn’t so heavy it would be out the window, if I could find the little blue pill me and my computer would be cheating on her right now.
I’m a caged animal, scratching at the walls knowing if I ever made out. I wouldn’t last long. Or at leased she’s brain washed me to believe that.
I live in the city, she’s gone tree hugger on me.
I plotting my revenge, she’s not voting for Ford, I’m going book a trip for Vegas next year departing on election day. I will vote, promise to let her vote but will be home late, just enough time to make the airport.

Ah.

…………………………………………………………………….
Smoking Man unless your wife is an idiot or niave, there is something called early voting! She can vote ahead of the herd, they did this just incase you are going to be away!
Just saying!
BTW have fun at Seneca tonight, Drink heavy, smoke heavy and chase the girls. I’m off to Vancouver for two weeks to visit family, my brother is out there now waiting me so we can hit the town. I really don’t like Vancouver that much!
Merry Christmas,,,,,,,,,,,,,,,,,,,,,,,,

#147 :):( Ying Yang on 12.13.13 at 1:16 pm

Oh yes Fear and Loathing in Las Vegas ome of my favorite Johnny Depp movies, It was just insaine. Could’t belive it was even Johnny with the balding combover makup he had on. Wild trip epesically the melting people and dinosuars, oh yes and the bats!

#148 Derek R on 12.13.13 at 1:20 pm

#130 Life’s a supermartingale on 12.13.13 at 10:50 am wrote:
As Milton Friedman taught us, inflation is always and everywhere a monetary phenomenon.

True as far as it goes. However the problem is that it is a monetary phenomenon with major effects on the real economy.

His work on the Great Depression (and later the work by Ben Bernanke) shows that the Federal Reserve turned a large but garden variety recession into a depression through aggressive monetary contraction.

The Fed was just doing what every other economist of the time would have suggested. So put that down to general cluelessness on the part of 1930s economists. The fact is that the “aggressive monetary contraction” would have happened even if there was no Fed.

The money supply contracted by a third between 1929 to 1933 as part of the Fed’s program to punish speculation. The was the cause of the Great Depression, not the stock market crash of 1929.

The major reason for the money supply contracting so much was the fact that people were repaying debt that they’d run up before 1929 and not being allowed to take out any more. Sure, the Fed made things worse in the US but the fundamental cause of the worldwide Great Depression was private debt, not the Fed.

That’s why the situation in Canada is so scary right now. Too many people are running up huge debt which will crucify them when jobs become scarce. That is the deflation monster in all its naked glory.

#149 bentoverandpaying my taxes on 12.13.13 at 1:30 pm

Its all about what people think they can afford…not what the cost of the purchase is…..when will people get that?

“That includes intense over-valuation compared to incomes and rents, residential investment at 7% of the GDP, “above the peak in the US and far outpacing population growth”, porcine household debt and a piggy appetite for more.”

As long as the BOC ( that really doesn’t get it) KEEPS SHOVELLING FREE MONEY at the real estate market Pastrick and the real estate pimps will be right.

The problem is that the government itself is addicted to the free money it has been able to create for itself creating ‘bonds’ for itself at zero rates……debt that can never be paid back…….this is why they risk the prospect of collapse……they’re like junkies shooting up in the bath room …..debt is the smack they can’t do without. A rise in real rates would crater every city, municipal and provincial budget…. no more raises for the fat little piggies.

The lack of responsible foresight is what Canada lacks…the US had the guts to let the market fail and readjust to market norms. I looked at houses ( near new with all the bells and whistles) in The Colony…an area 15 minutes west of Dallas yesterday…with a pool…3000 sq ft..for $132,500!!!!

Whats the big idea in Canada these days……jack up the CPP rates to 13%…..property taxes in the cities….and crater the dollar so that union work places can compete….none of these will solve the real problem at the root of the issue at hand. Canada is like a diabetic addicted to sugar…..overhead is destabilizing the whole country……like a diabetic the prognosis is for limbs to be amputated.

#150 -=jwk=- on 12.13.13 at 1:33 pm

@#30 shawn. Your criticism of the graph is misguided. The baseline is 100, Jan 1980. They could have set Jan 1980 to be zero and the graph would look and scale exactly the same. The reason for using 100 is to avoid negative (people get confused when graphs ‘cross the line’) so using a baseline of 100 is common. Doesn’t change the facts as presented.

