Risk on

fair modified

A fav topic here is risk. Childbirth is risk. Spending seven years at university is risk. Marriage is risk. Driving is risk. Borrowing is risk. Raising kids is risk. Yet people happily embrace such things, thanks to hormones and social pressure. Like kids buying houses, even without savings and virtually 100% debt. Society says that’s a good thing.

In contrast, a TD Ameritrade survey found when it comes to money, Millennials (especially) are insanely conservative. Almost 45% believe the best way to prepare for retirement is a…get this…savings account. Barely more than one in ten would go near the stock market.

Why are we growing children with the brains of 75-year-olds? Simple. Five years ago the kids saw stock markets temporarily fall, heard their parents moan about losing mutual funds, and learned bad things about ‘investing’. Then, for the last four years, real estate has romped higher on the back of cheap mortgages, lax lending and parental house lust.

Here’s the result: a HuffPost analysis has found that a quarter of Canadian cities are now unaffordable for average families when it comes to buying a home. Apparently this is news to these guys. Among those out-of-reach places are Markham, Mississauga, Burnaby and Surrey (as well as Toronto and Vancouver, of course). Four others – Calgary, Edmonton, Brampton and Victoria – are considered borderline.

How was this determined? Using a median household income of $87,000, current mortgage rates and 5% down, a family with no debts could borrow $460,000. So the Huffsters concluded anyplace with house prices averaging $100,000 more than this amount are beyond the means of normal people, a.k.a the middle class.

Of course, this is meaningless. That’s because most folks consider real estate to be riskless, and so find all kinds of ways around such financial barriers. A third of first-time buyers (40% in Toronto and Vancouver) expect gifts from their parents to throw at real estate. Banks are still financing 0% deals with cash-back mortgages. Developers will sell you a condo in return for your used car, or 2% down.

At the heart of this madness is financial illiteracy, which is all about how we perceive risk. Most people’s worst fear is losing money (80% of marriage breakdowns are financial). Because stock markets are revalued daily and the price of assets there can fluctuate a few percentage points every week, the Google generation can’t handle it. In a world brimming with job instability and flaky parents, it’s all too much.

Risk to them means any kind of loss, even transitory. Money is precious because they don’t have any. But debt is a romantic construct, entirely acceptable because it means you can get free stuff. Like a condo. In fact I think almost every young person buying real estate today with massive leverage never actually plans on paying it back. It’s cool to have debt roll through life, financing things you want, especially since (like their folks told them) houses always inflate!

The lessons yet to be learned: interest rates rise. Nothing goes up forever. Debts must be settled. Houses get illiquid. Life’s greatest risk is running out of money. And that’s why you never bet on just one thing, especially when everybody else is doing it.

Last year Canadian house prices increased, on average (says CREA), about 10%, on flat sales. The Canadian stock market gained 9.6%, the Dow advanced 30% and a balanced portfolio (no stocks, no mutual funds) grew about 11.5%. A 25-year-old who can find $100 a week to put into a TFSA, invest in assets like that and keep doing it until age 60 will have (at just 7% average return) $785,000.

And on that almost-eight hundred grand, there will be no tax. More importantly, there is no attached debt. There were no interest payments necessary to achieve it. No condo fees. No property tax. No land transfer changes and no commission.

If the hundred bucks weekly inhibits hipsters’ ability to buy a condo box or a saggy semi in a debauched but gentrifying hood, then they’re fools to take the plunge. Given that real estate markets are growing increasingly unaffordable even for people with average incomes, no debt and cash downpayments, it’s inevitable volatility and correction lie ahead.

But, as I said last week, I’m just one little whizz in the face of a hurricane. Each generation has to learn through its own mistakes, especially when the previous one lost its way.

Risk on, kids.

188 comments ↓

#1 gladiator on 03.30.14 at 5:12 pm

A real psychic will never ask you the purpose of your visit.

#2 RONCRUCKLE on 03.30.14 at 5:22 pm

furst

#3 Randy Randerson on 03.30.14 at 5:23 pm

Right on, Garth! Always expressing yourself so eloquently in your posts.

#4 espressobob on 03.30.14 at 5:26 pm

OK, so our education system needs a revamp! I won’t hold my breath.

#5 Human Capital on 03.30.14 at 5:32 pm

When you have no money, a million dollar mortgage makes you a millionaire, since the figure of one million dollars occurs in the context of your personal finances.

When you’ve had to scrape together one tenth of that amount by working, saving, and investing, and know just how hard it can be, the thought of going to zero and then being in the hole for nine times again that much is enough to give a sensible person hives.

Cognition is a funny thing. It was never built for the world we live in, and struggles mightily with it.

#6 Kingarthur on 03.30.14 at 5:37 pm

Thinking of you and Bandit walking today; remember, small steps! Wishing you a slow and steady recovery.

#7 pinstripe on 03.30.14 at 5:48 pm

What I hear from millenniels is their lack of trust in authority. The recent case in Alta where the Premier resigned due to excessive spending on personal matters, many people are totally disgusted how people with authority are manipulating the system.

There are stories how well the market is doing, and yet there are many people who have barely recovered from the 2008 crisis. The bad news spreads fast. Many people do not trust the good news. There are too many scars on many people and the millenniels want no part of that.

Those with good paying jobs in the oil patch feel smug and immune to the fast lane. These people have big take-home paychecks and borrow whatever they can get their hands on buying real estate. They use the last 10-15 year benchmark on property value and smile with “why not, it’s impossible to lose”.

#8 Happy Renting on 03.30.14 at 5:52 pm

But Garth, that $100/wk is for spending at the bar!!

Young people also never really believe they’ll get old, or it’s too far away to really even think about. Not planning for the future is risking getting old without the things that make old age bearable: money, good health, hot young lover acquired with that money and enjoyable because you have good health, etc.

Children learn finances from their parents, so if their parents’ generation has no financial education to pass on, it’s no wonder this one is where it is.

#9 Ripped on 03.30.14 at 6:00 pm

1986 1,700 sq ft bungalow asking $499K, sold in two weeks for $490K in Edmonton.

#10 economictsunmai on 03.30.14 at 6:08 pm

In today’s New Normal this is what acceptable risk looks like:

10-Year Yields: Italy 3.3% Spain 3.2% Ireland 3% US 2.7% Germany 1.5% Japan 0.62%.

Risk is quite often hidden, manipulated and misstated; until someone cries out:

“The Emperor has no clothes!”

LA HAM and HFT:

Wealthy Chinese home buyers boost suburban L.A. housing markets

http://www.latimes.com/business/la-fi-chinese-homebuyers-20140324,0,5923659.story#ixzz2xUB8IiQk

Tonight on 60 Minutes…

Michael Lewis’ “Flash Boys” reveals how a group of unlikely characters discovered how some high-speed traders work the stock market to their advantage:

http://www.cbsnews.com/news/stock-market-rigged-says-michael-lewis-in-new-book/

#11 not 1st on 03.30.14 at 6:12 pm

Sounds like the most sensible generation yet.

#12 JL on 03.30.14 at 6:25 pm

“It’s cool to have debt roll through life, financing things you want, especially since (like their folks told them) houses always inflate!”

Nobody says that houses always inflate. What people say is that currency ALWAYS depreciates. The entire system is based on currency being deflated, the very mandate of the Bank of Canada is to maintain an inflation rate of 2% (between the 1-3% band).

Without inflation the system would in fact collapse because of compound interest. Think about it. Imagine a small country with $1 million in currency and $800,000 in total debts owed between the citizens. After 10 years of compound interest at 5% the total amount of money owed exceeds the total amount of currency in existence. Clearly this can’t happen which is why we have continuous increase in the money supply and continuous decrease in the value of currency (i.e. inflation). I don’t understand why Garth talks about the price of an asset as being meaningful. Its not, all we’re talking about is devaluation of currency.

Now do I think that there is going to be hyperinflation? Of course not. But I think we will continue to devalue the currency by 2-3% per year or more indefinitely.

#13 Garth Vader on 03.30.14 at 6:34 pm

Mr. Turner, you have been saying the same message for six years now. Meanwhile anyone who bought at that time has seen their home value increase by at least 50 percent. The govt shows no sign of increasing the central bank rate, in fact it may go lower, which will inflate housing prices even further. This could go on for at leat another five years. Agreed?

No. Rates won’t fall unless the economy crumbles. You won’t want a fat mortgage then. — Garth

#14 Joseph R. on 03.30.14 at 6:36 pm

#5 Human Capital on 03.30.14 at 5:32 pm

It’s called the “wealth effect”:

http://www.forbes.com/sites/investopedia/2014/01/28/a-study-on-the-wealth-effect-and-the-economy/

Basically, if the value of housing goes up, so does household spending proportionally. The reverse is also true.

#15 Lady-in-waiting on 03.30.14 at 6:36 pm

I’m a renter who is not planning to buy real estate, and is in the process of switching my portfolio from mutual funds to stocks. A co-worker recommended me this blog. After reading it for a few weeks waiting for some useful advice to materialize, I feel like I keep getting the same diagnosis – for the disease that I do not have. 

Do you plan to post anything informative about stocks in the near future? Maybe on April Fool’s day? Or the whole purpose of this blog is to convince the gullible not to buy real estate – but seek the info about stocks elsewhere?

Good idea. Bye. — Garth

#16 T.O. Bubble Boy on 03.30.14 at 6:37 pm

Meanwhile… In HAM news… $14.5 BILLION in assets seized from former Chinese political leader:
http://www.cnbc.com/id/101537309

(any Vancouver McMansions in that $14.5B?)

#17 JL on 03.30.14 at 6:39 pm

Hey Garth, just wondering, why is it meaningful that real estate sales were flat in 2013 on rising prices and that’s bad. But the stock market rising in 2013 on volume that was 6% lower than 2012 not worth a mention?

In 2013, total trading volume was down 6% compared to 2012:

http://www.newswire.ca/en/story/1285891/tmx-group-consolidated-trading-statistics-december-2013

I have said repeatedly markets have risk, which is why portfolios should be balanced and diversified. Look it up. — Garth

#18 Look Mom, I finally made it on Garth's Blog on 03.30.14 at 6:39 pm

http://www.theprovince.com/homes/There+house+sale+Vancouver+under/9670573/story.html

Vancouver home for only $600K
Spead the News !!

#19 Cow Man on 03.30.14 at 6:40 pm

Sir Garth:

It has too be tough for you trying to persevere knowing how right you are and just waiting for the axe to fall on the mislead. We had two couples over for dinner today. The topics of conversation were:
1.How their married children were living hand too mouth in $700,000 houses with two new vehicles at each home.
2.How everything their kids buy is on their HOLOC.
3.How if either of the spouses lost their jobs they would be financially ruined.
4.How easy it is too buy a house.
There was no discussion about real estate always going up. Both couples (retirees) have their homes for sale and are waiting; but will not drop he price. Sounded just like your blog.

#20 not 1st on 03.30.14 at 6:40 pm

#10 economictsunmai on 03.30.14 at 6:08 pm

These flash traders can easily be beat at their own game. Thir time horizon is seconds minutes days and if yours is longer than that you will come out on top.

Simply buy a stock that has a dividend and DRIP eligible. Signing on to the DRIP allows you to by shares and fractional shares at a discount to the market. No high frequency trader can front run those buys.

#21 55rider on 03.30.14 at 6:57 pm

Thanks Garth. Your advice is priceless.
Unfortunately, they’re not paying attention.
I’ve been watching a stream of want to be mortgage holders flowing through my neighbor’s 35 year old East Vancouver special open house. Priced a 968K.
What’s it going to take to reverse this?

#22 Linda Mulligan on 03.30.14 at 7:01 pm

To be fair, almost no one who is in their early to mid 20’s has the slightest interest in saving for retirement. That is for ‘old’ folks. Come on, recall your youth people – those who say they totally thought about retirement & had a plan from the first payday are definitely in the minority. I know I didn’t think about retirement or saving for the future prior to age 30 or so…..
Plus, how can you blame today’s youth for going into debt when everyone prior to them has done just the same? Hey, back in the 80’s (& 90’s AND 2008 etc.) there were plenty of foreclosure & ‘for sale’ signs popping up when the economy tanked because – gasp – say it isn’t so – pretty much 80 plus percent of the working stiffs were in debt up to their eyeballs, no savings, no way to cushion the loss of a job & everything financed. So yes, I can see why youth today is willing to embrace debt, their parents & grandparents did the same & got to enjoy the good things without owning anything. The 20 percent or so who were prudent are now considered the elite due to owning & having financial assets. Scary but true – if you have change in a jar at home, some actual cash in your wallet & even just a few dollars in a bank account YOU are considered to be in the top 10 percent or so of ‘wealthy’ Canadians. The idea being if you have any debt you would not have change in a jar at home, or cash in the wallet or a few dollars in a bank account anywhere at all.

#23 Cici on 03.30.14 at 7:02 pm

#5 Human Capital

Bang on! ;-)

#24 Rainclouds on 03.30.14 at 7:03 pm

Those same millennials don’t vote either….”what’s the point” Too busy multi-tasking poorly. Sooo screwed……..

Psychics:

Several years ago, had orders to deliver T1 circuits to a psychic hotline. Customer was in full panic mode “when will this be done?” “What is the delay”?

“Uhhh, you tell us future boy” ( I miss the monoploy days sometimes……….)

Turns out it was phone sex. The psychic thingy was a cover and yes it was costing money as the crones waiting in the call center to “converse” with their clientele had to be paid……Nothing is as it seems.

Hey Twinkle Toes: You need to update! it’s 2014
Copyright © 2007-2013 Garth Turner. All Rights Reserved

#25 Cici on 03.30.14 at 7:17 pm

#15 Cow Man

The worst part of it all is that most of these people racking up the HELOC don’t even realize that that portion of their debt is separate from their mortgage debt, and subject to a higher interest rate (usually 5% to 6%). They think that all their “freebies” are only costing them 2.99% or whatever bargain rate they got on their mortgage.

I imagine there will be a lot of panic, tears, divorces and suicides when rates rise, people realize that they’ve barely touched their principal, their home values have fallen and the bank wants mega $$ upfront to protect themselves against debts that will otherwise never be paid back.

