Economic update

economy

Recently I posted that the economy will get better. The road back will be led by the stock market, and the rally will be spectacular. Things, I said, will change in days, not months.

This will happen. But jobs, real estate, consumer spending and family finances will take years to catch up.

You see this today and will again Tuesday. Things are getting damn awful, which will lead us closer to the bottom of an abyss that must be plumbed prior to any recovery. This final leg down will be numbing and difficult. Hang on.

* The latest GDP numbers, which measure the size of the economy, are dismal. Canada’s activity collapsed in the last three months of 2008 by the rate of 3.5%. What does that mean? Well, a 10% contraction over a year equals a depression.

* This disaster mirrors a similar one in the States. In case you missed it (and if you follow the MSM, you did), their GDP tanked by just over 6% in the final months of last year. This is also technically known by economists as a ‘freaking disaster’.

* Insurance giant AIG, recipient of $150 billion so far from Washington, has reported a $62 billion quarterly loss, which is resulting in another bailout of $30 billion. This comes just three days after Washington started nationalizing banks, with a 40% share of Citi. It already owns 80% of AIG. Where does this end?

* Tomorrow the Bank of Canada will cut interest rates again, the seventh time in a year. The key rate will drop a half point, taking it to 0.5%. This is a first. Never happened before. And yet central bank policy – slashing rates, pumping $40 billion into the financial system, even accepting dodgy corporate bonds as collateral for loans – is not working. Lending is still seized up despite these billions in laxatives.

* Meanwhile, on the ground, real estate will wither more as job losses infect society. In the coming weeks we will hear about television stations, newspapers, mines, parts plants, retailers and manufacturers shedding workers or simply folding. The car companies will not be allowed to fail, but plants will close and the workforce will at least halve. This means many families will no longer be able to afford their homes, as legions more struggle to make payments on mortgages worth more than their houses. The headline will be negative equity.

On this blog I’ve gone on record as saying residential real estate prices will decline across Canada on average by a minimum of 15% in 2009. I’m sticking with that. I’ve also said the defining story of the year will be job loss. It already is – even though we’ve just started to see the impact. The economy will shrivel and shrink. Big names will fail. Those in politics, media and industry who tried to talk things up will look like misleading and false prophets.

And then, at the moment of despair, it will be over.

At least, for financial markets whose rally will look groundless and reckless. But a year before anyone starts feeling better about a job and three years before houses start selling again, equities will emerge from a dark night.

It will be the moment you want oil not gold, paper not bricks, cash not debt and rivers of courage.

Meanwhile…

As the survey below shows (today’s Globe and Mail), while most people feel a lot worse about the economy than they did months ago, almost three-quarters think the mess will be over in a  year. Delusional.

While the financial markets will be higher, daily life will be worse, real estate will be languishing and unemployment more acute. It will be three years before Canadian housing finds a floor and jobs start to trickle back. Meanwhile, thanks to hundreds of billions in public money, shareholders will be doing just fine.

Unfair. Get used to it.

survey

142 comments ↓

#1 Bill-Muskoka (NAM) on 03.01.09 at 9:39 pm

Garth,

Gee, I would be trembling except I know what life is really about. I am BREATHING, EATING, and WARM! I also intend to remain that way!

Did I add debts current, cash flow good, and work in the pipeline?

Oh, and I don’t gamble in the markets and especially unReal Estate!

BTW, do you know Dr. Strangelove?

#2 Pat G on 03.01.09 at 9:44 pm

Looks like we will have more crime. I guess the Tories will just stimulate the economy by building more jails and hiring more jailers.

As Garth has suggested in his latest book, networking with friend or neighbours would be a good idea. We can try to help each other. Now is a good time to make friends if you don’t have any — and donate a bit to those who will try to help.

#3 hmm.. on 03.01.09 at 9:53 pm

Well, of course all this will happen. For sure !

However the real oracle knows when,and timing is most
important.
How about that?

#4 Sail1 on 03.01.09 at 10:02 pm

Garth wrote:

On this blog I’ve gone on record as saying residential real estate prices will decline across Canada on average by a minimum of 15% in 2009.

15% from early 2008 or late 2008?

#5 Bobby G on 03.01.09 at 10:03 pm

Check out the SP500 index
http://finance.yahoo.com/echarts?s=%5EGSPC#chart8:symbol=^gspc;range=19920701,20090227;indicator=sma(50,100,200);charttype=candlestick;crosshair=on;ohlcvalues=0;logscale=on;source=undefined
A double top and violating the neckline
Where is the support going to come in?
Could be a long way down

#6 ThumbsUp on 03.01.09 at 10:08 pm

Thanks Garth for the updates and analysis as always.

Canadian RE is catching up to the US on the way down.

#7 North Vancouver Citizen Jr. on 03.01.09 at 10:09 pm

Garth, do you mean to say that

….the U.S. Dollar continues to gain value vs the Euro and the Ruble as Europe and Russia continue to implode ?

….that as China invades Siberia…it leads to war with Russia?

…..that the U.S. liberates Cuba?

…..that Singapore replaces London as a Financial capital?

…and that Vancouver Proper morphs into the next Financial/Trade/Leisure capital of North America?

tia

#8 Bob on 03.01.09 at 10:15 pm

Vancouver will be a hole in the ground…

#9 Apocalypse Now on 03.01.09 at 10:26 pm

In a year of greater and greatest economic disasters ever, in a year of firsts such as BOC rate going to 0.5%, and lower I’m sure, in a year when giants of economy like Germany have failed bond sales, in year when there will be more money printed worldwide than in all of history, in such a year even God might hesitate to forecast any emergence of equities from a night that is beginning to resemble more and more like a black hole into which the light of all stimuli keeps vanishing.

Methinks Mr. Turner doth contradict himself; if things truly are as bad as he proves they are, then even a return to a semblance of normalcy where equities will trade at pre 2000 levels is a pipe dream that will probably not be fulfilled in the lifetimes of anyone over 40. Mr. Turner seems to have become quite adept at straddling the fence, not wanting to commit himself to one forecast. Either we will have the mother of all economic storms, i.e. a greater depression or things will be hunky dory again in the not too distant future – which one do you forecast it will be Mr. Turner? Granted there may be a sucker’s rally this spring but neither the Dow nor the TSX will end the year above 5000! Let’s revisit this post in 01-2010 and see which scenario plays out!

#10 canadian citizen on 03.01.09 at 10:29 pm

you’ve mentioned Robert Prechter’s forecast before, so for the record, Bob is forecasting the possibility of a bear market rally due to the short side of the trade being overly crowded. He sees the Dow at much lower values going forward….See Bob’s interview on BNN (~6:45 mark in video clip) http://watch.bnn.ca/squeezeplay/february-2009/squeezeplay-february-26-2009/#clip144191

#11 Crikey on 03.01.09 at 10:33 pm

“On this blog I’ve gone on record as saying residential real estate prices will decline across Canada on average by a minimum of 15% in 2009.

15% from early 2008 or late 2008?”

I’m assuming that means a drop of 15% from the beginning of 2009 to the end of 2009. Nationally, that sounds about right- the frothier the pre-bubble market, the harder the fall.

#12 squidly77 on 03.01.09 at 10:37 pm

i can only hope that the bottom is near
but hope only goes so far
pandorahs box has been opened and hope is all we have

eastern europe will bring down western europe and russia
which will bring down the US which will take down the world and then and only then we will enter into a brave new world

After Prometheus’ theft of the secret of fire, Zeus ordered Hephaestus to create the woman Pandora as part of the punishment for mankind. Pandora was given many seductive gifts from Aphrodite, Hermes, Hera, Charites, and Horae (according to Works and Days). For fear of additional reprisals, Prometheus warned his brother Epimetheus not to accept any gifts from Zeus, but Epimetheus did not listen, and married Pandora. Pandora had been given a large jar and instruction by Zeus to keep it closed, but she had also been given the gift of curiosity, and ultimately opened it. When she opened it, all of the evils, ills, diseases, and burdensome labor that mankind had not known previously, escaped from the jar, but it is said, that at the very bottom of her box, there lay hope.
http://en.wikipedia.org/wiki/Pandora's_box

#13 squidly77 on 03.01.09 at 10:39 pm

http://en.wikipedia.org/wiki/Pandora's_box

#14 Gord In Vancouver on 03.01.09 at 11:23 pm

On this blog I’ve gone on record as saying residential real estate prices will decline across Canada on average by a minimum of 15% in 2009. I’m sticking with that. I’ve also said the defining story of the year will be job loss. It already is – even though we’ve just started to see the impact. The economy will shrivel and shrink. Big names will fail. Those in politics, media and industry who tried to talk things up will look like misleading and false prophets.

______________________________________

By now, former real estate pumpers are begging for a 15% decline in prices in 2009.

#15 M I K E in Ajax on 03.01.09 at 11:38 pm

I was talking to a friend of mine today who works for a part plant in Scarborough. He said he will be let go in June as the plant is closing down, He’s been there for 15 yrs or so.

Bumpy ride ahead.

#16 Shawn on 03.01.09 at 11:47 pm

Yep, things are bad…

I think though that the 6% GDP contraction in U.S in Q4 and the 5% in Canda Q4 are annualized numbers. So I don’t think it is 5% in 90 days. (hope not!)

Media have a way of reporting these things without saying if a number is annualized so I blame Garth’s sources.

Anyhow, bottom line, Garth, I think is correct. Much more bad stuff coming and but market will at some point rally hard up.

#17 Investx on 03.01.09 at 11:50 pm

#8 Bob on 03.01.09:

“Vancouver will be a hole in the ground…”

It already has one… where the Ritz Carlton was supposed to be.

#18 Da HK Kid on 03.01.09 at 11:54 pm

I believe what Garth says about 15% RE down in 2009 means exactly that. Take the 2008 drops, add another 15% for 2009, and maybe 8-10 for 2010, 5-7 2011 is my best estimate. Do you honestly think the US RE market is bottom this year??? NO BLOODY WAY! Look at another 15% this year, 8-10 2010 and Canada trailing by 10-12 months.

You can gauge via GDP or Unemployment but either are going to show you the way down.

10+% Unemployment in US & CAN for sure!

And this is not real unemployment as it doesnt account for the real picture only claims. Estimate real unemployment at 17-18% then estimate how many people will be defaulting on mortgages.

Price returns to 2003 are completely possible!

#19 JET on 03.01.09 at 11:58 pm

Garth,
A couple of posts back you mentioned that oil is headed to the $20 range. Do you still see this happening before it shoots back up? (My guess would be it depends on what weighs more heavily: continued decreasing demand from tanking worldwide economies, or, OPEC cuts, Israel bombing Iran’s nuclear plants, Israel retaliating against Hamas, North Korea shooting missiles, China recovering faster than expected, etc).

#20 Jack the Lad on 03.02.09 at 12:04 am

I think North Van Citizen is just trying to wind people up. He is kinda funny though.

I’m still not sure how we will know when the absolute bottom in the stock market will be reached.

I suspect there will be several small rallies on the way down which could be mistaken as signs that the bottom has been reached and passed.

Very tough to say.

