Entries from December 2008 ↓

Through the course of this year people have accused me of spreading doom. Some political acquaintances suggested one reason (among countless) I lost in the last election was because people were irritated at me for saying their houses would fall in value. Interestingly enough, my former riding is turning into the Stockton of Canada, so I sure hope they listened to me, even if they voted for the other team.

As the year ends, there’s no satisfaction seeing my predictions materialize, because we’re entering a real estate-based collapse just as middle America did. And it will get far worse in 2009.

More evidence of that came Tuesday with the latest Case-Shiller house price index showing real estate to the south is heading for Depression status. Prices fell 18% in the last 12 months, on top of the dive in 2007. Homes in Phoenix and Las Vegas declined by another third in just a year.

This is a disaster. Median prices are crumbling by the most on record. Fully 45% of all sales in the US are now foreclosures and bank deals, and the biggest homebuilder told analysts in a conference call, “we’re in the midst of a downward spiral and the momentum is building.”

It’s building here, too. It’s just that there aren’t too many people saying what I am. And while Calgary is not Phoenix and the GTA is no Vegas, it is folly to think we’re immune from the contagion now sweeping through western society.
But, the dangerous myth lives on. Just hours after the latest US numbers flashed, a story moved to most Canadian newspapers containing this:

“House prices continue to plummet in the United States, but the consensus in Canada remains that the impact of the downturn will not be as severe here…Ted Zaharko, who owns Royal LePage Foothills Real Estate Services in Calgary, said Canadians are following the U.S. too closely and expecting the same market conditions to happen here. While prices and sales continue to fall in Calgary, he figures the market has bottomed out in the city that surpassed Toronto as the second-most expensive place to buy a home during this housing cycle. “We have people putting ridiculous offers in on a home and nobody is selling. People are saying ‘l’ll wait for prices to drop.’ It’s not going to happen,” says Zaharko. “

Well, Ted, I guess we’ll see about that. So will your buyers.

But, such denials are not new. I’ve been showered with them for the past year. And as the ideas contained in my latest book and on my new site seep out, I’m girding for a new chorus of what’s-he-smoking?

Cue the squirrels.

Eric Sprott, of Sprott Asset Management in Toronto is worth listening to. He’s telling clients, “Make no mistake – we are in a Depression. That’s right, it’s the dreaded ‘D’ word. And we are knee deep in it right now.”

Sprott points to car sales (down 37%), housing starts (down 47%), stocks (down 42%) and unemployment (250,000 jobs lost last month in the US, 66,000 here). Interest rates at zero are deathly worrisome, since they show central bankers are all out of bullets. Worse, the US deficit will hit $1 trillion, double any shortfall which came before. Massive bailouts now will mean a crash in the Yankee greenback later, followed by hyperinflation. America may well be in the process of bankrupting itself. And it’s our largest customer.

“This is a depression,” he says again, “one that has only just begun.”  Stocks will fall further. New unemployment will be massive. Real estate’s a rathole. Sprott’s safe havens: cash and gold.

It is against this background – fears of economic Armageddon punctuated by cries of denial – that the new year dawns, and that I raise my voice once again. Eventually opportunity will return. Houses and stocks will get too cheap not to buy. Markets will rally. But that could be a long time coming, and events in the meantime might range from difficult to extreme.

This is why my book deals not only with the growing odds of financial collapse and what to do about it, but also how to position for when morning finally arrives. Doubtless, there will be many ‘experts’ who refute my every word, as they did a year ago.

Finally, xurbia. Now in preview mode, it will be operational next month, at which time I will have more to say. Let me just give this background: It took me months and months to source the tools and knowledge I needed to keep my family safe through the potential events ahead. I wanted to gain more control over whatever might occur, and now I have it. If you share my views, I’m providing you with a roadmap. If you don’t, move on.

And if you think this is survivalist fear-mongering, why not run for the Conservatives?

Best Canadian prediction of the year: here

and…

…another one

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He was an institutional pollster, marketer, focus group leader and pundit. He’s served as a strategic advisor to the Greens’ Elizabeth May (after quitting in dismay). He’s a consultant and confidante to major corporate clients, and Dan Baril has been at the end of the phone when I felt in need of some political advice – one of the four people I trust.