And the US housing market crashed, which then exposed what a mess the finances were. It will happen in the same order here.

#151 High Plains Drifter on 12.13.13 at 1:34 pm

After reading todays offering I decided on a tin of tomato soup rather than go out for a beer and steak. Seriously, those rent to price, income to price graphs need to relate back to the interest rate structure otherwise they relate to a biblical world with no interest rate. My boomer claim to fame is that of a drunken washed up cowboy who at the age of 47 came to slowly but surely know the products of easy credit and declining interest rates. These are products written in black, black. Eight weeks of winter before Christmas and only the aforementioned knows how many after. Oil, nat gas, go Alberta.

#152 Dan on 12.13.13 at 1:40 pm

Garth,

re/#135,and bank “bail-ins”, 5 canadian major banks
were “bailed out”,contrary to what most Canadians
think…including my TD bank! I’m invested,diversified,
and,(horror)hold some pm’s as well, but I still have
lots of cash as well,from the sale of my house. That
clause in the most recent budget is never too far from
my memory.My cousin has heard that the larger
credit unions may be the only shelter from being bail-
inned, if you know what I mean.Those who were
(capitolized), should the shtf will be paying it back!!
Food for thought,


No food. Not even a crumb. It is 100% fiction. Not a dollar of depositor money will be touched, regardless of any crisis. That said, no Cdn bank will fail in your lifetime. Stop believing such crap. — Garth

#153 Pr on 12.13.13 at 1:43 pm

Today, Quebec Real Estate Board also confirmed its withdrawal from the ACI following an advisory vote conducted among its members. Other Real Estate Boards should make decisions on this issue very soon.

Dossier ACI : la CIGM maintient sa décision de mettre fin à son adhésion à l’Association canadienne de l’immeuble

#154 Boomers stealing from future generations on 12.13.13 at 1:46 pm

At least this millionaire boomer is honest enough to tell the truth about inter-generational theft

http://www.youtube.com/watch?v=fbgIiAnpcPc
http://www.youtube.com/watch?v=PhSSjXX6fmk

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

#155 happity on 12.13.13 at 2:12 pm

The whole world is living on a debt model that cannot be repaid.

To fight deflation central banks only have one tool left, the IMF will reset currencies and govs will confiscate digital assets.

#156 KG on 12.13.13 at 2:13 pm

From the Pan Am games: $700-million athletes village in the West Don Lands, which will eventually become condos and affordable housing.

Are we taking into account this coming housing stocking in 2 yrs time ?

#157 screwed on 12.13.13 at 2:19 pm

Price inflation can easily co-exist with asset deflation. Is your income also inflating? — Garth

What you’re trying to describe is Stagflation. A slow grind down.

Where does RBC get the idea Canada’s economy be growing 2.6% next year? What are they smoking or trying to sell? US recovery has all but slowed to a halt and won’t get better next year. Budget deal has the government in a spending bind. Who is buying Canada’s products down there?

Keystone XL is dead in the water. Mark my words.

#158 broadway skytrain on 12.13.13 at 2:20 pm

The ground wire that is shared by both windows maybe broken. Sure enough, an hour and half later after I spliced and soldered a new ground wire the windows worked. I wonder what the final bill would have been if I had let Lexus do the repair?
——————————————
bingo
brillant
google knows FAR MORE than one any one mechanic , it’s a diagnostic miracle.

your cost – pennies for some tape and solder and 20bux for a meter or iron if you didn’t already have one.

not getting posteriorly penetrated by the dealer? – priceless.

#159 TurnerNation on 12.13.13 at 2:20 pm

Should be renamed Air Canada Post?
“We’re not happy until you’re not happy”.

Their new slogan?: http://tinyurl.com/n52bntn

#160 broadway skytrain on 12.13.13 at 2:27 pm

She takes control of the channel changer, won’t let me have a 3rd wine and forcing me to watch a stupid show
————————————–
really? that’s very un-smokingmanish.

not only because of balllessness, but there are these cool things called laptops and tablets and netflix and 2nd TVs and headphones and you sit there and watch her (lame) shows?

you can do better, son.