#21 Dan in Victoria on 03.02.09 at 12:06 am

HSBC plans to halt personal loans and mortgages in the USA http://www.reuters.com/article/ousiv/idustre5202ap20090301 Love that picture Garth.Well won’t be the first crunch we’ve gone through.The warning signs have been here in Victoria for a couple of years,kind of like the tide going out before the big tidal wave.Head for high ground.All the fools are down on the beach looking around.Dan

#22 Adeptus on 03.02.09 at 12:06 am

Most of your article is correct, except the beginning and end.

“…the economy will get better. The road back will be led by the stock market, and the rally will be spectacular. Things, I said, will change in days, not months.”

Somebody hold him to that, because he will be miserably wrong. Ain’t no rally coming that will stick around for more than a few weeks, and only after a drastic fall. The Trillion dollar bailouts will take years before they prop up the markets, and we won’t see Dow/TSX above 12,000 for 5 years minimum, maybe 10!

We’ll see Dow at 6,000 or lower by end of 2009.

“It will be the moment you want oil not gold, paper not bricks, cash not debt and rivers of courage.”

Wrong again. Oil will do didly squat this year. In case you haven’t been paying attention, OPEC is cutting supply behind the curve thus too little too late. The curve is the deflationary spiral increasing unemployment, killing manufacturing and thus killing the consumption of oil. Oil will not stay above $50 for most of 2009.

USD may still rally further until some eventual cataclysmic explosion to the down side – god help us all whenever that happens.

Gold is the best bet in town, though some potential downside may arrive along with the upcoming stock market dives, still it will beat the markets by a LOT.

Paper will be worthless, and bricks (housing) will continue to depreciate as per your predictions (the only right one?).

#23 01 0111001001111000110000001 on 03.02.09 at 12:13 am

Hey “Must coke-ah-Bill” and “deke the geek” ….those werent my words, look here

http://www.radioliberty.com/stones.htm

“On one of the highest hilltops in Elbert County, Georgia stands a huge granite monument. Engraved in eight different languages on the four giant stones that support the common capstone are 10 Guides, or commandments. That monument is alternately referred to as The Georgia Guidestones, or the American Stonehenge. Though relatively unknown to most people, it is an important link to the Occult Hierarchy that dominates the world in which we live.
The origin of that strange monument is shrouded in mystery because no one knows the true identity of the man, or men, who commissioned its construction. All that is known for certain is that in June 1979, a well-dressed, articulate stranger visited the office of the Elberton Granite Finishing Company and announced that he wanted to build an edifice to transmit a message to mankind. He identified himself as R. C. Christian, but it soon became apparent that was not his real name. He said that he represented a group of men who wanted to offer direction to humanity, but to date, almost two decades later, no one knows who R. C. Christian really was, or the names of those he represented. Several things are apparent. The messages engraved on the Georgia Guidestones deal with four major fields: (1) Governance and the establishment of a world government, (2) Population and reproduction control, (3) The environment and man’s relationship to nature, and (4) Spirituality.

In the public library in Elberton, I found a book written by the man who called himself R.C. Christian. I discovered that the monument he commissioned had been erected in recognition of Thomas Paine and the occult philosophy he espoused. Indeed, the Georgia Guidestones are used for occult ceremonies and mystic celebrations to this very day. Tragically, only one religious leader in the area had the courage to speak out against the American Stonehenge, and he has recently relocated his ministry.

THE MESSAGE OF THE GEORGIA GUIDESTONES

1. Maintain humanity under 500,000,000 in perpetual balance with nature.
2. Guide reproduction wisely – improving fitness and diversity.
3. Unite humanity with a living new language.
4. Rule passion – faith – tradition – and all things with tempered reason.
5. Protect people and nations with fair laws and just courts.
6. Let all nations rule internally resolving external disputes in a world court.
7. Avoid petty laws and useless officials.
8. Balance personal rights with social duties.
9. Prize truth – beauty – love – seeking harmony with the infinite.
10.Be not a cancer on the earth – Leave room for nature – Leave room for nature.

#24 Expat on 03.02.09 at 12:13 am

Good reality check to counteract the guns, ammo, and MRE set. Yes, the average RRSP is going to vaporize, maybe to rebound in the next 5 or 10 years, but as a society nobody starves and people get adequate shelter and health care. Adequate meaning an unemployed person in Canada is still likely to have a warm and safe small apartment/basement suite that is far better than 80% of the planet goes home to. Adequate does not mean marble countertops and stainless steel appliances.

Vancouver will not become a hole in the ground, but will be what it actually is, a very pleasant and liveable city where the well off from Canada, the Pacific Rim, and other neuveau rich (Russia before the oil crash, various arab conties, etc.) come to relax (unfortunatelly not to start primary industries or tech ventures) in safety and, well, boredom. The real estate bubble just gives the illusion of wealth being created. As world cities goes, it will remain a backwater as far as business and finance goes, heck even the dodgy VSE finally had to be shut down after the Bre-X “bubble”, but then again that part of the appeal, besides the beautiful setting and, untill levelling the West side for the condo madness, decent city planning. Think of it as Hong Kong on qualudes. Really, really strong qualudes. Or BC bud.

#25 Eric Dumas on 03.02.09 at 12:31 am

Harper’s cuts…

I guess Harper was a suicide bomber in a previous live the way he likes to play with dynamite…

His new sadistic kick is to try to choke CBC by cutting their budget.

In the last year or so, Harper played that game at least two times and he lost every time:

a- back during the last the last Federal Election, he tried to cut the budget for the arts for about 25 millions or so. His goal was to choke to death those artists from Quebec who tend to vote Bloc. Being a Quebecer, I saw his mistake right away. I told my Vancouver girlfriend that Harper had just given a shake to the coffin of the separatists, which were not doing good at the time. As a results, his numbers went straight down in the follwoing weeks. He ended up in a minority.

b- Before Christmas, he tried the bif CHOKE on all opposition parties at once by cutting their budget. Result: he had to shut down the Parliament for a while. He sure looked like a total moron on this on.

c- This time, he tries the big choke again on CBC, which tend to be Liberals.
Harper never thought about asking his buddies on the oil patch to start to pay taxes. The reason he did not ask them to cover the $60 million he wants to get from CBC is that his pals have no idea what taxes mean or look like. They never paid any.

PBS, BBC and CBC, etc. are the only places where you can get more than soundbites programes made in USA. Harper wants to kill CBC so we can get more good stuff like TMZ or Entertainment Tonight, which are buzzy selling us their Nashville and L-A artists.

Because of his inability to rise above rock bottom partisnanship, Harper will end up as the smartest Cockroach od Canadian politics. Smart enough to survive form minority govt. to minority govt. but not smart enough to fight for, defend, develop and promote the Canadian culture. He is selling out like Brian Mulroney did.

CHeers!

#26 Vancouver_Renter on 03.02.09 at 12:34 am

We’re not just 2 years behind the US with regards to real-estate. I think we’re only 5-10 years behind Mexico with regards to organized social unrest, crime, corruption, and drug wars.

Mexico is losing its battle with organized crime. Have you been reading the news about this? I can easily see Vancouver, if not much of Canada, going that way as we enter a depression and life gets really difficult.

Once the reality of plunging tax revenue results in reduced resources for law enforcement and the criminal justice system, things will get even more ugly than they already are. Add to this the desperation of citizens who need to earn a buck anyway they can in times when jobs are unavailable.

Canada will go down one of two paths; either we get really serious about this issue or we lose our country to crime. Getting really serious = really serious sentencing. Every time I hear of a bad guy shooting someone in Vancouver (which is now usually once a day), he is always “known to police”. If I were in charge, we’d have “3 strikes and you’re out”. “Out” would be life in prison or the death penalty.

Unfortunately, kind and politically-correct Canada is probably going to be ravaged by organized crime in the tough times ahead. My US friends say they feel less safe in Vancouver than at home in Texas.

I’d write more, but I think I hear gunshots… again…

#27 Might As Well Be Concerned on 03.02.09 at 12:37 am

http://www.reuters.com/article/newsOne/idUSTRE51P2SJ20090226

#28 Seadoo-bear on 03.02.09 at 1:47 am

I need to get this question out to a smarter person than me.
If I have a $300 K mortgage and the term comes to an end in August. At that time the value of my house is $235 K Will the bank appraise the house and still give me the $300 K mortgage or will it only give me a portion of the $235 K value of the house??
I know I’m already underwater now.
I’m wondering what is coming down the road.

#29 barb the proofreader on 03.02.09 at 2:27 am

The photo reminds me of tons of dead fish at a Grand Bend beachfront cottage we stayed at a couple of years ago. They said the fish die due to run-off from streams.
I practically grew up at Ipperwash, Pt. Franks, Kettle Pt. being only 40 min away — still can’t swim in Lake Erie but you could in Huron 50 years ago. Gone are the days.

#30 Future Expatriate on 03.02.09 at 4:36 am

Just three questions: Exactly where is the money for this massive paper rally going to come from, and 2: Exactly what is going to convince shell-shocked investors to believe in the ponzi paper scheme ever again in their lifetimes?

I know people are lemmings and the world is now filled with idiot daytraders and their computers, but 1929 effectively put an entire world off paper for decades.

What is going to reduce this crisis back to mere “business-as-usual” as far as the paper markets are concerned? World War?

#31 HalifaxFamily on 03.02.09 at 5:19 am

Garth – can you explain the funny house price increases in Halifax-Dartmouth?

#32 GenXer on 03.02.09 at 6:10 am

Yes! Great post Garth. Lately I haven’t agreed with some of your posts, but this one is bang on. It’s like a boxing day sale for equities and oil out there – unfortunately it feels like everyone is too hung over from turkey dinner to see it. With these disastrous GDP numbers ready to be announced it feels like the next 3 months could be the bottom for equities.

Housing dropping by 15% – mathematically it should. Velocity of housing sales in the eastern GTA continues to defy logic though. It’s like someone forgot to tell young couples that we’re in a global repression.

Unfortunately too many people are still hanging on to the notion that real estate is going to be their retirement income. I guess it’s easier to believe that you can make enough to retire early by living in a house than actually working your [email protected]@ off at a 50% tax rate to try and squeak by with enough money to have a life after work.

#33 Grantmi on 03.02.09 at 7:10 am

I just love how one of the biggest Vancouver Real Estate shills – Ozzie Jurock-off as he continues to spout dribble about how great the Lower Mainland RE is… and you better get in now!!!!

These guys and others, have now resorted to publishing info. magazines about their properties and inserting them into the Global chain of papers like the Vancouver Province or Vancouver Sun. Trying to pawn them off as life style mags, or home reno mags. HILARIOUS!!!

I love Ozzie’s latest quotes (page 52) in this weekends edition of – Westcoast Home and Design Magazine (March/April 2009).

I love these:

“The market is what people think it is … and what they hear/tell and retell about it. And fear is more powerful than euphoria!”

“Anyone buying a BC home in 1987, 1991 or 1974 would have shared in the largest real estate price appreciation in history.”

So let me get this straight!

What’s next Ozzie…. when RE drops another 15% – 20% this year in value… you’re going to start quoting RE prices going back to the 1950’s and 1940’s?

and… Tell people who have lost their jobs.. and can’t pay their mortgages…. that the market is down because of the whisper factor.

He makes me puke!!

