Getting it wrong

It’s been a bad few days for the doomers. Houston sinks into a watery morass, taking the energy biz with it and gas spikes. North Korea’s dipstick leader overflies Japan with a missile, Trump erupts, but markets go up and gold shrugs. Canadian housing sputters and limps, but the banks bring in new billions. The US is ripped by race issues and white supremacists, yet consumer confidence rises the most in 17 years.

The American stock market is at a record level, global growth is robust and there’s one thing central banks want for Christmas. Normalized rates. Those people who have spent the last eight years in cash, GICs or precious metals got it wrong. There was no rerun of 2008, nor will there be one. There’s no reason to believe markets will crash simply because the Dow has hit 22,000.

The Canadian residential real estate market represents far more risk than financial assets, which was one of the points of yesterday’s post. Wealthy people are different from the rest, and have a vastly smaller amount of their net worth in a single asset at one address. They’re diversified, whereas Mr & Mrs Front Porch are not. If 1%ers do not own businesses, they almost always possess business equity. The returns there over decades have far outstripped those of housing, a pattern expected to continue.

This week CMHC admitted the obvious. Changes to moister mortgages brought in last year have crashed loan volumes. Down an incredible 41% – right in the middle of the greatest housing boom in national history. “Volumes decreased largely as a result of the new regulations,” the agency said in an understatement. In fact, CMHC I left now with more than $100 billion in excess loan capacity, with new mortgage growth slowing to a crawl.

The reason is as explained here a few days ago. When the kids were suddenly compelled to qualify for insured loans at an effective rate for 4.64% (about 2% above bank rates), they couldn’t. The stress test worked. They failed. They lacked the financial resources – down payments or incomes – to afford the homes they wanted to buy.

So they decided to cheat and lie, usually with the help of families. Instead of proving to CMHC they could carry loans, they went around the agency. By amassing 20% down in money from other sources, they avoided having to buy insurance or face any test. And that’s why CMHC volumes crashed at the epicentre of our real estate mania. It’s also why banks suddenly saw uninsured loan volumes bloating at 14% annually, and why their regulator freaked. Untold thousands of people who can’t actually afford their homes have transferred their risk from the feds to the lenders.

Soon this ends. All buyers, regardless of how much money they have to throw at a property, will be tested as if mortgages cost a full 2% more than current rates. Meanwhile current rates will be rising. Those who say the moister stress test had no effect on dampening prices are correct. Those who say the new test will have the same effect are decidedly wrong. There is no place to run and hide anymore, save some slap-happy CUs and subprimers who want 8%.

Now, back to the doomers.

The Canadian real estate market’s a great example of what happens when money’s too cheap. Asset values inflate because borrowers have no discipline. When rates fall people don’t do the smart thing and pay down debt. They want more of it. They spend the bucks. Prices go up. The result is an economic nightmare – inflated assets (destined to correct, as they always do) and inflated debt (which ain’t going anywhere).

To stop the borrowing, central bankers withdraw stimulus, which is as unpleasant as it sounds. Rates rise, credit tightens, asset values correspondingly decline. People who bought at peak house levels with big mortgages quickly see the evil side of leverage.

The Bank of Canada started this process in July. It will continue in October. The Fed has been at it for a year. The Bank of England is probably the next to join. Because tightening cycles occur over long periods of time, there will be four to six more increases between now and the end of 2019 if history is any guide. And given the first paragraph of this post, what reason would there be to halt the process?

Recall that a recent by Forum Research found 34% of people polled said the single, itsy-weensie rate increase so far (0.25%) will hurt their finances. Of those, 12% said the impact would be “extremely negative.” In the 35-44 age bracket, the proportion of people saying any hike at would whack them rose to 44%. For people making eight grand a year, it was 39%. Among those making $100,000, 41% are scared.

In summary, the world is fine. But I’m worried about you.

165 comments ↓

#1 Helpme on 08.31.17 at 6:17 pm

Furst!

#2 Keith on 08.31.17 at 6:19 pm

Thanks for your concern Garth, but don’t worry.

https://www.youtube.com/watch?v=DAiFSHfMeio

#3 Ian on 08.31.17 at 6:24 pm

Gold shrugged. Look at the last half hour of trading in SGOL!!! My Goldcorp and Dynacor are crushing it. Plenty more to come!!! Go rocks!!!

#4 powder_hound86 on 08.31.17 at 6:26 pm

Garth your belief that Canadian housing markets are a bubble, but that no similar bubble exists in equities is quite simply delusional.

#5 Happy Housing Crash Everyone! on 08.31.17 at 6:27 pm

You dirty shysters are face a world of hurt. Hopefully those who are guilty of RE sin/crimes will suffer financial hardship and scream in financial pain. The housing crash going from bad to worse. Stress test will be another nail. Interest rates are going Uppa UP UP while prices crash down down down. Happy Housing Crash Everyone! :-)

#6 Mark on 08.31.17 at 6:27 pm

“Because tightening cycles occur over long periods of time, there will be four to six more increases between now and the end of 2019 if history is any guide.”

How many times in history has the economy been on the verge of deflation in a tightening cycle, and the central bank has proceeded with more tightening?

Not too many times I would suggest. The yield curve is incredibly flat, and is still moving towards inversion. The central banks appear to be trapped here.

#7 FLHTK on 08.31.17 at 6:28 pm

I think alot of people are going to be hurting once those 4 to 6 more rate increases come. Time will tell. For now im going to keep plunking away investing in my tfsa for myself and our daughter and when she turns 18 and gets her own tfsa….i’ll be topping hers up because compounding takes time and she should have a good lot of it to make millions in their.

#8 mouldyinYVR on 08.31.17 at 6:32 pm

Yes, as always, thanks Garth.
“To stop the borrowing, central bankers withdraw stimulus, which is as unpleasant as it sounds. Rates rise, credit tightens, asset values correspondingly decline. People who bought at peak house levels with big mortgages quickly see the evil side of leverage”

so true , and that’s ‘leverage’ not ‘cleavage’!
yes …it ‘can happen here’….we are not smarter than everyone else on the planet when it comes to investing…….’debt is debt’ and paying debt off is not as much fun as accumulating it……..

Have fun – debt free and loving it!

#9 Goldie on 08.31.17 at 6:33 pm

“The US is ripped by race issues and white supremacists…”

It looks like somebody’s been watching a little too much CBC. Dig deeper my friend.

#10 Mike in Airdrie on 08.31.17 at 6:36 pm

“For people making eight grand a year, it was 39%. ”

I’d think if you were making $8k a year it would be 100%. :)

#11 Michael Francis on 08.31.17 at 6:36 pm

In Canada, do you have interest only loans whereby first home buyers need only repay interest and not principle.

#12 Chris on 08.31.17 at 6:37 pm

Making $100k/yr and very concerned about a .25% hike? Definitely getting it wrong. A little budgeting and responsibility goes a long way.

#13 tccontrarian on 08.31.17 at 6:43 pm

“There’s no reason to believe markets will crash simply because the Dow has hit 22,000.” – GT
——————————————————

Seriously?
This is like saying that there will be no housing crash just because prices vs household income is x10-15 (compared to the historic norm of x3).
The smart money has been selling the Dow – the not-so-smart money (ie. ‘dumb’ money), is still buying.
All markets behave the same…

See y’all at Dow 10,000-12,000 (by end of 2019).

TCC

#14 Victor V on 08.31.17 at 6:53 pm

TD Bank CEO talks about the economy, real estate and the upcoming OSFI stress tests:

http://www.bnn.ca/masrani-brushes-off-great-white-short-argument-as-canadian-economy-bounces-back-1.844390

#15 The Other Shawn on 08.31.17 at 6:53 pm

Sorry about stealing the blogs thunder, but quick question to all the people that post here. What’s in your TFSA? I’m getting out of MAW104 (love the company but paying 96 basis points for a fund that’s comprised of only 60 equities is tough to swallow).

I’m thinking equal amounts VCN, XUU and XEF. Any advice would be much appreciated. I was born in 84 if that changes things.

#16 millennial905 on 08.31.17 at 6:54 pm

“They’re behind your bed, they’re behind your curtains, they’re inside your closet”… LOL.

Watch as Ben Shapiro destroys this nonsense narrative.

https://www.youtube.com/watch?v=jWr8pUOUfQY&feature=youtu.be&t=244

#17 Real Estate is Religion on 08.31.17 at 6:54 pm

Canada’s worship of RE is outright religious.

The deity is price appreciation. Must go up, up and up.

Blind faith in speculation. Dreams and theories of why the world will pay whatever it takes to find ultimate RE nirvana in Canada.

Deniers are being chastised for “having missed out” or “refusing to be a part of the club”.

The inquisition preached FOMO and beat buyers into giving more than the last guy.

Canada will need RE enlightenment and education to show alternative lifestyles. Followed by science to present career and investment options outside the church of RE.

Stop drinking the RE koolaid before you’re another casualty in a religious war. RE preachers will always have an explanation to defend their philosophy as being superior. It’s a no win argument. Refuse to partake and be happy!

#18 HereIsNow on 08.31.17 at 6:54 pm

Nice post. You do however gloss over the point that the central bank interventions to quell the financial crisis has had a similar effect on the stock market. During times of abnormally low interest rates many corporations were able to improve earnings and shore up their balance sheets. However…in a rising interest rate environment like this one….where rates are rising even though GDP is stubbornly low as is core inflation….it will be increasingly difficult for companies to grow revenues and profits. The past 8 years that you elude to has disproportionately increased debt (every $2 of debt has created $1 of growth). Thus….worrying about the moistened who may struggle with mortgage payments is only a thin slice of the pie. Gov and household debt, here and the US has reached unsustainable levels. Ie) sub-prime auto loans, student loans etc.

To focus exclusively on the Canadian moisters while suggesting that everybody else is ok shows either an extreme bias or naivety.

#19 Basil Fawlty on 08.31.17 at 6:56 pm

If the real estate market is a great example of what happens when money is too cheap, what about equities and bonds? Have they not also been inflated by the lowest interest rates in history?

#20 Dave on 08.31.17 at 6:56 pm

“Those people who have spent the last eight years in cash, GICs or precious metals got it wrong. ”

And so did those who didn’t buy in Vancouver.

#21 Ian on 08.31.17 at 6:58 pm

The doomers have certainly been wrong the last eight years, but they won’t be from this point onwards!

US broad market is overvalued as f. It’s a house of cards. It’s like a brown paper bag in a thundershower.

#22 Costco Nation on 08.31.17 at 7:00 pm

The CMHC avoidance explanation makes sense and it also raises a question. Why didn’t the bankers facing real risk flip back to assessing the interest rate correlated to the new nonzero risk? Are they incompetent? For the last 3 months they are now facing assets barely making up for the loan amount. Hanging by a thread. Cannot wait for the new provision requirements to hit. Will affect those fat reports for sure.

#23 Nonplused on 08.31.17 at 7:10 pm

A good short term investment idea might be to top up your jerry cans and gas tanks. 23% of US refining capacity is currently off line and the estimate is for 2 weeks but I’m guessing it’ll be a lot longer before those facilities are certified to run again depending on the damage. Pipelines that carry refined fuels from Texas to the east coast are already shutting down due to lack of supply. I don’t know how much impact this will have on Canadian prices at the pump but the railroads will ship what they can as long as there is a price arbitrage.

