Then, now, always

19301

Is there nowhere to hide?

At one point in the last 24 hours, stocks were ravaged, gold was mauled, oil was trashed and faith in the very banking system that issues paper money was largely lost. So, if investors were giving up simultaneously on equities, corporate profits, commodities, energy, bullion and paper money, what hope is left?

Apparently, not much. And have you noticed the way the word ‘depression’ is gaining creds?

Interestingly, AP ran a story Monday quoting smart guys as saying we’re probably in a depression now. The evidence is actually compelling.

* Trillions spent so far by governments, and no result.
* Billions spent bailing out sorry-ass companies like AIG and GM, and they’re still corpses
* Massive tax cuts and public works projects, and people are still too freaked to spend.
* Interest rates at zero, yet nobody wants to lend or borrow.

This is how depressions start. At least that’s how the one in Thirties did – although then things weren’t quite this bad in the months after the ’29 market dive.

The real difference between now and then seems to be lost on most observers, though. Eighty years ago it was a crisis and crumble in the financial sector which infected the rest of the economy. This time, it’s a crash in the real economy – symbolized best by real estate – which has bought down the stock market as it pulverized banks, and then led to rapid unemployment. That makes 2009 a lot more dangerous, a lot harder to fix.

So, we have virtually every government throwing virtually all they’re got at the problem – unlike the 1930s. We have countries closely coordinating their rescue and stimulus packages, unlike the Thirties. We have coordinated central bank policy, free trade and massive social safety nets, unlike the years following 1929.

But because this time we have real estate, cars, manufacturing and consumer spending leading us into the vortex, none of that is working. At least, not yet.

Yet, there will be no depression.

That’s not to say the stock market cannot lose half its current value between now and the end of the summer. It could. But unlikely. The market will also be the first thing to rebound, because its losses have been simply unjustified in terms of corporate prospects. The Dow and the TSX have actually declined far faster and further than the real economy, which means they will scrape bottom first while real estate prices, jobs, car sales and confidence are still crashing south.

By the way, I read house sales have started to surge a little.

So, for some of us, this could be the Spring of 1930 all over again.

136 comments ↓

#1 Jonathan on 03.02.09 at 10:01 pm

“Yet there will be no depression”

“could be the spring of 1930 all over again”

I’m a little confused on what your current perspective is.

Depression happens to those who do not pay attention, such as the Sucker’s Rally of 1930. This time, it’s real estate. — Garth

#2 Observer on 03.02.09 at 10:02 pm

Yes, the local news (Global) was talking to a Real Estate “expert” who was saying we’re through the worst and it’s a good time to buy.
I’m going to go out and hunt for a house tomorrow, after all the Real Estate experts know best don’t they?

#3 paulb on 03.02.09 at 10:05 pm

The news in Vancouver is trying to pretend things are heating up. Well… sales are down -45% from FEB 08 and inventory is 35% higher.

#4 Boombust on 03.02.09 at 10:10 pm

Well, when you have financial psychopaths like Madoff (and others) on the loose, what can you expect?

Those Wall St. hotshots will (and are) wrecking the entire economy and they couldn’t care less.

Similar to 80 eighty years ago. And so it goes.

#5 Indicator on 03.02.09 at 10:19 pm

Sure, the stock market will bounce about. But the Real Estate market still has lots of room to plummet.
As you’ve said many times in your blogs and in your book, we are lagging the US by 2 years. There is still and will remain to the majority a pessimism in the housing market.

Just last week, I spoke to a Toronto Developer and to get rid of vacant condos they had to drop their price tags and rental tags by 20%. Rent was dropped by a few hundred. Imagine that … buyers can wait further as there are many people out there that will lose jobs and are faced with a delimma. Should I sell now and get out of the housing market or do I hold and hope for the best, while bankruptcy looming in the background.

Garth, I agree…stock markets will pick up eventually and quickly…but this housing market will not see brighter days for a long time. Its good that Victoria shows and uptick in sales…but this is only false hope or rather the premature desires of those to get a big piece of real estate. In the end those will fall to the wayside as well.

I think if anyone wants to make it through these eventual depression times…learn how to provide steps for preparing squirrel cuisine. Write a book, provide a nation blog…hey just like you Garth. I am sure there will be some followers.

#6 Vik on 03.02.09 at 10:22 pm

The great depression in pictures :
http://economictimes.indiatimes.com/articleshowpics/4215540.cms

#7 househunter on 03.02.09 at 10:33 pm

“By the way, I read house sales have started to surge a little.

So, for some of us, this could be the Spring of 1930 all over again.”

Jonathan, I think Garth is talking about it will be like 1930 for those guys brought house recently.

Correct me if I am wrong.

#8 Almost Papa on 03.02.09 at 10:36 pm

“Those Wall St. hotshots will (and are) wrecking the entire economy and they couldn’t care less.”