If people don’t start wising up it is going to be brutal out there :-(

#26 Retired Boomer - WI on 03.30.14 at 7:26 pm

So Millenials are “scared” to invest in the stock markets, because they saw their parents lose a ton in 2008. BFD the same thing happened to my dad when he saw the bank close in 1932 taking his father’s saving with it. That meant the family lost their family farm in the aftermath. My dad, who started a business, and owned two NEVER put a dime in the stock markets, and never put a dime more than then $10,000 limit into any one bank. He also never had a credit card.
The son -me- had a wad of credit cards at 21 but rarely a balance on any. The son loves the market, and invests in it regularly! At 62 I might have a few more years to enjoy the fruits.
I try to teach my son to save his 16% weekly into his retirement investments. If he listens he will have lots of “screw you” money in his pockets. It gives you freedom to make choices, not ruled by your lust for the “good life on debt.”
Each generation learns from the last one, as well as their peers.

#27 dontcallmeshirley on 03.30.14 at 7:38 pm

Garth,

To assess practical risk and consequences, as opposed to theoretical, interview a bankruptcy trustee.

Then blog about what happens with judgements and REAL collection activity and REAL lender success with recovery.

That would be an eye opener and largely explain why folks are nonchalant about debt.

#28 Millennial on 03.30.14 at 7:45 pm

I’m one of these “insanely conservative” millennials. I was born in ’82. I’m a health care professional, with 11 years of education beyond high school, and have been working for almost 3 years now. I’m not married and have no kids. I have no debt/mortgage, I own my car (a Camry I will drive into the ground), I have about $10k of physical gold/silver coins/bullion (yes, I used to listen to Peter Schiff a lot, not any more), and (after paying my quarterly tax payment on March 15th) I have almost $300k in a savings account making 1.05%. I have no TFSA or RRSP accounts.

I can feel you rolling your eyes at me Garth.

Why am I sitting on cash? It’s because everything seems outrageously expensive. In early 2013 I almost opened a Scotia ITrade account, maxing out my TFSA/RRSP and then some to a total of $100k. I had literally given them checks amounting to $100k. I cancelled my application when the S&P500 reached an all-time high a few days later. Why would I invest when things are at an all-time high? And as you preach buying real estate is danger right now. Everything is expensive because of cheap cash. Everything! You know what’s really expensive? Dental practices. Retiring dentists are selling their dental practices to young dentists for ridiculous prices – they are getting multiple offers for already overpriced offices. It’s insane. Banks love to loan young dentists money cause they think it’s a solid loan.

Interest rates have been essentially 0% in Canada and the US since December 2008, half a decade. This is unprecedented. These are dangerous times. I don’t have assets like you older people that have appreciated. Don’t be so hard on us. I want to invest.

Go ahead, flame me! ;)

So you think the only choices are stocks or real estate? What did I say about financial illiteracy? — Garth

#29 CalgaryRocks on 03.30.14 at 7:48 pm

Michael Lewis’ “Flash Boys” reveals how a group of unlikely characters discovered how some high-speed traders work the stock market to their advantage:

http://www.cbsnews.com/news/stock-market-rigged-says-michael-lewis-in-new-book/

When the Swifttrade boys were hunting down institutional orders on Millénium back in 2006 they were accused of market manipulation.

But they were just a rag tag gang of independent traders. Now that Wall Street has practically legalized front running its own customers there is no problem.

And for some reason these darn young kids just don’t trust our awesome institutions.

#30 Aggregator on 03.30.14 at 7:48 pm

Are TO rents starting to capitulate? Could be.

Craigslist GTA Average Rental Price Index for March

Average Rental Price YoY%

1 Bedroom 3.6% ($1,460)
2 Bedroom 5.6% ($2,049)
3 Bedroom 15.5% ($2,337)

Median Rental Price YoY%

1 Bedroom 3.4%
2 Bedroom 6.8%
3 Bedroom 13.1%

#31 Chris on 03.30.14 at 7:52 pm

There is not tax on a TFSA? Are you sure about that? Do you mean the interest you earn?

#32 InvestX on 03.30.14 at 7:58 pm

Well, well, well…

60 Minutes has just aired a segment exposing how the stock market is rigged via high frequency trading.

The story was about front-running individual stock orders, and how it has been uncovered and is being defeated. Most people should not buy equities. — Garth

#33 LS in Arbutus on 03.30.14 at 8:00 pm

It’s called living the LOC lifestyle.

#34 Van Isle Renter on 03.30.14 at 8:03 pm

#25 Cici

I imagine there will be a lot of panic, tears, divorces and suicides when rates rise, people realize that they’ve barely touched their principal, their home values have fallen and the bank wants mega $$ upfront to protect themselves against debts that will otherwise never be paid back.

+++++++++++++++++++++++++++++++++++

Exactly. This silly and wrong-headed fixation on “I’m OK because interest rates will never rise” is a mugs game.

At some point in time the bank wants some or all of their money back. Interest rates could be negative and and it would mean nothing. You’d still be bankrupt. That’s why they call it BANK-rupt.

#35 Daisy Mae on 03.30.14 at 8:05 pm

#5 Human Capital: “When you have no money, a million dollar mortgage makes you a millionaire, since the figure of one million dollars occurs in the context of your personal finances.”

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

That’s true. People with mortgages DO think of the house as theirs. When in reality, it belongs to the bank…and they actually really just own a wee part of it.

#36 Mishuko on 03.30.14 at 8:06 pm

Just for giggles I calculated some of my numbers and turns out I have debt of 1.1% of gross income… looks like I need to binge on debt to get that bad boy up to the national average!

Or not because just like today’s post I refuse to go to bars to kill the few brain cells I have and use it to finance my tsfa.

Just like you said a month or so ago, watch the 99 % and do what they don’t do.

Thanks for your advice and hope you enjoyed this ‘hot day’!

#37 Ripped on 03.30.14 at 8:09 pm

#28 Millennial

Joe Average has made more owning a house then any other investment the last decade. He even got to live in it.

Untrue, actually. Unleveraged, financial assets have outperformed. — Garth

#38 Mishuko on 03.30.14 at 8:11 pm

Best advice I have seen on this blog, “do what the 99% don’t do”.

Hope you had a great walk!

#39 sciencemonkey on 03.30.14 at 8:19 pm

@28, your problem is you chose a good career and have a lot of $ to invest. I’m one year younger than you, also spent 11 years in university, and I’m very lucky among my professional peers to have an investment account 1/6 the size of your account.

Since my prospects are so bleak, I see investing as a potential lifeline for my future.

#40 Daisy Mae on 03.30.14 at 8:21 pm

#8 Happy Renting: “Young people also never really believe they’ll get old, or it’s too far away to really even think about.”

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

This is very true. A 25-year-old is not thinking about their retirement — $100 a week deposited into investments is, unfortunately, the farthest thing from their minds. And, they can’t afford it.

When I was that age I didn’t want to be encumbered with furniture, let alone real estate. We wanted to be FREE to pursue whatever came along. We rented the damn furniture and paid six times its value. Lesson learned. LOL

Those kids are unreachable. We have to zero in on the thirty-somethings who are marrying and starting families…

#41 UTSBLUE on 03.30.14 at 8:21 pm

Right on, Garth. Way to come out swinging!!! Very nice choices of words…. at the end of the day, this time will not be different.

#42 economictsunami on 03.30.14 at 8:23 pm

Your calls on Canadian RE are correct Garth just a tad too early.

Who could have correctly and accurately predicted all the spillover effects from CB alchemy…

60 Minutes Overtime: Michael Lewis Flash Boys…

http://www.cbs.com/shows/60_minutes/video/_Yqfd24_hiYZmJZNRpkofhpQQJrdSfgL/lewis-explains-how-the-stock-market-is-rigged/

Michael Lewis’ “Flash Boys” Exposes Shady World Of Dark Pools; Some Funds Have Already Pulled Out:

http://www.ibtimes.com/michael-lewis-flash-boys-exposes-shady-world-dark-pools-some-funds-have-already-pulled-out-1564881

Houses: the greatest investment delusion known to man:

http://www.telegraph.co.uk/finance/comment/rogerbootle/10733345/Houses-the-greatest-investment-delusion-known-to-man.html

#43 Freedom First on 03.30.14 at 8:23 pm

#15 Lady-in waiting

“Good idea. Bye” ……..priceless Garth:)

Thank you Garth. I guessed she missed your award for
being “The Top Canadian Finance Blog” which is at the top of the page.” Bye Princess idiot.

#44 Ripped on 03.30.14 at 8:26 pm

Untrue, actually. Unleveraged, financial assets have outperformed. — Garth

——————————————————–

You can’t live in a financial asset either. Joe Average killed two birds with one stone just buying a house.

And took on epic debt. No profits without a sale. — Garth

#45 Internal Auditor on 03.30.14 at 8:36 pm

@28 Good on you for saving that much. I’d recommend finding a good financial planner that will diversify your cash. If you’re scared of a big crash, then keep 25%-30% of it in cash so you can buy dips, or develop a strategy (with a professional) and purchase some puts to reduce your downside. Also, you could purchase stocks that have high trading volume then write covered calls that allows you to generate more income off your holdings. Look, it’s easier said than done but there are ways of earning income while reducing your potential losses.

In my opinion, low rates are here to stay for at least another 12 months, we may see some temporary increases in bond prices but they will flatten out. I think it was Warren Buffet that said when people are greedy be scared and be greedy when people are scared (hence a decent size of cash to deploy should a good buying opportunity arise).

Make money make money, best of luck.

#46 Ripped on 03.30.14 at 8:41 pm

And took on epic debt. No profits without a sale. — Garth
…………………………………………….

Yup at record low rates. All I know is that I’ve been the idiot waiting and waiting for the big melt that never happens while family and friends have made multiple 6 figure profits just owning the box instead of renting it.
You can’t deny it Garth.

Cheers

The gains are paper, until realized. The debt is real. It’s all about risk. — Garth

#47 AB Boxster on 03.30.14 at 8:42 pm

Garth,

While I do agree with your perspectives on housing your comments on investing and people’s reluctance to it are vastly oversimplified.

I suspect that there is a huge reluctance to invest in the stock market for the following reasons:

Volatility
The markets have always had a level of volatility and now even more so. When it comes to money people usually choose a moderate certain growth they can count on vs. wild swings or 10% this year , 15% next year and -20% the year after. So sure maybe growth over the ‘very long term’ is better. But people don’t live or think in the long term. They live and plan in 3-5 year increments.

This article describes it very well.
http://www.moneysense.ca/columns/what-are-normal-stock-market-returns

Markets are Rigged
Ok not all of them, but too much of the market is filled with junk investments that must be sold at all cost. The average Joe is the patsy. Moodys, S& P and Fitch all tell us it’s triple A but it’s mostly junk.

No Oversight
When innocent people get ripped of by the market slime, they have no recourse. CSA in Canada is a joke and the SEC is not much better.

No Recourse
People who invest and lose have little recourse.
Too bad, so sad. Sure they lock up guys like Earl Jones for 4 years. Big deal.

Financial Advisors are not.
The financial advisor industry does not have any real
fiduciary duty to clients, which is ridiculous.
Plus most of them couldn’t advise their way out of a paper bag.

So gee, folks are reluctant to invest in a system that is gamed by the companies that create the securities, where the companies that rate the securities have a vested interest in sales, where securities are pushed by the bank’s Financial Advisors (i.e. Mutual Fund Salesman) who have no fiduciary duty to their clients, and which is regulated by toothless government
agencies, and a legal system that provide little justice or recourse to the victims.

Sounds like a system we should all rush into.

So don’t buy bank mutual funds or stocks. Lots of better places to invest. — Garth

#48 Mark on 03.30.14 at 8:44 pm

The govt shows no sign of increasing the central bank rate, in fact it may go lower, which will inflate housing prices even further

Actually house prices have been coming down, which is why we’re seeing the lower rates, non-existent inflation, and the likelihood of further bond market and policy rate drops.

The only reason why the Realtors are claiming “increases” is because there has been a dramatic change in the sales mix. Basically the entry level buyers have been priced out (5 years of job stagnation will do that!), while boomers continue to trade houses amongst themselves as they ordinarily do.

Go study Japan to see an example of a country with low interest rates, yet housing that continues to deflate over a long term. Once the industry has fulfilled demand, prices can only go down. And that is what’s been happening in Canada over most of the past year.

#49 totalinvestor.com on 03.30.14 at 8:44 pm

Why do people believe the home ownership myth?

#50 LS in Arbutus on 03.30.14 at 8:44 pm

Young people SHOULD be saving and investing. It’s the time when you CAN save money because you don’t have kids. Once I had kids, I had daycare costs, two cars, bigger house, activities, etc., etc. Not to mention mat leave and the fact career (and rate of earning) slows down because of time off.

BEFORE you have children is a PRIME time to be saving. If you weren’t saving before having children, there is zero to little chance you’ll save anything after children.

Or perhaps put another way, once a saver always a saver. Once a spendthrift, pretty well always a spendthrift.

Live below your means is the key.

#51 Assquatch on 03.30.14 at 8:50 pm

#38 sciencemonkey on 03.30.14 at 8:19 pm
@28, your problem is you chose a good career and have a lot of $ to invest. I’m one year younger than you, also spent 11 years in university, and I’m very lucky among my professional peers to have an investment account 1/6 the size of your account.

Since my prospects are so bleak, I see investing as a potential lifeline for my future.

Having spent 11 years studying science, I thought for sure you’d be a professor or have some high level research job. What line of work are you in?

#52 Ryan Perich on 03.30.14 at 8:52 pm

Joe Average has made more owning a house then any other investment the last decade. He even got to live in it.

Untrue, actually. Unleveraged, financial assets have outperformed. — Garth

In Edmonton and Calgary – the average single family house NEW was ~ $150,000-$200,000 with garage. Today it’s worth at least $500,000-$600,000 (as you saw previous post of a 1980’s house being sold in 2 weeks for $490,000). and in 2007 you can bet that house in Edmonton / Calgary was easily $750,000.