Also there is a major mercaptain manufacturing plant that is in the process of blowing itself to bits because they lost their backup power due to flooding and they need to keep some of their products refrigerated. Don’t know what effect that’ll have but mercaptain is used to make natural gas and propane stinky so it is a safety issue if that runs low. It’ll be a while before that becomes an issue though most utilities have 6 months of the stuff on hand. A little gies a long way.

Pray for Houston this looks to be much worse than what hit southern Alberta some years back. The Alberta floods were confined mostly to the river valleys.

#24 Dolce Vita on 08.31.17 at 7:11 pm

BoC expected a much lower GDP than we learned about yesterday, yet with their much lower forecasts, they expect inflation to increase and what we have now for inflation is only temporary.

More rate increases to come, for certain. Rates up, RE down.

For the stress test deniers, here is what happened in Vancouver after the insured mortgage stress test came into effect Oct. 2016 (1st Qtr 2016 vs. 1st Qtr 2017), fact, not fiction:

# of mortgages went from 9,162 to 6,226. -32%
Avg. mortgage amount went from $553,719 to $517,415.

[9,162 x $553,719 – 6,226 x $517,415] = $1.85 Billion less money to go buy a home, that is Vancouver only.

Squares well with the last 102 days of resale RE Total Sales in Vancouver, to Aug. 29:

$1.39 Billion to $726 Million.

An October rate increase and later in the year OSFI B-20 = perfect storm for Cdn. RE.

So far, GDP not impacted by RE going down (June RE Investment -4.7%).

No one to rescue you.

https://beta.theglobeandmail.com/real-estate/the-market/fewer-smaller-mortgages-seen-in-vancouver-after-cooling-measures-enacted/article36049598/?ref=http://www.theglobeandmail.com&

#25 Muttley O'Toole on 08.31.17 at 7:14 pm

1) Would it be reasonable to say Canada’s winter of discontent fast approaches?

2) When does Smoking Man take up residence in the Windies? (For all his huff & puff I reckon he just might have got it right).

#26 young & foolish on 08.31.17 at 7:15 pm

Hmmm …. I wonder if I’m a “doomer” ….

#27 BuyTheDip on 08.31.17 at 7:25 pm

Here’s some more good news!!!

https://www.castanet.net/news/Canada/205546/Alberta-recession-over

It’s great to see that the Calgary and Edmonton RE market’s managed to tough out this recession with barely a drop in price. That’s gonna drive the RE haters on this forum crazy, but the truth is the only way is up from here. No bubbles in CGY or EDM. Still very affordable by comparison to TO or VAN. My guess is that neither of those markets are going to drop much either.

#28 AGuyInVancouver on 08.31.17 at 7:27 pm

WRT to moisters going around the CMHC and “lying”, are we so sure no banks, credit unions, or other lenders weren’t also aiding in that deception? I said yesterday there can’t be a crash unless some sort of black swan event occurs. Could the uncovering of widespread “liar loans” be that event? I just don’t understand how any reputable financial institution would take on that kind of risk when they approve a buyer who obviously begged, borrowed and stole to get around the CMHC requirements. Where’s the proof of income? Or did the banks repackage these loans and sell them a la USA circa 2007?

#29 BuyTheDip on 08.31.17 at 7:27 pm

#21 Ian.

I know you would love that to be true, but notice that Garth is encouraging people to be IN equities, not out.

How are you determining ‘overvalued’. If RE has taught us anything, its that value is determined by what people are willing to pay for something, and there are plenty of buyers in US equities right now.

#30 Annek on 08.31.17 at 7:29 pm

“Untold thousands of people who can’t actually afford their homes have transferred their risk from the feds to the lenders.”

That’s ok with me. Let the lenders take some risk, and not the taxpayers ( ie: “. Feds”

#31 Annek on 08.31.17 at 7:38 pm

Sorry, my ipad sent the message incomplete.
I will resend:
Speaking to people in general, many are still convinced that housing is a great investment.
They state that although housing has dropped some in GTA, in October, you will see prices rise….
Where are they getting this information from?

#32 Dave on 08.31.17 at 7:38 pm

Why Bother with Stocks with Vancouver’s Relentless Housing Mkt?

https://www.bloomberg.com/news/articles/2017-08-31/why-bother-with-stocks-in-vancouver-s-relentless-housing-market

#33 crowdedelevatorfartz on 08.31.17 at 7:44 pm

@#21 Nonplused
” Pray for Houston ….”
++++++

Or in the case of Atheist looters…”Prey ON Houston”

As the military commander said in much less politically correct times, “Looters? What looters? They’ve all been shot.”

#34 mike from mtl on 08.31.17 at 7:52 pm

#15 The Other Shawn

/////////////////////////////////////////////////////

VCN, VXC and perhaps VEE if we’re talking equites. Spud portfolio. Not equal qualities of course.

Depending on how much you’ve got to invest <50k this is enough complexity to contribute often. A more complete one of 8 ETFs might be more appropriate if you're after dividends.

#35 For those about to flop... on 08.31.17 at 7:52 pm

Hey Dolce,did you notice another 150 million got wiped off of Greater Vancouver residential real estate asking prices this month?

I have noticed the reductions are getting larger in Kelowna as well…

M43BC

#36 Dave on 08.31.17 at 7:59 pm

I dont understand how Scotiabank can pay $800M to rename NHL Toronto Maple Leafs center but can not pay out any decent interest rate accounts or pay their front line employees decent salaries? How do you being to justify ROI on that spend other then inside deals.

#37 really? on 08.31.17 at 8:02 pm

Sorry about stealing the blogs thunder, but quick question to all the people that post here. What’s in your TFSA? I’m getting out of MAW104 (love the company but paying 96 basis points for a fund that’s comprised of only 60 equities is tough to swallow).

I’m thinking equal amounts VCN, XUU and XEF. Any advice would be much appreciated. I was born in 84 if that changes things.

……….

why do some people only look at cost of a vehicle in buying analysis?

have a look at its historical alpha/beta/returns vs a globally balanced set of etf’s

compare apples to apples AFTER fees and who has the better risk adjusted numbers? have you looked at the data?

#38 re., ian on 08.31.17 at 8:04 pm

The doomers have certainly been wrong the last eight years, but they won’t be from this point onwards!

US broad market is overvalued as f. It’s a house of cards. It’s like a brown paper bag in a thundershower.
……..

why will it be different this time? Please provide your analysis

thank you

#39 Ace Goodheart on 08.31.17 at 8:11 pm

Here’s a treat for y’all:

https://www.realtor.ca/Residential/Single-Family/18368845/44-MITCHELL-AVE-Toronto-Ontario-M6J1B9-Niagara

Question: what did this wonderful house, with a free coat rack, sell for back last February?

Answer is actually on this blog (and was the subject of a rather long post).

#40 SNAKE PLISSKIN on 08.31.17 at 8:12 pm

Don’t expect too much folks. Interest rates will never return to “historical norms”. And house prices will never agin be 3 or 4 times family income, it will be more like 6 or 8 times income. And don’t hold your breath, the “bottom” is a long ways off. It’s a brave new world out there.

#41 Keith on 08.31.17 at 8:13 pm

Latest GDP growth number rung the bell at 4.6%. How is this possible with a Liberal government at the helm? How did the Conservatives get the economy so wrong for so long? How can this happen when a tax increase that replaced tax cuts is already in place, with more to come?
Economics is hard.

#42 Ace Goodheart on 08.31.17 at 8:14 pm

Sorry, 18 Mitchell. But you get the idea:

http://www.greaterfool.ca/?s=mitchell+avenue

Same house, only the one for sale now at 44 is actually quite a bit nicer.

#43 Capt. Serious on 08.31.17 at 8:16 pm

#23 Nonplused on 08.31.17 at 7:10 pm
A good short term investment idea might be to top up your jerry cans and gas tanks. 23% of US refining capacity is currently off line and the estimate is for 2 weeks but I’m guessing it’ll be a lot longer before those facilities are certified to run again depending on the damage. Pipelines that carry refined fuels from Texas to the east coast are already shutting down due to lack of supply. I don’t know how much impact this will have on Canadian prices at the pump but the railroads will ship what they can as long as there is a price arbitrage.

I was on a conference call today with a colleague in Dallas area who said he’s happy he has a bunch of trucks that run on diesel and a motorhome with a massive gas tank full of gas. Another in the New Jersey area said the gas stations are only selling half tanks of gas – rationing.
Yikes America. Good luck.

#44 Capt. Serious on 08.31.17 at 8:17 pm

#41 Keith on 08.31.17 at 8:13 pm
Latest GDP growth number rung the bell at 4.6%. How is this possible with a Liberal government at the helm? How did the Conservatives get the economy so wrong for so long? How can this happen when a tax increase that replaced tax cuts is already in place, with more to come?
Economics is hard.

Well, governments have little to do with economic growth, so I guess we’re done with this point.

#45 Not Mark on 08.31.17 at 8:21 pm

Do we prepare for an 85 or 90-cent Canadian dollar? I see from Elliott Wave that the CAD$ broke resistance at 80.3 cents today. It may go higher.

#46 Fake News Again on 08.31.17 at 8:21 pm

Sorry to burst everyones “white supremist bubble”, but Charlottesville was completely staged.

You can find pictures of the dudes at the NAZI rally…..protesting at LEFT rallies. They were hired guns.

#47 Mark on 08.31.17 at 8:25 pm

“It’s great to see that the Calgary and Edmonton RE market’s managed to tough out this recession with barely a drop in price. That’s gonna drive the RE haters on this forum crazy”

Calgary individual identical unit prices easily went down 20-30% from the 2011 peak. The sales mix in Calgary was particularly severe. Rank and file lower wage people didn’t lose their jobs nor find themselves in distress. The job carnage in Calgary was mostly at the high end, and people in higher-end jobs tend to own higher end properties. Hence, the dramatic change to the Calgary sales mix.

Edmonton, still not even back at the 2007 peak.

#48 Ian on 08.31.17 at 8:27 pm

#38

Because the Shiller p/e is the second highest of all time, same as 1929. Only 2000 was higher.

I did a post last Saturday, first post of the day as it happened. Mentioned about ten other factors too including student and auto debt being completely out of control. Trade deficit ex services is 3/4 trillion per year.

USD is heading for a crisis. It’s been on a slide all year even as equities go up.

#49 Mark on 08.31.17 at 8:30 pm

“If the real estate market is a great example of what happens when money is too cheap, what about equities and bonds? Have they not also been inflated by the lowest interest rates in history?”

Some equities, particularly those that benefit from investment in interest-rate correlated assets, do extremely well with lower rates. The S&P500 index is heavily composed of these sorts of companies, and as such, it has utterly outperformed in the past decade.

Other equities, particularly those with long-term infrastructure, do much better in a higher rate environment. Canadian firms and the Canadian non-RE economy generally falls into this category. If you look at the contemporary TSX60 index, for instance, its exposure to consumer consumption or RE is quite minimal.