People who have resources should start supporting their local economy more. Take the bus instead of driving, hire a cleaner, go to the Farmer’s Market. Start going to galleries and live music venues, have more fun.

We can divert our money so it helps our neighbours rather then dumping it in the financial hole the corporations have become.

#9 MMMM Squirrel on 03.02.09 at 10:39 pm

SO Garth….are you saying that there could be an RE suckers rally this spring?

#10 Coho on 03.02.09 at 10:44 pm

Regarding the psychology behind sucker’s rallies in the markets: Below is an exchange of thoughts from The Automatic Earth website.

Poster #1:” Do you think the herd feels enough optimism to rally? I think the crash is hitting home. I hear it in the remarks of friends who sold furniture, insurance, homes. Good poeple who are seeing the abyss for the first time. And see no way out. I think the suckers’ rally was a fluke of the ’30’s. We’re heading beyond optimism born of faith here.”

Poster #2: It’s exactly that kind of pessimism that spawns a rally. Optimism comes later – towards the end of the rally, not the beginning. A consensus takes time to build and is therefore a lagging indicator. People always jump en masse on to passing bandwagons when it’s far too late and the gains have already been pocketed. The public buys into it in time to be fleeced yet again (ie giving insiders the opportunity to cash out).

There are always sucker rallies. They’re thoroughly grounded in human nature, but have nothing to do with rationality. They happen in spite of the fundamentals, not because of them. In fact it’s precisely because rallies are not rational that they’re moderately predictable. Watch what the herd is doing, and when the herd is in almost complete agreement, do the opposite.”

#11 Roger in Victoria on 03.02.09 at 10:53 pm

The Victoria Real Estate Board released their stats today and were spinning like crazy because sales jumped up in February from January. Duh?? But they are down 35% from last February and are the lowest for February in five years. They didn’t mention that statistic. Also no mention that prices for condos, houses and townhomes are all down year-over-year.

Click my name to see my detailed analysis of the stats.

#12 alea on 03.02.09 at 10:58 pm

I was looking for a commercial space last year for a small business i was running from my home. There was little to choose from and prices were very high. A family emergency forfeited that idea but I am looking again now.
I have seen far more signage and availability but prices are still where they were before. Any idea where they are going? Is it better to wait? (I was planning to rent but would consider buying if the prices came down)

#13 Mi Too Bitz on 03.02.09 at 11:01 pm

I still don’t see the difference. I am currently living in Calgary. I rent, so I am not panicking about equity or being underwater. I have been going to work, and going to the grocery store etc. People at work aren’t talking about this at all. Restaurants seem busy, as is Starbucks. I believe that the depth of this recession is deep…but everyone seems very calm, even happy. I don’t smell any fear or panic. What has your guy’s experience “around the water cooler” been? Anyone buying a shotgun and a bible and running for the cabin in the hills?

#14 Investx on 03.02.09 at 11:02 pm

“Yet there will be no depression”

“Depression happens to those who do not pay attention, such as the Sucker’s Rally of 1930. ”

Garth, could you be a little more confusing? Thanks!

#15 Jeff Smith on 03.02.09 at 11:04 pm

By the way, what is the difference between a Real Estate expert and a Catfish?

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#2 Observer on 03.02.09 at 10:02 pm

Yes, the local news (Global) was talking to a Real Estate “expert” who was saying we’re through the worst and it’s a good time to buy.
I’m going to go out and hunt for a house tomorrow, after all the Real Estate experts know best don’t they?

#16 dd on 03.02.09 at 11:06 pm

“which means they will scrape bottom first while real estate prices, jobs, car sales and confidence are still crashing south”

I was hearing that commerial real estate has not cause the cold like the residentual, however, it will be next. A way to play this would be the SRS Proshare US Real Estate ETF. Goes up when US commercial real estate goes down.

#17 MBS-guru on 03.02.09 at 11:07 pm

Home sales are higher than Dec and Jan for sure but we’re approaching the Spring market where sales are expected to be higher than the winter months. Year or year is still pretty dismal and supply is increasing by the second. I forecase a slight up in prices for a month before it falls off the table again into the Autumn. There’s always a dead cat bounce before things get really bad …. it’s also called a suckers rally.

#18 CC on 03.02.09 at 11:12 pm

I’m not as optimistic as you. I hope you are right and I am wrong.

#19 Opportunity on 03.02.09 at 11:19 pm

So far cash is king. Making some gains on the ups and downs of the market but only using a little cash. Hold the rest back until we start to see a more realistic gain. Lose a little gain but safer than being a bear right now.

#20 Alex on 03.02.09 at 11:32 pm

Garth, give it up. Stocks aren’t going to rally. At least not for another 50 years. Look at Japanese stocks. They are trading where they were about 30 years ago (not even factoring in inflation). That’s what we are in for: stocks are going back to where they were in the 1970s. Bank on it.