#161 Rational Optimist on 12.13.13 at 2:33 pm

137 Raj on 12.13.13 at 11:40 am

Raj: I try not to judge other people, but since you’re calling people “crazy” for not doing exactly what you’re doing and saying you feel sorry for people, might I suggest that you could be singing a different tune if some tenant trashes your completely remodelled income apartment. Or if someone decides they prefer not paying rent, and you don’t have that “mortgage help” for six months (I’m presuming you live in Ontario).

I’m not saying that what you are doing might not be perfectly appropriate for your situation, since I don’t know you. But I wonder if your pitch to your new tenant was that he’s crazy for renting from you, and that you feel sorry for him that he is not as bright as you are.

#162 Rational Optimist on 12.13.13 at 2:36 pm

Raj at #137 shows a lack of understanding of the risks of being a landlord (in his own home, no less), but, conversely, Dean Mason at #90 thinks it’s all risk and has never worked for anyone.

Dean, do you complain to your boss when he sends you a pay cheque because you have to pay tax on it? Yes, net rental income is taxable, but it can legally be reduced or deferred in a number of ways, like claiming CCA. And, yes, the capital gains (if there are any) are taxable one day, but at more advantageously than the income from your bonds and GICs (on which you have to pay the tax each and every year, even sometimes if you don’t even receive that money).

Most importantly, please don’t hold provincial strip bonds in your TFSA. What a waste.

#163 Mister Obvious on 12.13.13 at 2:43 pm

About a week ago someone posted a link to a CBC article on Amanda Lang’s views of corruption in the financial system. As I recall, Garth didn’t take it seriously and the poster got a little huffy about his dismissiveness.

I read that article and was not surprised to learn that Lang started out on a path to architecture but dropped that quickly (perhaps too much ‘sine/cosine’ stuff for a ‘people person’) and moved instead toward to ‘financial journalism’. I’m sure it was a long and arduous road.

Today, her main role on CBC is to be trotted out to give the two-minute expert’s view whenever Peter Mansbridge is reporting on the latest upset in the market, housing crash/boom, interest rate cut/hike, millennial uselessness/victimhood, boomer greed/entitlement and so on. Of course, her other role is to play straight lady to the largely contrived Ebenezer-isms of Kevin O’Leary.

I think she is excellent at being a television personality. And it helps in TV, I suppose, that she is quite easy on the eyes. But I don’t sell her short because of that. She is certainly smart enough and very good at what she does but I wouldn’t let her within a hundred miles of my portfolio.

About two weeks ago I was watching the Lang & O’Leary Exchange. Kevin was not present that night. Instead there was a guest who seemed to be in complete agreement with her about what she termed the ‘investor class’.

The problem is taxes. Or, to be more accurate, the lack of taxes paid by this parasitic layer of society. In her view, it’s time to return to 100% tax exposure on capital gains and lose the extremely favourable tax credits enjoyed on dividends from Canadian corporations. This would (somehow) go a long way to helping the middle class actually get back to the middle.

She made no mention of taxing capital gains on the sale of principle residences. Nor did she define properly who actually comprises the investor class. I don’t think it’s the proverbial ‘one percent’. The one-percent gang have always been with us and have always been very rich. Taxing them more is counterproductive at best. Amanda might even know that much.

By ‘investor class’ I think she means that small percentage of the middle class that had the foresight to jump ship when it was clear the Titanic was going down. That wee gang of contrarians, who never binged on debt, sold their insanely overvalued real estate and put those proceeds together with other life savings into sound, balanced and diversified investments.

That is to say… Garth’s people.

#164 broadway skytrain on 12.13.13 at 2:46 pm

portland, maine
denver, colorado
state of NY

3 more places move to ‘free the weed’

america is slowly coming to it’s senses

meanwhile here in the ‘greenest place in the world’ a petition fails to get enough signatures

i see deflation in mj prices.

#165 Rexx Rock on 12.13.13 at 2:50 pm

We all know Cyprus was a testing ground for wealth confiscation from peoples bank accounts.It seemed it worked well with no backlash from the citizens of Cyprus.Even Canada passed a bill to bail out the banks soon after this travisty.Canada being such a passive nation they will probably raise taxes like Europe big time.Lets say 20 % vat to pay the bank debt.We all know how politicians really care for the people.