Therefore, it logically follows that Canada should outperform in a rising long-term interest rate environment. As it did in the 1960s and 1970s versus the US. And as it underperformed in the 80s, 90s, and the past decade compared to the US economy in the falling rate environment.

#50 David W2 on 08.31.17 at 8:35 pm

Based on the the first graph Garth, it looks like we’re due for a third crash soon.

#51 Investx on 08.31.17 at 8:42 pm

Garth, so what are the chances (percentage estimate) the BoC rate will rise again in October?

#52 Yaroslav on 08.31.17 at 8:42 pm

Garth, I would like your response to #6 (Mark).

There does seem to be a deflationary trend in the USA. So why the unbridled optimism about Canada?

http://www.zerohedge.com/news/2017-08-31/i-was-wrong-albert-edwards-finds-something-has-never-happened

#53 Happy Housing Crash Everyone! on 08.31.17 at 9:04 pm

31 Annek

They are making it up/ wishful shyster thinking. Prices will continue to drop. Speculators/realtors are either trying to sell or trying to get out of deals. That’s how bad this housing crash has gotten so gar.

Happy Housing Crash Everyone!

#54 Poor cousin of U.S = Canada on 08.31.17 at 9:07 pm

Most Canadian are banking on their houses when they retire. This is the only thing that really ever flourished in Canada. Too bad this is ending now.

#55 MF on 08.31.17 at 9:09 pm

I remember reading on a weekend post about how the equities market has been manipulated by central bankers as much as the housing market.

Equities are assets too no?

How can the historic withdrawal of stimulus levels and experiments like QE that have never been seen before not impact equity prices that are also at an extreme overvaluation?

I think it’s a risky time in equity markets too. We still don’t know the effect of all that unprecedented stimulus but we do know that any asset doesn’t go up forever (like the dow’s 8 year bull run) without its own correction.

What can central bankers do during the next inevitable correction?

MF

#56 Smoking Man on 08.31.17 at 9:16 pm

Where did the 4.5 GDP come from with real estate sales cut in two.

Something not right here. Anyone?
Poloz 180 on interest rate direction few months back.

Could it be? Look Trump during Nafta negotiations, see we don’t manipulate our dollar.

Something is fishy is all I’m saying.

In other news. The last bit of cancer we know about was dug out of my snoze yesterday. To much pain to start the savage road trip today.

Tomorrow it begins. Deep into the USA the land of division, where up is down and down is up.

Going to try and understand why facist beat and call regular folks facist. First hand.

Lots of Parascopes @SmokingMan

#57 Smoking Man on 08.31.17 at 9:37 pm

55 MF on 08.31.17 at 9:09 pm

Re your equity valuations. The usa has been under the control of globalists for a whIle. If Trump gets to cut corp and personal tax like he says he is.

Man you ain’t seen nothing yet. It’s priced in a bit.

Canadian economy is being proped up by globalists. There poster child is captin of the ss Canada. They will go to extreme lengths to prop up or make appear that having a school curiculm whos aim is to turn men into little girls so the confiscation of wealth and the complete hand over of Canada to the un is complete.

Interesting times. I’ll be in Washington on Sunday. Get to the bottom of things. Meet with the Real Smoking Man.

#58 Donkey Kong on 08.31.17 at 9:37 pm

Aren’t there still people on the sidelines waiting for house prices to come down who don’t read your blog and just want a home to live??
Not everyone is as smart and swift as your blog followers.

Some people actually want a home of their own, don’t have a lot of money and won’t be fixing up their rented property and have pride of ownership there.

Yeah money is nice but owning a home is important to a lot of people.

You do realize not everyone out there is like this special bunch you have that comes to read your blog night after night.You definitely have some real weirdos. Percentage wise you’re probably pretty high.

#59 Backmarker on 08.31.17 at 9:40 pm

Seems it is hard:

Government Spending refers to public expenditure on goods and services and is a major component of the GDP.

https://tradingeconomics.com/canada/government-spending

#41 Keith on 08.31.17 at 8:13 pm

Latest GDP growth number rung the bell at 4.6%. How is this possible with a Liberal government at the helm? How did the Conservatives get the economy so wrong for so long? How can this happen when a tax increase that replaced tax cuts is already in place, with more to come?
Economics is hard.

#60 White Crock BC on 08.31.17 at 9:41 pm

Goldie on 08.31.17 at 6:33 pm

“The US is ripped by race issues and white supremacists…”

It looks like somebody’s been watching a little too much CBC. Dig deeper my friend.

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

What do you suggest? BreitFox? Infowars? Cernovich?

#61 ANON on 08.31.17 at 9:43 pm

The returns there over decades have far outstripped those of housing, a pattern expected to continue.

inflated assets (destined to correct, as they always do)“?

Methinks this is a tongue in cheek blog post. :)

#62 Hans on 08.31.17 at 9:45 pm

Shouldn’t taxpayers be happy that CMHC isn’t insuring to capacity? Doesnt that mean that the gov’t has less skin in the game during an inflated housing market? I have never been a fan of mortgage insurance, particularly because it allows banks to profit while taking on less risk with the riskiest borrowers (whoa that’s a mouthful). If I recall correctly, it was about 15 years ago that the big six made $1bill combined in a year and it was big news. Now it’s an order of magnitude larger. So if banks (bank shareholders) are forced to shoulder the risk of their lending practices…..so be it. Actually sounds somewhat fair to me.

#63 Graph on 08.31.17 at 9:49 pm

On that first graph…

Wouldnt red and blue lines be pretty close together if you correct for tax on stock gains and divs?

Or is cap gains on prim residence taxed too, in the US?

#64 Am I doomed - lol on 08.31.17 at 9:50 pm

I’ve bought houses and rented them out starting in 1990. The last house I bought in the GTA was in 2016. I now have 5 rental properties fully rented out and live in my principal residence and have no mortgage on any of these 6 properties. Real Estate has been the best investment. The rental income has paid for the initial purchase cost of each house many times over. Once these properties are rented and all of the major costs covered, this is the real gravy train. Anyone that missed this train, don’t worry cause there are many stops along the path to financial freedom. I quit work and now I am just working on my own properties. I don’t have to get up in the morning to go and work for some idiot boss. All I do now is look after my family and our properties. Happy Housing Prosperity everyone…even that ‘Happy Housing Crash’ guy, who I really think is one lost soulless individual who doesn’t know what it means to own real estate. To really feel that have a home they can cherish with family and friends. I’m sure readers would agree, a home owned is really one that becomes more than just 4 walls and a place to sleep in.

#65 Smoking Man on 08.31.17 at 9:50 pm

Now I know why there is a oxy epidemic out there. Doc gave me a prescription of T3 to deal with the pain of having 1/4 inch of my nose lopped off.

I threw it out the window, too much of an addictive person here. JD is a wonder drug. Kills pain and gets you to the truth real fast. It’s sitting in all our subconscious minds. You just got to find your own way to get to it.

And never share on linked in if you love what you do for a living.

I know where the edge is now. Free falling and loving the view. I’ll share with you dogs till I splat.

#66 Figmund Sreud on 08.31.17 at 9:57 pm

North Korea’s dipstick leader
____________________________

Yes. Far too many ‘Northern Americans’ – and Americans, too – simply view North Korea and its leaders as dipsticks – officially, “crazy” in fact … oblivious of history. But, … there always is “but”, the history behind today’s crisis – should one choose to study it, reveals a more complex reality that, … just perhaps, could change those simplistic impressions?

For example, a 635,000 tons of high explosives and chemical weapons were dropped upon North Korea during the period of 37 months. That was, for comparison, far more than was used against the Japanese in the Second World War. The capital, Pyongyang, was razed. The U.S. Air Force General Curtis LeMay claimed – Carpet-Bombing the North: American bombings caused the deaths of about 20 percent — one in five — North Koreans, … ( such bombing would be considered a war crime as of the 1977 Protocol I of the Geneva Conventions), …

… but I digress most grossly, off topic. Forgive me, please?

Best,

F.S. – Comox, BC.

#67 sink or swim realist on 08.31.17 at 10:11 pm

The glass has water in it. I own my own company and last year we brought in $718,138 in sales. Total profit $34,756 after expenses which included employees and 2 salaries of $125,000 for owners. We (Owners) actually brought in more money in sales than we took out of the company, because of the tax rate we would be charged. We are a seasonal business and the market can change at any time so having some money in the bank isn’t about dodging taxes it’s about preparing for the future. No pension, no EI. Get up every morning and create your own destiny.

Last year we each paid $40,746.34 income tax so out of the 250,000 we took out of the company we paid the government over $80,000 in taxes. We also had operating costs, municipal business taxes, insurance, blah, blah, blah. I don’t think leaving $35,000 in your company for a rainy day is cheating the tax system.

I have a mortgage and put money into my RRSP every pay check and barely have enough money to cover the bills. I do have a 10-month-old baby and my partner is on maternity leave which will end soon. We are trying to figure out if working part time is worth getting up every day to make enough money to pay someone else to take care of our child while she goes to work. The kicker is her part time job does have full benefits, which I do not have as a business owner so we have to figure out what is more important.

#68 Smoking Man on 08.31.17 at 10:17 pm

#64 Am I doomed – lol on 08.31.17 at 9:50 pm
I’ve bought houses and rented them out starting in 1990. The last house I bought in the GTA was in 2016. I now have 5 rental properties fully rented out and live in my principal residence and have no mortgage on any of these 6 properties. Real Estate has been the best investment. The rental income has paid for the initial purchase cost of each house many times over. Once these properties are rented and all of the major costs covered, this is the real gravy train. Anyone that missed this train, don’t worry cause there are many stops along the path to financial freedom. I quit work and now I am just working on my own properties. I don’t have to get up in the morning to go and work for some idiot boss. All I do now is look after my family and our properties. Happy Housing Prosperity everyone…even that ‘Happy Housing Crash’ guy, who I really think is one lost soulless individual who doesn’t know what it means to own real estate. To really feel that have a home they can cherish with family and friends. I’m sure readers would agree, a home owned is really one that becomes more than just 4 walls and a place to sleep in.

Congrats. Me, I’m a zillonair refugee in my sons apartment. About to go on an epic road trip to find the heart of the devil. I won’t crush it. Just want to write about it before bozze totaly makes me useless.

Pay backs a bitch son.

The shit a loving dad has to do to turn his little boys into men. Teachers made it a challange I’ll give then that.

#69 Bay Street Banker on 08.31.17 at 10:19 pm

Recall that a recent by Forum Research found 34% of people polled said the single, itsy-weensie rate increase so far (0.25%) will hurt their finances. Of those, 12% said the impact would be “extremely negative.”

—————————————————————

Sure, renewing the old mortgage at rising rates will cause people to pare back on other expenses (no trip to Disneyland this year kids). But “extremely negative” doesn’t mean imminent default. We still need something like a big jump in unemployment to knock down housing prices in Canada.