#21 Basil Fawlty on 03.02.09 at 11:35 pm

“Yet, there will be no depression.” Why? How do you know this? Is productive capacity in the US going to make a sudden re-appearance? Is the highly leveraged commercial real estate sector going to magically find new tenants as business’s continue to shut down and/or layoff?
In the 1980’s in Canada, university economics classes taught that a depression was two or more quarters of zero or negative economic growth. The US has seen this since December 2007, however “they” conveniently changed the definition of a depression. Similarily to how “they” changed the definition of being unemployed, or the calculation of inflation.
We are in a depression. Please prove me wrong.

#22 kc on 03.02.09 at 11:39 pm

A couple pages back I stated that there is no comfort in hoping for any recovery until 2 basic signs are showing on the horizon – new manufacturing and agricultural growth. Not one person in here 1-noticed the point I was making or 2-could care less to connect the dots. Paper wealth in simple terms is what the funds you invest in every month are giving you. now connect these dots.

Mass layoffs and plant closures – paper loss
booming foreclosures – paper loss
offshore turbulances – paper loss
ect..ect…

Until new opertunities open new doors for new manufacturing in this country (instead of mass China cheap imports) there is no new BULL rally. this new suckers rally is someones pipe dream. when it comes you really think it is going to be the start of something great? or just the tip of the next deeper fall? The days of the credit consumer are over… the days of riding the stocks up are a scam, the days of flip your house are upside down. The days of do nothing money are toasted and you can try eating them with cinnamon and coffee.

Before when stocks were bought the majority were purchased for the dividends they supplied. Today it is like the perpeptual elevator, roll the buy sell numbers and not the divs, now think hard about this one… FUNDS on FUNDS on FUNDS… doesn’t this sound like some crazy ponzi scheme….?? what did they buy with those funds?? ummm we bought ABCP, and put money into the DOW… ok, do you know the dow companies aren’t meeting there divs because most of the companies are going broke slowly from credit maxed out consumers that are going tits up in DERBT they can’t service?? that doesn’t concern us, as long as you give us money for our FUNDS….

doesn’t this picture seem kinda like a needle on the death throu of the final groove?? around it goes….

read back #57 on MC DOOMED

Now Main Street’s whitewashed windows
and vacant stores
Seems like there ain’t nobody
wants to come down here no more
They’re closing down the textile mill
across the railroad tracks
Foreman says these jobs are going boys
and they ain’t coming back
to your hometown

#23 WestCoastGirl on 03.02.09 at 11:46 pm

Great little quote:

“There are 10^11 stars in the galaxy. That used to be a huge number. But it’s only a hundred billion. It’s less than the national deficit! We used to call them astronomical numbers. Now we should call them economical numbers.”

– Richard Feynman

And the great not-so-short read it came from. Well worth the time to go through, amazing timeline of how this all came about, from 2000 until now.

http://www.crisisstrategyalert.com/report?ref=cpexcerpts&goal=free

#24 Irvine on 03.02.09 at 11:53 pm

Garth, how has oil crashed? It’s still near 40 bucks a barrel even in the darkest of economic times for the USA.

If you look back over the past 20 years, 40 bucks for a bucket of oil is quite good. Even in 2003, oil prices were lower..you’re just used to the 100 plus dollars a barrel

This tells you one thing…that we are at Peak Oil..when this commodity is still “highly valued” by historic standards. And it means the minute this economic heats up, oil will rocket through the roof

We’re not going to have a depression, we’ll once again have economic growth which will push oil through the roof..and the high cost of energy will crush the economy (which is what caused this meltdown). Like the Cylons on Battlestar Galatica..this will happen over and over again…

#25 Apocalypse Now on 03.02.09 at 11:54 pm

Garth writes, ‘Yet, there will be no depression’.

These times we are living in have absolutely no precedent; comparing events of today to the thirties is comparing apples to oranges. Therefore, no matter how many crystal balls Garth lines up to make such predictions as the one above about there being no depression, his guess is as good as anyone else’s. The truth is that nobody really knows how bad things will get, or how quickly there will be a recovery. I would venture to say that we are already in a depression that is deepening by the day; that it will be a miracle if we come out of this before 2015, and it will be a bigger miracle if the financial world in 2015 even remotely resembles that of today, particularly where currencies are concerned. Money itself will probably be redefined before it’s all said and done. Wait and see is probably the best thing to do right now (but buy a little gold just in case.)

#26 Lenka on 03.03.09 at 12:16 am

“But because this time we have real estate, cars, manufacturing and consumer spending leading us into the vortex”

I am surprised you would write that, being as well informed as you are, you know that this was not the case. All those sectors are/were affected by the drying up of free flowing credit, i.e financial engineering that artifically inflated sales and spending. Going forward, stock P/E ratios will look much worse, because the E will be absolutely slaughtered. No good news for the stock market, for years….