Financial assets have NOT gained 200-300 % over 10 years as houses have in Edmonton / Calgary, 7 % / year @ 10 years = 1.07^10 = 96 % increase (or 196 % of starting value)

(and you’d have the vast majority of people saying 7% average is bogusly high – which could be the case if you only put in $$ once a year…scary timing)

#53 Frustrated Kiwi on 03.30.14 at 8:55 pm

#15 Lady-in-waiting

Perhaps you could have read some of the archive helpfully posted on the sidebar of this page before posting your rather entitled message (paraphased as “your blog targeted at the Greater Fool is not directly targeted at me – what gives?”). Garth does not recommend buying individual stocks unless you have $1mil to invest and does not recommend individual ETFs because he believes they need to be targeted at the person. If you read through the comments on some of his ETF articles you’ll get some perspectives but there are almost certainly better sites for that.

#54 I'm stupid on 03.30.14 at 8:55 pm

@28 millennial

Rome wasn’t built in a day, Relax don’t be afraid. Life will always throw right hooks at you. You just need to roll with the punches. You can’t plan for every situation you’re going to face in your life but that’s what makes life worth living. If you could live forever life would be boring. Remember BALANCE is the key to life. You spent a lot of time in school and you have a good profession so relax. Stop looking at where you want to be and be happy. You put in the time now start realizing dreams. And for god sakes don’t waste your time building a portfolio hire someone, It’s tax deductible.

If you don’t know who to trust hire Garth. He won’t scam you because he’s to public and has too much pride.

#55 Kessel on 03.30.14 at 9:02 pm

Just heard an earful from my wife as we drove through Woodbridge with everything sold at 200k more than 2 years back when we sold and started renting.

Did you invest the house proceeds and let them pay the rent so you could max family cash flow and invest that? — Garth

#56 young & foolish on 03.30.14 at 9:03 pm

OK, so RE is over-valued and will correct. However, I think a previous poster made a good point about the constant devaluation of our currency. Perhaps holding a real asset (like a house or a valuable piece of art) can offer a hedge.

But how about those financial assets? A balanced portfolio with out stocks? What else is available except debt?

#57 High Plains Drifter on 03.30.14 at 9:08 pm

The last 14 yrs., the winning bet was lower rates and there was plenty of ways to make that bet or one of it’s many derivatives. One added benefit is if made against a bank your win goes into their shareholder loss column. Give yourself title of “market corrector”.

#58 chopper on 03.30.14 at 9:09 pm

Garth you are so right, you are a wise old man. You really do understand humans and how we make financial decisions. I used to make a lot of bad financial decisions but since reading your blog about 2 years now I am a lot wiser. I see lots of friends and family make some bad financial decisions and it just floors me. There is a proverb “A fool and his money are soon parted”.
Thanks for the wise counsel.

#59 chris Q on 03.30.14 at 9:09 pm

http://www.theatlantic.com/features/archive/2014/03/hey-parents-leave-those-kids-alone/358631/
explains a lot of the lack of risk appetite in millenials I think.

#60 shawn on 03.30.14 at 9:21 pm

Why Buy at a Record High?

Millennial at 28 said/asked (rhetorically)

I cancelled my application when the S&P500 reached an all-time high a few days later. Why would I invest when things are at an all-time high?

**************************************
Firstly congratulations on your choice of schooling and your hard work to get where you are.

But buying at the peak of the market CAN be okay.

The question is not is the S&P 500 at a peak but rather is it reasonable value.

The S&P 500 has always eventually left each old peak in the dust although there were a few bad times to buy like 1999/2000.

If you buy the S&P 500 now and then continue to invest regularly for years (say 5 to 10% of your income) you will become rich. I can just about guarantee that.

Even starting such a plan in 2007 has worked out well.

In fact starting from zero and investing monthly since 2007 in the S&P 500 has turned out fantastically.

#61 chickenlittle on 03.30.14 at 9:25 pm

Noah preached for 120 years before the flood hit.

Hop-Along here has only been blogging for, from what I can see, 6 years.

Cut the guy some slack. It takes a while to stablize an entire planet’s economy.

On another note, I can’t believe how many people still think this blog pushes stocks.
Do they not read the posts?!?
I have no background in finance or economics (obviously) and I seem to understand what he’s saying, so what’s the problem?!?

I think The Cat Food Lady was on to something yesterday. Our expensive educations have, for the most part, not paid off like our parents promised they would. Many (not all) people don’t seem to want to settle down with one person, instead setttling for one short term relationship after another.
A house seems to be the new fulcrum for my generation. If your job stinks and your spouse is a princess or a “real man”, buying a house is one thing you can control. The world is a crazy place!!

#62 shawn on 03.30.14 at 9:25 pm

Why so Risk Averse?

One of the reasons people are risk averse, when it comes to equity investing, is because the advice of moronic idiot doomers has become so easy to spread in this internet age.

A little knowledge is a dangerous thing, especially when used to spread moronic advice.

#63 Mark on 03.30.14 at 9:32 pm

A balanced portfolio without stocks, eh? That’s quite a trick, Garth. What do your ETFs hold? Rainbows and Unicorns? Same things those RE agents have coming out of their-

What part of ‘no individual equities’ do you not understand? — Garth

#64 Ripped on 03.30.14 at 9:35 pm

I’m priced out sitting on the sidelines waiting.

There’s not a hope of me ever getting in this market at my boomer age.

An interesting note the last two weeks of the people viewing my sisters house before it sold….

There was no Gen Y viewing it. They were all Boomers looking to downsize from there $Million acreages and bigger homes. Nobody was upgrading, just downgrading just as my sister is doing having sold this place for $490K and buying a $350K condo.

Cashing in, taking profits and realizing gains.

#65 John on 03.30.14 at 9:39 pm

So clearly cheap money is not the only factor that drives prices of SFH higher. In big cities it is government policies that stalled supply of SFHs, but residents want to live in SFH, and they hate condos. The ratio of detached houses to multi-unit dwellings is dropping fast. Yet in Ontario now there are almost 100 000 people in public sector making more than $100k, that’s up from 14,926 people in 2003. Add that to 100 ooo millionaires in GTA and private sector high paying staff. With such incomes they would easily absorb interest rate increases.

#66 Nemesis on 03.30.14 at 9:39 pm

#RiskOn?NoS**t #ClairvoyanceIsTricky #Booomers[BoatsNotWrinklies] #SuperlativeCubansOnTheSail #5EyesOfSauron

SweetlyCheekySnugglyButtocksNosty… you MisfitScholasticScoundrel, you [in the FortuneTellerCommunity, that’s a compliment. But you knew that already, right?]…

Which reminds me, at some point either prior or subsequent to your abandoning the Linotype/PaigeCompositor – did you ever manage to enjoy a ReallyGoodCuban on the Sail?

http://youtu.be/BN-oLuNeNxE

Just wondering.

DecipherTheCodeBelow [HighLevelSemioticAbstractions], Nosty & thou shalt earn a case of PrimoHillBillyVino:

http://tinyurl.com/q3p2prg

Well. There it is…

[NoteToSaltyDogz: Chillax. FortuneTellers have a notoriously DarkSenseofHumour… and in this particular instance – this evening’s cinematic interlude was, mostly, just for fun – and primarily, a QuizComponent for a very EnquiringMind who likes OkiVino. That’s all.]

#67 Ripped on 03.30.14 at 9:46 pm

Sorry one more post. lol

Another interesting note was the guy that bought it never saw it. He bought it from a video. Cashing in Vancouver and heading over the rockies.

#68 Notta Sheeple on 03.30.14 at 9:49 pm

“…….Barely more than one in ten would go near the stock market………..”
=========================

Remember all those fraudsters from AIG, Bank of America, Bear Stearns, Freddie Mac, Fannie Mae, Goldman Sachs, Merrill Lynch, Nortel, etc. who were sent to jail for destroying the lives of millions around the world?

Me neither.

#69 Aggregator on 03.30.14 at 9:50 pm

The one chart that Poloz is targeting right now to slaughter savers in cash with financial repression (negative rates). Chart

But what Poloz doesn't want Gen Y to know is that they have options to save in a low risk savings vehicle that keeping pace with a balanced portfolio: the yuan.

Now here's a really nice chart showing what happened to British pollyannas that said they would never lose their reserve status and continued to hold assets in GBP over USD. Chart

Devaluation. It happens.

#70 Sean on 03.30.14 at 9:50 pm

There is no need to take on the risk of buying property right now. Renting is way cheaper. I am renting property that lists at $386K for $1600/month and I don’t have to worry about, maintenance fees, property taxes, or my mortgage payments spiking on renewal.

If my job moves, once I go off lease I can simply give 60 days notice and move on.

#71 Tripp on 03.30.14 at 9:51 pm

Huff Post study: AFFORDABLE: Ottawa-Average price of a detached house: $381,407

I do not believe Ottawa is affordable, although we are in a far better position than TO or Van. The duration of a commute from Barrhaven, Orleans or Kanata(where housing is more affordable) is approaching Toronto numbers. At one hour or more per way, the cost in time is greater than the one in dollars.

I live off Baseline, west end, inside the Greenbelt in a very “normal” neighbourhood. Most of the houses are 40-50 years old, with all the issues that come with this age. Townhouses are between $250,000-$350,000. Add $50,000 for a semi and double that for a hi-ranch or split bungalow. Two-story houses go for $450,000-$500,000. For that price you get 2×4 structure and insulation, foundations without water-barrier, 100 amp panel, sagging floors etc.

Hardly affordale.

#72 A Yank in BC on 03.30.14 at 9:52 pm

Garth.. Many shots on your “goal” of financial enlightenment tonight. It’s amazing how many Canadians seem hard-wired to think that diversification in one’s finances is not the way to go. Sure doesn’t say much for the system of education here. It’s a shame that so many will eventually get burned so badly as a result.

#73 espressobob on 03.30.14 at 9:55 pm

#54 young & foolish
#61 Mark

Ever heard of index investing? Probably not, its murder taking profit off all those damn ETF’s. Someones has to do it!

#74 Sheane Wallace on 03.30.14 at 9:56 pm

Both the stock market returns and housing appreciations are unrealistic. The economy does not grow 7 % on yearly basis. It grows by 2-3 presents. Accounting for inflation there is no growth in the last 3-5 years.

There is depreciation of money, prices double every 10 years on average.

These 800 k 40 years from now will be the equivalent of 50 k now, they would be almost nothing.

Yes, investing is the key but do not have big expectations.

Stock markets are more influenced by corporate profits, where growth has far outpaced GDP. — Garth

#75 Sheane Wallace on 03.30.14 at 9:56 pm

per cents, darn spell checker.

#76 Sheane Wallace on 03.30.14 at 10:03 pm

Stock markets are more influenced by corporate profits, where growth has far outpaced GDP. — Garth
……………………….

This is not sustainable long term.
It could be argued that it is a bubble.
I see stock rise in the last years as run away from bonds and attempt to preserve capital.

In the lack alternatives (nobody likes gold) what else is left? Housing?

Of course corporate profits would bounce after a recession. US stock markets are up 172% since 2009. — Garth

#77 Ronaldo on 03.30.14 at 10:05 pm

Savings account??? Wow. At todays interest rates it would take 32 years to double your money. Now that is risky. Except that we all know they will be 5-6% in the next 5 years right?

#78 Windsurfer12 on 03.30.14 at 10:06 pm

So Garth, will we see you this coming Saturday at the Toronto International Centre for the Real Estate Investment Show? You could definitely have some fun there. Wear your flak jacket.

http://www.realestateinvestmentshow.com

Disclaimer: I have nothing to do with it but will plunk down my $10 to kick the tires.

#79 Dg on 03.30.14 at 10:07 pm

Thinking of buying,starting to believe all the hype.Went to a party this weekend,and a friend of mine whom I haven’t seen for a while.introduced me to his new girlfriend.Just so happens she is a realator.Told me she getting out of it,hasn’t been busy for eight months.And that’s in Red Deer,where all the oil money is.I think I’m going to wait for a while.

#80 Smoking Man on 03.30.14 at 10:11 pm

Everyone here are such defeatist… So conditioned to believe that the only way to wealth is nice diploma a good job and prudent investing..

That’s method 1 of millions of others.

Sell shit. Buy low sell high….

Your Minds are so boxed into one way thinking.

I’m not schooled, have serious addictions, a rather anti social personality and have at leased 20 sources of cash flow..

Open your minds, you won’t care if rates go up or down, or houses go up or down.

#81 Shawn on 03.30.14 at 10:12 pm

A little Knowledge is a Dangerous Thing

A case in point…

Sheane Wallace at 71 says:

Both the stock market returns and housing appreciations are unrealistic. The economy does not grow 7 % on yearly basis. It grows by 2-3 presents. Accounting for inflation there is no growth in the last 3-5 years.

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

GDP of 2 to 3% is reported after already deducting inflation, so no need to deduct it again

Corporate profits will not grow faster than GDP on average in the long run

But you must add dividends

Stocks can return say 2% GDP plus 2% inflation plus 3% dividend

Voila 7%…

As to houses, no comment there…

#82 4 AM Sunrise on 03.30.14 at 10:12 pm

#28 Millennial on 03.30.14 at 7:45 pm

You don’t have an RRSP? Cool. Thank you for being my health care, and also for paying extra taxes to pay for my health care.

Unless you have some set-up going on where putting money into an RRSP puts you at a financial disadvantage. It can happen, I guess, I just can’t imagine how.

You know you can keep your RRSP in cash and still get the deduction on your taxes, right?

Yeah, everybody else, go ahead and flame me for being an enabler.

#83 ozy - very well SAID on 03.30.14 at 10:14 pm

very well SAID! It looks the “Millennials” will work a lot harder than us (generation X) as they will be in debt above their heads

shall I shoout: HOOOOREYYYY ?!?

#84 Shawn on 03.30.14 at 10:14 pm

No individual stocks?

Now that’s no fun. Surely a guy just starting out can risk money in individual blue-chip stocks since a decline would just be a buying opportunity if it were a good company.