Poloz is increasing rates precisely because the Canadian economy is doing fantastic. Surprised you didn’t comment on the 4.5% Q2/17 annualized GDP growth rate announced today. If the economy is doing well, people keep paying current market price for housing because they can afford to service a big mortgage, even at rates that are half a percent higher than six months ago.

#70 For those about to flop... on 08.31.17 at 10:20 pm

The guys over at howmuch are cranking out the articles ,check out this one…

M43BC

“Working Class Can’t Afford the American Dream

The national conversation in the U.S. is focused squarely on improving the lives of people in the working class. The debate revolves around exactly how to do that. Politicians and pundits have all sorts of ideas, from efforts to save jobs, create tax cuts, subsidize housing, and provide universal healthcare. Thing is, people don’t even agree on how to define the working class, much less how their living conditions stack up across the country. We created a data visualization to illustrate this complex situation.”

https://howmuch.net/articles/where-the-working-class-can-afford-to-live

#71 Ian on 08.31.17 at 10:23 pm

Hey I’ve got a good Barry Goldwater joke for you dogs!

He was campaigning in 64 and went to a posh golf club that didn’t allow Jews in. And he goes ‘I’m only half Jewish, could I play nine holes?’ Classic!

#72 Rexx Rock on 08.31.17 at 10:25 pm

Some pain may come to homeowners next month but will be temporary.Six months to a year and interests rates will be lowered.All debt is unbeliveably high so it cant be seviced with higher rates.

#73 Doghouse Dweller on 08.31.17 at 10:30 pm

#50 David W2
Based on the the first graph Garth, it looks like we’re due for a third crash soon.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Yes the first blip was the .com bubble the second was the housing bubble and now the Everything Bubble

#74 NoName on 08.31.17 at 10:36 pm

#66 Figmund Sreud on 08.31.17 at 9:57 pm

https://www.libertarianinstitute.org/daily-featured-articles/tgif-fire-and-fury-no-first-for-north-korea/

Truman wanted to use big kaboom on NK.

#75 april on 08.31.17 at 10:36 pm

# 53 Happy Housing Crash. I guess your referring to Toronto ’cause it doesn’t seem to be happening in Vancouver at least in the the condo market …or is it?

#76 FahtCoot on 08.31.17 at 10:38 pm

How many times in history has the economy been on the verge of deflation in a tightening cycle, and the central bank has proceeded with more tightening?

Not too many times I would suggest. The yield curve is incredibly flat, and is still moving towards inversion. The central banks appear to be trapped here.

——————————————————————–

Not sure, but there’s always a first for everything!
We have never goosed the markets with such ferocity and in this duration before either…

They are tightening into weakness because they have no other decent options. They need to have a lever for when the economy is in the shitter…

I believe you are correct about the lack of growth both here and in the US. I know you catch a lot of flak but I appreciate your posts :)

#77 Karma on 08.31.17 at 10:39 pm

#11 Michael Francis on 08.31.17 at 6:36 pm
“In Canada, do you have interest only loans whereby first home buyers need only repay interest and not principle.”

No, the vast majority are amortizing mortgages. There’s some that have home equity lines of credit attached to them in which only interest is required monthly.

#78 rental property math on 08.31.17 at 10:43 pm

All you renters get to deal with this:
a) I tell you to get all your crap off the deck for a week so I can come clean and seal it.
Bitch to you about not watering the lawn because it looks like shit.

b) you have paint chipping on your bedroom and bathroom ceiling from a roof leak. I fixed the roof (mine) but I don’t care about painting your ceiling and that won’t happen for a good year or so.

c) your front porch also looks like crap. I won’t paint it for years because I’m going to do the least amount of work and spend the least amount of money on the property so I have more money to spend on it to fix it up after I give you the BOOT to and CASH IN.

d) I’m probably better off than you having invested in RE than your ETFS.

Renting is so great!!! Your home belongs to me.

#79 45north on 08.31.17 at 10:45 pm

Guy in Vancouver: I just don’t understand how any reputable financial institution would take on that kind of risk when they approve a buyer who obviously begged, borrowed and stole to get around the CMHC requirements.

I do. The reputable financial institution has a 20% cushion and the ability to chase the buyer for any loses.

#80 Karma on 08.31.17 at 10:52 pm

Interesting indicator from my little social circle. Last year’s biggest FOMO of Vancouver RE (and also got his Realtor License so he can sell his property without paying high commissions) said that he’s thinking of selling his East Van house soon. He bought it in June 2016.

I’m speechless because he was always so bullish on VanRE, particularly SFD in the City of Vancouver. It looks like he’s realizing that RE doesn’t always go up and costs lots of money to maintain (his is likely from the 1920s or 1930s, but has been reno’d).

If he’s thinking this, I wouldn’t be surprised if a bunch of people like him are coming to a similar conclusion. (He’s Asian and got help from his parents).

#81 Leo Trollstoy on 08.31.17 at 10:54 pm

Because tightening cycles occur over long periods of time, there will be four to six more increases between now and the end of 2019

Bingo.

Rates to go up in NA everyone.

Deflation nowhere to be seen.

Canada and US economies strong and growing.

Jobs plentiful.

Enjoy life.

#82 FahtCoot on 08.31.17 at 11:02 pm

Hmmm …. I wonder if I’m a “doomer”

——————————————————————–
Hah. I’ve been razzed for years from a few friends, one a RE agent, about saying the market is in a bubble…

That’s the thing about bubbles, timing is very hard to predict. Lot’s of smart people have looked silly trying to call the quarter or even year…
I like averaging in and out much better than trying to call the exact tops and bottoms. There’s just too many variables at play.. and of course it doesnt help when the markets are manipulted either!

#83 Robert White on 08.31.17 at 11:04 pm

The Governor of the Bank of CANADA assures me that there will be more interest rate increases to come. I received a letter from him after I complained about the lack of a rate hike in light of the Bank for International Settlements directive to raise rates. Clearly, I agree that there is way too much money sloshing around these days due to the incessantly low rates that have occurred since the 08 crash. Significant rate hikes are necessary IMHO.

RW

#84 MSM-Free Zone on 08.31.17 at 11:07 pm

“……There was no rerun of 2008, nor will there be one….”
___________________________

I’m not so sure. The serial-lying President of the Alternative Facts of America has already surrounded himself with the very same un-tried, lobbying, white collar criminals who brought America’s GFC v1.0 to the world in the first place.

Given his repeated Tweeterprompter lust toward gutting the Dodd-Frank Act, a return to 2008 is but a virtual certainty.

#85 John in Mtl on 08.31.17 at 11:10 pm

… “It’s also why banks suddenly saw uninsured loan volumes bloating at 14% annually, and why their regulator freaked. Untold thousands of people who can’t actually afford their homes have transferred their risk from the feds to the lenders.”

So the banks are not doing their homework, making sure they don’t lend to someone who has a very high chance of defaulting? I find that very, very hard to beleive! Maybe they are thinking they can eventually pick up the asset on the cheap when the borrower goes belly-up or some insiders are taking a page out of the 2007-2008 subprime lending book and rubbing their hands at the bets on defaults they just made…

#86 Karma on 08.31.17 at 11:28 pm

#64 Am I doomed – lol on 08.31.17 at 9:50 pm
“I’ve bought houses and rented them out starting in 1990. The last house I bought in the GTA was in 2016. I now have 5 rental properties fully rented out and live in my principal residence and have no mortgage on any of these 6 properties. Real Estate has been the best investment. The rental income has paid for the initial purchase cost of each house many times over. Once these properties are rented and all of the major costs covered, this is the real gravy train. Anyone that missed this train, don’t worry cause there are many stops along the path to financial freedom. I quit work and now I am just working on my own properties. I don’t have to get up in the morning to go and work for some idiot boss. All I do now is look after my family and our properties. Happy Housing Prosperity everyone…even that ‘Happy Housing Crash’ guy, who I really think is one lost soulless individual who doesn’t know what it means to own real estate. To really feel that have a home they can cherish with family and friends. I’m sure readers would agree, a home owned is really one that becomes more than just 4 walls and a place to sleep in.”

Good job. But your experience clearly cannot be replicated by everyone as: A) not everyone can own multiple homes, otherwise there would be no rental demand. Having too high of a home ownership rate is bad as when prices eventually do turn, there is less liquidity as there are fewer potential buyers when SHTF. Spain’s the poster child of too high home ownership rate before the GFC. Since prices fell, everyone was affected and it worsened the economy.

B) Back when you bought, cap rates (Net Operating Income/Market Value) was about 10% back then, now it’s closer to 3% in Vancouver and Toronto. (Interest rates were also higher, but would have still been less than cap rates, otherwise you wouldn’t be able to achieve a return on equity high enough to do what you achieved).

C) You benefited from falling interest rates, meaning every time you renewed your mortgage, the monthly payment would have likely fallen. In this current environment, it’s the opposite situation. For example, if you get a mortgage at 2.69% for 5 years, 30 year amort, and renew at 4.69%, then the mortgage payment will be 13.1% higher in the 2nd 5 years than the original 5 years. That’s 2.5% growth per annum. That’s not insignificant. So young people today will be facing an uphill battle while you fought a downhill battle.

Lastly, why don’t you employ debt? Small amounts will keep the risk low enough but improve your returns as you can use the equity to do other things.

#87 dr. talc on 08.31.17 at 11:30 pm

osfi is hoax management ……

their lies and fear mongering hysterics is about corralling the brainwashed into the
‘security’ of one of those hard to sell five year terms

#88 Mark on 08.31.17 at 11:41 pm

“Deflation nowhere to be seen.”

Guess you didn’t see the recent month over month CPI (0.00%). Guess you didn’t see the most recent month over month PPI (-1.5%). Guess you aren’t seeing the falling housing prices. Are you blind or something? Deflation is all around us, and appears to be accelerating. Lots of people, including yourself, seem to be in denial about it because you’ve never seen it in your lifetime.

#89 Karma on 08.31.17 at 11:45 pm

2% gross yield in Toronto… Yikes…

https://twitter.com/416_AnthroBear/status/902974425187966976

#90 Mark on 08.31.17 at 11:47 pm

“Doc gave me a prescription of T3 to deal with the pain of having 1/4 inch of my nose lopped off.
I threw it out the window”

Good for you, mixing the Tylenol in the T3’s with alcohol is a quick way to destroy the liver. Your doctor, if he knew that you liked your alcohol, should have never prescribed the stuff to you.

Where did the 4.5 GDP come from with real estate sales cut in two.

I suspect the abnormally high GDP number, which doesn’t seem connected to anything else in reality (employment, the stock market, currency, etc.) is an artifact of a mismatch in sampling periods for GDP and the CPI which is an input to the GDP deflator. Might be a little bit of premature experimental weed smoking at whatever government agency came up with the number as well.

Its kind of along the lines of the recent claims that inflation is accelerating in Canada, yet month over month CPI was actually 0% per Stats Canada. Sure, that’s more inflationary than the outright deflation, but the trend for CPI in Canada is still clearly towards deflation.

#91 FLHTK on 09.01.17 at 12:13 am

Am i really doomed-lol
I think you got it made!

#92 Richer than I think on 09.01.17 at 12:21 am

Closed on our house today in The Fraser Valley.