A month ago I gave him a review copy of my soon-to-be-released book, After the Crash. He has today given me his response. — Garth

What if Garth is right again?

From Dan Baril’s blog, published Dec. 29

Chapter-after-chapter the crap scares out of you with near indisputable facts. Then, in the final chapter of his new book After the Crash, Garth Turner outlines three economic scenarios; Probable, Possible, and Worst Case. You’ll have to read the book yourself for the details when it’s available in mid-January, but that’s not what most caught my attention when I read my “review copy” of what will surely be another best-seller.

In that same final chapter, warding off the alarmist label some are sure to affix to his leathers, Turner rhetorically poses and answers two critical questions “…should a sensible, non-alarmist person worry about the “possible” or “worst case” scenarios above? Or is this stuff too over the top? The answer lies in the nature of risk. If the possibility of something happening is not 0%, then a prudent person usually does something to protect against it.”

The question I kept asking myself as I was reading, and since, is how much above zero percent probability are the Possible or the Worst Case scenarios, and to whom does one look for the answer?

Should Canadians look to a Prime Minister and his sidekick Minister of Finance who a few months ago told Canadians “our economic fundamentals are as solid as the Canadian Shield” or to the guy about who the Canadian Press says “…more important may be that the former MP’s alarmist book about collapsing housing prices in Canada – “Greater Fool,” which he began writing last December when the sky seemed to be the limit – has turned out scarily bang-on.”

Far from being just another “how to” book – although there is some of that too – reading between the lines of After the Crash, there is a far more fundamental message about taking back that which a few decades ago many of us unwittingly gave up. Control.

Control of what is another question, as is how much and in what denomination.

Garth makes it amply clear the decision about taking control is a very personal decision which ultimately each of us has to make on our own. The book doesn’t make the decision for you but there is certainly no shortage of facts, figures and a historical context to help the reader decide. By the end of the book it’s also clear what decisions and which path Garth has, and is, taking.

Looking back at 2008, I will be kind and generous. I won’t say politicians did what they did on purpose. Instead I will let them get away with saying they didn’t know – read as they proved their incompetence.

Truth is Misters Harper, Flaherty, Ignatieff, Layton, Duccepe, and their Provincial equivalents haven’t a clue what’s truly in store for 2009. I watched Stephen Harper’s year-end interview with the CTV duo, Robertson and Fife, and I can’t for the life of me figure out why the broadcaster needed two questioners of a man with no answers. The interview was about nothing like no show of Seinfeld ever was.

For certain and just as the real estate industry did a year ago and continues today, the government doesn’t see its role as telling the truth so much as it believes in self-servingly creating and maintaining an illusion and working to prevent widespread panic. Fair enough, there is no sense in making matters worse, but at some point – preferably sooner than later – Canadians need to draw the line on blatant deceitfulness driven by greed and power-hungry partisanship.

Politics is the blood sport it’s reputed to be. That much we know. But as of quite some time ago the end-game seems no longer about what political good is done with the winnings, rather it’s all about ensuring no end to the game of politics.

For those on the inside and those just on the outside it’s all good fun and terrific theatre. We get to play directly as strategists or indirectly as colour commentators about who’s right, who’s wrong, anticipated next moves, and an endless stream of differing analysis. But as my father used to say when we kids horsed-around too much, it’s all good fun until somebody gets hurt. And by some measure of account, it appears 2009 is going to hurt plenty.

To minimize the hurt each person has to decide for themselves how much of the Probable scenario they can weather or how much above zero percent is the probability of Garth’s predictions of the Possible Case and Worst Case scenarios. Rationalists may ask why plan for the less likely scenarios, and perhaps that’s a good question so long as you trust the person attaching percentage probabilities to each scenario.

True to form, the best line in After the Crash is a taunt at the end of chapter one; “…after you read the factors which got us here, and the trends now propelling current events, the ultimate decision is yours on how aggressively you prepare, or how much you pray you don’t have to.”

Ahem, Dear God…