#85 Basil Fawlty on 03.30.14 at 10:16 pm

“The Canadian stock market gained 9.6%, the Dow advanced 30% and a balanced portfolio (no stocks, no mutual funds) grew about 11.5%.”

How is this possible? Where is this kind of return available without investing in stocks?

The other thing is that while real estate gains are liquidity driven (low interest rates), so are the returns in the financial markets. You can’t have a coming real estate price decrease due to rising interest rates, while maintaining current rates of return in financial markets. Rising interest rates will adversely affect real estate and financial assets, which means the long term estimates of capital appreciation in TFSA’s, are not reliable.

#86 Nemesis on 03.30.14 at 10:32 pm

“Stock markets are more influenced by corporate profits, where growth has far outpaced GDP.” — Garth

http://youtu.be/xa5qg7cB1ZQ

I didn’t say you have to like it. — Garth

#87 World According To Garth on 03.30.14 at 10:43 pm

No. Rates won’t fall unless the economy crumbles. You won’t want a fat mortgage then. — Garth

———

So in otherwords, rates will stay the same or fall. Economies are crumbling planet wide unless you are a rich, well paid govt worker. And how can that last forever unless they continue to destroy the economy by raising taxes even more.

#88 Babblemaster on 03.30.14 at 10:46 pm

“The lessons yet to be learned: interest rates rise.” – Garth

—————————————————————-

Garth, you’ve been predicting higher rates for years and they’ve barely budged since 2008. With all this private and public debt, they can’t rise. It should be obvious. Yes, we’ve heard about the bond market ad nauseam. Well, it looks like the bond market has been willing to accept these low rates for a long time already and will probably continue to do so. So, the “foolish” and “shortsighted” people that have bet on low rates for a long time have been on the winning side of the bet the last six years and probably will be for many years more.

Don’t count on it. — Garth

#89 Babblemaster on 03.30.14 at 10:54 pm

#47 Mark

“Go study Japan to see an example of a country with low interest rates, yet housing that continues to deflate over a long term.”

——————————————————–

Japan doesn’t have any immigration. Canada has a planeload of immigrants landing every 10 minutes. Big difference.

#90 John on 03.30.14 at 11:03 pm

Here’s a few thoughts on trust and the system:
CEO’s are overpaid — end of story. I do not know how anyone can honestly and truly justify million dollar salaries and compensation. The CEO’s will never say, “Yes, you’re right we are overpaid and we should take a pay cut, the system needs an overhaul”. They would rather crash it as they did in 2007/08 before making any rational changes. That is why millenials probably don’t have any trust in the system anymore. Look at Obama and the West trying to dictate how Russia should act. What comes out of our leaders mouths is unbelievable. Just like Clinton telling the populace “I didn’t inhale”, a real leader would either decline from making comments on his personal life or tell the truth, not blatantly lie.
Lee Iacocca asks the question of this century: Where have all the leaders gone

They became dentists. Worry about their pay. — Garth

#91 Happy Renting on 03.30.14 at 11:06 pm

#28 Millennial on 03.30.14 at 7:45 pm

I am just a few years older than you (so you know this opinion isn’t coming from someone with a generational advantage.)

If you are dead set on staying in cash forever, I’d recommend 1) read about CDIC insurance and split up the $300k if it isn’t entirely insured already, and 2) The Orange Guy’s Shorts (ING) pays 1.3% on a high interest savings account. If you’re determined to stay in cash, at least do better than the 1.05% you quoted.

You are lucky in that if you remain insanely conservative forever, your earning potential is likely high enough that you could save every dollar you need in retirement (and more, for the erosion of inflation and taxes) out of your employment income. But it’s an extremely inefficient way to do it, and saving that much of your income will kind of suck. After 11 years of post-secondary education I suspect you need to live it up a little. :)

You said, though, that you do want to invest. Read this December post (I have it bookmarked):

http://www.greaterfool.ca/2013/12/13/choices-6/

You can dip your toes in the water, slowly. You don’t have to jump in all at once. You can set yourself a (still insanely conservative) allocation of 10% equities, 10% bonds, 80% cash and see how that goes for a while, then change your asset allocation as you see fit. You could dollar-cost-average in by making smaller buys on a schedule until you’ve reached the allocation you’ve set.

Yes, North American stock markets are near “record highs”, but you can’t just look at the absolute number because earnings and inflation need to be accounted for. Is today’s price expensive compared to the current and expected future level of profits?

If you check the Fact Sheet for the S&P 500, you can see the P/E ratio isn’t near the bubbly levels of some of the market peaks during our lifetimes.

http://ca.spindices.com/indices/equity/sp-500

No one can accurately predict when and how the market will move, but if you regularly re-balance a diversified portfolio, on the upside you’ll lock in profits and on the down side you’ll buy low (which everyone wants to do but, left to our own devices, almost no one ever does.)

I’ve experienced paralysis from fear (“everything’s so high the market must be crashing soon!”) and inertia (“the money’s fine where it is for another year or two…”). I am finally getting my act together because what will serve me best going forward is diversification, re-balancing, and not trying to time the markets (the last one is tough, just seems to be dumb human nature.)

It sounds like you’re trying to find your way (though you’re already in vastly better position than most). Good for you for seeking guidance and education. Hope you are able to find your way to a portfolio optimized for your situation and comfort level.

(A little more reading you may find helpful:

http://www.greaterfool.ca/2013/06/17/emotional-baggage/

http://www.greaterfool.ca/2014/01/26/loaves-and-fishies/

Enjoy!)

#92 45north on 03.30.14 at 11:14 pm

Cow Man : We had two couples over for dinner today. The topics of conversation were:
1.How their married children were living hand too mouth in $700,000 houses with two new vehicles at each home.
2.How everything their kids buy is on their HOLOC.
3.How if either of the spouses lost their jobs they would be financially ruined.
4.How easy it is too buy a house.
There was no discussion about real estate always going up. Both couples (retirees) have their homes for sale and are waiting; but will not drop the price.

funny, if your couples dropped the price that would be the sign their married children are financially ruined

cici : I imagine there will be a lot of panic, tears, divorces and suicides when rates rise, people realize that they’ve barely touched their principal, their home values have fallen and the bank wants mega $$ upfront to protect themselves against debts that will otherwise never be paid back.

you know it occurs to me that rising interest rates are like the rising waters of the flood (Noah’s flood)

ChickenLittle : Noah preached for 120 years before the flood hit.

source?

Yahweh said, ‘My spirit cannot be indefinitely responsible for human beings, who are only flesh; let the time allowed each be a hundred and twenty years.’

https://www.catholic.org/bible/book.php?id=1&bible_chapter=6

#93 bread and wine on 03.30.14 at 11:15 pm

Fellow Victorians, now is the time to negotiate with landlords and property managers. Tomorrow I move into a (tired but suitable) 3 bedroom house (with wife and kids). They wanted 1550. I offered 1400 and they went for it. My current landlord hasn’t found anyone to replace us. Few people have come by to view either of her suites. Explain why you would be a good renter and give them an offer. It might work for you too.

#94 Fed-up on 03.30.14 at 11:17 pm

#88 Babblemaster on 03.30.14 at 10:54 pm

#47 Mark

“Go study Japan to see an example of a country with low interest rates, yet housing that continues to deflate over a long term.”

——————————————————–

Japan doesn’t have any immigration. Canada has a planeload of immigrants landing every 10 minutes. Big difference.
————————————————————————

Japan has a population of nearly 130 million people living on land mass (most of it unlivable, mountains everywhere) much smaller than the state of California. They also have 330% of Canada’s GDP with REAL industry and technology.

Next…

#95 len on 03.30.14 at 11:18 pm

Temporarily dipping mutual funds – hmmm.. that could be one interpretation.

Predatory behaviours on the part of Wall Street and other “streets” could be an alternate explanation. The perpetual casino rigged in their favour and “Muppets” comments as well as general attitudes of the masters of the universe towards Joe Blow may also have something to do with it. Damn snowflakes – they can apparently read!!!

Houses – well the the financiers will pull the plug soon enough to buy on the cheap, bundle the rents, rinse and repeat. Strip mining (of assets) – the new green revolution!

Frankly, the financial predatory class will implode the economy and the young entitled snowflakes will watch in satisfaction as their future has been stripped mined of opportunities (and sustainability) long ago.

Still waiting for a post on those heroes of our times – the job creating squillionaire snowflakes – now those are interesting blokes but that would come too close to home eh?!

#96 Shawn on 03.30.14 at 11:18 pm

It’s the Math Dude

Millennial at 28 observes:

Everything is expensive because of cheap cash. Everything!

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

Absolutely correct. The value of a constant stream of cash is annual cash divided by the appropriate required return.

Lower interest rates make lower required returns which make higher asset values.

It’s simple math… though few are taught that math and most of those forget the math after college…

#97 Mrs Riverview on 03.30.14 at 11:19 pm

Garth, why no individual stocks? Diversification? Or avoiding discouraging setbacks?

I have 25 or so different securities in my portfolio. Some pref shares, some REITs and some common shares. No single security is more than 5% of the total portfolio. Sometimes prices go down but often that is a buying opportunity so no need to feel negative emotions. I often sell when I make 10% on a security, it’s taking profits, roll that into something else that is good but on sale. I like reading the financial press each day and invest based on news plus the balance sheets.

I made 15% last year.

BTW – I’m a woman and this investing hobby is kind of lonely – try to get friends interested in it but so many of them liken it to gambling.

It is. — Garth

#98 lurker on 03.30.14 at 11:38 pm

I feel incredibly distrustful of the markets, of the policy makers, of CREA etc. We’re in a time of unchecked “capitalism” without any checks and balances. Ponzi schemes are legal as long as they’re big enough.

I’m not a doomer, but seriously trying to find my footing in this rocky landscape.

For now, I scramble to pay off my remaining housing debt as fast as possible (I can see the finish line), put 20k/yr into my RRSP and buy dividend paying ETFs.

Reading this blog daily stops me from buying into the pervasive herd mentality. Thank you.

Garth, may your healing be compounded daily.

#99 espressobob on 03.30.14 at 11:43 pm

#83 Shawn

Individual stocks? Why? Outperformance, maybe? Owning an index ETF sounds less risky!

#100 Doug in London on 03.30.14 at 11:46 pm

@Retired Boomer – WI, post #26;
I keep hearing about these people who, as you say, lost a ton in 2008. Yes, in 2008 I also saw the value of my equity investments drop, but patiently held on to what I had rather than sell at a loss and actually bought more equity funds while they were ON SALE!!!!!!! As a result I didn’t lose money during the crisis of 2008-09 but actually made money in the long run. How could anyone lose money when it was such an AWESOME BUYING OPPORTUNITY back then?

@Millennial, post #28:
Not everything is outrageously expensive. How about the sales last year on REITs, preferred shares, and utility stocks? In late summer and fall truck traffic was unusually high on the 401 as truckers were being paid to haul these investments away to landfills. Why didn’t you scoop up some back then when they were so cheap?

#101 Popeye the Sailor Man on 03.30.14 at 11:57 pm

I really wish the school system gave better emphasis on some basics of real life. Why can’t cooking be the chemistry and art classes for a while. Why not teach family finance, like income, taxes, budgets, compound interest, true cost of buying a car or a house, risk. Read books like The Richest man in Babylon or about successful entrepreneurs. Role play and fill out tax forms for the role. Play games like rat-race. Have speakers come in successful ones and ones not so successful who had to deal with divorce or health issues, even credit counselors and investment advisers. Earn extra credits to volunteer at the food bank ect. This would have more direct effect on there life’s and help them be more successful.

#102 Bobs ur uncle on 03.30.14 at 11:58 pm

What kept me invested in a diversified portfolio in my 20s and then through the crash of 08 was the realization that, if the stock market goes to zero, and I lost all of my assets, we are all royally screwed. Life will be very unpleasant for most everyone – seeing as all the jobs at those public companies would be vaporized. How’s the value of your house going to hold up in that scenario? Figure you’ll still be making your payments?

If you think the markets are gambling, newsflash, we all have chips on the table – whether you are aware of that or not. Unless we suddenly embrace communism, the markets are going to continue to generate wealth. You can either enjoy some of those benefits, or sit out on the sidelines. I’d say there are benefits to having skin in he game – just don’t put all you money on any one asset – even if some other [email protected] got lucky. I bet some people made craploads of money holding onto RIM for a while before the iPhone – and then lots of people lost their shirts…same logic can apply to a house.

Having all of your money in one asset is never a good idea.

#103 2CntsCdn on 03.30.14 at 11:58 pm

You can’t save people from themselves. Most are hopeless as far as finances go. They ask for help … then fight you on the answer if there’s any hardship or discipline involved. The small percentage who get it will be patient and live good lives, the masses will live frustrated, angry and confused.

#104 Pope Slobberchops Snugglebums the 666pp (aka Nosty) on 03.31.14 at 12:41 am

#65 Nemesis on 03.30.14 at 9:39 pm — “SweetlyCheekySnugglyButtocksNosty… you MisfitScholasticScoundrel, you [in the FortuneTellerCommunity, that’s a compliment. But you knew that already, right?] … Which reminds me, at some point either prior or subsequent to your abandoning the Linotype/PaigeCompositor – did you ever manage to enjoy a ReallyGoodCuban on the Sail?”

Aha! Nemesis old boy, never got to the Linotype / PC setup — that was in the last 18 months of the five year apprenticeship. Instead, the paper went to cold type (I could type by then) and went to a far more sophisticated Merlin-magick system. No more hot metal splashes!

Bypassed the Cuban (cigars) and kept company with Messrs. Jack Daniels, Jim Beam and Wild Turkey along with Brandy and Port, two shameless gigolos who shall forever remain nameless!
*
SMan and others — New Axis of Profit, Borders “Kudos to NBC news for not relying on White House press handouts and going to look for themselves!” wrh.com, Animal Flatulence (CC) and Put A Cork In It!, Flt. 370 or Flt. 370.