I give up. — Garth

#166 Dan on 12.13.13 at 2:58 pm

Garth,

Then why is “that statement”,in the budget?How do you
interpret the meaning, where is the source of the said
recapitolization going to be coming from? Very curious!

Covered extensively back when it was news. — Garth

#167 TurnerNation on 12.13.13 at 3:02 pm

Smoking man’s Christmas tree is up:

https://pbs.twimg.com/media/BbSKVb7CIAA5gFa.jpg:large

#168 Dan on 12.13.13 at 3:07 pm

Garth,

Sorry I should have included this statement in my last
post,I don’t don’t think any banks will fail,but eventually
that said “support” will have to be repaid from somewhere,I just don’t see too rosy of a future for
Canada and its banks in the near future.

Dan

#169 Shawn on 12.13.13 at 3:15 pm

TAX THE INVESTOR CLASS?

Mr. Obvious at 163, despite being a card-carrying member of the investor class I agree with you and Amanda Lang that taxes are too low on capital gains (and in general too low on investment income).

One did not have to sell anything in 2008 as the market tanked. I basically rode it out but bought as much as I could in late 2008 (that was early) and Spring 2009 (that was ideal). Those who remained invested over the years and added steadily have done well unless they went heavy into the wrong sectors.

A balanced portfolio has done well. Now, Caesar should get his due.

#170 Exurban on 12.13.13 at 3:21 pm

Fodder for your next post GT!

Pamela Wallin drops $34k in sale of NYC condo

Even a spendthrift Senator can only afford 500 sq. ft. in New York, and she can’t get what she paid for it.

#171 Exurban on 12.13.13 at 3:22 pm

Sorry, messed up that link.

Pamela Wallin drops $34k in sale of NYC condo

#172 World According to Garth on 12.13.13 at 3:22 pm

Bill Good must be feeling pressure of the drivel on CKNW because he did a fantastic interview of a woman in her 40s who cannot find a job. 89 people on hold later, it was the same story..

Folks the govt is LYING THEIR ASS OFF about the “official” un-employment numbers. But it is govt so what else is new.

Welfare – not counted
No longer receiving EI – not counted.

The REAL number? Somewhere around 20%. So….20% of the public is UN-employed. 20% work for Govt. And the rest of the working poor are supposed to pay for 91,000 Dollar Govt salaries and 1 million dollar pensions.

Canada Post cuts? Folks you have not seen anything yet. King Harper is quaking in his boots and hopes he will not be guillotined (figuratively of course) before the next election.

If you people knew how much the Govt depends on resource revenue it would blow your mind. What is going to happen when half the cars are electric? And the new polymers “last” 20 years? No wood revenue or gas revenue or oil revenue. Canada is hooped.

Garth keep up the excellent work and Merry Christmas.

#173 TurnerNation on 12.13.13 at 3:33 pm

You’re best to save money at Dollarama.

One’s opened even closer to me, at King/Portland Sts.
In a basement – almost underneath a high-end niteclub (we have the most expensive vomit in the city here) beside a Spinning Fitness club, where yuppie nymphs clad in lulu and neon twerk up a sweat. And that’s just the guys.

#174 Ralph Cramdown on 12.13.13 at 3:55 pm

#163 Mister Obvious — “In her view, it’s time to return to 100% tax exposure on capital gains and lose the extremely favourable tax credits enjoyed on dividends from Canadian corporations. This would (somehow) go a long way to helping the middle class actually get back to the middle. […] Nor did she define properly who actually comprises the investor class. I don’t think it’s the proverbial ‘one percent’. The one-percent gang have always been with us and have always been very rich. Taxing them more is counterproductive at best.

By ‘investor class’ I think [Amanda Lungs] means that small percentage of the middle class that had the foresight to jump ship when it was clear the Titanic was going down. That wee gang of contrarians, who never binged on debt, sold their insanely overvalued real estate and put those proceeds together with other life savings into sound, balanced and diversified investments.”