#34 Mike B on 03.02.09 at 7:17 am

Missing in this latest spate of financials… Pension fund managers are as feable at managing cash as amateurs in spite of their self acclaimed expertise . Quebec fund down some 25% or 40 Billion . Other pensions are down 7% -15%.. To add insult to injury the managerd shrug it off arrogantly by indicating others are down 30% such as Warren Buffet.
Given the belief that the market is poised to take off (not my belief) perhaps these overpaid blowhards should go long on the market. What’s there to loose except other people’s life savings!!

#35 Grantmi on 03.02.09 at 7:45 am

One more comment about the WCH&D mag.

The editor – Jodie Warren claims that we’re heading for a recovery.. because Ipsos Reid’s recent Feb. 2009 survey says so.

According to the IPSO…. 54.2% of Lower Mainland (Vancouver) residents THINK THEIR HOME WILL BE WORTH MORE THEN TODAY!!!!!!

Snap shot: http://i42.tinypic.com/27xgzrm.jpg

Actual survey: http://tinyurl.com/IpsosReid-BC-Feb09

Baaaahhhhhhaaaaa!! (Shepherds need not apply)

;-)

#36 Sondra on 03.02.09 at 8:03 am

#28 Seadoo Bear

“If I have a $300 K mortgage and the term comes to an end in August. At that time the value of my house is $235 K Will the bank appraise the house and still give me the $300 K mortgage or will it only give me a portion of the $235 K value of the house”

The answer is Yes, and No.

No if you shop your mortgage out to another lender.
No if the original lender knows they can get the mortgage repaid by CMHC or GE Capital.

Did you pay this fee when you purchased? You did if you purchased with less than 25% down.

Yes with your original lender, if they have the funds to renew. Some smaller credit unions will not be in the position to renew your mortgage.
Yes, but only if you are in a steller financial position.

To renew your mortgage you may have to change your payment to a higher amount, and they may want you to pay a down a portion of your principle balance.

You can pay down your principle balance if you have a nest egg, cashable RSP, or be the sudden recipient of cash donation from a family member. All of these options have there own consequences, especially the family member option.

Do you really want to keep this house at any cost?
Do you have the resources to keep it?

You need to get financial advice immediately.
This week.
You may want to investigate the option of bankruptcy.

Worse things could happen, deal with the issue logically. Rule with your head here, not your heart.

#37 Toronto C9 Renter on 03.02.09 at 8:11 am

Re: the coming market rally

Agree it could happen, possibly even soon. But in my opinion bad idea to try to time it (Garth I realize that’s not what you’re suggesting)

Remember, for every 25% you lose on the way down, you need 33% up just to break even.

For me, best to wait until a bull market is solidly present before committing too much. The gains might not be as spectacular, but neither is the risk

My opinion

#38 Alex on 03.02.09 at 8:15 am

Garth, you were dead on for so long, but calling for a huge stock market rally and economic recovery is WAY OFF. We are in an economic death spiral, and this time there will be no recovery. This is the death of capitalism. 50 years from now, the TSE will be way lower than it is today. Unemployment will be permanently above 20%. Prepare for the dark decades to come.

#39 josh on 03.02.09 at 8:28 am

#28 Seadoo-bear on 03.02.09 at 1:47 am

I need to get this question out to a smarter person than me.
If I have a $300 K mortgage and the term comes to an end in August. At that time the value of my house is $235 K Will the bank appraise the house and still give me the $300 K mortgage or will it only give me a portion of the $235 K value of the house??
I know I’m already underwater now.
I’m wondering what is coming down the road.

Go re-mortgage now, while the prices are a little higher. If i was in your shoes i would most likely re sign now so my kids have a home to live in. Just prepare for the worst and hope for the best.

another option is walking away and renting, that would be my last resort but its an option……….

#40 Sandatola on 03.02.09 at 8:28 am

This article came to my inbox from the Mortgage Centre in Guelph:

National Article – National Truth?

A recent MACLEAN’S article revealed “The shocking truth about the value of your home”. The article focuses on a few examples to make their case, and they profess it to be the forecast for every market in Canada. The facts are that some markets will do better than others, in any economy, country, province, region or city. The first third of the article focuses on a poor fellow from Vancouver who has found himself in a quandary: no one to buy his current property, and being on the hook for another property he purchased firm (thinking he?d sell his property in time). He is now facing losing his deposit and potentially being sued by the developer. This has been happening all over Canada during the past 10 years. It’s called not pricing your property to sell and overpaying for another.

Something that should have been addressed is that predictions for a decrease in prices are an AVERAGE. Wondering what will happen in Ontario? Consider this: Real estate prices haven’t increased at the same rate as they have in Western Canada. In fact, they have been held in check by a manufacturing sector that has been struggling as a result of a declining auto industry and a high dollar. Remember when the Loonie was worth over $1.10 USD? That produced lay-offs, closures and a slowdown and as a result kept real estate appreciation in check. If we see a decline in prices here it will be much more subdued.

The article did make some interesting comments that I think are worth noting, such as using the futures market as an indicator of where real estate prices are headed. My only concern is that we never know if it is the actual market predicting a decline through the masses trading these future contracts, or if it is the traders (stock brokers) themselves who are “creating a market”. Look at the price of oil today and what a barrel of oil was selling for a year ago and you will understand what I mean.

Be careful what you read in the national news. It certainly doesn’t apply in Guelph. Bad news sells papers and magazines. Maybe we should ask the average person in Vancouver who bought their home in 2005 whose house was worth 38% more at the end of 2008 how they were feeling. I’m betting they were feeling pretty good.

If you could sell in Vancouver for last year’s price, I am sure you’d feel great. But that is changing by the day. As for Guelph, check your numbers. In January the dolar volume of home sales was down 20% year-over-year, unit sales decline by 16.5% and prices by 4.5%, while listings mushroomed by 31%. This is not a healthy market. — Garth

#41 Alex on 03.02.09 at 8:34 am

Not only will unemployment be consistently around 25%, but most of the people who remain employed will be government employees. The future is very dim for corporations and their employees.

#42 OttawaMike on 03.02.09 at 8:42 am

That’s a nice Global economy you have there, it would be a shame to see anything happen to it..

The US govt. will nationalize their crippled banks despite what they are saying and that will be the turning point for equities as Garth describes.

#43 North Vancouver Citizen Jr. on 03.02.09 at 8:48 am

Two pundits on this blog have been consistently accurate…Garth, who covers all of Canada’s Provinces and Regions, except for “Vancouver Proper” and myself, who covers only “Vancouver Proper”, which will become the next Financial/Trade/Leisure capital of North America.

…All readers are advised to follow these expert’s forsoothings.

#44 Sondra on 03.02.09 at 9:13 am

#43 North Vancouver Citizen Jr

“myself, who covers only “Vancouver Proper”, which will become the next Financial/Trade/Leisure capital of North America.”

You can not be an island of prosperity in a sea of misery.

Vancouver is currently propped up by illegal transactions relating to drug/crime money.

I am a 4th generation Vancouverite, you can’t fool me.

#45 Future Expatriate on 03.02.09 at 9:14 am

#43, for the love of God, Vancouver died the day Scully and Mulder left it. And it ain’t coming back.

#46 Dave on 03.02.09 at 9:51 am

Garth, you were dead on for so long, but calling for a huge stock market rally and economic recovery is WAY OFF. We are in an economic death spiral, and this time there will be no recovery. This is the death of capitalism. 50 years from now, the TSE will be way lower than it is today. Unemployment will be permanently above 20%. Prepare for the dark decades to come.

—————————————————-

now you sound like the exact opposite of those people that said “real-estate will never deppreciate”.

Can we get a bit of balance on these blogs? How do people come with 20 year forecasts like this?

#47 George on 03.02.09 at 9:58 am

First of all, really there is no official definition of a depression that I am aware of. It’s a make it up as you go along call. Second if these markets that you speak of weren’t rigged with counter party booby trap games on the downside and the manipulations of misreporting inflation and interest rate fluctuations, I think your old school calls might carry some weight. Modern financial engineering has become as sophisticated as subatomic particle physics. Being so certain about where your flock should throw their bucks reminds me of the famous stock broker adage, “why aren’t most stock brokers famously wealthy? The answer – they don’t believe the bullpucky the sell to their clients.

The financial markets resage the economy. If you believe the economy will continue to contract for many years, I suggest you buy a cabin and a S&W. — Garth

#48 InToronto on 03.02.09 at 10:00 am

what happened to this blog post? it mysteriously changed from reading GDP contraction “will be worst in our lifetimes”, and 5%, to reporting a 3.5% decline. hindsight 20/20?

The first version was written 12 hours before the numbers were released, based on best available estimates. The second version reports the actual numbers. You want accuracy, no? — Garth

#49 Keith in Calgary on 03.02.09 at 10:01 am

I am going to report the February RE numbers for Calgary from the truthful point of view…….as opposed to that position espoused by those who make their living flogging cardboard boxes on the frozen bald assed prairie we call home……

The SFH average price is now $415,568…..down $90,352 from the 06/07 peak……a 17.8% decline.

The CONDO average price is now $268,970…..down $63,267 from the 05/07 peak…..a 19.0% decline.

The SFH sales volume is now 825…..down 1,447 units from the 03/07 peak….a 63.6% decline.

The CONDO sales volume is now 343…..down 683 units from the 03/07 peak…..a 66.5% decline.

Listings are rising again……up almost 20% from their lows. And spring isn’t here yet……

#50 CalgaryRocks on 03.02.09 at 10:07 am

#38 Alex

Take your pills. This is not the end of capitalism. This is how capitalism works. Boom bust, constant destruction and renewal.

I do agree with you that societies that are not free market based have to endure higher unemployment rates and an overclass of well fed public sector parasites.

I may add that the public sector parasites feed off the corporations so if their ‘host’ is doing poorly so will they.
It is therefore in their best interest to keep the host alive. Of course parasites are usually just blood sucking creatures that are otherwise very stupid so they may not realize that. See David Miller and what he’s been doing to Toronto.

#51 smwhite on 03.02.09 at 10:19 am

#9 Apocalypse Now

5000 is pretty scary, but very probable. Then again, from top to bottom in 1929 the market contracted from a ratio of 10 to 1. That would put the DOW at a height of 14K to low of 1400…

Boo!

I don’t think you can go wrong buying up commodity based Canadian companies at this point with a time frame of 3 – 5 or even 10 years. With gold at $950 and oil at $40, the historical 10 to one ratio for these two is out of whack. So is oil undervalued or gold overvalued? A little from side A, a little from side B.

So if the losses of 60 billion can cause the market to sway 2% – 3% before opening, whats going to happen when all companies start reporting that winter 2008 and spring 2009 were the worst in 35 years(1974 when the DOW touched 575).

Europe and Asia got tagged with 4% loses yesterday, two of the German markets were down 10% overnight…

Your crystal ball is as good as mine.

#52 barb the proofreader on 03.02.09 at 10:26 am

Acquaintances who are office and sales at several custom builders in Calgary (they have long since quit from the one below) talked of a development near Cochrane selling with no payments for one year.
I didn’t pay attention but I think I stumbled on it on a radio website. Out of curiosity I looked up price and terms 2 years ago.
Here’s an item 2 years ago
http://www.fyicalgary.ca/cgi-bin/publish.cgi?p=183989&x=articles&s=homes
and here’s the ad I saw on a radio site
http://www.youtube.com/watch?v=w4EpbQmti7k
Starting price is significantly lower, not to mention the one year free is probably new.