Bought April/15, sold Early July in a bidding war, 5 offers. Took the high one (obviously), they got cold feet after 3 days and walked from their deposit.

Took the third highest which was unconditional and still over $20k over ask.

In 27 months sold at 55% more than we paid

Equity gain 362% in 27 months. Tax free.

Crazy times. Once in a lifetime.

That deposit? Bought a new car

#93 Newcomer on 09.01.17 at 12:24 am

It is clear that equities are overvalued and of course there will be a crash. What is different this time?

That does not mean that financial instruments have suddenly ceased to be the best place to invest but it’s pretty ballsy to flat out declare that there won’t be a repeat of 2008. It seems to me that only thing we can be certain of in markets is that, on their own time and based on factors that nobody can predict well, they tend to repeat.

#94 Frank on 09.01.17 at 12:33 am

The SP500 has a P/E of 21.6. Long run P/E is 14.2 Its 50% over-valued, capitalization weighted, overpriced large companies have a big impact. Avoid. The P/E always moves back to the same value, considering data back to 1870.

Buy ETFs or companies that are more reasonably priced meaning lower P/E with higher growth. Investors become progressively more enthusiastic about future growth prospects, and eventually overpay. Regardless whether its houses or stocks.

#95 I like cookies on 09.01.17 at 12:41 am

Vancity is making a purchase offering of Class E Investment shares, the first time since 2001… https://www.vancity.com/Investments/TypesofInvestments/ClassEInvestmentShares/?xcid=hp_banner_investmentshares

I wonder if the timing is related to the hammer falling in the Vancouver housing market… Vancity has issued a lot of 0% down and “mixer” mortgages in the past few years. It must know that the hammer is about to fall on its bottom line…

#96 Joe2.0 on 09.01.17 at 12:49 am

Bad day fer da Doomer’s.
I guess it’s all peachy when the U.S.of A is dropping bombs in S Korea war games or Russia is evacuating people nearest Korea.
Alls good in OZ.
What’s the Kerdashians up too?

#97 LadyStetson on 09.01.17 at 1:29 am

2008 caught 99.7% of the market players with their pants down.

As a rule, the next crash will catch 99.7% of the market players with their pants.

It can happen tomorrow, it can happen in 2030. 0.3% will see it coming, the rest won’t. This is how it should be.

#98 My dog has issues on 09.01.17 at 1:50 am

#15

I’m always curious what other people have for investments too. I currently have 2 etfs- cbn and zpr. I also have 2 mutual funds- ci signature income and growth and edgepoint global portfolio. I add roughly $800 a month to my portfolio through contributions /reinvestments, which isn’t much but also have a defined benefit pension I pay into so that makes the difference. Right now I’m aggressively paying down my mortgage and dealing with this dog who has issues day and night. Cheers!

#99 NEVER GIVE UP on 09.01.17 at 2:09 am

“There is no place to run and hide anymore, save some slap-happy CUs and subprimers who want 8%.”
=====================================
=====================================
How is that going to stop anybody?
If you can go over to a Credit Union and borrow with the same fake credentials as the Banks were taking now, it sounds like a no brainer?
What kind of barrier is that?
Is someone going to say “I would never be caught dead borrowing from a Credit Union, What would the girls at the PTA say?”

#100 Dolce Vita on 09.01.17 at 2:35 am

#35 For those about to flop…

Sorry, late, just woke up here in Italia.

Just looked at My Realty Check. Good eye Flop.

Holy Moses, that is a large drop. $154.9 million in list price drops for August, that is a lot of equity gone in a month unless they all end up selling over list, unlikely.

If so, looking forward to more of your Pink stories of actual vs. list.

Again, per TransUnion the number of mortgage drops after the Oct. 2016 insured stress test resulted in, Vancouver only:

$1.85 Billion drop in mortgage money, -37% and a 32% drop in the number of mortgages (1st Qtr comparisons, 2016 to 2017).

Garth has posted estimated -18% in purchasing power drops, TD estimates -10%…I believe they are all optimistic and need to show their numbers as I do. Add to that:

50% of the mortgages are uninsured, 50% of those are clustered at the 80% limit and are 30 yr amortizations, which means:

Many, many buyers are BARELY scraping enough money together to skirt CMHC insurance and the stress test. Why OSFI B-20 so significant as uninsured mortgages will now get stress tested as well.

I think the TransUnion numbers will be what we will see in the # of mortgage drops and $ available to purchase RE, for all mortgage LTVs:

…somewhere between 30% to 35%, rounding estimate.

Add in a few more rate increases and I do not foresee any Cdn. RE market weathering this storm without large price drops.

Vancouver RE sales in the last 102 days or so has dropped from:

$1.39 Billion to $726 Million. -47.8% Total $ Sales (poor Realtors).

No surprise here when you look at the TransUnion data.

Far fewer buyers across the property spectrum of Condo to Detached, MUCH less mortgage money available to buy = price drops.

And inventory has not changed, still about 2,700 or so units in Vancouver. So, the theory that buyers will not sell is just that, a theory, and a wrong one at that when you look at the numbers.

I like to say I dispassionately crunch the numbers. But anyone looking at actual data above, has to conclude:

Price drops are inevitable, unless someone comes to rescue the Cdn. RE market out of the goodness of their heart.

There is always someone that has to sell and they will make the market.

I think I will wait out the Cdn. RE market here in RE crashing Italy before I return to Canada.

#101 Ponzius Pilatus on 09.01.17 at 2:36 am

#66 Figmund Sreud on 08.31.17 at 9:57 pm
North Korea’s dipstick leader
____________________________

Yes. Far too many ‘Northern Americans’ – and Americans, too – simply view North Korea and its leaders as dipsticks – officially, “crazy” in fact … oblivious of history. But, … there always is “but”, the history behind today’s crisis – should one choose to study it, reveals a more complex reality that, … just perhaps, could change those simplistic impressions?

For example, a 635,000 tons of high explosives and chemical weapons were dropped upon North Korea during the period of 37 months. That was, for comparison, far more than was used against the Japanese in the Second World War. The capital, Pyongyang, was razed. The U.S. Air Force General Curtis LeMay claimed – Carpet-Bombing the North: American bombings caused the deaths of about 20 percent — one in five — North Koreans, … ( such bombing would be considered a war crime as of the 1977 Protocol I of the Geneva Conventions), …

… but I digress most grossly, off topic. Forgive me, please?

Best,

F.S. – Comox, BC.
—————–
Thanks, you are brave.

#102 Dolce Vita on 09.01.17 at 2:56 am

Speaking about RE crashing Italy, here is the Province I live in (Pordenone, NE Italy) price drops (scroll down until you see a chart on the right hand side titled “Prezzi case in vendita”):

https://www.immobiliare.it/Pordenone/vendita_case-Pordenone.html?criterio=rilevanza

And this Province has the 2nd lowest unemployment and poverty rate in all of Italy, considered an affluent Province by Italian standards.

Then there is the affluent Villa Borghese area of Rome and look at what YVR RE money will buy you in a condo there (filtered for + €700 K, 200 sq. m. or more, upper floor…again, look at the price chart on the right hand side as you scroll down):

https://www.immobiliare.it/Roma/vendita_case-Roma.html?criterio=rilevanza&prezzoMinimo=700000&superficieMinima=200&fasciaPiano%5B%5D=30&idMZona%5B%5D=10146&idMZona%5B%5D=10161&idMZona%5B%5D=10159

And yes, that’s all marble, granite and real hardwood floors and they are not 1/8 inch thick either or laminated onto a cheaper base.

And I think, the view of St. Peter’s and/or Villa Borghese alone trump anything YVR can muster (recall, we have mountains too and 750,000 km of coastline with beaches you can swim in), no contest 416. Elegance, history, culture, cuisine surround you at bargain basement prices.

And no, I am not an Italian Realtor, just a Cdn. retiree in Il Bel Paese.

#103 Keith on 09.01.17 at 3:03 am

#44 I agree, but so many people on the right link government policy with negative or positive economic growth.

#59 How come Harpers massive borrowing and spending had way less effect? We’re all Keynesians now.

#104 I've crossed the Rubiconjob on 09.01.17 at 5:57 am

#83 Robert White on 08.31.17 at 11:04 pm
The Governor of the Bank of CANADA assures me that there will be more interest rate increases to come. I received a letter from him after I complained about the lack of a rate hike in light of the Bank for International Settlements directive to raise rates. Clearly, I agree that there is way too much money sloshing around these days due to the incessantly low rates that have occurred since the 08 crash. Significant rate hikes are necessary IMHO.

RW

you want higher rates and less money in the system?
why?

#105 When Will They Raise Rates? on 09.01.17 at 6:45 am

#6 Mark on 08.31.17 at 6:27 pm

The yield curve is incredibly flat, and is still moving towards inversion. The central banks appear to be trapped here.

————————————

That’s why they’re beta testing negative rates, universal income and a cashless society.

#106 Dharma Bum on 09.01.17 at 6:48 am

This just in:

“Happy Housing Crash Everyone Guy Revealed!”

https://www.google.ca/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&ved=0ahUKEwi61vm954PWAhXnzIMKHQzVBwkQjRwIBw&url=http%3A%2F%2Fwww.jasonsteele.ca%2F&psig=AFQjCNFjkIeG6lOOgLlIpWHwT2Z-wrfpLQ&ust=1504349109956330

#107 dr. talc on 09.01.17 at 6:59 am

sept 1 1939, a rude awakening for Poland and Europe

#108 Ian on 09.01.17 at 7:28 am

#88 Mark

But they’re still going to raise rates. That’s the part you’re not seeing.

BoC has correctly assessed that bursting the debt bubble is far more important. And as Garth has pointed out, Canada has enough GDP growth to have a solid cushion to do so.

So I agree with Rowat et al, this ain’t stopping at two increases. 4-5 much more likely.

#109 MF on 09.01.17 at 8:32 am

#66 Figmund Sreud on 08.31.17 at 9:57 pm
North Korea’s dipstick leader
____________________________

North Americans may think that the leader and country are crazy but they do not want war.

The peace we enjoy had a price that our veterans paid for.

Every year we remember not only their sacrifices but also the horrors of war and the value of peace.

I know that’s not what you were getting at, but some people will use your comments to forward their anti American or anti western bias.

MF

#110 crowdedelevatorfartz on 09.01.17 at 9:08 am

@#59 Kong of the Donkeys
“You do realize not everyone out there is like this special bunch you have that comes to read your blog night after night.You definitely have some real weirdos…..”

******

Every night?
I come here every hour!
Is that weird?

Haiku over

#111 crowdedelevatorfartz on 09.01.17 at 9:18 am

@#107 Dr Talc
“sept 1 1939, a rude awakening for Poland and Europe.”
+++++++

Perhaps Sept11 2017 will be much ruder?

https://www.reuters.com/article/us-nato-lithuania/u-s-send-extra-fighters-to-police-baltic-skies-during-russian-exercise-idUSKCN1BA1TE

#112 Dissident on 09.01.17 at 9:21 am

Welp, I don’t see any ‘surge’ in new listings for September/Fall, do you? I just see the same crappy $750K dumpster fire houses as I did last month. They ain’t moving in Mimico/Longbranch. I sure as heck wouldn’t plop down my life’s savings into that.