I don’t think you give Lungs enough credit. She’s the daughter of a cabinet minister, twin sister of a lawyer, and sibling of a bunch of other high achievers. Even if she’s the dumbest, most underachieving of her family, I’m guessing she made more than I did last year (for whatever that’s worth).

Now tell me, how many tax returns have you done recently? The working class (and by this I mean everyone whose biggest source of income is from employment) gets BONED. Make most of your income from dividends, family business or capital gains and you pay a lot less. Over 65 or qualify for the disability tax credit and pay even less.

I live at the centre of the earth, and our high taxes haven’t driven the billionaire bracket to Alberta.

#175 broadway skytrain on 12.13.13 at 4:12 pm

By ‘investor class’ I think she means that small percentage of the middle class ….sold their insanely overvalued real estate and put those proceeds together with other life savings into sound, balanced and diversified investments.

———————————-
garth says hold RE alongside other assets, in balance.

most all investor class types have no mtge and multiple properties

#176 World Traveller on 12.13.13 at 4:36 pm

Hi Garth,

The other day you mentioned the axings in media, here is another one to add to the pile.

http://www.blogto.com/city/2013/12/dean_blundell_show_suspended_by_1021_the_edge/

Although this one is just a suspension, I wonder if 102.1 will bring the show back if the heat is too much.

#177 Lurker on 12.13.13 at 4:39 pm

Raj #137:
Hope you don’t get a tenant like our friends did; turns out he had a criminal record with an assault conviction (but at first he seemed so nice). Ended up that he didn’t want to pay his rent and they had to evict him. Would you want a guy convicted of assault and not paying his rent living in your basement?

#178 Crack Head Crackservatives on 12.13.13 at 4:40 pm

Personal debt ratio hits record high of 163.7%

Good job you crack head crackservatives. Conservatives are on crack

#179 Mike on 12.13.13 at 4:53 pm

I know this topic has been discussed, but I can’t remember the details. If a prospective home purchaser uses CMHC, can he/she still qualify for a variable rate mortgage? I know a variable mortgage requires qualifying for a higher rate, which means a lower loan approval, but can you still go variable when you require CMHC insurance? Thanks

Yes. — Garth

#180 Smartalox on 12.13.13 at 4:53 pm

@ Garth, re: response to #152:

Maybe no Canadian BANK will fail in our lifetimes, but what about credit unions? They’re not governed by the same FEDERAL rules for maintaining capital ratios, they’re overseen by the provinces.

#181 my thoughts on 12.13.13 at 4:55 pm

and another 300 jobs lost in the GTA… bye Novartis… hello unemployment

#182 Nemesis on 12.13.13 at 5:12 pm

Oh my!… Today’sLineUp is, “ahem”… RatherContentious…

Nevertheless, and even at the considerable risk of StokingAnew our Host’s Favourite Controversy… Let’s just dive in, shall we? Ms. Chen’s clients would certainly understand!

Psst!… your Quote’OTheDay, SaltyDogz:

“We don’t need to see them. Just pick the good ones.” – OffshoreClient of Detroit Realtor Ms. Caroline Chen

[Forbes] – China’s Newest City: We Call It ‘Detroit’

…”The Chinese certainly have made an impact on the locals in Detroit. “I have people calling and saying, ‘I’m serious—I wanna buy 100, 200 properties,’ ” said Caroline Chen, a real estate broker in nearby Troy, Michigan, to Quartz.com. “They say ‘We don’t need to see them. Just pick the good ones.’ ” Chen reports that one of her colleagues sold 30 properties to a Chinese investor.

The Chinese are coming, but what are they doing? Dongdu International will make a big contribution to downtown by redeveloping the Detroit Free Press building, turning it into a retail and residential complex, but that ambitious plan appears to be the exception. China’s rich are investing in the Motor City like they invest in their own country, where they buy multiple units at a time. In China, like here, they often keep their acquisitions vacant, treating new properties like stores of value…

…There is substantial disagreement as to how much Chinese individuals have already stashed offshore. Boston Consulting Group estimates they hold $450 billion in assets outside their country, and WealthInsight believes the number to be $658 billion.”…

http://www.forbes.com/sites/gordonchang/2013/12/08/chinas-newest-city-we-call-it-detroit/

…Well, whatever else Detroit may be, it’s definitely ‘Mo’Town’ for your money, SaltyDogz. As to the BroaderPhenomenon of ‘flow’ – well, in a word, and to paraphrase our MagnanimousHost, “Really.”