#105 World According To Garth on 03.31.14 at 12:49 am

But it’s different here. Yeah well good luck with that…..

http://armstrongeconomics.com/2014/03/31/the-age-of-civil-unrest/

#106 Tony on 03.31.14 at 12:51 am

Re: #90 Happy Renting on 03.30.14 at 11:06 pm

She’s already doing the right thing but needs to put more money into both gold and silver.

#107 Win on 03.31.14 at 1:01 am

45North

Your quote ChickenLittle : Noah preached for 120 years before the flood hit.

source? You replied

Yahweh said, ‘My spirit cannot be indefinitely responsible for human beings, who are only flesh; let the time allowed each be a hundred and twenty years.’ Genesis 6:3

He actually preached 100 years Simple math

Genesis 5: 32 And Noah was five hundred years old: and Noah begat Shem, Ham, and Japheth.
Genesis 7: 6 And Noah was six hundred years old when the flood of waters was upon the earth.

#108 Waterloo Resident on 03.31.14 at 1:10 am

Garth’s Quote from yesterday: “Unmitigated drivel. — Garth”

Maybe you are correct, but here is one site that explains it a little bit better than I can. Read it yourself:

http://theeconomiccollapseblog.com/archives/the-growing-rift-with-saudi-arabia-threatens-to-severely-damage-the-petrodollar

And this article tells you why Obama just visited the Saudis:
http://www.zerohedge.com/news/2014-03-28/china-germany-sign-yuan-settlement-pact-and-obama-heads-saudi-arabia

One of the main reasons why most people fear the stock market is because it is RIGGED up against them. High frequency traders have an unfair advantage and make money off the ordinary investor, so most investors now don’t invest. Sad but true.

http://www.bloomberg.com/news/2014-03-30/high-frequency-traders-ripping-off-investors-michael-lewis-says.html

But that’s old news; smart people already are aware of all of that. So they buy real estate INSTEAD of stocks; it is because they think that real estate has no risk and that prices will never fall down here in Canada. I’m not sure if they are correct or not, they are probably wrong but every day seems to be proving them correct more and more.

I’ve noticed that young people feel that the way to prosperity is DEBT. They feel that saving is for losers and that the only way to end up on top is to load yourself up on debt and build up the things you own and let the wave of debt push your assets up in price. So far that strategy is working for the millennials, they don’t think that it could possibly backfire. The kicker is going to come when real estate does start to fall in prices and when that happens they millennials won’t believe how screwed they are.

Millennials have also learned that the best way to success is to NOT THINK for themselves, but to simply ‘FOLLOW THE PACK’. So when the pack is buying real estate then that is the smart move, or at least that’s what the Millennials feel is the smart move. They are too young and too busy tweeting and updating their facebook profiles to even begin to think about anything other than real estate when it comes time to invest.

A lot of Millennials are hearing advice from smart people saying “So don’t buy bank mutual funds or stocks, there’s lots of better places to invest,” and that is why they are investing in real estate instead of stocks, bonds, preferred shares, ETFs or mutual funds. They have never actually experienced a falling real estate market themselves so they don’t think it could happen to them. Of course they are wrong.

#109 Derek R on 03.31.14 at 1:10 am

#12 JL on 03.30.14 at 6:25 pm wrote:
Think about it. Imagine a small country with $1 million in currency and $800,000 in total debts owed between the citizens. After 10 years of compound interest at 5% the total amount of money owed exceeds the total amount of currency in existence.

Yes, I’ve thought about it. You haven’t given me enough information to check your figures and you’ve ignored the fact that each of those 1,000,000 dollar banknotes can be used many times a year as they pass from hand to hand in payment for goods, services and loans. You’ve also not mentioned whether the non-monetary economy might have grown or shrunk over the ten years but I’ll see what I can do.

For simplicity I assume that the non-monetary economy neither grows nor shrinks over the ten year period. I also assume that we start with all the $1,000,000 in the bank vaults and that on day zero $800,000 of it is loaned out to the citizens. So the citizens are paying $40,000 per year in interest to the banks. But the banks employ some of those citizens and buy goods and services from others and are owned by yet others so the banks are paying wages, dividends and expenses back to the citizens (which the citizens can use to pay back the loans). You really need to tell us how much the banks are paying the citizens before proclaiming that the outcome will be inflation because there are three possible outcomes. And only one of them is inflation.

If the citizens are receiving less than $40,000 per annum in income from the banks then the citizens will be unable to fully pay the interest or the principal. As a result money will become scarcer and scarcer for the citizens as more and more of it ends up back in the bank vaults. This is deflation. It makes money appreciate in value as the citizens find it more and more difficult to obtain it to pay off the loans. After 10 years the debt will be somewhere between $800,000 and $1,303,116 and the interest payments will be somewhere between $40,000 and $65,156. There will be between $600,000 and $703,116 sitting in the bank vaults and between $400,000 and $296,884 in general circulation. As there are fewer dollars in general circulation, a dollar will be worth somewhere between 1.6 and 3.33 times as much as it was 10 years before.

If the citizens are receiving exactly $40,000 p.a. in income from the banks the result is a steady state. The citizens can afford to pay the interest but they can’t pay the principal so the loans aren’t being paid off but they aren’t getting bigger either. After 10 years the situation will be unchanged. There will be no deflation and no inflation.

If the citizens are receiving more than $40,000 p.a. in income from the banks the result is inflation. The citizens will be able to pay the interest and to repay the loans. Of course the only way that the banks can do this is emptying their vaults. If they do this over the ten year period, they will pay the citizens around $55900 p.a. and the loans will be reduced to around $600,012. At this point interest payments will have dropped to $30,000 and the bank vaults will contain about $12. The other $999,988 are in general circulation. This means that a dollar will be worth about 0.8 of what it was worth ten years before.

So as JL says, banks can cause inflation. However the scenario that he describes is an example of deflation. And the real problem happens at the end of year 14 when interest payments total $79,127 but there is only $16,055 left in general circulation. At this point dollar bills are 50,000 times as valuable as they were ten years ago and the economy is on the verge of collapse. However his scenario assumes that the banks have no employees, no shareholders and no suppliers and that the government prints no new money over a ten year period.

#110 Millennial30 on 03.31.14 at 1:28 am

30 year old millennial here. Gladly renting a 1 bedroom condo in mid town Toronto.

I figured I would weigh in. I agree with Garth’s post. Financial illiteracy is the culprit for our stupidity. It is a little more complicated then that however.

I have 50k sitting in a “high interest” savings account at BMO. I make about 45 k a year, and save as much as I can. I am single. Just finished grad school in the paramedical field.

The reason why the money is just sitting in the savings account is because the prevailing idea is investing in the equity markets is way too volatile in the short term, and that you need to accumulate a ton of capital before you can make any meaningful money anyways. It all seems so out of reach.

Add the fact that, in my experience, about 60-70% of us still don’t really have a stable career that we at least somewhat enjoy (or we have an enjoyable job but with lousy pay..35k/year). Many still have debt from previous schooling and there are yet others who have gone back to school after unsuccessfully trying to land a decent stable job with their university education.

Because we spend so long in school, spend so long finding a decent job, the fear of losing what morsels we do have is very real. A house is a tangible asset that can at least look, from the outside, that we are “grown up”. Most of us live at home until at least the mid 20’s, so moving out and owning a home is a huge goal. Pretty much is The Goal. Moving out is when we consider ourselves “grown up”. Men staying at home in the late 20’s can be seen as momma’s boy’s. I know that is how I felt. I moved out into an apartment for school at 27 and I was proud to be out of the house even though my parents are very supportive and I knew I was saving a lot of money.

It is no secret how pricey real estate is. It is prestigious to say “I own”. Others envy you. Everyone assumes these owners have a great job with a six figure salary, which as mentioned above, is considered very lucky/successful and grown up for one of us. Renting means you cannot afford to buy. Which as we know is not true, but can come off as meaning you are less successful at landing that elusive job and touch of financial freedom that comes with it.

Also, the only thing financial advisors seem to recommend is GIC’s. The high level guys I spoke to all reminded me of volatility and how the money may be less in a time of need (for more school, down payment on home, car, wedding etc.).

You therefore feel overwhelmed and fearful of the many investment vehicles. Real estate seems simple and “fool” proof. Everyone has at least a few friends who have made lots of money in the past ten years. Usually these are guys who went straight into a trade after high school (which to be honest is what I wish I did instead of university.)

You guys are right. Real estate is an emotionally driven market. Couple that with financial illiteracy and fear, and you have us millennials gladly taking on huge mortgages and debt. I don’t think it is going to change any time soon either to be honest :(

#111 late learner on 03.31.14 at 2:12 am

Mrs Rearview:

I feel the same. dont own a house and investing 1000 a month. friends busy buying lululemon yoga pants. my coworker who works part time just bought a condo for 128000 and making minimum monthly payments.
When i talk about investing in balanced portfolio no body gets it. they think i am nuts. its getting lonely here.

#112 sciencemonkey on 03.31.14 at 2:36 am

#51 Assquatch on 03.30.14 at 8:50 pm asks:

#38 sciencemonkey on 03.30.14 at 8:19 pm
@28, your problem is you chose a good career and have a lot of $ to invest. I’m one year younger than you, also spent 11 years in university, and I’m very lucky among my professional peers to have an investment account 1/6 the size of your account.

Since my prospects are so bleak, I see investing as a potential lifeline for my future.

Having spent 11 years studying science, I thought for sure you’d be a professor or have some high level research job. What line of work are you in?
@@@@@@@

I have a PhD in polymer chemistry and I work in the biotech industry. I’d estimate that I am above average in my profession. Polymer chemistry is fairly employable, but a lot of other scientific fields are not. My research job is high level, and my pay is decent at 80% percentile relative to Canadians, but we know how far that goes in the GTA.

I’d like to explain the fundamental difference between the job markets for dentists/doctors and science PhDs. The medical professions limit the number of people trained, which lowers supply and pushes the pay up. (Nursing is different, the MO there is to train a lot of nurses, then burn them out in horrible hospital working conditions.)

Scientists are the opposite. Academic research is done under the pretense of training, where a professor (who is earning 3-10x the salary) will have groups of 5 to 50 graduate students and postdocs. The prof sits in her office mentoring students, editing their manuscripts, reading the literature, thinking about research projects, writing grants, going to committee meetings, teaching, grading, etc., while the science slaves read literature and do experiments in the lab. (Students also spend 20% of their time teaching and grading.) The prof works very hard, but the problem here is that the contribution of the science slaves is not valued. The fact that a professor in a research university might train 5-100 PhDs over her lifetime suggests a pyramid scheme.

The reason this system continues is due to the granting agencies and the profs. Granting agencies provide research grants for profs who have publications. The cheapest way to get publications is through low paid students and postdocs (stipends of 20 grand and 35 grand, respectively). The agencies also like the idea of training more scientists.

I do want to stress that I’ve seen a lot of idiot/unproductive grad students and postdocs. I think scientific training needs to fail a lot of people in grad school, but we don’t. To anyone who has gone through med or dental school, is it the same there? Do lots of idiots graduate?

A more humane system would actually provide jobs for all the scientists we train. Research in academia would be carried out by a much smaller number of students and postdocs, with a large number of staff scientists working in professors’ groups. These staff scientists would be decently paid bench (ie experiments at the bench) scientists with job security not dependent on obtaining research grants, and they could periodically switch between profs to the benefit of both.

Think about it, 35 grand a year for a hard-working postdoc scientist who has already spent 10 years in university, and will likely never make it to her dream of being a prof herself. Which brings me to another point. The difficulty in becoming a prof has become exponentially higher over the past two decades. Twenty years ago if you had some decent publications you could become a prof. Ten years ago you needed a Science or Nature paper. Now you need a few of them.

Certainly there is some advantage to society in training way more scientists than needed and using only the best, but it comes at great human cost to all scientists under 80-95th percentile.

Another point to touch on is the common meme of a STEM shortage. There isn’t a shortage, only a shortage of scientists and engineers willing to work at really low wages. A great way to drive wages down is by bringing in H1Bs by the boatload.
http://chemjobber.blogspot.ca/2014/03/the-horrors-of-redistribution.html

I still think science is very important to society, both in what it can produce and in general science education for the populace. It’s just that being a scientist is a very poor career choice, and responsible parents should steer their children away.

#113 Dr. Wu on 03.31.14 at 5:50 am

The United Nations want’s us all in condos, no one told the CBC.

http://www.youtube.com/watch?v=tUyelPUCypY&feature=youtube_gdata

#114 Ralph Cramdown on 03.31.14 at 6:02 am

You should cut Mrs Riverview some slack.

It is true that many people are not good at picking stocks. They are emotional, they buy into stories rather than facts, and some of them tend toward buying longshots rather than good earners. But Mrs Riverview had me at “balance sheets.”

An equity ETF is just a bunch of stocks with a management fee on top, as you well know. If those stocks are, on balance, a bad investment, then bundling them together and taking a bit off the top won’t make them a good one.

Most of the money I manage is in individual stocks (I include REITs in this category), with a minority in ETFs and closed end funds. Discipline and diversification are key. It pains me to think about some of the high profile stocks with triple digit (or non existent) P/Es that my ETFs hold on my behalf.

Lighten up on stock pickers, Garth. They are the antidote to “I won’t invest in the market because it’s at all-time highs,” to “the market is a casino,” to high priced mutual funds and ill-conceived ETFs, and a number of the world’s other ills for which over-the-counter medication is not available.

It’s a low growth world, and fees count. Are ETF investors getting their money’s worth? For some, the answer is yes. But it is by no means automatic.

#115 OttawaMike on 03.31.14 at 6:21 am

#93 Fed-up on 03.30.14 at 11:17 pm

#88 Babblemaster on 03.30.14 at 10:54 pm
#47 Mark
————————————————————-

Having just returned from a month in Japan, I can give you a “from the ground” view of what a spectacular real estate bust looks like:
Newer build condos in central Tokyo, ranging in size from 500-700 sq. ft. condos are fetching $450,000- $600,00.
example

Hmm, isn’t that what similar condos are fetching in downtown Toronto and Vancouver? It looks like our Canadian cities are becoming world financial hubs just like Tokyo — or not.