Come on, RE agent? I thought y’all predicted a huge influx of great new listings in the Fall? Am I a week early? Gotta wait till after labor day weekend, I guess, eh. Then we shall see if the RE agents ‘release the hounds’, ‘open the floodgates’ on their rounded up Fall listings they’re holding back.

#113 crowdedelevatorfartz on 09.01.17 at 9:22 am

Yo Apocalypse 2017.
You busy stacking canned beans in the bunker?
I gotta do your job now?

https://www.reuters.com/article/us-russia-nato-wargames/russia-seeks-to-reassure-over-war-games-denies-invasion-plans-idUSKCN1B90ZS

#114 M on 09.01.17 at 9:30 am

Gartho baby… I hope that in between the great ice cream weekends and joyful strolls with Bandit you might also take a peak at those charts .
With stupefaction you would see that , by far, the best asset going up this year is the good al’ and despised gold :) 15 to 17% ??
…and in terms of canadian pesso is kinda flying :)

..it must be a reason :)

“It’s been a bad few days for the doomers.” .. it actually was not at all. It was a great 2 weeks run in which tactical short terms gains were rolled into mid term strong defensive positions.

“Those people who have spent the last eight years in cash, GICs or precious metals got it wrong. ” –
… dec 2015 to jul 2016

“There was no rerun of 2008, nor will there be one. ”
YET :)
…. but that’s why being smart and foretelling is a bit lonely but how rewarding.

“There’s no reason to believe markets will crash simply because the Dow has hit 22,000.” – great sample of effect denial and cause identification in one phrase.

…Hail to the Jenny for her soul will be forever kept in our prayers for the tenacity with which she’s pumping in the Grand Casino making us all rich on the future road down :)

Take a look at a chart platting US equity markets and US corporate profits. All you need to know. — Garth

#115 Morneau is on the ropes!! on 09.01.17 at 9:31 am

His own party MPs are turning on him now….about time

https://ca.finance.yahoo.com/news/morneau-calls-nervous-liberal-mps-221819092.html

#116 NoName on 09.01.17 at 9:41 am

#109 MF on 09.01.17 at 8:32 am

Reason why KJU is scared out of his mind and he is pursuing long distance delivery, is because he is only dictator of some significance left.

His army is joke, as gadafis, sadams and what is keeping everyone out is not nucilar weponds its huge stockpile of chemical and biological weponds and very close proximity to lots of people. We can deal with nuc fallout “fairly” well, but we cant deal with chem or bio agents. There is a book titled Other Losses, maybe you should read it. Its about end of ww2.

And small homework, plot regime changes on a chart in different colours, and report your findings.
https://imgur.com/a/mEPa3
https://en.wikipedia.org/wiki/United_States_involvement_in_regime_change

#117 HaHaHa on 09.01.17 at 9:58 am

Just back from Northern Ontario vacation. Drove across from Alberta. People really take the drive someday. Ontario, truly spoiled with all those wonderful lakes. Thunder Bay to the Soo one of my favorite scenic drives. Things I learned. Man this country is HUGE. Quebec poutine is unreal. Living at a lake in a 30 foot trailer is all I need. Liberals are still brain dead. Albertan’s work too hard. I need to retire next year and see the rest of this country in all it’s natural beauty. On a side note. Canadians get off your asses. Run Walk bike ski snowshoe canoe swim. We are blessed with outdoor abundance. Quit being lazy

#118 Calgary Rip Off on 09.01.17 at 10:02 am

Speculation.

All this about interest rates. Interest rates will rise. So what?

If a person didnt borrow the maximum, mortgage payments dont involve sacrificing for food, and come renewal the value of the place is more than the mortgage, what matters next is health, longevity, and whether the job still exists.

All this stress about variables no one has any control over. Do people watch news because the bad stuff gives them adrenaline to get over their fatigue? Is this post something to think over because the person acquiring debt didnt think before they borrowed?

What really matters is physical and mental health. All the variables you mentioned are not permanent. They wont kill you. Stress however can and will kill. Focus on preventing that, and you will have all the energy and health so that finances dont matter.

Perhaps all the “adults” here would be wise to learn from kids: Kids play, kids run, kids ride bikes, kids dont worry. Then everything gets complicated as time goes along. Keep it simple.

#119 Balmuto on 09.01.17 at 10:38 am

#90 Mark on 08.31.17 at 11:47 pm
“I suspect the abnormally high GDP number, which doesn’t seem connected to anything else in reality (employment, the stock market, currency, etc.) is an artifact of a mismatch in sampling periods for GDP and the CPI which is an input to the GDP deflator.”

You’re the king of excuses.

#120 Penny Henny on 09.01.17 at 10:39 am

An excellent article on the demand for money in America.

http://scottgrannis.blogspot.ca/2017/08/something-to-worry-about.html

also some pretty charts too!

#121 Victor V on 09.01.17 at 10:45 am

Chances of a Bank of Canada rate hike as soon as next week rose to nearly 50 per cent after data on Thursday showed Canada’s economy expanding in the second quarter at its fastest pace in nearly six years.

http://www.bnn.ca/loonie-hits-two-year-high-as-rate-hike-chances-near-50-50-1.844901

#122 crowdedelevatorfartz on 09.01.17 at 10:46 am

@#226 geez
“Morons crave for distractions like that….”

++++++

Obviously I’ve never watched the show but thanks for the update oh faithful viewer….

#123 Ben on 09.01.17 at 10:47 am

Any updates on August sales and price figures? I’m sure Realosophie has them ready to go

#124 Snoopy on 09.01.17 at 10:52 am

Generally, almost always in fact, rising interest rates can be understood as indicating an appetite for investment and risk and signalling positive economic output / some degree of inflation being anticipated. However, when the world is experiencing low inflation or arguably deflation, an increase in interest rates is just as likely a signal that debt issuers fear default. Thus the rising rate is not a signal of health but assessment that money lent is less likely to be return, and the cost of borrowing increases. It is not an increase in demand for money but fear of default. If that is the case then it can lead to a purging cycle of debt default. I’m not saying that is what this is, cause who am I to predict anything, but merely that there are other potential understandings. Just food for thought all.

#125 Doghouse Dweller on 09.01.17 at 10:54 am

Take a look at a chart platting US equity markets and US corporate profits. All you need to know. — Garth
““““““““““““““““““““““““““““

Call it Financial Engineering

One of the most tracked measures of a company’s performance is earnings per share. EPS numbers usually are the first thing investors and the media look for in a business’s results — and whether the number beat expectations set by industry and sell-side research analysts at financial firms.

Critics of buybacks say they’re the easiest way to game the system and come in above EPS forecasts, thus making a company look better. Since EPS is generated by dividing profits by shares in the market, if you shrink the number of shares, the EPS will rise.

Stock Buybacks Hit Record—–Total $2 Trillion Since 2009

#126 Ponzius Pilatus on 09.01.17 at 10:59 am

Canada’s economy is all gangbusters.
Not bad for a drama teacher.

#127 Ian on 09.01.17 at 11:00 am

Further to my post 108, we should also discuss the US side of things.

Q2 revised GDP there too surprised on the upside. I found this very shocking given their anemic Q1 and downward revisions to it.

So, the comments people have made on here in the past few weeks along the lines of “US is done raising rates”, “Yellen is pausing” etc, are very likely wrong.

If I’m correct that what they’re really doing is bursting a debt bubble under Trump’s watch, then they now REALLY have ammunition to do it. All they have to say is “look how strong GDP growth is!”

#128 NoName on 09.01.17 at 11:04 am

@MF
Watch this, friend of mine sent me this video few months back.
https://www.ted.com/talks/laura_galante_how_to_exploit_democracy

#129 Howard on 09.01.17 at 11:15 am

The American stock market is at a record level, global growth is robust and there’s one thing central banks want for Christmas. Normalized rates. Those people who have spent the last eight years in cash, GICs or precious metals got it wrong. There was no rerun of 2008, nor will there be one. There’s no reason to believe markets will crash simply because the Dow has hit 22,000.

————————-

Hmm…

#stockmarketgoesupforever
#thistimeisdifferent
#buybuybuy

Nope. #diversifaction. #balance. #liquidity. — Garth

#130 Grantmi on 09.01.17 at 11:15 am

Well Blog Doggies…. i just spotted a Big Foot in South Surrey. In the land of Home Prices that never go down, and houses always sell in 1 day… A REDUCED PRICE sign on a home in the much coveted area of Rosemary Heights.

http://bit.ly/2iOd8ek

If any of you ex real estate agents who have drank the Kool-aid.. still have access to agent info. Curious to see how long this has been on the market and what did they reduce it by. Funny thing is.. there is a house right next door also up for sale. Different agent.

asking $1.1M

http://bit.ly/2epG7jF

#131 Howard on 09.01.17 at 11:20 am

Newspapers in this country still passing off RE newsletters as journalism.

http://business.financialpost.com/real-estate/why-bother-with-stocks-in-vancouvers-relentless-housing-market
“Want an investment with a 10% return or a $600K salary? Surprise, property in Vancouver still your best bet”

One word: diversification. — Garth

#132 Penny Henny on 09.01.17 at 11:23 am

#98 My dog has issues on 09.01.17 at 1:50 am
#15
Right now I’m aggressively paying down my mortgage and dealing with this dog who has issues day and night. Cheers!

////////////////////////////

It’s ragweed season right now. Try some benadryl for the doggie, or reactin. check online for proper doses

#133 Grantmi on 09.01.17 at 11:27 am

Sorry… Pic link didn’t work.

http://bit.ly/2evfbm1

#134 n1tro on 09.01.17 at 11:40 am

$265 swing in GBTC today. owning 1 share at the right point is pure profit. This is getting nuts.

#135 paulo on 09.01.17 at 11:43 am

Still calling a definite .25 this year from BOC and a 70% chance of a second .25 this year if its the single look for 4 increases next year starting right out of the gate

surrendering .50 to .75 of annual GDP is looking like a good option to quell the real estate market.

#136 MF on 09.01.17 at 11:56 am

NoName,

I read the Wikipedia page and looked at the maps ie did the homework :)

Anyways most of the interventions are in Central America, the Mideast or Asia.

Am I missing some other pattern?

MF

#137 Dolce Vita on 09.01.17 at 12:05 pm

#123 Ben

DIY as Garth does.

Look at table below chart.

Filtered for Toronto Detached:

https://toronto.listing.ca/detached-home-price-history.htm

Apply your own filters for what is of interest to you.

#138 Dolce Vita on 09.01.17 at 12:12 pm

#130 Grantmi

If you want to see price reductions, many of them, just go here (1379 of them today alone):

http://www.myrealtycheck.ca/

For individual city price reductions just click on the city name at the top of the page.

For individual listings, copy the address, and not the city name, then paste into the input field at e-valueBC to view its assessed value, images, prior sales history within last 3 years etc.

#139 gary smith on 09.01.17 at 12:15 pm

new-ish reader to the blog.