Oh yes, speaking of AsianCapitalFlows, it’s not just our GoodFriend Ambrose who is getting a tad jittery these days…

[UK Telegraph] – Bank of America advises China default contracts to hedge debt storm

…” The pattern has echoes of what happened to Icelandic banks and Northern Rock, which relied on fickle capital markets during the credit boom. They were caught in a vice when funding suddenly dried up. The Academy said Jilin Trust, AsAc, and Taipingyang Municipal, are among the most overextended. All three have had trouble rolling over debt or covering payouts over recent days.

Fitch Ratings says the explosive growth of loans over the last five years in China is unprecedented in any major country in recorded history. Credit has risen from 125pc to 200pc of GDP, if all forms wealth products and offshore banking are included. The Chinese credit system has grown to $24 trillion from $9 trillion in late 2008, equivalent to adding the entire US commercial banking system.

The pace of credit growth over the five-year period exceeds the extremes seen before Japan’s Nikkei bubble burst in 1990, or before the onset of the US housing crash in 2007.”…

http://www.telegraph.co.uk/finance/financialcrisis/10516124/Bank-of-America-advises-China-default-contracts-to-hedge-debt-storm.html

…Still… how can bad it really be? Last time ‘Nem’ checked, the LatestIncarnation of TheGreatHelmsman didn’t seem overly concerned. And that’s a GoldenThang. Right???

http://usa.chinadaily.com.cn/photo/2013-12/13/content_17174003_3.htm

…unlike Italian Prime Minister Enrico Letta… who probably wishes he could just forget all about Turin – and spend his WeekEnd hosting a little, “BungaBunga” instead.

[UK Guardian] – Italy hit by wave of Pitchfork protests as austerity unites disparate groups: Demonstrations point to frustration with traditional politics, with minister warning parliament of a country in ‘spiral of rebellion’

…”In a loosely formed movement which has gone largely by the name of I Forconi (the Pitchforks), lorry drivers, farmers, small business owners, students and unemployed people staged protests venting their fury at a political class which they blame for Italy’s longest post-war recession and want to “send home”.

But they were not alone. Alongside them were anti-globalisation groups, members of the Veneto Independence movement, elements of the far right and – for good measure – football “ultras”. Among the sights “rarely seen before”, reported the Turin-based daily La Stampa, were supporters of arch-rivals Juventus and Torino standing “side by side”.

Although the protests had been publicised, especially on the internet, their scale and occasionally violent nature – particularly in Turin, a historic city of protest – appeared to take many by surprise.”…

…Yikes!… you know things are bad in EuroLand when rival FootBallClub supporters can agree on anything… Still, you’ve just gotta Love those Italians – they’re so Zesty!…

Unlike the Portugese, ‘on the other hand’… [or at least the ones condemned to while away their time in British supermarkets]…

[UK Independent] – Man banned from every supermarket in Britain for pleasuring himself in Sainsbury’s meat aisle

http://www.independent.co.uk/news/uk/crime/man-banned-from-every-supermarket-in-britain-for-masturbating-in-sainsburys-meat-aisle-9003511.html

Oh, The Indignity! The Indignity!

What would HM say?… Hmmmm…. “Off with his head!”???… [TeeHee!]…. which reminds me…

[UK Independent] – You can STILL be jailed for being a republican, government confirms, and it remains illegal to even ‘imagine’ overthrowing the Queen

…”Section Three of the Treason Felony Act 1848 reads in part: …and such compassings, imaginations, inventions, devices, or intentions, or any of them, shall express, utter, or declare, by publishing any printing or writing … or by any overt act or deed, every person so offending shall be guilty of felony, and being convicted thereof shall be liable … to be transported beyond the seas for the term of his or her natural life.”…

http://www.independent.co.uk/news/uk/home-news/you-can-still-be-jailed-for-being-a-republican-government-confirms-and-it-remains-illegal-to-even-imagine-overthrowing-the-queen-9004176.html