I now recall the feeling when condo prices dropped so dramatically in Alberta 20 years ago. It got ugly. But hey, the ad is tempting nonetheless. Garth, I just want a pretty kitchen.. is that so much to ask?

#53 InToronto on 03.02.09 at 10:27 am

“The first version was written 12 hours before the numbers were released, based on best available estimates. The second version reports the actual numbers. You want accuracy, no? — Garth”

Hmm, “best available estimates,” or not. According to the Globe economists were predicting a decline of 3 to 4 per cent while others were suggesting the numbers MAY be worse. That is a lot different that articulating the GDP decline WILL BE the worst in our lifetimes, and WILL BE 5%. But hey, at least it sounded exciting!

Has GDP declined by 3.5% before in your lifetime? Are you 80? — Garth

#54 Mcfly on 03.02.09 at 10:38 am

Just received an email from my friend in Lithuania: “in Lithuania the real estate prices went down and sales stop at all. Rent prices went down too. It is impossible to get financing from the banks. The similar situation in all Europe.” …this is not looking good.

#55 Bill-Muskoka (NAM) on 03.02.09 at 10:53 am

bit & Byte Bozo!

Radio Liberty, eh? Well, seems the Klu Klux Klan, in conjunction with (most likely) Falwell’s Liberty University, has tried to mimic a bit of very ancient knowledge. Nice scam from the White Supremcists.

Read carefully their goal!

Bringing you the Story behind the Story, the News behind the News. Hoping to convince you that reality is usually scoffed at and illusion is usually king, but in the battle for the survival of Western civilization it will be reality and not illusion or delusion that will determine what the future will bring.

Crap like that is the stuff that is very common for the ignorant Sheeple. Can you say Baaaaaaaaaaaaaaaaa?

#56 North Vancouver Citizen Jr. on 03.02.09 at 10:57 am

Five Things Worth Paying For In A Recession
By Carey, 5:40 PM on Sun Mar 1 2009, 27,841 views

Just because the economy is imploding doesn’t mean you should entirely freeze your spending. The Wall Street Journal brings us a list of five things that are well worth their price, even in a recession.

1. Pay For Expert Advice: Google can’t replace your lawyer, tax advisor, or financial advisor. Open your wallet to professionals who are familiar with your particular situation.
2. Pay To Reduce Debt: Now isn’t the time to take on more debt, and that’s what happens if you stop paying off your existing obligations. Debt also affects your credit score, making other financial services more expensive, so stick to your debt repayment schedule and work with creditors if you need extra help.
3. Pay Into Your Savings Accounts: Keep saving for your future by continuing to take advantage of employer matches while they still exist.
4. Spend On Yourself: It’s ok to spend on yourself, but only for things that have a substantial impact. We also think it’s important to keep giving yourself little gifts here and there to help maintain your sanity. Just don’t overdo it. Think chocolate, not diamonds.
5. Pay For Some Things You Can Do Yourself: Keep focused on the big picture and figure out which spending is actually worthwhile. Sure, you could shovel the driveway, but if your hip’s been hurting and your 60th birthday is around the corner, give the teen next door $50 instead.

#57 Scott on 03.02.09 at 11:10 am

Alex, buddy, you are way out to lunch.

North America will never see 25% unemployment.

While I disagree wholeheartedly with many doom and gloom posts by Garth, I value and respect different opinions. You can’t get ahead without taking into account different views and possibilities of the future.

If you were to look at all the money on the sidelines, all the savings that people are accumulating. There is a huge amount of cash building up waiting for a release. Once government stimulus has any effect at all, this damn will spring a leak that will turn into a deluge.

This recession is all psychological. There is no credit problem for people who still have jobs or companies which were well run. The weak will be weeded out and the recovery will be fast and furious.

We’re going to see massive inflation and wealth unlike any other time in history, unfortunately those left behind will live in poverty for decades to come.

Classism will become a huge problem as those who got the short straws struggle for basic necessities while those who have job and investments will go back to the consumerism and materialism.

Taxes will go up (way up) to pay for the massive bailouts and social programs needed to deal with the influx of poor.

I hate to think of my neighbors who are being forced to sell their homes, but I can only hope which side of the fence I end up on when this is all over.

#58 MikeB on 03.02.09 at 11:11 am

Not that I am one to say I told you so but if you check my previous postings in other blogs just last week I mentioned that there is little support for the run ups that happened last week. I also suggested a 400 point drop.
Today , at this moment a mere 445 point drop. Of course the ultra optimists would dismiss this. Folks
Big Dog Theory as espoused by Garth (my name for it). The US is the one country we all rely on, as pretty much anyone knows. Although people here in Toronto think we are special and will never see this kind of turbulence that exists in the US they cannot dismiss numbers like todays gruesome GDP number. Facts are facts and while I am gleeful I did say this was a likelyhood I am somewhat terrified of the end results.
A very bleak year for everyone unless you are bankruptcy lawyers or collection agencies or working in a coffee shop.
OK I told you so!!

#59 Keith in Calgary on 03.02.09 at 11:22 am

http://www.downtownnews.com/articles/2009/02/23/news/02-23-09-news03.txt

Commercial tenant “rent revolt” wins concessions at a Los Angeles mall…………watch for this coming to a mall or apartment block near you.

#60 kitchener1 on 03.02.09 at 11:43 am

Garth is right, once the bottom hit- probely at or by the end of the month of March, we will see a nice rally, im guessing something to the 10K range. I think that will hold until sometime in the early to mid summer. When the Q3 number come out and they are worse then Q1-Q2 the markets will drop down again.

We will close below 6000K on the DOW and TSX.

I think the SHTF sometime in August when the US and Europe relize that despite all of their bailout billions and trillions, things are still not getting better.

Things will get better but I think it will be at least Q2-Q3 in 2010 before the numbers get better,

Whoa, cowboy. Who said the end of March? — Garth

#61 Jelly on 03.02.09 at 11:46 am

Vancouver Renter re #26 You said,

“Unfortunately, kind and politically-correct Canada is probably going to be ravaged by organized crime in the tough times ahead. My US friends say they feel less safe in Vancouver than at home in Texas.

I’d write more, but I think I hear gunshots… again…”

You should send this to politicians, ask them if they want Canada to become as corrupt and scary as Mexico. Of course it can happen, what kind of life would
it be if our “safe” country become a hole where the criminals run the place.
Revolting thoughts…
I agree with you, be tough on criminals, there won’t be as much crime. You better believe in Arab countries,
they don’t waste loads of $ on inmates, and do not give many chances. Not a lot of crime understandably.
There is a lot Western society falls short on compared to the rest of the world. We think we are so enlightened and civilized. We let kids get away with murder, don’t spend enough time teaching our kids about so many things they should know, and give them really bad messages about how to treat others and the world.
Then we wonder why there are so many selfish arseholes around that only care about themselves and the almighty buck.
Things certainly have gone downhill from years ago,
that is not just perception.

#62 George on 03.02.09 at 11:52 am

This is very impressive political acumen possibly cultivated over many years of being shaped and sculpted into the system. Above all else – control the debate- “live in shack pack s&w” Playbook page – dismiss to control-. Why is it not possible to conceive of a new financial system. Could this one possibly be a dinosaur on its deathbed. It doesn’t really matter since most people have such short memories that they could never dig down deep enough to remember what it was they had for breakfast. I think that it is quite reasonable when considering all the uncharted waters we are now sailing in to consider “it’s different this time” I respect that this is your party here and you can cry if you want to but could this be “dooced II” the sequel? How well does this game of life’s tough get used to it working for the country? You’re never going to see me going S&W someone has to at least begin to be a little more visionary about our particular societal arrangement. Hope this comment is allowed in on the orgy

#63 Jelly on 03.02.09 at 11:54 am

barb the proofreader #52,

I phoned regarding the free one year mortgage for a condo in Cochrane. (just curious, not wanting to buy at this time obviously) She had 70 units available-ouch.
Not many have sold from what I can gather. Only a few dumb people that do not do their research.
When I calculated the discount based on the mortgage fees being paid for, it only amounted to 15% off!
(not a lot for how much they need to sell and real estate like it is and going to be)
Plus, it’s a write off for them so they do not lose out as much as they would. They were not even willing to go
down in price for any of the condos.
Condo fees: over $300
Here is a perfect example of marketing to make it sound a hell of a lot better than it actually is.
I would be curious to find out how many actually sell in a year.
There will be further discounts-guaranteed,
no way will they want to hold onto all of these units.

#64 rory on 03.02.09 at 12:26 pm

Okay my turn for forecasting …I have got no frickin’ clue …none, nadda, zero. Everywhere you turn someone has a different viewpoint even on this blog. There is no consensus except RE is going down.

I have taken a s*%t kicking in the market – mr. equity boy here – but I had good funds with good managers before the crash and I have to trust that they know what the hell they are doing (some days I doubt this – a lot).

What are the alternatives? Could go all cash but where to put that cash that does not have its own risks – safes, money markets, GIC, banks. And what of the adage that all the money that is made in ‘the markets’ is made in very short bursts as in market timing does not work. Bonds – could go the way of the dodo if rates go up, companies default. Yes they protect on the downside so I am too late to the party here.

I own no RE, have sold some funds and bought a precious metal fund and a gold producer but I hold no physical bullion…a little insurance???

As to living far away from major centres and growing food, I feel more isolated and vulnerable in rural parts than I would in a townhouse environment where neighbours (lots of neighbours) are close and the area could be fenced and arable land obtained within the perimeter.

So in a nutshell – don’t worry, be happy, work hard at something, stay in equities (side note – need to get rid of all shorts, derivates, etc and go back to making money the old fashioned way). Equities are the only long-term solution because if they are not then it is cave man time. Hard working companies and individuals that produce income is the game. The world still functions as before albeit at a slower and reduced pace. There will be stars and dogs – hopefully my pros will know the difference and keep me warm, dry, safe and fed (even if it is just rice and beans and a kerosene lamp and an Xurbia space blanket). What is that bear joke – I do not need to outrun the bear I only need to outrun the guy beside me …got my fingers crossed.

#65 BCing You on 03.02.09 at 12:39 pm

“Things, I said, will change in days, not months.”

I believe some people are interpreting this to mean “the next few days in March 2009”. I interpretted Garth’s words to mean; that once the upward movement in the stock market happens, it will take days and not months to move significantly higher. This movement higher, however, may not start for quite a while.

Precisely. — Garth

#66 David on 03.02.09 at 1:06 pm

AIG actually had mathematically elegant models providing them with the secure knowledge that credit defaults would be no problem. AIG burned through its first bailout installment last autumn within a week. The company managed to record the largest quarterly financial losses in US history last week and needs yet more bailout money. Hard to believe the world’s largest insurer is now penny stock.
Carney’s interest rate gimmicks aren’t doing much to prevent all the asset write downs and credit contractions. One would think he would have caught on by now.
A 15% average decline for 2009 sounds huge, but compared to the price escalation over the past 5 years it is pretty modest.

#67 Jonathan on 03.02.09 at 1:07 pm

Garth Turner says: “What does that mean? Well, a 10% contraction over a year equals a depression.”