Can someone explain the use of the word “moister”?

It is Garth’s pejorative synonym of choice for millennials eager to get into the housing market?

#140 oncebittwiceshy on 09.01.17 at 12:23 pm

….. and just to prove that we can do better than the Americans:

“Debt experts have expressed concern with the rate homeowners are borrowing against their homes. Hoyes-Michalos, one of Ontario’s largest debt consultancies, recently said more Canadians have been borrowing against their home to avoid filing for bankruptcy.”

http://vancitycondoguide.com/loans-secured-against-canadian-real-estate/

“This follows a similar phenomenon where low credit-score homeowners in the United States between 2002-2006 borrowed an average of $0.40 for every $1 increase in home equity value. Which was rarely used to pay down existing debts.”

#141 Dolce Vita on 09.01.17 at 12:27 pm

#131 Howard

It’s the YVR RE Cult.

MSM writers are not immune to it either.

We’ll see how Mr. Woodhouse weathers what is to come with the coming rate increases and OSFI B-20.

He also has not monetized any of his gains and intends to purchase more properties and rent them out.

It will not end well for this Mortgage Broker.

If not well, doubtful you will read a follow-up article.

#142 Tazi Bnu on 09.01.17 at 12:28 pm

#88 Mark on 08.31.17 at 11:41 pm
“Deflation nowhere to be seen.”

Guess you didn’t see the recent month over month CPI (0.00%). Guess you didn’t see the most recent month over month PPI (-1.5%). Guess you aren’t seeing the falling housing prices. Are you blind or something? Deflation is all around us, and appears to be accelerating. Lots of people, including yourself, seem to be in denial about it because you’ve never seen it in your lifetime.
___________________________________________

There’s a lot of talk among real economist(the ones that have jobs and don’t pontificate in the blog dog comments) that CPI and PPI may be an extremely poor measure of inflation in economies that consist of larger amounts of services. However, they can’t agree on a way to better measure it, if there is one. You cannot observe inflation or deflation directly, but you can measure it’s effects. There’s a lot of noise you have to filter out as well. CPI and PPI are just 2 ways to attempt to show it. This is just anecdotal from different economists that I come in contact with.

#143 Tazi Bnu on 09.01.17 at 12:41 pm

Garth, don’t you love it when people equate investing in a house with investing in a global diversified securities portfolio. The only way I see the 2 coming close is if they buy residential, commercial, industrial, and agricultural properties in many different cities and countries around the world. However, the costs to do so would be bigly.

#144 James on 09.01.17 at 12:44 pm

#56 Smoking Man on 08.31.17 at 9:16 pm

Where did the 4.5 GDP come from with real estate sales cut in two.
Something not right here. Anyone?
Poloz 180 on interest rate direction few months back.
Could it be? Look Trump during Nafta negotiations, see we don’t manipulate our dollar.
Something is fishy is all I’m saying.

In other news. The last bit of cancer we know about was dug out of my snoze yesterday. To much pain to start the savage road trip today.
Tomorrow it begins. Deep into the USA the land of division, where up is down and down is up.
Going to try and understand why facist beat and call regular folks facist. First hand.
Lots of Parascopes @SmokingMan
…………………………………………………………………..
While I do not concur with 99% of your drivel Smoking Man I wish you a speedy recovery on your bout with Cancer. This is a horrible disease that nobody should experience. I had a friend die from Melanoma. They ignored the lesion didn’t comprehend it until it had metastasized and it was rampant in vital organs. So hats and sunscreen for all of my children now. Please keep an eye on your nose pardon the pun. Check it often and get regular checkups with the doctor.

#145 NoName on 09.01.17 at 12:58 pm

#136 MF on 09.01.17 at 11:56 am

Its not about geographic location, its about how are they financed, money has to come from somewhere, spreading democracy is not free, why finance at 10% when you can do it for less.
At this point 20% of us military budget is interest alone on loans accumulated…
Keep on a mind all kabooms have expiry/best before date, and very few things is recyclable.

#146 Robert White on 09.01.17 at 1:06 pm

#104 I’ve crossed the Rubiconjob

“You want higher rates and less money in the system? Why?”

The BIS advisory to raise rates across the board has been in existence since the 08 crash. Central banks can no longer languish at the low ebb of rates due to their lack of wiggle room if a major cataclysm occurs. Mr. Yellen is being forced to dance on the head of a pin. Poloz cannot allow CANADA to lag behind their rate increases, and with too much money sloshing around the system we are increasing risk to the system overall.
Furthermore, everyone has been printing too much QE Infinity which is bound to decrease the actual spending power of a dollar via hyper-inflation of the pathetic dollar straight from the tap/printing press. In brief, fake money and fake news via false econometrics can only suffice to buoy the system for so long. Eventually, rates must be normalized at the historical mean or the centrally planned banking Oligopoly will crash outright due to dollar inflation. Deflation, and normalization of rates, will slow up the inevitable system wide implosion which will manifest much sooner if we continue printing to infinity and beyond. Lastly, it’s like the Fram Oil Filter commercial from yesteryear…”pay me now or pay me later.”

Sooner or later the lithium crystals will not be able to maintain power, Captain. Our warp drives will fail, and we will be consumed by the Doomsday Machine!

RW

#147 Ponzius Pilatus on 09.01.17 at 1:13 pm

#124 Snoopy on 09.01.17 at 10:52 am
Generally, almost always in fact, rising interest rates can be understood as indicating an appetite for investment and risk and signalling positive economic output / some degree of inflation being anticipated. However, when the world is experiencing low inflation or arguably deflation, an increase in interest rates is just as likely a signal that debt issuers fear default. Thus the rising rate is not a signal of health but assessment that money lent is less likely to be return, and the cost of borrowing increases. It is not an increase in demand for money but fear of default. If that is the case then it can lead to a purging cycle of debt default. I’m not saying that is what this is, cause who am I to predict anything, but merely that there are other potential understandings. Just food for thought all.
————–
Good stuff.

#148 Citizen on 09.01.17 at 1:13 pm

Hey Garth,
Great post…..interesting times ahead..

It’s funny sometimes to look back and see what the press was saying. I didn’t have to go too far back.
I found this Globe article from June.
The last line had me in stitches:
“But before deciding on a response, you first have to figure out what you’re responding to. And nobody can say for sure what the problem is with the housing market, or whether there even is a problem. ”
“The federal Finance Minister, Bill Morneau, said this week that Ottawa will do a “deep dive” into Canada’s housing market and figure out what is causing prices to surge in Vancouver and Toronto. He had better get his deep-divers moving quickly.”

#149 Gravy Train on 09.01.17 at 1:26 pm

#143 Tazi Bnu on 09.01.17 at 12:41 pm

“… [T]he costs to [buy residential, commercial, industrial, and agricultural properties in many different cities and countries around the world] would be bigly.”

(Or they could just buy global REITs, at much less cost.)

#150 Bytor the Snow Dog on 09.01.17 at 1:33 pm

@66 Dyslexic Psychiatrist-

And those North Koreans STILL haven’t learned!

#151 jess on 09.01.17 at 1:37 pm

If asset values inflate because borrowers have no discipline (living beyond ones means)than what happens to asset values when :

..”as noted 1999 coso study indicated that either the CEO or the CFO was involved in 83% of the financial statment frauds studied.”
Fraudulent Financial Reporting: 1987-1997,
https://www.coso.org/Documents/FFR-1987-1997-Analysis-of-US-Public-Companies-Executive-Summary.pdf
Investors should be aware of the possible complications arising from family relationships and from individuals (founders, CEO/board chairs, etc.) who hold significant power or incompatible job functions. Due to the size and nature of the sample companies, the existence of such relationships and personal factors is to be expected. It is important to recognize that such conditions present both benefits and risks

4.
Family relationships among directors and/or officers were fairly common, as were individuals who apparently had significant power. In nearly 40 percent of the companies, the proxy provided evidence of family relationships among the directors and/or officers. The founder and current CEO were the same person or the original CEO/president was still in place in nearly half of the companies. In over 20 percent of the companies, there was evidence of officers holding
incompatible job functions (e.g., CEO and CFO).
https://www.coso.org/Documents/FFR-1987-1997-Analysis-of-US-Public-Companies-Executive-Summary.pdf

==================
The Association of Certified Fraud Examiners’ (ACFE’s) latest Report to the Nations on Occupational Fraud and Abuse provides all the confirmation one needs to understand how pervasive and significant fraud remains as a threat to organizations. The latest report finds that asset misappropriations, financial statement fraud, and corruption account for median losses of $150,000 per organization, based on more than 2,400 cases examined in the report.

Those cases alone accounted for US$6.3 billion in total losses, but that number barely begins to scratch the surface…”
https://iaonline.theiia.org/blogs/chambers/2016/Pages/Fraud-Risk-Hasnt-Reemerged-It-Never-Went-Away.aspx

profiling
global fraud study -median age 40/male/university degrees
in s.asia 83.5 % 98 cases have university degree are mostly managers /40 years of age mostly male
canada 54.9 % in 83 cases have a university education
http://www.acfe.com/rttn2016/perpetrators/data-by-region.aspx
http://www.acfe.com/rttn2016.aspx

The most prominent organizational weakness that contributed to the frauds in our study was a lack of internal controls, which was cited in 29.3% of cases, followed by an override of existing internal controls, which contributed to just over 20% of cases.
The perpetrator’s level of authority was strongly correlated with the size of the fraud. The median loss in a scheme committed by an owner/executive was $703,000. This was more than four times higher than the median loss caused by managers ($173,000) and nearly 11 times higher than the loss caused by employees ($65,000).
http://www.acfe.com/rttn2016/about/executive-summary.aspx

#152 MF on 09.01.17 at 1:53 pm

gary smith,

Oh this was too good to resist.

1) People who fantasize about real estate all day. Dream about, and structure their whole financial lives around it are “house horny”.

2) A “moister” is a usually a younger person/millennial who, after being house horny for so long, has decided they want to purchase real estate..and fast. They have read and watched house porn like “hot property” at night alone for years. They hear their friends and family rave about their own “purchases” all day. They want to experience it all and are ready and “moist”. Often easy prey for the slimy real estate industry.

Hope that helps.

MF

#153 The holy trinity #diversification #balance #liquidity exemption? on 09.01.17 at 2:17 pm

Hmm…

#stockmarketgoesupforever
#thistimeisdifferent
#buybuybuy

Nope. #diversifaction. #balance. #liquidity. — Garth

These are general historical observations, based on average, in the past, which is different in profound ways from the present. They are not sufficiently scrutinized, if at all, although each financial prospectus starts with an other wisdom, also based on historical observations and average average: “past results are no indication of future performance…” Would the holy trinity of #diversification #balance #liquidity be exempt?

Any counter argument against these particular concerns, dissecting and analyzing the generic broiler template of #diversification #balance #liquidity?

ETF

+ The flood of money into passive products is making stock prices move in lockstep and creating markets increasingly divorced from underlying fundamentals.
As the market moves ever higher, there’s the potential for a sharp decline. The U.S. ETF market has about $2.7 trillion in assets, the majority in products that track indexes.