Older build condos that are around 200 sq. ft., which is not unusual for a crowded city in Japan, can be had for well under $200,000.
Mortgages? Yeah, they are 1.75% rate guaranteed for 35 years and yet buyers are still cautious.

I met a Tokyoite who had attended university in Canada. His response to my tale of our never ending housing boom? You guys better be careful, lest you end up like us.

17 years of deflation and counting , yet their economy still plods along.They are after all still the world’s third largest economy.
Prime Minister Abe has introduced an increase in their VAT from 5% to 8% for April 1st and has “ordered” all of the large firms to increase wages in an attempt to stir inflation. Companies are resisting the PM’s order.

One interesting side bar, from visiting their excellent museums I gleaned the fact that Japan has been an economy of spectacular booms and busts going back to the 1600’s and through the Edo period of the 1800’s.

History doesn’t repeat itself but it sure rhymes.

#116 mark on 03.31.14 at 7:03 am

600k I guess the media attention will make it 800k

http://www.cbc.ca/player/News/Canada/BC/ID/2445588746/

#117 liquidincalgary on 03.31.14 at 8:32 am

@ #12 JL

it is not necessary for a country to have as much physical currency as its’ citizens debts. fractional reserve lending negates this principle; also, bank reserves (physical cash) need only be a small percentage of the total amount on deposit at their institution

#118 TurnerNation on 03.31.14 at 8:44 am

Everyone, stay out of the stock markets! Insanely rigged. For example look at that they’ve to poor Johnson and Johnson (your bathroom is full of their product). It’s gone up for 40 years, with an ever increasing dividend. Sickening, this manipulation!

https://ca.finance.yahoo.com/echarts?s=JNJ#symbol=JNJ;range=my

For fun look at a 50 year S&P chart. Obviously manipulated straight up, with dividends. A life time of profit. Stay away!!

#119 Babblemaster on 03.31.14 at 9:05 am

#93 Fed-up

“Japan has a population of nearly 130 million people living on land mass (most of it unlivable, mountains everywhere) much smaller than the state of California. They also have 330% of Canada’s GDP with REAL industry and technology.

Next…”

——————————————-

So what! They’ve always had a large population situated on a tiny land mass. My point is that, if they don’t have immigration and instead have a shrinking population, then they don’t have the same demand pressure for housing to rise in value.

Regardless, you can’t logically compare Japan to Canada and make prognostications for Canada on the basis of what happened in Japan. Two totally different economies with totally different factors at play.

The fact is, Canada does have a massive immigration influx and that is certainly a factor in the high demand for housing. Especially in the major population centers. And, that demand does contribute to higher prices. I just don’t see how you can conclude differently.

#120 Buy? Curious? on 03.31.14 at 9:09 am

#91 45north on 03.30.14 at 11:14 pm

Did you just quote the bible as truth? Gaaaah! Why do I abuse my brain reading the comment section?

Listen, real estate is a commodity. It’s all about Supply and Demand, not predicting the future. Right now, the demand is high for reasons even Forrest Gump can figure, and yet, the supply is limited. Therefore, the price will go up. Until people stop including their wedding photos into offers, the price is going to continue to go up. You can site stats, averages, economic principles all day long but any crash or correction will not happen in Toronto in my life time and I eat right, exercise, and have lots of sex with Mrs BC.

Losers! Not you Garth. You’re a stud.

https://www.youtube.com/watch?v=5ywjpbThDpE

Rob Ford 2014!

#121 airhead princess on 03.31.14 at 9:09 am

Risk is hardwired into the human brain as an element of our survival instinct. Unfortuneatley so is nesting for procreation….and that drives chubby chicks and balding duds to be driven into a hormone induced mating dance displayed in belly bumps and commuting from far suburbs. Its no different from watching the display of young singles driving themselves ‘to get into shape’ at the local gym…..Its just natures way of making sure there’ll be another generation of greater fools. Instinct juice over rides every other sense.

Instinct also includes some other less altruistic archetypes…..greed, envy, nepotism, regret and carelessness. We see that in abundance displayed in today’s generation of civil servants. The class war against people they see as ‘getting ahead’ unjustly….that drives them to the lowest displays of public behavior is outlined in this Vanc Sun article.

http://www.vancouversun.com/opinion/columnists/Daphne+Bramham+Sense+entitlement+runs+rampant+among/9679195/story.html

#122 gladiator on 03.31.14 at 9:53 am

BTW, no taper in the US. Just now on my Bloomberg terminal: “Yellen says economy needs extraordinary support for “some time”.
S&P liked this news, of course

But she said the economy was getting better just a couple of weeks ago or so…

Taper three times already, three more to come. — Garth

#123 Fed-up on 03.31.14 at 10:06 am

#119 Babblemaster on 03.31.14 at 9:05 am

#93 Fed-up

“Japan has a population of nearly 130 million people living on land mass (most of it unlivable, mountains everywhere) much smaller than the state of California. They also have 330% of Canada’s GDP with REAL industry and technology.

Next…”

——————————————-

So what! They’ve always had a large population situated on a tiny land mass. My point is that, if they don’t have immigration and instead have a shrinking population, then they don’t have the same demand pressure for housing to rise in value.

Regardless, you can’t logically compare Japan to Canada and make prognostications for Canada on the basis of what happened in Japan. Two totally different economies with totally different factors at play.

The fact is, Canada does have a massive immigration influx and that is certainly a factor in the high demand for housing. Especially in the major population centers. And, that demand does contribute to higher prices. I just don’t see how you can conclude differently.

————————————————————————-

So what??? Imagine California with 100 million more people added to it.

Get your head out of the sand. Enslaving immigrants with insane debt won’t prop this up, whether they have money or not. The USA attracts more than 2 million new immigrants annually and already has 330 million people in it. Is their economy, interest rate environment and geography “similar” enough to ours for you?

Yes I know, next you will say, “So what???” and tell us how much better and smarter we are than America.

#124 gladiator on 03.31.14 at 10:14 am

ok, you are right: there were 3 tapers before. what I wanted to say is “no MORE taper”.
Even ZH guys agree (and, even if they tend to be pessimistic, they have been right about many things in the past).

http://www.zerohedge.com/news/2014-03-31/stocks-surge-yellen-goes-uber-dovish-says-fed-short-reaching-employment-and-inflatio

#125 Smoking Man on 03.31.14 at 10:20 am

Check mate….

Putin just doubled the pensions of the elderly in Crimea… Wow.

Now the people in Kiev Ukraine proper via the IMF are facing a cut to the already low pensions..
Energy costs to double…

Revolution two one the way…

#126 Holy Crap Wheres The Tylenol on 03.31.14 at 10:28 am

I don’t know if its better to let these kids take a risk or not on the RE market. There is arguments on both sides of the fence. Risk is something that unless you try it, you will continuous be a side-liner watching the show instead of being a performer in the show. Help them take calculated risks. Talk it over with them, but let them do it. Your primary job is to prepare your child for how the world really works.

“But, as I said last week, I’m just one little whizz in the face of a hurricane. Each generation has to learn through its own mistakes, especially when the previous one lost its way.
Risk on, kids.”

http://growingleaders.com/blog/3-mistakes-we-make-leading-kids/

#127 shawn on 03.31.14 at 10:28 am

No Individual Stocks?

Expresso Bob at 98 said:

#83 Shawn

Individual stocks? Why? Outperformance, maybe? Owning an index ETF sounds less risky!

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

Agreed. Index ETF is less risky and on average will beat individual stock picking due to lower costs.

Picking stocks will cause about half of stock pickers to trail the index, some very badly. The other half of the stock pickers will beat the index, some by a huge amount. That is the math (and is before costs).

Some will wish to strive to be above average and it can be done. Also owning individual stocks is simply a lot more interesting.

A blanket prohibition against owning individual stocks is unjustified. To each his own.

If owning stocks is Okay for a 2 million portfolio it can also be okay at $200k given $10 trades.

If owning stocks is unwise then I assume owning a business rather than getting a safe job is just insane?

#128 miketheengineer on 03.31.14 at 10:34 am

If someone owned shares in a company like “GoldmanSachs’ or such…..how could someone ‘sell short’, and ‘dump stock’….and make a huge profit…?

#129 Daisy Mae on 03.31.14 at 10:36 am

“…you are a wise old man.”

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

Garth, are you going to just sit there and take this?

#130 Fed-up on 03.31.14 at 10:37 am

@#115 OttawaMike on 03.31.14 at 6:21 am

Newer build condos in central Tokyo, ranging in size from 500-700 sq. ft. condos are fetching $450,000- $600,00.
example

Hmm, isn’t that what similar condos are fetching in downtown Toronto and Vancouver? It looks like our Canadian cities are becoming world financial hubs just like Tokyo — or not.

NOT!!! Population of Tokyo 14 million and among the world’s most important cities. Vancouver and Toronto? Not so much (or not even in the same galaxy for that matter). Calgary??? LOL give me a break.
—————————————————————————-

Thanks OttawaMike for that most insightful and fact filled post but save your breath. Babbling Canadians who have done no statistical research know far better than you and don’t want to hear it. Simple catch phrases like “mass immigration”, “HAM” and “everyone wants to live or it’s different here” are all they need to keep this party going.

Sigh…

#131 Holy Crap Wheres The Tylenol on 03.31.14 at 10:39 am

Smoking Man I often see you like to talk about JD, well I might ask you to consider putting your money where your mouth is (in a non-derogartory manner that is). I have been involved with their stock for some time. Good performer and only going to get better in my humble opionion. I recomend the next time you are at your Casino to ask they stock the Jack Daniels Single Barrel Whisky. Try it!

http://investors.brown-forman.com/phoenix.zhtml?c=98415&p=irol-IRHome

#132 SRV on 03.31.14 at 10:49 am

Conspiracy Alert!!!

#122 gladiator…

Look at the Fed balance sheet since the taper began… seems the pace of growth does not reflect the taper figures.

Oh, and who’s the newest “big believer” in US debt since the taper started? Why it seems Belgium has “decided” to fill the void and buy more US bonds than ever before.

Hmmmmm… wonder where they got all that spare cash, since they run 4% of GDP deficits; have an 8% unemployment rate; national debt is 100% of GDP, and almost 20% of the population lives in poverty (maybe Ben dropped off some cash on his way to Dubai to pick up his $250,000 cheque for an hours work)?

#133 Aggregator on 03.31.14 at 11:11 am

Euro zone inflation drops to lowest since 2009

(Reuters) – Euro zone inflation hit its lowest level since November 2009 in March, a shock drop that raises expectations the European Central Bank will take radical action to stop the threat of deflation in the currency bloc.

This is important to watch as Mario "whatever it takes" Draghi warms up the EU printing press that will, in effect, boost the CAD and USD higher as the Euro crisis is, well…just around the corner again as Brussels' leaders lock horns to debate who's footing the bill.

Of course, a higher CAD and USD means more pressure on wage growth, which is fine for central planners as long as it doesn't create social instability, otherwise they'll retaliate by printing more.

It's a race to the bottom!

#134 Mr. Frugal on 03.31.14 at 11:14 am

Garth,

Parents have a big role to play here. We need to educate our children so they will know how to save, budget and plan for their future. We need to ensure that they are financially literate. But, we can’t do this unless we first learn to do these things for ourselves and lead by example.

#135 Vangrrl on 03.31.14 at 11:33 am

#109:
You are talking about sheep-like people. We’re not all like that, though I agree most are. YOU don’t have to be. I can’t figure out how your generation became so ‘herded’ and scared. Kids growing up in the third world prob have a sunnier outlook than you guys. The goal of your generation is to own a house?? Seriously? That’s it?!
I for one do not envy anyone who is in debt/has a mortgage. If they outright own then good for them. I envy them the financial freedom of not having a monthly housing cost (though of course there are always some costs). They can lock up and travel whenever they please!
re: the house in Van on sale for 600k. That couple made me cringe- classic greater fools. They just looked and sounded so naive, so… sheep-like!

#136 Retired Boomer - WI on 03.31.14 at 11:42 am

#99 Doug In London

In 2008 I was fortunate enough to exit the stock market in spring before the melt, and return to it in early March 2009
3% loss from the highs of Oct 2007….

Others who panicked and SOLD in the depths of the dismal winter of 2008-09 “locked in their losses” as the majority switched their balances to “SAFE” investments (bonds) which of course, had little return. Anyone who stayed the course in the stock markets saw their balances return, then excel as the market has set new highs.

Millennial’s who saw, and heard their parents talk about “losing half our money in the market” that does leave an impression on young people. Now, a decade later they are decidedly a more conservative investor group. Too bad in a way, as it will damage their longer term numbers.

I know people who panicked, and sold out at the market lows, never to return. A decade later they are facing retirement with piddly numbers because their emotions got in the way of their brains! Too bad, but they wouldn’t listen then, and are seeing the damage fear hath wrought.

Similar to the ‘fear’ in being priced out of a real estate market, buy now or never they said…. emotions again in control, instead of your brain. You do something you know in your gut you should not do….. life 2014 style.

#137 Mike S on 03.31.14 at 11:53 am

Garth,
Thanks for all your posts

In previous post you mentioned that the new 5 yr 2.99% is due to more competition for less business.
Going forward, do you see less profitability for Canadian banks?

Also in case of a housing correction, do you see any dividend decrease (similar to what happen in US after 2008)?

#138 Alberta_bound on 03.31.14 at 11:55 am

Thanks for the tip bread&wine, ima fellow south islander looking for a rental…

#139 rosie "moving forward" in the knowledge that, "this won't end well" on 03.31.14 at 12:09 pm

I liked the info on RBC Bank. They do like to make dreams come true. http://www.desertsun.com/story/money/real-estate/2014/03/29/coachella-valley-real-estate-weak-canada-currency/7047079/

#140 Peter on 03.31.14 at 12:11 pm

#13 Garth Vader on 03.30.14 at 6:34 pm
Mr. Turner, you have been saying the same message for six years now. Meanwhile anyone who bought at that time has seen their home value increase by at least 50 percent. The govt shows no sign of increasing the central bank rate, in fact it may go lower, which will inflate housing prices even further. This could go on for at leat another five years. Agreed?