A depression is generally defined as 10% reduction in GDP from peak to trough. This decline does not have to occur in just one year.

The report today says that the economy contracted at 3.5% annualized rate in the 4th quarter. However the decline was accelerating. In December alone the economy was contracting at a 12% rate. Monthly figures are very volatile, but a 7%+ annualized contraction for the 1st quarter of 2009 is possible.

#68 Koochigoo on 03.02.09 at 1:21 pm

AIG has 62 Billions quarter loss… that’s equivalent to $8000 per second. How much can the government bail them out at this rate?

#69 questioning on 03.02.09 at 1:21 pm

I found 4L milk price is up about 15% in Wal-mart and Superstore yesterday….

I still have a job…

I am renting…

so far so good…

#70 PTDBD on 03.02.09 at 1:30 pm

head smashed in
buffalo herd :-) jumps forward :-)
in spirit only

#71 beagle on 03.02.09 at 1:31 pm

Has GDP declined by 3.5% before in your lifetime? Are you 80? — Garth

It’s the biggest drop since 1991 according to most of the articles I’ve read. That 3.5% is the annualized rate.

Research a little more. — Garth

#72 North Vancouver Citizen Jr. on 03.02.09 at 1:42 pm

Fibotus…(Lies of the President of the U.S.)

“””The Fibpotus is having a summit this week about healthcare. Healthcare stocks are down. Anyone see a pattern here? If you haven’t figured it out by now, you are indeed walking around blind without a cane.

Based on results, specifically, the loss of $7 trillion dollars (and counting) of equity in the U.S. stock market which has occurred in direct response to first the prospect and then the reality of a Marxist occupant of the White House, the Fibpotus is already, far and away, the worst president in U.S. history.

All of you liberal Democrats who have no stake in America, and just hover around these boards pretending to be shareholders, can fall back on your Marxist talking points and blame George Bush for the Fibpotus effect just like you blame the supposedly racist whites that elected the Fibpotus for the fact that black Americans comprise less than 13 percent of the population but commit over 52 percent of all murders in the United States.

Those who are interested in, and can face, the facts already understand that at the bottom of this so-called financial crisis are the high-default rate, sub-prime, affirmative action loans that Democrats encouraged and even coerced banks into making. The Fibpotus was right in the middle of that debacle having both coached ACORN and their allies on how to disrupt and intimidate bankers and having himself filed suit against Citicorp on behalf of ACORN alleging discriminatory lending practices as well as using the rules of the Senate to stonewall Republican-led efforts to clean up and reform Fannie Mae and Freddie Mac.

They also know that despite numerous problems in the financial system, the stock market didn’t crash until it became obvious that the next president of the United States would be a Marxist. Check your dates. From 6 May 2008 (when the Fibpotus took the permanent lead in delegates for the Democratic presidential nomination) to 20 November 2008, the market lost 42 percent of its value. The markets have added to those losses as the Fibpotus has advanced his Marxist agenda with the passage of the Trillion-Dollar Wealth Redistribution and Political Payoff Act and the Aid For Irresponsible Real Estate Speculators Act and now the proposal of a budget which seeks to reward failure, punish success and saddle taxpayers with unprecedented levels of public debt.

From Obama Declares War on Investors, Entrepreneurs, Businesses, And More by Larry Kudlow

“Let me be very clear on the economics of President Obama’s State of the Union speech and his budget.

“He is declaring war on investors, entrepreneurs, small businesses, large corporations, and private-equity and venture capital funds.

“That is the meaning of his anti-growth tax-hike proposals, which make absolutely no sense at all — either for this recession or from the standpoint of expanding our economy’s long-run potential to grow.””””

http://www.cnbc.com/id/29434104

#73 tom on 03.02.09 at 1:48 pm

Thank you BCing You #65 and Garth for that clarification

#74 . . . fried eggs and spam . . . on 03.02.09 at 2:10 pm

Beware The Ides of March — http://tinyurl.com/cu7872 — and — http://www.moneymorning.com/

The above links only cover North America, but both have an understanding of what is happening in TROTW (The Rest Of The World).

Iceland’s collapse — shorter than a year — followed by Spain, Ireland and plenty of other countries such as the UK has just started. The world is less than halfway through through this mess.

I guess timelines / predictions are irrelevant now, as each family or individual has to deal with their own lives the best way they can.

Did anyone catch 60 Minutes last night? Seems that the SEC are a bunch of wolves in sheep’s clothing, or more to the point they, like Carney here, do not have the slightest idea of what they are dealing with.

The SEC knew what Madoff was doing, and let him continue. Where are the punishments going to be for them? Some of them profited enormously from this.

In the next election, why don’t Cdns. vote for Bozo The Clown? He has as much chance of making a positive difference as anyone!

#75 beagle on 03.02.09 at 2:12 pm

Has GDP declined by 3.5% before in your lifetime? Are you 80? — Garth

It’s the biggest drop since 1991 according to most of the articles I’ve read. That 3.5% is the annualized rate.

Research a little more. — Garth

OK, here’s my research from Stats Can
http://www.statcan.gc.ca/daily-quotidien/090302/t090302a1-eng.htm

and

http://www.statcan.gc.ca/daily-quotidien/090302/dq090302a-eng.htm

“Real gross domestic product (GDP) declined 0.8% in the fourth quarter, weakening progressively each month. This was the sharpest quarterly decline since 1991. Declines in exports, capital investment and personal expenditures all contributed to the economic contraction. Final domestic demand fell 1.2%. Government current and capital expenditure rose. Real GDP declined 1.0% in December.”

I feel so much better. — Garth

#76 Jonathan on 03.02.09 at 2:16 pm

Hey Rory,

Nobody has a clue about the timing of the market. Humans play the game, not a graph, so don’t listen to any economist that thinks there model has an answer. You can only rely on a good wisdom, common sense and your own instincts.

I’ll list what you don’t want to have your money in:

1. US Denominated assets
A quick and dirty calculation:
– 108% increase in US greenbacks since January 2008.
– 11% increase in CDN dollars since January 2008.
– 1 US dollar = 1 CDN on January 2008
RESULT: Value is around 51 cents – give or take a dime. This is only going to get worse thanks to quantitative easing etc.

2. BONDS
– The Asian savings / US spending cycle has been jack knifed. The new supply of real savings to borrow from is going to be in short supply soon. The government will either print (inflation) or borrow money at much higher market rates. Higher risk free interest rates means much higher risky interest rates. If the interest rates demanded on T-Bills double to 6%, your bonds are worth 50% what they were!

All else equal, and not including inflation, foreign investors are going to lose a minimum of 75% on their investment in US denominated T-Bills.

The US dollar should correct itself to 51 cents Canadian based on changes to money supply and based on a CDN = 1 US dollar as of January 2008.

, and Obama’s plan is to incre

#77 jess on 03.02.09 at 2:28 pm

…for you gold bugs have you thought about all the claims that will be coming forth due to lung disease ,Silicosis! If you have followed mesothelomia from asbestos will this disease start to gain victims in the future. Who pays compensation our health care? Will our government have to sue this industry to pay back the wsib like the mesotheolomia cases.

#78 Larry on 03.02.09 at 2:38 pm

What recession ? certainly not here in Calgary, Oilberta according to CREB presidente anyways
http://calsun.canoe.ca/News/Alberta/2009/03/02/8584516-sun.html
LOL

#79 Carole AB on 03.02.09 at 2:55 pm

#54 Mcfly

The Oracle on BBC world: Max Keiser with guest Jim Rogers on Eastern European “Fandango” An entertaining look at the news with weekly predictions.
They also talk about gold, and how mad the Swiss are at the Yanks looking for tax evaders. Switzerland has asked the US for their gold back.

http://wallstreetblips.dailyradar.com/video/the_oracle_with_max_keiser_27_february_2009_1_of_3/

#80 Bill-Muskoka (NAM) on 03.02.09 at 3:07 pm

#72 North Vancouver Citizen Jr. on 03.02.09 at 1:42 pm

What are you…Rush Limburger North! Get a grip on reality!

#81 Timmy on 03.02.09 at 3:11 pm

How do you predict 10 or 20 years into the future?
Harry Dent. Age wave theory

http://www.investopedia.com/terms/b/baby-boom-age-wave.asp

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=116479&t=01008255228265744535

This baby boom is a massive problem, separate from a credit problem.

#82 dekethegeek on 03.02.09 at 3:13 pm

#23- 010010001000001
R.C. Christian ?!??!!?? Your kidding me right?
L. Ron Hubbard by another name is still a cryogenically frozen a nut bar with grandiose delusions of “nirvana after the apocalypse “. Hmmmm , how will the cryo tanks keep pumping when there isnt any electricity?( I digress, back to the rant at hand)
If i’m wrong and you 500,000 wacko’s inherit the earth then c’est la vie. Dance on my headstone.
But ,( and i have a very big butt) ,if i’m right, then all of you guys are gonna spend a crapload of money on bullets and beans fer nuthin’ and chances are there will be 95% guys to the 5% gals. Who gets the gals? Gee , might it be the “leaders” ( why do the leaders ALWAYS get the hot chicks?) So, 010010000100000000, if you aint a leader, dont forget to pack lubricant and condoms because chances are you wont be able to fight off the “randy” hoards of fellow survivors. Enjoy.

#83 Carole AB on 03.02.09 at 3:17 pm

The Oracle Feb 27/09 part 2/3 with Michael Hudson

http://www.youtube.com/watch?v=MLtYbOQogRE&feature=related

#84 Kettle...Pot Calling on 03.02.09 at 3:28 pm

Jonathan, Jonathan, Jonathan….

First of all…you have completely neglected the demand side of the equation on your USD/CAD “analysis”. Why should USD correct to 51 cents CAD when it’s the safe harbour for trillions of dollars around the world? When the price of oil drops from $147 to $40 in the last 7 or 8 months, don’t you think that impacts the demand for Canadian dollars? Canadian interest rates and inflation are also chasing their American counterparts towards zero, which means that, all else constant, there should be little appreciation in CAD.

And you think if yields on treasury bonds (not bills) doubles to 6%, treasury bond prices will fall by half? Either you don’t know the basics of bond math or I’ve completely misunderstood your comments about this.

#85 North Vancouver Citizen Jr. on 03.02.09 at 3:52 pm

-Yahoo! Finance User –
Monday March 02, 2009 02:04PM EST

“””Has it occurred to you what is the best way for this government to prop up the borrowing (i.e. bonds, treasury yields) to fill their gigantic deficits for years to come ? to scare people to invest in treasuries of course. So the same madness about going after real estate few years ago is now turning into another madness to go after dollar based treasury yields with almost zero percent interest or even negative interest in some cases. Once the government has their pot flush enough with cheap borrowed money, they will stop and treasuries will slide…..and kabbbooooom ….mr. obama and his mates will start being optimistic about economy. If you want to make real money, follow warren buffet who says don’t follow people’s greed, follow their fear.”””

#86 Carole AB on 03.02.09 at 4:05 pm

#74 …fried eggs & spam…

I agree TROTW (The Rest of the World) cannot be ignored whether you believe the US dollar will collapse or not.