#183 Victor V on 12.13.13 at 5:14 pm

In the spirit of Christmas, here is at least one step in the right direction for tech sector in Ontario. New jobs ‘may’ be coming;

http://www.cbc.ca/news/business/cisco-ontario-deal-may-create-up-to-1-700-jobs-1.2462749

#184 Canadian Watchdog on 12.13.13 at 5:26 pm

Provincial and local government debt soars to new record in Q3  Chart Jobs, jobs, jobs! (with your money)

Next: Quebec, Ontario and/or British Columbia credit rating downgrade in t-minus…

#185 George Soros on 12.13.13 at 5:47 pm

133 Daisy Mae on 12.13.13 at 11:13 am
All junk food we CAN live without….

If you are looking for healthy food you live in the wrong country, go to Europe where genetically modified products are prohibited.

I am not even mentioning the prices of the ‘organic’ items in the stores.

#186 TurnerNation on 12.13.13 at 5:54 pm

#72 Nemesis

Recognized that car bonnet from my childhood. My Dad’s first car in Canada was a 1972 Pontiac Grand Prix SJ. Yep 454ci, dual exhaust, 4 barrel. Before the 70s smogged down HP. I bet it passed everything but a gas pump.

Yet I always drove imports ha.

‘Cept for that V8 Mustang GT I rented in Van a number of years ago. Spent $90 on the car and $100 in gas. In one day. Put it though paces on Sea to Sky hwy. Scooped hood would lift with alarming alacrity upon judicious application of its dino pedal.
4-on-the-floor or I shifted that way. There’s no replacement for displacement. Followed a Carerra 4 down the hill, tires as wide as me. He was bait.
Used to know every hwy curve there before the reno ‘ruined it’. Also took a perfectly balanced 328i up and down. Magical. Enter turns wide, brake late & hard , downshift and briefly unload tires before flicking the wheel toward apex like a slingshot. Couple of times had to save myself using trailing braking. Early & firm on the gas on the way out, upshift at redline. It never wavered. Rinse and repeat, couldn’t wipe smile off. Something to be said being a cager.

#187 Paul on 12.13.13 at 6:07 pm

Canada Post?
Waited all day for a important package went to the door and there is was not the package but a delivery notice.
Call the P.O. said I must have been out,They never even rang the bell.
In all day $27.00 later I can pick it up maybe tomorrow.
Why are they going broke?I get the price is to low.

#188 jess on 12.13.13 at 6:16 pm

http://stinktanks.org/
http://stinktanks.org/secret-documents-exposed/

Shilling for Profit: a Case Study of ALEC’s Campaign against Divestment from Apartheid South Africa
http://prwatch.org/news/2013/12/12338/shilling-profit-case-study-alecs-campaign-against-divestment-apartheid-south

State conservative groups plan US-wide assault on education, health and tax• State Policy Network co-ordinating plans across 34 US states
• Strategy to ‘release residents from government dependency’
• Revelations come amid growing scrutiny of tax-exempt charities

• Read key excerpts from the SPN proposals
• Portland Press Herald: group’s plan to eliminate taxes
• Texas Observer: the money behind the fight to wreck Medicaid
http://www.theguardian.com/world/2013/dec/05/state-conservative-groups-assault-education-health-tax

#189 JL on 12.13.13 at 6:20 pm

Garth,

How can you talk about rising fixed rate mortgages in the same week that you talk about deflation.

Anyone who questions you on rising fixed term mortgages typically gets a sarcastic rebuttal from you, such as “ever heard of the bond market”.

Well I have heard of the bond market and I can put myself in the shoes of a bond investor… In what world do you live in do bond investors demand higher yields in a period of deflation?? For North America (where as you’ve rightly pointed out, risk of govt default is basically 0) the ONLY reason bond investors would drive up yields would be due to the expectation of rising inflation. In a world of deflation bond prices will go up, yields down and with it fixed term mortgages.

You will soon see. — Garth

#190 broadway skytrain on 12.13.13 at 6:51 pm

Next: Quebec, Ontario and/or British Columbia credit rating downgrade in t-minus…
—————————————-
bc govt is running surplus , we are doing ok out here

ont/que have bleaker futures imho.