No. Rates won’t fall unless the economy crumbles. You won’t want a fat mortgage then. — Garth

Fair enough, but when home prices gone up so much since 2007, most won’t care for any correction that may occur because of the equity build up. Currently, the consensus is clear that any correction will be mute.

My personal prediction is that RE price will be stable and perhaps flat. Nonetheless, if anything RE is a good way to force people to save albeit other there may be better opportunities elsewhere. Furthermore, the fundamental demand and demographic growth are strong.

#141 Holy Crap Wheres The Tylenol on 03.31.14 at 12:11 pm

#119 Babblemaster on 03.31.14 at 9:05 am
#93 Fed-up
“Japan has a population of nearly 130 million people living on land mass (most of it unlivable, mountains everywhere) much smaller than the state of California. They also have 330% of Canada’s GDP with REAL industry and technology.

Next…”

——————————————-
So what! They’ve always had a large population situated on a tiny land mass. My point is that, if they don’t have immigration and instead have a shrinking population, then they don’t have the same demand pressure for housing to rise in value.

Regardless, you can’t logically compare Japan to Canada and make prognostications for Canada on the basis of what happened in Japan. Two totally different economies with totally different factors at play.

The fact is, Canada does have a massive immigration influx and that is certainly a factor in the high demand for housing. Especially in the major population centers. And, that demand does contribute to higher prices. I just don’t see how you can conclude differently.

_____________________________________________

I agree the whole point is you can not compare Canada to Japan. Japan is an economic powerhouse with a collapsing population and extremely high negative resources. In the end Japan is doomed due to their narrow viewpoint on expanding population, granted where would new people go? To the high ground? Canada is an open book with huge potential for economic and population expansion, again granted who wants to live in Moose Factory (My apologies to Moose Factorians)! Canada could dwarf Japan but perhaps not for another 50-75 years.

#142 BCD on 03.31.14 at 12:18 pm

When you’ve had to scrape together one tenth of that amount by working, saving, and investing, and know just how hard it can be, the thought of going to zero and then being in the hole for nine times again that much is enough to give a sensible person hives.
__________________________________

Well said–couldn’t be more true. Earning a good income (80K) it was taking me 4-5 years to pay off each 100K of my mortgage–and that’s saving like crazy.

Debt slavery is a disease. I think the only reason people are so willing to sign up for it is because they see everyone else around them doing it and they can’t foresee a way to save up slowly for the things they want in life. When it comes to expensive items like housing and cars how can you blame them? When you come from meager beginnings it is very hard to not succumb to the temptation of credit to finance the things you want/need. Those who have had no help from their parents don’t stand a chance!

#143 Holy Crap Wheres The Tylenol on 03.31.14 at 12:24 pm

#125 Smoking Man on 03.31.14 at 10:20 am Check mate…. Putin just doubled the pensions of the elderly in Crimea… Wow. Now the people in Kiev Ukraine proper via the IMF are facing a cut to the already low pensions.. Energy costs to double… Revolution two one the way…

____________________________________________

I surmise Smoking Man you are talking about Western Europe’s energy costs about to double?
If that happens it could be a boom for us, of course the huge economic crash that will ensue ignored that is!
Build the dam pipeline EAST you idiots! Build it! If you build it they will come (with empty tankers).

#144 rosie "moving forward" in the knowledge that, "this won't end well" on 03.31.14 at 12:42 pm

A cautionary tale for all you flat price real estate correction types.

http://www.bloomberg.com/news/2014-03-31/millenials-mired-in-worth-gap-as-elder-americans-recoup-wealth.html

#145 Renter's Revenge! on 03.31.14 at 12:54 pm

“Stocks can return say 2% GDP plus 2% inflation plus 3% dividend… voila 7%” – Shawn

Don’t forget share buybacks and cost cutting, both of which increase EPS without increasing GDP.

voila 10%

Bottom line: Stocks R Awesome! (yay! highfive!)

#146 Buy? Curious? on 03.31.14 at 12:58 pm

Hey Losers under 40, you’re doomed! Old people have ripped you off.

http://www.bloomberg.com/news/2014-03-31/millenials-mired-in-worth-gap-as-elder-americans-recoup-wealth.html

#147 happity on 03.31.14 at 1:02 pm

“Life’s greatest risk is running out of money. And that’s why you never bet on just one thing, especially when everybody else is doing it”

These days, life’s greatest risk could become return OF you money, especially when everyone is in the digital stock fantasy market.

Heck, if 60 Minutes says it’s rigged…

#148 Linda Pearson on 03.31.14 at 1:12 pm

#134 Mr. Frugal on 03.31.14 at 11:14 am

That’s a timely comment. You should read Gail Vaz-Oxlade’s blog entry for today. You’ve taken the words right out of her mouth. I particularly liked the part where she says it’s the parents’ job to teach their kids – NOT the teachers’.

#149 sofaking on 03.31.14 at 1:21 pm

Garth, you wrote to a poster – ‘most people should not buy equities.’

Then can you enlighten us a bit as to what got you 11.5% return last year?

Done several times. No individual stocks. No mutual funds. — Garth

#150 Aggregator on 03.31.14 at 1:22 pm

This is how you know stocks will keep rallying for a little longer before it all comes crashing down. Chart

When that chart hits bottom and unicorns are flying in the air — that's when you sell.

#151 Republic_of_Western_Canada on 03.31.14 at 1:33 pm

#109 Millennial30 on 03.31.14 at 1:28 am
[…]
The reason why the money is just sitting in the savings account is because the prevailing idea is investing in the equity markets is way too volatile in the short term, and that you need to accumulate a ton of capital before you can make any meaningful money anyways. It all seems so out of reach.

Yup, and it will continue to be out of reach until you fight back by scratching out some basic dividend returns. Won’t make you rich overnight, but it’s not supposed to.

Just like going to the gym a few times a week when you’re working for wages will not train you for the Ironman or olympic competition. But it will keep you stronger and less tired for longer in the day.

Holding a diversified list of preferreds over the long term can eventually return several times the original purchase price of the original shares. At 50K invested, diversified over say 4 Canadian preferreds and 2 U.S., in 3 different industries, you can still clear 5% compounded annually. That’s about 2500.- bucks after tax starting the first year. One extra paycheque a year just for a half Saturday of research for a couple of months; not too shabby.

If you want to put a little spice on top, split a grand of it over a promising tech company and a resource company when nobody wants tech or resources. Say, Cliff’s (common) or Riverbed Tech (common) just after they’ve finished cratering. Or even 3 resource penny stocks on the Pez exchange & a tech stock.

#152 World According To Garth on 03.31.14 at 1:35 pm

Just a reminder fellow Canadian Dr Tim Ball will be on Coast To Coast tonight.

http://www.coasttocoastam.com/show/2014/03/31

Dr Ball has a PhD in Climate Science (as opposed to ammonia in squid like these other thousands of scientists).

#153 gut check on 03.31.14 at 1:36 pm

#128 – I’m a total neophyte and everything, but I believe that the whole raison d’etre of the short sale is that you do NOT own the stock, rather you sell with the promise of buying back in later at the (predicted) lower price.

Are you by any chance getting wind of the algo trading thing that half past human put out? (If not I’m sure that that sounded like the ultimate in gobbledegook.)

#154 Republic_of_Western_Canada on 03.31.14 at 1:46 pm

#128 miketheengineer on 03.31.14 at 10:34 am

If someone owned shares in a company like “GoldmanSachs’ or such…..how could someone ‘sell short’, and ‘dump stock’….and make a huge profit…?

Sell borrowed shares high and then buy them back low.

‘Course, you’ll have to have a willing [discount] brokerage company and enough margin in your account to hold out until the stock tanks. (Margin is also charged interest, BTW. Between 4-5% now).

Only works though if something has clearly and insanely increased in price beyond all reasonable measures and is about to correct short-term. Sort of like TWTR *was* or like Blackberry *was*.

Tricky stuff though, sort of like being a high-voltage electrician or a mining explosives specialist.

#155 Chickenlittle on 03.31.14 at 2:04 pm

45 north:

So I actually read the story, and you are right: it doesn’t say 120 years at all!!

Lousy sunday school teacher!

That’s what happens when you grow up Catholic: you are never encouraged to read the story for yourself.

#156 Cash SALE held over! on 03.31.14 at 2:15 pm

“Yellen indicated that the Fed still thinks rates should remain low to stimulate borrowing, spending and economic growth. I think this extraordinary commitment is still needed and will be for some time…”

http://www.news1130.com/2014/03/31/yellen-signals-that-still-subpar-job-market-needs-feds-continued-low-rate-policies/

#157 Mark on 03.31.14 at 2:19 pm

Anyone think that a decent strategy for Millennials might be to leverage up on relatively cheap stocks with cheap debt, and ride that wave up?

I don’t know of many, if any Millennials with a margin account, nevermind any invest leverage other than their house. And it does seem likely that an equity risk premium will re-appear at least in Canada over the next few decades.

#158 Republic_of_Western_Canada on 03.31.14 at 2:20 pm


#142 BCD on 03.31.14 at 12:18 pm
[…]
Debt slavery is a disease. I think the only reason people are so willing to sign up for it is because they see everyone else around them doing it and they can’t foresee a way to save up slowly for the things they want in life. When it comes to expensive items like housing and cars how can you blame them? […]

A big chunk of the problem is that people have been trained that they always have to buy what they can [or cannot] afford, with after-tax savings. Instead of ‘thinking outside the box’ and saying to hell with what the others believe, and making it themselves.

Best to build up your own basic skills instead of depending on the manufacturing industry and consumer complex, when you’re not in the 1%. That way you can do most of the basics yourself, like cook your own food, grow your own garden, build your own furniture, and do basic repairs/maintenance on some electronics clothing cars etc.

In many cases even coming up with something stronger, cheaper, and as good in appearance as factory made. That’s because all factory product has to a) satisfy a large number of different people’s tastes and situations and therefore be a compromise, b) be designed in such a way that it can be made quickly, as cheaply as possible at profit, c) be shipped disassembled from China in as compact a form as possible. You don’t have to worry about any of that when you do it yourself.

Getting a small basic used car for half the price of new and bringing it ‘up to snuff’ with new parts and minor adjustments will both save a couple of years of payments and provide a therapeutic diversion on a sunny weekend.

Getting half a plywood sheet good-one-side cut 3×6′ in the lumber yard, and a couple of 2×4’s, 2×2’s or better cuts of wood, screws/bolts/glue, paint & moulding can produce something a helluva lot cheaper and stronger than going out and buying some chinese import at 79 bucks a month for 3 years.

Buying 2 weeks of fresh food for the price of 2 days worth of pizza and sugar-water, or making your own coffee instead of paying the local Tim H’s 5 bucks a day pays off big time in health and $$ over the years too. Etc, etc.

#159 Old Man on 03.31.14 at 2:22 pm

#143 Holy Crap – Smoke is talking about Crimea, and blame the other on the lack of vision with Caesar along with his Reformist clowns. Canada has one functional LNG import facility in New Brunswick, and NO EXPORT facilities anywhere. It takes $billion to build one and with this dysfunctional government of circus clowns nothing will be done for years. The USA on the other hand is moving fast with LNG projects to meet the coming demand. What has this incompetent two pit leader called Caesar done for Canada in all these years? NOTHING!

#160 The $100 Bill story on 03.31.14 at 2:42 pm

Stay with this (if you haven’t heard it before) … it’s fun at any rate.

It’s a slow day in the small town of Henderson and the streets are deserted. Times are tough, everybody is in debt, and everybody is living on credit.

A tourist drives through town, stops at the motel, and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs to pick one for the night.

As soon as he walks upstairs, the motel owner grabs the bill and runs next door to pay his debt to the butcher. (now… pay attention)

The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.

The pig farmer takes the $100 and heads off to pay his bill to his supplier, the Co-op.

The guy at the Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her “services” on credit.

The hooker rushes to the motel and pays off her room bill with the motel owner.

The motel proprietor then places the $100 back on the counter so the traveler will not suspect anything

At that moment the traveler comes down the stairs, states that the rooms are not satisfactory, picks up the $100 bill and leaves.

No one produced anything. No one earned anything. However, the whole town now thinks that they are out of debt and there is a false atmosphere of optimism and glee.

And that, my friends, is how a “government stimulus package” works!

Alwyn

#161 Snowboid on 03.31.14 at 2:55 pm

In the meantime, it looks like the US has a worse retirement outlook than Canada, with only 18% of workers saying they have enough to live comfortably after retiring.

http://www.cbsnews.com/news/danger-zone-americas-retirement-system-is-breaking-down/

#162 Republic_of_Western_Canada on 03.31.14 at 2:58 pm

#156 Mark on 03.31.14 at 2:19 pm

Anyone think that a decent strategy for Millennials might be to leverage up on relatively cheap stocks with cheap debt, and ride that wave up?

Over the last couple of years when margin was 3% and you had a good array of dividend stocks at still beaten-down prices that was a good play until ‘tapering’ talk started.

Too much overpriced froth now though, and returns to margin in most cases are razor-thin. Not good. Sorta like real estate. If you have your own after-tax capital though, there are still decent financial investment vehicles available.

#163 Holy Crap Wheres The Tylenol on 03.31.14 at 2:59 pm

#158 Old Man on 03.31.14 at 2:22 pm

#143 Holy Crap – Smoke is talking about Crimea, and blame the other on the lack of vision with Caesar along with his Reformist clowns. Canada has one functional LNG import facility in New Brunswick, and NO EXPORT facilities anywhere. It takes $billion to build one and with this dysfunctional government of circus clowns nothing will be done for years. The USA on the other hand is moving fast with LNG projects to meet the coming demand. What has this incompetent two pit leader called Caesar done for Canada in all these years? NOTHING!
_____________________________________________

Just as I thought I could parse out Smoking Mans verbiage I have failed to understand his UCC words. Crimea Crisis Has Little Impact Thus Far on Russian Oil Deals. With or without clowns involved we could have easily built a refinery with some of Ontario’s CHUMP CHANGE on the now defunct gas plant deals that the current Ontario government just blew. So it only takes a Billion dollars to build a refinery, hmmmm are you listening government of Ontario. You could have owned a refinery on the east coast but instead you got NOTHING!