Leap/E2020 Dec. 16 excerpts:

The risks weighing on the world financial system are now coming from the real economy on the one hand; and from the Dollar monetary system’s collapse on the other hand. So they are extremely serious.

Even the states which financial institutions (or individuals) may think ‘safe’ can provide huge surprises. As our readers know LEAP/E2020 estimates that the US will default on its debt by Summer 2009. Such a situation will act as a ‘nuclear financial bomb’ wiping out some of the most prestigious financial institutions worldwide. It is sufficient to identify which ones have the biggest exposure to US Dollar denominated assets (Treasury Bonds, Dollar, US corporate stocks, ) to have a good map of the existing risks. This situation also goes for UK and Switzerland. These two countires, which are two key pillars of the existing global financial system are directly exposed in 2009.

#87 . . . fried eggs and spam . . . on 03.02.09 at 4:27 pm

AIG lost $61.7 billion in the fourth quarter, yet the US taxpayer (govt.) keeps bailing them out. Who will bail the taxpayers out, and does anyone feel that we’re headed in the same direction — pouring untold amounts of money which can never be paid back, into an endless sinkhole?
——
From Money&Markets.com . . .

“. . . That’s the single largest loss ever suffered by a U.S. corporation, larger than the record losses at Bank of America and Citigroup COMBINED!

“Worse: To keep AIG from going belly-up, Washington is giving the company another $30 billion, bringing the total bailout for this one company to a staggering $180 billion. “That’s equivalent to nearly HALF the U.S. government’s entire budget deficit for all of 2008!

“Worse still: The company’s stock, which sold for nearly $50 per share last May is now only 49 cents. Any investor who bought $10,000 of AIG stock eight short months ago now as a meager $98 left. The rest — a whopping $9,902 — is gone with the wind.”

“. . . If this is what happens to companies that are seized and operated by Washington bureaucrats, what’s going to happen to Citigroup now that those same people have controlling interest? What’s going to happen to Bank of America? To GM? To Ford? To all the other stocks getting money from Washington?

“And what’s going to happen to the millions of investors stubbornly sticking with bull market buy-and-hold strategies — who are still hanging on to these doomed stocks — as this crisis continues to intensify?

“More importantly, it makes one wonder …Why are so many smart investors doing so many brain-dead stupid things?

“Take Warren Buffet, for example. The Wizard of Omaha’s Berkshire Hathaway just put in its worst year ever. Its shares have plunged 48% in value. . . . But has Buffett learned his lesson? Apparently not!

“Although his letter admits that “the economy will be in shambles throughout 2009, and, for that matter, probably well beyond,” Buffet continues by saying, “But that conclusion does not tell us whether the stock market will rise or fall.”

“Is this his rationale for continuing to own billions in companies that are almost certain to get hammered by “an economy in shambles?”

“Won’t the “economy in shambles” also devastate his holdings in retailers, furniture and jewelry stores, real estate firms and so many others?”

“. . . Buy-and-hold investing is risky enough when you have a reasonable assurance that the economy will be stable. But in an economy that’s admittedly broken — and in a stock market that’s been falling or six straight months — it’s utterly insane!

As long as he stays on that tack, Mr. Buffett is not only losing money hand over fist as the market sinks, he’s also completely missing out on the truly explosive profit potential this bear market offers.”
——
Here is one aspect which very few bother considering — for each DOWN, there must be it’s equal and oppsite UP so obviously there are opportunities out there, and is why the msm trash should be taken with a pinch of salt.

Further, — http://www.dailyreckoning.com/

#88 CC on 03.02.09 at 4:34 pm

It is interesting that China’ stock market rose today while all others declined. I expect decoupling where conditions allow and have been waiting for it.

It’s probably just a blip.

#89 MikeB on 03.02.09 at 4:37 pm

Once again Garth called this some time ago, almost a year ago in fact in the first book.
Canadian Consumer Credit.. while many like to plump their chests and say we are not like the Americans new data indicates that average Household debt is now at 90K
debt to disposable income ratio now at 140% … higher than the US rate before their bubble burst.
This according to Vanier Institute as reported on BNN

http://watch.bnn.ca/clip145273#clip145273

I still run into people who say Toronto is a robust market and will see no further impact with housing or job layoffs or even bankruptcies. The figures just don’t support this.
anectdotally, a number of houses have come on the market bought by spec builders who see no market for custom monster homes . Some are even below what they paid for these dumpers. Yet there are some that are over 250K more than they paid less than two years ago.
With the lowering of interest rates tomorrow should bring another bonehead rally on TSX of traders and optimist addicts . Having to drop interest rates to near 0% is hardly something to be happy about. But they will be…they will be..

#90 Future Expatriate on 03.02.09 at 4:49 pm

I think I see the reasoning now. The bailouts will cause the a-holes who receive them to pour trillions into a crashing equities markets, on the one hand, in an effort to increase their booty, and on the other, to keep a failed system afloat out of philanthropy, patriotism, and the self-preservation of the social and economic structure.

As opposed to socking as much gold and cash as they can in Swiss and Israeli bank accounts, and offshore in the Caribbean.

Paper bulls, you dreamers you… if you’re depending on the noblesse oblige of bailout receivers and broke governments in hock up to their eyeballs, you’re toast.

There isn’t enough real wealth left in this world to rally the markets; the patient is terminal, and it’s long past time to pull the plug.

But instead, because we don’t have the balls, a long lingering decades long coma-death with fools claiming “Oh, she’ll wake up any day now; you’ll see!”

The great majority of the supposed “wealth” of the planet was a Ponzi paper scheme; the wealth never existed except in cyberspace, and it’s not ever coming back. Nor should it.

Easy come; easy go.

#91 Bill-Muskoka (NAM) on 03.02.09 at 4:56 pm

Time for a little good old Johnny Cash!

‘They went down, down, down in a burning ring of fire!’

‘They went down,. down, down and the flames grew higher!’

TSX plunges amid global selloff

Man, watching these gamblers bail is like seeing a Crack addict go through withdrawal. It ain’t pretty but necessary to get well!

#92 Bill-Muskoka (NAM) on 03.02.09 at 4:58 pm

#89 Future Expatriate on 03.02.09 at 4:49 pm

Gee, makes you wonder how Gucci is gooing nowadays, eh?

A world full of drug addicts all going through DT’s at the same time.

#93 Bill-Muskoka (NAM) on 03.02.09 at 5:01 pm

#35 Grantmi on 03.02.09 at 7:45 am

The only thing that is going to go UP in VBC is the street price of Wacky Weed!

#94 Jake on 03.02.09 at 5:02 pm

Rough day on the markets today. Man, there sure will be a lot of bargains out there tomorrow…..LOL.

#95 Investx on 03.02.09 at 5:12 pm

Harry Dent’s has been wrong in his predictiosn before.
He used to have a fund based on his demographics. It didn’t do well.
It no longer exists.

I believe in the impact in demographics, but it is not so easy to predict it’s effects… apparently.

#96 Jake on 03.02.09 at 5:17 pm

Bill,
Still trying to figure out your reality. You tell others to get a grip with reality then post stories and poetry out of your Uncle Jim’s Bathroom Reader digest. BTW, why only a few posts today? Have you been holding your spot outside the White House in eager anticipation of the arrival of the first dog. Someday you will be able to look back, with tears in eyes, and say, “I was there when the Obamas said ‘Hello’ to Biscuits for the first time.”

I have to go now or I’ll miss the Rush Limburger show.

#97 Sail1 on 03.02.09 at 5:34 pm

Relevant info.

The Close : March 4, 2009 : Consumer Credit Crisis in Canada [03-02-09 4:20PM]

A recent report shows the ratio of Canadian consumer debt plus mortgage debt is now above what the U.S. rate was in 2006, just before the real estate bubble burst. BNN interviews Laurie Campbell, executive director, Credit Canada on consumer debt load in Canada.

http://watch.bnn.ca/clip137240#clip145273

#98 Jeff Smith on 03.02.09 at 5:39 pm

I don’t know what it will be in the future, but right now it doesn’t look at that promising nor safe.

http://www.theglobeandmail.com/servlet/story/RTGAM.20090209.wdtes_money0209/BNStory/thefix

********************************************
#7 North Vancouver Citizen Jr. on 03.01.09 at 10:09 pm

Garth, do you mean to say that

….the U.S. Dollar continues to gain value vs the Euro and the Ruble as Europe and Russia continue to implode ?

….that as China invades Siberia…it leads to war with Russia?

…..that the U.S. liberates Cuba?

…..that Singapore replaces London as a Financial capital?

…and that Vancouver Proper morphs into the next Financial/Trade/Leisure capital of North America?

tia

#99 Future Expatriate on 03.02.09 at 6:54 pm

On the subject of things getting worse before they get better, and not getting better for a long, long, time:

Here’s a prediction of the stock market hitting 5000, and not turning around unless the real estate situation turns around.

And keep in mind; the COMMERCIAL real estate crash in the US hasn’t even begun to hit yet. And that market is far more over-leveraged than the housing real estate market could even dream of. We’re talking deserted malls, mini-malls, and industrial complexes as far as the eye can see.

THE Crash To Come

There will be no rally and return to normal for decades. Plenty of suckers’ rallies, absolutely.

#100 Slice on 03.02.09 at 7:26 pm

“In January, Wegerich said there were 11 months of inventory available in the city of Calgary, and now we’re probably down to six.”

“I think it’s picking up and I’m fully encouraged by what I’m seeing right now,” she said.

“I think sales are happening and prices are probably levelling off.”

“We’re very happy,” said Wegerich.

There were 9,225 properties for sale in the city in January, according to numbers listed on the CREB website, with 949 of them changing hands.”

THIS MEANS CALGARY HAS ALMOST 10 MONTHS OF HOUSES FOR SALE, YOU LIAR.

– Slice

#101 Darlene on 03.02.09 at 7:51 pm

Seadoo bear, from what it sounds like this is your first renewal.

If so if you were good and made all your payments usually they call you before renewal and make an offer. If they do this they will send you the paperwork in the mail and you just have to sign and send it back. This is what happened on my last 2 renewals. It could vary depending on your bank.

Usually proof of income is only required if you are trying to secure more credit. Renewals are different because the credit has already been extended and credit worthiness has already been established.

Just in case if you are worried because of banks not lending, it’s not as bad as you might think. I renewed in Dec 08 and there was no problems. I bought in 2002 so the amount owing is still way less then current values. Just remember banks are greedy and as long as your paying they are making money. If you don’t they are not. Hopefully this adds some confidence when that nasty renewal time comes around.

#102 Shifty on 03.02.09 at 7:52 pm

Real estate sales pick up in Greater Victoria

http://www.timescolonist.com/Business/Real+estate+sales+pick+Greater+Victoria/1345779/story.html

#103 Coho on 03.02.09 at 7:57 pm

Scott wrote:

“Alex, buddy, you are way out to lunch.

North America will never see 25% unemployment.

While I disagree wholeheartedly with many doom and gloom posts by Garth, I value and respect different opinions. You can’t get ahead without taking into account different views and possibilities of the future.

If you were to look at all the money on the sidelines, all the savings that people are accumulating. There is a huge amount of cash building up waiting for a release…”
____________________________________________
That’s what the rally some are forecasting will start late this month is all about. You will be a perfect candidate for the last money squeeze the ruling elite plan to impliment.