+ Shift To Passive Investing Increases Systemic Risk, Will Make Crashes Worse

+ Market Absurdity Squared: There Is Now An ETF ETF

+ Hedge Fund CIO: “Expect Enormous Losses In The Next Correction As There Is No Price Discovery In Index Investing”

http://www.zerohedge.com/news/2017-04-27/etfs-are-weapons-mass-destruction-fpa-capital-warns-we-could-get-onslaught-selling

Bonds

BlackRock, the world’s biggest money manager, said the marketplace for corporate bonds is “broken” and in need of fixes to improve liquidity.

http://www.zerohedge.com/news/2014-09-23/blackstone-slams-broken-bond-market-despite-record-bond-issuance-driven-stock-buybac

When Will The European Super-Bubble Pop?

+ Over $1 trillion worth of Italian bonds actually have negative yields.

+ Once the ECB—the only large buyer—steps away, Italian government bonds will crash and rates will soar.
Soon it will be impossible for the Italian government to finance itself.
Italian banks—which are already insolvent—will be decimated. They hold an estimated €235 billion worth of Italian government bonds. So the coming bond crash will pummel their balance sheets.

http://www.zerohedge.com/news/2017-06-10/when-will-european-super-bubble-pop

+ BofA: “2018 Is When Bond Investors Again Get Very Concerned About Fundamentals”

http://www.zerohedge.com/news/2017-08-16/bofa-2018-when-bond-investors-again-get-very-concerned-about-fundamentals

So don’t invest. But time will prove it is not different now. That’s a human conceit. — Garth

#154 Marka on 09.01.17 at 2:29 pm

“But they’re still going to raise rates. That’s the part you’re not seeing.”

Why? If CPI continues to weaken, and continues to get chronically weaker, they obviously have a big problem on their hands. At some point the BoC will have to revert to being data driven, and the data shows clearly the need not only for the lack of rate hikes, but actually rate cuts.

As far as the debt bubble, the economy is taking care of that already by paring back credit. Bubbles in specific areas are better addressed with OSFI policy around regulatory capital requirements for credit against specific types of assets which are likely to not perform very well. Which in fact appears to be what has happened with the litany of requirements instituted over the years on mortgage loans and HELOCs including the qualification standards. As pointed out as well, the crackdown that marked the top of Canada’s housing market at the CMHC, initiated by Flaherty in Budget 2013, has been highly effective in reducing CMHC’s exposure.

Give it up. You lost. The hole is growing deeper. — Garth

#155 Dan on 09.01.17 at 3:25 pm

Rich are different just because they have more money.
Rich in Scandinavian countries have no problem paying high taxes. They do not emigrate to paradise like USA or Canada. Different kind of material is settling here.

#156 gary smith on 09.01.17 at 3:58 pm

Thanks for the explanation, MF.

___________________________________________
All the hype, talk about bubbles, excessively high SFH prices in relation to local economics (wages), speculation, etc is moot to this millennial.

We are still parents of two young kids looking to find a place in our “hometown” of Metro Vancouver- not as an investment vehicle, but to raise our kids for the next 30 years or however long the next generation plans on living in our basement.

And NOT in a location in arm-pit BC (Abbotford, Surrey, etc) that requires a 3 hour round trip drive for work.

Here is hoping for a crash!

#157 Braj on 09.01.17 at 4:27 pm

#152 The holy trinity #diversification #balance #liquidity exemption? on 09.01.17 at 2:17 pm
Hmm…

#stockmarketgoesupforever
#thistimeisdifferent
#buybuybuy

Nope. #diversifaction. #balance. #liquidity. — Garth

These are general historical observations, based on average, in the past, which is different in profound ways from the present. They are not sufficiently scrutinized, if at all, although each financial prospectus starts with an other wisdom, also based on historical observations and average average: “past results are no indication of future performance…” Would the holy trinity of #diversification #balance #liquidity be exempt?

Any counter argument against these particular concerns, dissecting and analyzing the generic broiler template of #diversification #balance #liquidity?

ETF

+ The flood of money into passive products is making stock prices move in lockstep and creating markets increasingly divorced from underlying fundamentals.
As the market moves ever higher, there’s the potential for a sharp decline. The U.S. ETF market has about $2.7 trillion in assets, the majority in products that track indexes.

+ Shift To Passive Investing Increases Systemic Risk, Will Make Crashes Worse

+ Market Absurdity Squared: There Is Now An ETF ETF

+ Hedge Fund CIO: “Expect Enormous Losses In The Next Correction As There Is No Price Discovery In Index Investing”

http://www.zerohedge.com/news/2017-04-27/etfs-are-weapons-mass-destruction-fpa-capital-warns-we-could-get-onslaught-selling

Bonds

BlackRock, the world’s biggest money manager, said the marketplace for corporate bonds is “broken” and in need of fixes to improve liquidity.

http://www.zerohedge.com/news/2014-09-23/blackstone-slams-broken-bond-market-despite-record-bond-issuance-driven-stock-buybac

When Will The European Super-Bubble Pop?

+ Over $1 trillion worth of Italian bonds actually have negative yields.

+ Once the ECB—the only large buyer—steps away, Italian government bonds will crash and rates will soar.
Soon it will be impossible for the Italian government to finance itself.
Italian banks—which are already insolvent—will be decimated. They hold an estimated €235 billion worth of Italian government bonds. So the coming bond crash will pummel their balance sheets.

http://www.zerohedge.com/news/2017-06-10/when-will-european-super-bubble-pop

+ BofA: “2018 Is When Bond Investors Again Get Very Concerned About Fundamentals”

http://www.zerohedge.com/news/2017-08-16/bofa-2018-when-bond-investors-again-get-very-concerned-about-fundamentals

So don’t invest. But time will prove it is not different now. That’s a human conceit. — Garth

Can we all agree that Zerohedge is not a source for anything but Apocalypse forecasts..

Wheres that Apocalypse 2016..2017 dude?

#158 Figmund Sreud on 09.01.17 at 5:04 pm

#149 Bytor the Snow Dog on 09.01.17 at 1:33 pm

Ah! Feeling cocky, eh? It’s most likely because there’s something you don’t know, … like I said, one needs to learn facts to spout confidence.

In your case, I suggest reading history, first – American Standard History, … say, starting with the second intrusion of the Japanese into Korea in 1876 in search of iron ore, and subsequent follow up intrusion by the Americans in 1882.

Anyway, this just a suggestion, a suggestion to get familiarized with the facts. Otherwise, confidence without the facts spells ignorance, … ig·no·rance

Best,

F.S. – Comox, BC.

#159 TheDood on 09.01.17 at 6:10 pm

#131 Howard on 09.01.17 at 11:20 am
#141 Dolce Vita on 09.01.17 at 12:27 pm

So this fellow’s retirement (and his family’s future) hinges on him being able to pay off half a dozen RE investment properties in the YVR area sometime before he retires and settles into the good life? I wish him best of luck. Is not what I’d do that’s for sure, but given YVR’s recent run-up in RE prices he’s one of thousands trying to do the same. Is hard to not drink the RE koolaid here on the west coast. Everyone’s been brainwashed for 20+ years here, is like an epidemic. Huge debt is normal, as long as its invested in real estate! Ask most homeowners here in YVR what they’re doing for holidays and the answer is always the same – “Oh, we’re staying home this year, a staycation” (is usually the same answer over and over, year after year) – usually because all their earned cash goes into the mortgage. Not that YVR is a bad place to vacation, its quite wonderful actually, is like living in a park!

I’m rambling, but I really wish Canadians would pull their heads out of the quicksand and get off the RE bandwagon. Buyers need to back away, disappear, and don’t even give RE a sniff until it collapses completely. This fake economy of selling each other over priced housing is such a farce!

#160 Stan Broock on 09.01.17 at 6:14 pm

#14 Victor V on 08.31.17 at 6:53 pm
TD Bank CEO talks about the economy, real estate and the upcoming OSFI stress tests:

http://www.bnn.ca/masrani-brushes-off-great-white-short-argument-as-canadian-economy-bounces-back-1.844390

—————————

Very interesting interview. An eye opener actually on how far wishful thinking can go.

1. It appears the the deeper in credit you get, the higher GDP you have (as you consume and spent more).

2. It is highly likely the the the shockingly higher official GDP growth is due to understated inflation.

3. There is no economy outside of financials, some resources and limited services.

Go to any grocery, convenience, retail store and look for products made in Canada. 15 % of the merchandise, max.

So how is that economy sustainable and why not to short it?

1. The economy is not sustainable. We have passed any rational limits in overflowing the biggest housing credit bubble in history.

2. The economy is house of cards that will imminently disintegrate/collapse.

3. The CAD is grossly overvalued. In Europe you can get twice the mileage of your CAD as purchasing power than in Canada.

————————

I will absolutely keep non-leverage long term shorting of CAD. Or short CAD economy in Euros.

The baby will blow up. it is just a matter of time.

We keep on borrowing close to hundred billions annually to spent on consumption.

The lights will go off suddenly, when no one expects.
It will be brutal.

#161 Victor V on 09.01.17 at 6:27 pm

http://www.cbc.ca/news/business/loonie-dollar-oil-1.4271691

As recently as Monday, the odds of a September hike were just under 1 in 4. As of Friday, however, the likelihood was up to 56 per cent — roughly doubling in a few days.

#162 Stan Broock on 09.01.17 at 6:30 pm

This week CMHC admitted the obvious. Changes to moister mortgages brought in last year have crashed loan volumes. Down an incredible 41% – right in the middle of the greatest housing boom in national history. “Volumes decreased largely as a result of the new regulations,” the agency said in an understatement. In fact, CMHC I left now with more than $100 billion in excess loan capacity, with new mortgage growth slowing to a crawl.

——————————-

As insane amounts of money are borrowed from the shadow lenders at much higher rates.

…………………………………..

The American stock market is at a record level, global growth is robust and there’s one thing central banks want for Christmas. Normalized rates. Those people who have spent the last eight years in cash, GICs or precious metals got it wrong. There was no rerun of 2008, nor will there be one. There’s no reason to believe markets will crash simply because the Dow has hit 22,000.

———————————-
1. Stock markets will be OK.
Agree

2. currencies will be destroyed. Agree. You cant reasonable and sustain-ably maintain currency valuations by issuing more debt.

3. Precious metals are an interesting ootpic.
When trust in currency fades, gold and precious metals will explode. It is imminent.
If bitcoin can go from 0.1 cents to 4.5 k USD anything is possible.

#163 Tony on 09.01.17 at 8:21 pm

Re: #159 Stan Broock on 09.01.17 at 6:14 pm

It appears the U.S dollar is heading down to the 80 level and then a retest of the 74 level. The obvious reason is to skirt a stock market crash in America for the next couple of months.

#164 BC Doc on 09.01.17 at 10:56 pm

http://globalnews.ca/news/3714143/justin-trudeau-no-apologies-tax-changes/

The video is something. If I read between the lines, I think the Trust Fund Kid just said he wants to chop me up and feed me to the “middle class” for dinner!

#165 Oft dleted much misaligned stock.picker on 09.02.17 at 11:55 am

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