#164 Louis on 03.31.14 at 2:59 pm

Untrue, actually. Unleveraged, financial assets have outperformed. — Garth

Last 10 year…

DJI went from around 10k in early 2004 to around 16k now. (+60%, )
TSX went from, around 8.5k in early 2004 to around 14k now. (+64%)

That’s about 4,8% compounded interest.

In the mean time.

The Quebec gov bound I bough 10 years ago (fixed 10 year) paid 5.2%

My house in went from 280k$ in 2004 to 540k$ (municipal evaluation) in 2014… (92% or 6,7% compounded) plus I lived in it (but paid maintenance).

You need to learn a lot more about financial investing, balanced portfolios and systematic rebalancing. Nobody buys dynamic assets and holds them static for a decade. Even with the 2008-9 crash, a 60/40 portfolio has exceeded the annual appreciate on your home. In the next decade, the race probably won’t even be close. (By the way, you also paid property taxes, insurance and financing charges on your house, plus closing costs when you bought and commission on selling.) — Garth

#165 Gen X on 03.31.14 at 3:00 pm

#31 Chris

From the Pamphle::
Your contributions to a TFSA are not deductible for income tax purposes but the investment income, including capital gains, earned in your TFSA is not taxed, even when withdrawn.

http://www.tfsa.gc.ca/tfsapamphlet-eng.html

#166 Carl on 03.31.14 at 3:24 pm

Low rates for long time (ie- 2.5 to 5%) – Check
Economy Improving – Check
Wages Improving – Check
Employment Rate Improving – Check
Home ownership for 10+ years – Check

RE risk? Moderate to Negligible.

#167 Smoking Man on 03.31.14 at 3:30 pm

Using labels to describe age groups is not a thing I get sucked into, I can only say that the newly schooled are dumb down far beyond anything I have thought.

These little twerps crying about climate change, big bad oil and banks. IPCC just came out with another load of shit, the last push while they got a friendly ally in the white house.

I sure as hell haven’t forgotten climate gate, hide the decline, Michal Man hiding for the last few years. Today kids in China trading in bicycles in for Audi’s while our youth who can barley afford auto insurance and settling for bicycles out of necessity.

When my dad came to Canada after WW2 , brain damaged became a sweeper, bought a house in downtown Toronto, a cottage and always drove a nice car.

Huge wage disparately these days, I benefited hugely as I own banks. 10 years ago our banks would make one billion a year, pop the champagne, todayit’s two billion a quarter.

I’m swimming in dividend and equity appreciation, I have more loot than I know what to do with.. Apart from the big wigs, wages have basically gone nowhere for most.

But we don’t have a rebellion of pissed off kids wanting some financial justice. Why? They don’t know they are touching there toes and an elephant is behind them, because they are to busy chasing Rob Fords around, Giving teacher McWynne a free pass because she speaks tree…..To busy trying to save the trees and punishing big oil, the more schooled they are, the more dumb they are….

Thanks fools.  You get the world you fight for, Long Banks, and Big oil is all I’m saying. But then again, you make no money so you can’t play……

Sucks for you….and my kids…

#168 Retired Boomer - WI on 03.31.14 at 3:30 pm

Oh… It is so amusing reading that nobody has any money, or is too “scared” to invest in the stock markets, or they don’t know “what to buy.” The markets are gonna crash!

Try an simple Index fund of the S&P 500 or, the total “stock market index.” Here in the US you can buy either one for an annual fee for .05% annually. Don’t know where the cheap broker-dealers are in Canada, but would assume they exist. If your employer offers something like that in a retirement account, with or without any match from the employer jump on it!
The longest journey starts with a first step. I started with nothing, fearing by retirement I might have most of it left. Starting putting 10% into that 401-K (the US pre-tax savings vehicle) into a simple S&P 500 Index Fund, while making a whopping $7.39 an hour back in 1987 in Buffalo, NY. (married, wife worked, kid, a (cheap) house payment and a (cheap) car payment too).
No Bull$hit, it CAN be done. Times have not changed THAT drastically. Get moving…

#169 happity on 03.31.14 at 3:44 pm

Looks like old yellen is saying there is labor slack, more easy money policy to hump that USA economic renaissance into shape…

#170 BCD on 03.31.14 at 3:45 pm

#157
Getting a small basic used car for half the price of new and bringing it ‘up to snuff’ with new parts and minor adjustments will both save a couple of years of payments and provide a therapeutic diversion on a sunny weekend.

Getting half a plywood sheet good-one-side cut 3×6′ in the lumber yard, and a couple of 2×4′s, 2×2′s or better cuts of wood, screws/bolts/glue, paint & moulding can produce something a helluva lot cheaper and stronger than going out and buying some chinese import at 79 bucks a month for 3 years.

Buying 2 weeks of fresh food for the price of 2 days worth of pizza and sugar-water, or making your own coffee instead of paying the local Tim H’s 5 bucks a day pays off big time in health and $$ over the years too. Etc, etc.
_____________________________________________

Agree to some extent, but if you’ve ever made furniture from plywood etc, you will know it takes time and the finished product is not always that great (risk of slivers etc).

My philosophy is you can have what you want but you need to look at owning whatever you buy long term. We bought an excellent leather couch set for $2400 (I could never make it that cheap by the way) and we’ve watched our kids grow up and make a mess all over the couches. They wipe off like new. We specifically bought them for for durability. 10 years and they still look new. We don’t plan on replacing them for at least another 20 years.

As far as cars go, I think you can buy a new car if you plan on driving it into the ground. We buy our cars new and enjoy trouble free driving and warranty for 5 years. Then we put some money into them and drive them for another 10 years. At the end of this time they have paid for themselves. We also buy inexpensive cars in the $25K mark, since they will last as long as a $50K luxury car for the most part and be cheaper to maintain. . .plus you don’t have to play amateur mechanic like you do when you have old crappy cars.

It’s not all about living like a pauper and driving old used cars and making furniture lol. Live within your means and you can live comfortably.

#171 4 AM Sunrise on 03.31.14 at 3:48 pm

#160 The $100 Bill story on 03.31.14 at 2:42 pm

My understanding of economics is rudimentary, but weren’t things produced? Isn’t the point of money to provide a common bill of exchange so that the butcher isn’t stuck trying to exchange sausages for motel rooms?

The motel owner provided a room.
The butcher made sausages.
The pig farmer produced pigs.
The Co-op owner provided farm supplies.
The prostitute provided services.

Didn’t everybody give something to somebody else and get something in return? Are they still in debt, then?

#172 shawn on 03.31.14 at 4:05 pm

Jobs for Science graduates

Science Monkey at 111… excellent comments about the bullcrap that there are many jobs for those with a bachelor of science.

My son is first year BSc, but I expect he will go to some profession eventually, the BSc is just an introduction to college it is not specific vocation training. The BSc can open many doors — to further training, not to a decent job.

#173 miketheengineer on 03.31.14 at 4:06 pm

Can someone explain why silver and gold is sooo messed up?

I am not a big fan of silver and gold….much rather have a good car etc…than invest in PM’s.

What I can’t understand is why PM’s are still selling sooo high. I mean look at the 20 year average for Silver…and pull up the chart…for years and years like Silver was like 7 bucks an ounce…then it bubbled up over 40 and if you look at da chart it is like around 20.

Looks like the prices for PM’s are on a downward slope…and Silver back to 6 bucks an ounce.

What gives…the biggest PM bubble in history coming down….or a blip in the charts…why are these things still sooo high?

So can someone explain how we can make money trading these things in ETF or what not…just curious as my experience here is very limited…

#174 shawn on 03.31.14 at 4:22 pm

Buy and Hold sucks?

Garth: Nobody buys dynamic assets and holds them static for a decade.

Buffett: if you would not want to hold an investment for ten years, don’t even think about holding it for ten minutes

I said buy and rebalance. You are being a dickhead again. — Garth

#175 economictsunami on 03.31.14 at 4:32 pm

High levels of trust and confidence reduces perceived risk.

When calculating risk, the investment world appears even less transparent then 2008; which makes diversification all the more necessary…

The Wolf Hunters of Wall Street: An Adaptation From ‘Flash Boys: A Wall Street Revolt…

http://www.nytimes.com/2014/04/06/magazine/flash-boys-michael-lewis.html?smid=tw-nytmag&_r=1

#176 not 1st on 03.31.14 at 4:35 pm

Garth, its going to be pretty hard for you to mount your usual defense of the stock market after that 60 minutes piece.

Easy. Don’t buy individual stocks. — Garth

#177 World According To Garth on 03.31.14 at 4:45 pm

#160 The $100 Bill story on 03.31.14 at 2:42 pm
Stay with this (if you haven’t heard it before) … it’s fun at any rate.

———————————————–

Great comparison to the money inventing of govt/banks (whomever you believe does it). But you missed the part where the money inventors also charge INTEREST ON MONEY/CREDIT INVENTED OUT OF NOTHING. THAT is the reason there is so much debt.

But carry on sheep. bahahahahahahaa

#178 Old Man on 03.31.14 at 4:51 pm

#170 BCD – Here is the way to go as have done it once to furnish my entire residence. It becomes a hobby and a weekend outing combined with lots of excitement. I went bargain hunting to small towns for the weekly auction sales looking for antiques as did my homework ahead of time. Those small town folks might not see a great investment, and could hoop me something that was worth a lot of money. Got an empty room at home; turn it into all antiques including that oriental carpet that had old dyes, silk, and 400 knots per square inch for $400 that was worth $8,000. Fill that empty room with lots of stuff over time and buy a few hurricane lamps to dress it up; its an investment.

#179 4 AM Sunrise on 03.31.14 at 5:17 pm

#109 Millennial30 on 03.31.14 at 1:28 am

Thank you for shining a light on the anxieties and pressures pushing Millennials into housing. We’re the first generation that’s been raised to believe that we can do anything and be anything and have it all. And then those who raised us look upon us expectantly, anticipating for us to do it all and have it all because somehow if we don’t, they act like it reflects badly upon them.

I do sympathize with why you’re keeping $50,000 liquid. You never know when you might have to live off of it.

#180 Led on 03.31.14 at 5:20 pm

An 800k will be worth about 80k in today’s dollars. what a retarded article

The question is what will you be worth, retarded or not? — Garth

#181 Ralph Cramdown on 03.31.14 at 5:37 pm

I have developed three highly effective methods to avoid being rooked by the algo traders.
1) “Low frequency trading.” Older market practitioners may remember the old days when this was called “buy and hold.”
2) Limit orders and patience. Do I NEED to buy or sell this minute, today, or can I wait until I get my price?
3) Not being a giant mutual fund trying to sell $3 million worth of Consolidated Moose Pasture Ltd. How often do you trade in issues where there aren’t enough lots on the bid or ask to satisfy your order? If you do, you already need a plan to get good execution without moving the market… But mostly, you don’t.

Some of you are still looking through the wrong end of the telescope. As annoying as it may be to pay an extra three cents per share to a front-running HFT outfit, or that regulators allow this type of activity, that’s eleven days worth of dividends if the shares pay a dollar a year. Just keep collecting those dollars. The amount lost is also far less than you would have lost to the market maker or the spread back when shares were priced in eighths of a dollar.

#182 World According To Garth on 03.31.14 at 5:57 pm

CKNW in moldcouver is so desperate for listeners they have a “CKNW puts people back to work” series. Too bad no one believes them…..drivel drivel drivel is all we get from Govt and the Main Slime Media (who gets much of their revenue from Govt Ads – you the taxpayer).

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#183 devore on 03.31.14 at 6:07 pm

#75 Sheane Wallace

I see stock rise in the last years as run away from bonds and attempt to preserve capital.

Really? Where do you get this stuff? Who sells bonds (which mature at 100 cents on the dollar while paying interest) and buys equities when their #1 concern is preserving capital?

#184 Derek R on 03.31.14 at 6:11 pm

#171 4 AM Sunrise on 03.31.14 at 3:48 pm wrote:
Didn’t everybody give something to somebody else and get something in return? Are they still in debt, then?

Nope. You got it dead right. The money was only needed to settle the debts. Once it had done that it wasn’t needed any more. People’s reactions to this story show just how well or how badly they understand what money really is.

#185 Shawn on 03.31.14 at 6:27 pm

Richard Cranial Cavity?

I said buy and rebalance. You are being a dickhead again. — Garth responding at 174

**************************
Oh, had I stopped for a time? But perhaps I misunderstood, I thought you meant selling out (completely) of certain assets at certain times but okay you just meant rebalance…

#186 Macrath on 03.31.14 at 6:51 pm

#173 miketheengineer
What gives…the biggest PM bubble in history coming down….or a blip in the charts…why are these things still sooo high
——————————————————————
Central banks have been printing $, ¥,£,€,元,CHF, ₹, ру,; like crazy for years to stimulate and create inflation . PM prices love wars, mayhem and inflation.
I have a suspicionthat it won`t get real cheap for a long long time.

They also print plenty of paper gold (GLD) to try and keep the price down and the fiat value up.
Germany wants their gold from the US and can`t get it.
http://moneymorning.com/2013/01/29/why-germany-wants-its-gold-back/

Interesting subject but this is not a gold blog.

Gold Bug central– http://www.kingworldnews.com/kingworldnews/King_World_News.html

#187 Fed-up on 03.31.14 at 11:27 pm

@#142 Holy Crap Wheres The Tylenol on 03.31.14 at 12:11 pm

————————————————————————-

Japan’s population is currently at its all time peak and has grown by 6 million + since its real estate collapse commenced, without mass immigration.

Buy anyways sorry guys, I know this blog isn’t about Japan.

#188 Patrick on 04.01.14 at 6:17 pm

Only $100 a week.
That is 20% of my take home pay.
Take home pay is ~$2000/mnt.

Rent 50%, Bus Pass 5%, Food 15%…
Food travel and shelter comprise 70% of my after tax income.

How am I supposed to live on 10% of my income after the necessities, and 20% savings?