The manipulators behind the scenes are eyeballing the money sitting on the sidelines. Some predict a major DOW rally starting within a few weeks, to hit 10,000 by late summer…and then…down down down it will go, far below the “bottom” of this month.

The “rally” will mop up the remaining money on the sidelines quite nicely, as the “fool me once, shame on you…fool me twice, shame on me” crowd learn a lesson they won’t soon forget.

They’ll be wrung so dry, they’ll feel like a piece wind blown popcorn on a desert floor at high noon.

THERE WILL BE NO RECOVERY FROM THIS DOWNTURN.

The Ruling Elite have no more use for the middle class.

Get used to it.

#104 Keith in Calgary on 03.02.09 at 8:19 pm

Talking with a colleague at the office this afternoon…….

He has a house worth $600K today (in his opinion) and he owes $50K on it……I told him to sell it for whatever he could get and rent as he said he plans to retire in 3-5 years anyways, and leave Canada.

He says things are going to turn around again late this year so he will not do that.

I asked him “why do you say that….can prove your statement ?”….all I got back was a dumbfounded blank stare as if I had asked the pope if he shits in the woods…..heh. Then I said the average family income in Calgary is $93K and that supports about a $240K mortgage, and since sales are down 65% from their peak numbers, how can prices go up if the affordability is out of whack ? A continuation of the blank stare and icy silence ensued. He changed the subject to travel.

#105 01 0111001001111000110000001 on 03.02.09 at 8:22 pm

#82- Dekemeister

I am an alpha male.

Would you prefer I waltz on your grave or a randy jig?

Take care, buh bye now. lol

#106 ThumbsUp on 03.02.09 at 8:22 pm

McCain launches broadside against Obama on spending

“As examples, McCain pointed to $1.7 million for researching pig odor in Iowa as well as $2 million to promote astronomy in Hawaii, the home state of the chairman of the Senate Appropriations Committee, Democratic Senator Daniel Inouye.”

source
http://uk.reuters.com/article/usPoliticsNews/idUKTRE5216JY20090302?pageNumber=1&virtualBrandChannel=0

#107 Jonathan on 03.02.09 at 8:24 pm

Kettle…Pot Calling,

I’m responding to your post, #84.

The demand you speak of is exactly why the US dollar has appreciated in light of this economic turmoil. Inflation is low because banks and investors are hoarding cash. But the turmoil won’t be around forever. In the long-term, if you double the quantity of an item, you have to double the demand to keep its value. That is the point you have made and I agree.

But demand is not going to stay constant. When the market rebounds people are going to stop hoarding cash and start to spend it. Furthermore, people will start to cash it in to buy equities and riskier investments. The value of the US dollar will fall significantly. I obviously can’t tell you if this is in the short (less than a year) or long-term without a crystal ball.

The US has benefited from being able to print money to pay for its government since it is the international currency of choice. But if it abuses its role as a safe haven of value, which is it is clearly doing, it risks losing this perch. The adjustment in value would be swift and painful. If you think that you can just double the amount of your currency without damaging its reputation and value, then I highly disagree with you. Over the long term, there is only evidence to the contrary.

From a foreign exchange perspective, all is good until people get fearful of inflation or fear a sudden reversal in demand. As the US has doubled its money supply, investors and banks will now need twice as many buyers of US funds to maintain its value. I assure you that when the market rebounds, that there won’t be twice as many people ready to buy greenbacks as there was in January 2008. If anything, the number will be less. That is when foreign exchange and inflation corrects the imbalance.

With respect to treasuries, I am speaking about long-term treasuries. Short term treasuries of course are alot safer since they mature earlier.

People desire a certain percentage out of their investments, let’s say 3% right now. That means a T-Bill that is worth $100 will pay $3.

NPV of $100 repayment in 30 years at 3% =$41.19
Present value of annuity of $3 over 30 years at 3% = $58.80
VALUE OF T-BILL = $58.80 + $41.19 = $100

But let’s say that the market all of a sudden demands 6%:

NPV of $100 repayment in 30 years at 6% = $17.41
Present value of annuity with $3 payment, 30 years and 6% = $41.29
VALUE OF T-Bill: $58.70

It is almost half.

#108 Rural Rick on 03.02.09 at 8:33 pm

Bell Canada is acquiring 750 The Source consumer electronic stores across the country, a deal by Canada’s biggest phone company that will ratchet up the pressure against rivals to sell more cellphones, technology and services to Canadians.
Creative Destruction

#109 Michael on 03.02.09 at 8:34 pm

I wonder if Garth is just too scared to think to the full conclusion or what else is going on here. What, I wonder, makes you think, Garth, that 15% decline is all that it will take?

I have no idea where the bottom is (though I have guessed ~80% off of the top), but the 15% that you proclaim strike me as…. well, rather optimistic.

First of all there is the income to debt ratio which currently sits at a snug 130%, as most people went into debt for their houses and condos one could presume a 30% drop right then and there, and this would just get us “on par” as far as income to debt ratio goes, and even THAT is not sustainable.

Garth also, for some reason, seems to see the decline in housing pricing as an insular event and that it is the only thing that determines the future of our economic, conveniently (it seems) overlooking that banks worldwide are hugely leveraged, anywhere from 30 – 60.

Finally (and my posting is far from complete really), as we seem to have entered a deflationary cycle the incomes will shrink, and thus the ability for people to pay high(er) prices for houses.

So tell me Garth, why do you think it will all be over after another 15% off? Why will it stop there and why does everything else that is currently going on not going to affect the housing prices beyond these 15%?

I said the average house price decline in Canada in 2009 will be 15%. Last year in the US it was 18%, which has resulted in a disaster. — Garth

#110 Rural Rick on 03.02.09 at 8:38 pm

The markets are begining to reform and restructure
Great time for the big guys to do some cherry picking

#111 Too old Bob$ on 03.02.09 at 8:39 pm

I’ve been reading all these posts for quite a while now. This is my first post because I just can’t contain myself anymore.

What started out to be ( what I thought) valuable information has now turned into comedy. The way most of you criticize each other is hilarious. Keep up the good work.
btw, Garth: I’ve known you for quite awhile now. “Real Estate Guide” 1987-88 Canadian. Also a personal letter writtened and signed Jan/89, $.38 stamp. Been awhile ole buddy. :)

#112 Yes We Can't on 03.02.09 at 8:48 pm

I noticed how much the markets surged today, except it was down. AIG underwrites the Peoples Republic of China’s pension fund for it Army officers.

That’s probably why Chaiman Obama was so willing to dump billions more of the sheeples money into it.

When will they revolt?

#113 Gord In Vancouver on 03.02.09 at 8:58 pm

Nonsense !!! BC’s Government IS Compassionate !!!!!

http://www.globaltv.com/globaltv/bc/story.html?id=1345061

#114 Sondra on 03.02.09 at 9:14 pm

#100 Darlene & #28 Seadoo Bear

Sorry Darlene, you are leading him astray.
Darlene had equity, Seadoo Bear is losing money everyday.

Seadoo Bear owes $300 on a $235 house.

What might it be really be worth in August when his renewal comes up? Seriously you think the bank doesn’t notice?

I am already hearing from people I know that they are being contacted by their CU & some banks that they are not renewing their mortgage. Some banks are also identifying people in “declining industries” and do not want to renew.

Seadoo, you need to make a plan and fast.

Find out now which poison you are going to take. My comments were on #36. Hold your nose and make the best choice with your head, not your heart.

#115 CalgaryRocks on 03.02.09 at 9:31 pm

The manipulators behind the scenes are eyeballing the money sitting on the sidelines. Some predict a major DOW rally starting within a few weeks, to hit 10,000 by late summer…and then…down down down it will go, far below the “bottom” of this month.

Put your money where your mouth is and ride this up 30% and then all the way down. You’ll be rich but more importantly, you’ll be qualified to open your own guru site. Let us know the URL. Good luck!

#116 Future Expatriate on 03.02.09 at 9:38 pm

#101- Victoria “pick up” in sales being debunked on Victoria’s bear blogs. Sales still WAY down from last year at the same time.

More realtor board lying numbers-fudgepacking BS.

#117 Coho on 03.02.09 at 10:29 pm

#114 CalgaryRocks

My my, but aren’t you a nasty little one.

Learn to read please.

I wrote that “some” have forecast a DOW rally to 10,000 — not me. And, I didn’t advise anyone to buy in, either.

The intent of my post was to warn of what may be a major “sucker’s rally”.

What is the intent behind your posts, besides being a smart ass?

#118 barb the proofreader on 03.02.09 at 10:45 pm

#63 Jelly,
Since these folks are people I see at parties a couple of times a year, good friends of good friends, I’ll let you know as I hear more.
As I say, none of them work for that company anymore, but they all seem to have their noses in each other’s business, and they were certainly abuzz about that sales tactic. Glad you called, I was a bit curious. That many available is troubling but no surprise. The numbers of new builds that were started here — or suppose to start the last few years — was getting ridiculous. At least this all will slow down the multiplex, speculation-building we hate so much — money hungry careless development that drags down neighbourhoods.

#119 Jeff Smith on 03.02.09 at 10:52 pm

Regarding the stock market. It is really really scary. I am not anywhere near retirement age but I am scared for our future. The fear is that with so much of our RSP savings tied into the stock market, we might we retire into poverty. I really feel sorry for people who are near retirement now though, they must be devastated. With their savings and their real estates value diminished, it must be a terrible way into the golden years.

************************************
#98 Future Expatriate on 03.02.09 at 6:54 pm

On the subject of things getting worse before they get better, and not getting better for a long, long, time:

Here’s a prediction of the stock market hitting 5000, and not turning around unless the real estate situation turns around.

And keep in mind; the COMMERCIAL real estate crash in the US hasn’t even begun to hit yet. And that market is far more over-leveraged than the housing real estate market could even dream of. We’re talking deserted malls, mini-malls, and industrial complexes as far as the eye can see.

THE Crash To Come

There will be no rally and return to normal for decades. Plenty of suckers’ rallies, absolutely.

#120 Jeff Smith on 03.02.09 at 10:55 pm

That’s weird. I thought they already own a whole bunch of those … what do you call them again ? Bell WOrld Store or Bell MObility something?? I can’t remember because I haven’t bought their products in a while. I don’t own a landline and my cell is with Fido and my internet with teksavvy.

*********************************************
#107 Rural Rick on 03.02.09 at 8:33 pm

Bell Canada is acquiring 750 The Source consumer electronic stores across the country, a deal by Canada’s biggest phone company that will ratchet up the pressure against rivals to sell more cellphones, technology and services to Canadians.
Creative Destruction

#121 CalgaryRocks on 03.02.09 at 11:11 pm

am already hearing from people I know that they are being contacted by their CU & some banks that they are not renewing their mortgage. Some banks are also identifying people in “declining industries” and do not want to renew.

Well that’s surprising to hear because his mortgage is most likely CMHC insured so what would a bank have to gain by forcing foreclosure on someone that is not in arrears. That would most likely be a breach of contract and may even render the CMHC insurance invalid as well as the homeowner’s obligation under the mortgage.

I think you are full of it but you are welcome to prove me wrong.