#191 Iconoclast on 12.13.13 at 7:02 pm

Re: taxes

I’ve never understood why capital gains and dividends are taxes so much lighter then regular income.
I should say that I understand why… which is that our masters want it that way…
but why we let them get away with it, I don’t understand.

Every dollar of income from any source should be treated and taxed exactly the same, with a few carve-outs:
1) Principal residence
2) Some inheritance exemption.
3) Some limited sheltering like RRSP and TFSA.

The NDP should jump on this with both feet. The Liberals can’t… their backers like it too.
Any Orange wavers out there? Here is Mulcair’s winning strategy…

#192 Canadian Watchdog on 12.13.13 at 8:04 pm

#190 broadway skytrain

lol.. Ya running a surplus. Fool! That's because BC borrowed longer term and hasn't paid any debt yet.

#193 Derek R on 12.13.13 at 8:19 pm

#190 broadway skytrain on 12.13.13 at 6:51 pm wrote:
bc govt is running surplus , we are doing ok out here

Not necessarily. You are only doing okay when

[trade surplus] – [govt surplus] > 0

in BC. And even then you might be storing up trouble for the future if you are taking on debt.

#194 broadway skytrain on 12.13.13 at 8:45 pm

#192 Canadian Watchdog on 12.13.13 at 8:04 pm
#190 broadway skytrain

lol.. Ya running a surplus. Fool!
—————————–

wow, don’t take it personally man.

i’m no CPA, not even close but the debt line seems to be going down here, i did not read the fine print so if it’s creative accounting i stand corrected… but
http://www.fin.gov.bc.ca/PT/dmb/ref/debtsummary.pdf

regardless of the exact #’s we are not in a dangerous debt situation like central canada

i feel that with natgas plants/pipelines/shipbuilding/tourism/selling out to china$$$ in our future we will get by , while ont continues to hurt.

#195 broadway skytrain on 12.13.13 at 8:47 pm

Québec $182,354,692,049.50
Ontario $265,959,195,802.50
British Columbia $39,142,555,265.20

ont prov debt/person is over double that of bc according to http://www.cfib-fcei.ca/english/article/5428-federal-and-provincial-debt-clock.html

#196 broadway skytrain on 12.13.13 at 8:59 pm

#192 Canadian Watchdog on 12.13.13 at 8:04 pm
#190 broadway skytrain

hasn’t paid any debt yet.
————————-
is your chart saying bc needs to come up with 10B over the next 8 yrs to pay bondholders?

even adding 10B today does not get us in ontario’s league

correction: ont pop at 14m is larger than i thought putting bc at just OVER half of ont, not under, my mistake. but at least we have a future.

#197 Nemesis on 12.13.13 at 9:17 pm

@TurnerNation/#186…

GooseBumps!

This one’s for you…

http://youtu.be/qlywcuw-1TU

…”We got rock stars in the White house
And all our pop stars look like porn
All my heroes hit the highway
‘Cause they don’t hang out here no more

‘Cause you can call me on my cell phone
You can page me all night long
But you won’t catch this free bird
I’ll already be long gone

Like Steve McQueen
All we need’s a fast machine
And we’re gonna make it all right

Like Steve McQueen
Underneath your radar screen
You’ll never catch us tonight”…

#198 Canadian Watchdog on 12.14.13 at 3:38 am

#196 broadway skytrain

Allow me to put the numbers in better context for you.

Québec – Gov’t Debt Per Capita $41,833
Québec – Household Debt Per Capita $23,191
Total $65,024

Ontario – Gov’t Debt Per Capita $38,985
Ontario – Household Debt Per Capita $43,720
Total $82,705

British Columbia – Gov’t Debt Per Capita $27,824
British Columbia – Household Debt Per Capita $49,105
Total $76,930

Who you gonna tax to pay down debt? Households? And what happens to the debt load when rates rise?

More immigrants needed pronto!

#199 Daisy Mae on 12.14.13 at 10:49 am

#185 George Soros on 12.13.13 at 5:47 pm
133 Daisy Mae on 12.13.13 at 11:13 am
All junk food we CAN live without….

“If you are looking for healthy food you live in the wrong country, go to Europe where…”

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

Nah…just looking for the best value for the dollar. If we must buy food, it might as well be reasonably healthy for us.