#122 Taxpayer like you on 03.03.09 at 1:14 am

Kettle/Johnothan. Play nice, quit fighting and agree to disagree. The role of the US$ is ongoing debate which everybody seems to disagree on – ie will it devalue, when will it devalue, how much it will devlaue, and how fast it will devalue. All good topics. Personally it continues to
amaze me how high its been and for how long.

On the bond price, I’ll side with Kettle even though Johnothan has done the math. But you’ll note that even over a very long 30 year period, it is still worth more
than half. You have to wonder just how much the US would change their rate on something that long term. My guess is not 3%.

#123 Bill-Muskoka (NAM) on 03.03.09 at 9:06 am

#108 Rural Rick on 03.02.09 at 8:33 pm

That news is about as exciting as learning their is a new condom routeman for the men’s room dispensers.

Radio Shack sold their stores to Circuit City and called them The Source. Well, source of what?

The heydays of the basement inventor of electronic thingys is over. They are just another retailer and they have little market share mostly due to too small of store, too much stuff, and uncompetitive prices.

Circuit City competed against Best Buy, Target, K-Mart and Staples/Business Depot…They LOST! Note that Best Buy now owns Future Shop..not any real deals there on everday thibngs, but some good ones on their specials.

So now BCE wants to try losing money on these stores? Sounds like Bell’s manglement to me. Their Bell World stores are nothing more than fronts for a company appearing to be Bell, but is not. Another cell phone retailer. Bell marketing sends out flyers on ‘deals’ and then there are so many restrictions you end up with a total screwing for 3 years on contract.

We switched to Rogers Pay-as-you-go and have already more than paid for the new cell phones and cut our monthly costs by $70+. No contract, great service, and responsible and respectful Customer Service. Oh, and CLEAR AS A BELL (All puns intended) reception on Rogers.

Rogers High Speed Internet is at least 3-4 times faster than Sympatico, always up, and allows far more bandwidth and server space than Bell’s ‘sometimes it goes/sometimes it doesn’t’ excuse for being an ISP. In fact Bellnet, the Bell business side of Sympatico, is even worse than Sympatico home service.

Bell originally had a monopoly and did build the base infrastructure, but they have become a lethargic Mandarin and horrid to deal with. Let them go the way of GM, AIG, etc.

Companies like Rogers, Telus, etc. have done a superb job and understand what customer service is. Heck, you can even understand them because their CSR’s are here in CANADA!

#124 Sondra on 03.03.09 at 3:14 pm

Calgary Rocks

Sorry won’t give you individual examples as that would be a breach of their privacy.

I am in an associated business, I can tell you that mortgage brokers are being told that “declining industry” clients are not welcome.

The people I know that are being told are not going to have their mortgage renewed are in the construction industry.

Also Seadoo Bear did not say if his mortgage was CMHC or GE Capital insured.

The bottom line is he is on the tip of a precarious financial perch. Owing far more than the value of the property, and the value is going down.

I understand your question, but I don’t understand your obvious your personal attack of “your full of it”.
Why the anger?

I don’t need to prove you wrong, time will.

#125 Too Old Bob$ on 03.03.09 at 3:18 pm

Jeff Smith on 03.02.09 at 10:52 pm.
“The fear is that with so much of our RSP savings tied into the stock market, we might retire into poverty. I really feel sorry for people who are near retirement now though, they must be devastated. With their savings and their real estates value diminished, it must be a terrible way into the golden years.”

Yep! there are a few to feel sorry for, but some of them got a little greedy and just weren’t happy with mediocre returns and needed more debt by buying (mortgaging) Cottages and over-sea Condos. Not to worry though, their children and the Government will take care of them. (tongue in cheek). Speaking of children, when these old boys and girls supplement their retirement by continuing to work, then the younger Gen. will complain that they should retire, quit, what ever, because they (old people) are taking all the jobs and thus keep them out of advancement and higher paying jobs. Oh wait, this is already happening. Excuse my poor memory.

#126 Sondra on 03.03.09 at 3:38 pm

Calgary Rocks,

For the record, “declining industry” is not my term, it was the exact words from the mortgage broker who works for a big bank.

#127 Jonathan on 03.03.09 at 3:53 pm

Hey taxpayer like you,

I don’t think Kettle and I were fighting. Just discussing.

As far as how much the interest rate will go up, well that is determined by inflation and exchange rates – not the government. When faced with very high inflation or if the exchange rate is falling, the government will has no choice but to raise interest rates significantly. The costs of not doing so are immense.

6% is very conservative. Personally I think it could go much higher. But of course that depends upon a set of assumptions occurring, including the collapse of the Asian savings bubble and a US economic rebound.

If you don’t think bond prices are going to go anywhere, then invest in them! There are certainly hoards of people lining up for them. But there is plenty of evidence that bonds are in a bubble. Time will reveal all.

#128 CalgaryRocks on 03.03.09 at 4:04 pm

Sondra, you don’t need to prove me wrong but you should at least know what you are talking about.

Like recommending that someone walk away from a home just because it is worth less than he paid for even though he can comfortably make the payments and there is 0 chance that any bank would foreclose on him at term renewal time.

Bankruptcy is a great idea if you want to work at Wendy’s for the rest of your life as employers check your credit nowadays for any job that does not involve a uniform and a name tag.

#129 David Bakody on 03.03.09 at 4:07 pm

Speculation what a wonderful word …. but was it not speculation by those so called educated investors with political influence that got us into this mess? Forbes spokesman on CNN this afternoon when asked for his assessment on a mild depression approaching the US said he would not use the world mild!

#130 prairie gal on 03.03.09 at 6:07 pm

CalgaryRocks I don’t know where you work but unless you are a lawyer or an accountant I can’t see a bankruptcy affecting one’s employability. In fact, discriminating on the basis of one’s credit rating is probably inviting litigation. I can see a criminal record check being requested.

Of course, the lenders would have you live in fear of losing your oh-so valuable credit rating because bankruptcy means they get a fraction of what they would had the loan been paid off. Don’t believe the hype, man.

A low credit rating means you rent and pay cash for stuff. Most of us should be doing that anyways. Banks don’t like this so they harp on the credit rating as something you should value more than your firstborn. Its baloney.

#131 Marc on 03.03.09 at 6:17 pm

#123 Bill-Muskoka (NAM) on 03.03.09 at 9:06 am

We use Telus for home phone and internet. The best thing about them is if you need to call customer service, it allows to leave your number, and they call you back when it is your turn. Non of this B.S. waiting for 30 minutes for a rep. Worst thing about Telus though, when my parents moved to Belgium, I called and asked to get the best rate to call Belgium regularily. I was told 25 cents was the best they could do. I shopped around, discovered Yak, and signed up for 9 cents per minute. When I cancelled my Telus long distence, suddenly they could give me 8 cents per minute. I told them to pound salt, as they wasted my time shopping around, and then think they can undercut the compitition when I leave? Too late for that, and if I was offered anything close to Yak as the best offer, I would have stayed.

#132 Sondra on 03.03.09 at 6:20 pm

Calgary Rocks,
Did you actually read my recommendations in #36?

#133 CalgaryRocks on 03.03.09 at 6:30 pm

CalgaryRocks I don’t know where you work but unless you are a lawyer or an accountant I can’t see a bankruptcy affecting one’s employability. In fact, discriminating on the basis of one’s credit rating is probably inviting litigation. I can see a criminal record check being requested.

You are unfortunately wrong. Discriminating based on credit is totally legit and coming to an employer near you, if it hasn’t already.

#134 CalgaryRocks on 03.03.09 at 6:34 pm

A low credit rating means you rent and pay cash for stuff.

I never once rented an apartment without the owner checking both my references and credit. When living in the US they actually had my employer write them a letter proving employment because my credit history was limited (not poor, just limited).

I guess you could always avoid that by living in a rent-by-the-week motel next to a crack house or something similar.

#135 Ned on 03.03.09 at 7:10 pm

Well, for most of the stuff I agree with Garth, however, predicting that the stock market will bounce back up is a bit too much. What will make investors put their money back into stocks? What news? Give us a reason.

You keep claiming that this is not a household recession (depression), however regarding the stock market, you seem to concentrate on the last 20-30 years. During this period a drop was followed very fast by a bounce.

My opinion is that the stock market is going lower and will stay there for at least 2-3 years. Forget about a DOW at 10K for a long time.

Garth, you have given us some good advice in the past and you have always provided evidence or good argumentation for your opinions, but this time you just went on hope.

#136 Bill-Muskoka (NAM) on 03.03.09 at 10:39 pm

#131 Marc on 03.03.09 at 6:17 pm

Star Choice has the same system and it is truly wonderful. They always call back within the time the system states and no waiting listening to god-awful music or infomercials. LOL

#137 Bill-Muskoka (NAM) on 03.03.09 at 10:43 pm

#130 prairie gal on 03.03.09 at 6:07 pm

Likewise, banks only give credit rating if you borrow from them. All those bills paid on time for years means Jack Squat! The entire Credit Bureau thing is a violation of our privacy laws IMHO! Especially when they are American companies with access to Canadian’s information.

Not to mention the India based CSR’s who have access to our credit and account information. Where is Canada’s Privacy Commissioner? Out to a Three Martini Lunch?

Like Frank Zappa said ‘We are a nation of laws, randomly enforced!’

#138 Bill-Muskoka (NAM) on 03.03.09 at 10:49 pm

#125 Too Old Bob$ on 03.03.09 at 3:18 pm

Golden Years? Isn’t that where you get pissed on after a lifetime of honest work? Face it, when we are born we were next to an arsehole, and most leave in the same proximity! LOL The advantage is we have lived long enough not to really G.A.S. (obvious acronym).

I can’t wait for the new Dreamworks movie ‘UP!’ with the Old Man sitting on his porch as the balloons carry him, and it, skyward. What a great opportunity to take much needed whiz, eh? LOL It’s Italian, as in Pizzonya! ;-)

#139 Bill-Muskoka (NAM) on 03.03.09 at 10:58 pm

#62 George on 03.02.09 at 11:52 am

My thoughts exactly! The patient is Terminal and should be Euthanized to out it out our misery! It is an overdose of feudalism left over from the past!

Time to get into the 21st Century. Maybe if Bill Shatner runs and becomes PM he can bring Gene Roddenberry’s excellent no-cash society in? Couldn’t hurt!

#140 Bill-Muskoka (NAM) on 03.03.09 at 11:00 pm

#96 Jake on 03.02.09 at 5:17 pm

ROFLAMO! Well, we wouldn’t want that to happen!

#141 Simon on 03.04.09 at 12:37 am

Keeping in mind the wild swings in markets like Vancouver, Calgary, Edmonton, etc, an “average house price drop” of 15% means there’d be little or no decline in large parts of the country, right?

#142 Martin on 03.15.09 at 12:59 pm

I live in Vancouver and I can see our Real Estate prices dropping 10 -15% this year – maybe more. I have a friend who bought a $750,000 3bdrm condo in Yaletown (downtown Vancouver) in 07 right when prices peaked. She thought she could flip it in 08 for $50,000 more. Didn’t happen. She is now getting desperate and dropped her asking price down $50,000. Still no takers. She may have to go lower. Real estate prices have doubled here in the last 8yrs so I can see it plunging more rapidly here if the economy continues to deteriorate.