#27 Increasing that 1% on 03.03.09 at 12:19 am

….so, I didn’t put any money in RSP

#28 nonplused on 03.03.09 at 12:21 am

Sales rose month over month but year over year or compared to historical it still looks disastrous. And sales always rise into the spring, although I don’t know if February is typically stronger than January.

Everyone has an opinion about whether this is a depression or recession or implosion or what. I personally like “Great Recession” but that’s just me. However, I am not as sanguine as Garth. I don’t think the world’s financial system can just “fall off a cliff” without consequences, and I still think most of the cockroaches are still under the throw rug.

We learned in the last couple of weeks that Eastern Europe is about to fail and that they will take many Western European banks with them, possibly killing the Euro. Briefly, what happened is that Western European banks rushed into the East selling mortgages and such, denominated in Euros. However, the mortgagees all get paid in local currencies, which have collapsed. Defaults are following and that is where we are at now.

Unemployment in the US has not gone to depression levels, and probably won’t. But that’s because globalization has meant that a lot of the jobs that used to be done here are now done in China. I read that 20 million Chinese migrate workers have already been sent home. If that is the case, then China is in trouble. How will they continue to buy US debt? What’s that mean for interest rates as they continue to borrow unprecedented sums? And where are we going to get cheap flat panel TV’s and iPods if they close all the Chinese factories?

It’s all interconnected and the system is breaking down. So far, I don’t see any signs that even the greats like Volker fully understand what’s happening or have an idea how to fix it. My own personal assessment is that it can’t be fixed because the system was designed too poorly to operate under these conditions in the first place. But that’s my conclusion, most people see it differently.

#29 gold bug on 03.03.09 at 12:27 am

“…gold was mauled…”

Down five bucks on a thousand is “mauled?”

Wow. How far will a politician go to defend funny money?

Name one other thing that is up nearly 400% over the past 8 years?

Name ONE.

#30 Mark on 03.03.09 at 12:32 am

The Vancouver Sun did a hilarious news story on the weekend saying what a great time to buy it was..

#31 Bobby G on 03.03.09 at 12:45 am

Easy chart to read
If you’re chart watching go with the Dow Transports
The major major support level is 2000 (down another 14%) from today
If it does not rally there and continues down (could
possibly go to 1000 – down 57% from today)
“Marinate the squirrel Mother”
Just my opinion
http://finance.yahoo.com/echarts?s=%5EDJT#chart4:symbol=^djt;range=19650104,20090302;indicator=sma(50,100,200)+macd+volumema;charttype=candlestick;crosshair=on;ohlcvalues=0;logscale=on

#32 Tony on 03.03.09 at 1:00 am

I’ll do everyone a favour and tell them the price of oil in US dollars will be in the mid-fifties next month. The dow will put in a bottom of 5,800 and change in November this year. That will not be its’ low only the low for this year. Real estate prices have a long way to fall in Canada no matter what happens in America. Good advice is certainly avoid all Canadian bank stocks unless you’re short them.

#33 Bobby G on 03.03.09 at 1:02 am

http://biz.yahoo.com/ap/090302/madoff_scandal.html
Maybe he can land himself a bailout
Couldn’t make this stuff up

#34 Mike (authentic) on 03.03.09 at 3:30 am

A fitting word for the situation: Quagmire. “A mixed up and troubled situation”

Did you notice the Panic in the market and the just hint of despair yesterday? Just a hint of despair, but it’s building.

Panic is the 3rd of 4 of confidence cycles of the Winter economic cycle. Despair will be next as Concern (1) and Fear (2) have already given way to Panic. Once you have full ripe Despair then you know you are nearing the end of the winter cycle. But then we should also have a depression, no credit available, deflation and then outright bond buying.

Gord is right, the market should turn long before the economy will, but as they said on Bloomberg/CNBC yesterday its a slow, grinding death of wealth in the stock market right now and people should sell now and wait it out. It’s only a market for the professional (options, shorting, siding), and even then, it’s mixed results.

The economy is like nature, you sometimes need a forest fire to clear the dead timber to bring new life to the area. Prevent the forest fire long enough and you’ll get something worse (like Pine Beatles)

Mike

#35 Future Expatriate on 03.03.09 at 3:31 am

“…the market will be the first to rebound because its losses have been simply unjustified in terms of corporate prospects.”

Garth, just what greatest fools are going to rush to the empty malls to buy corporations’ crap when they have no jobs and the house, if they’re lucky enough to still have one, is bleeding equity by the minute?

WHAT corporate prospects? I mean, apart from xurbia.ca and various squirrel recipe websites?

Tiffany did well during the 30’s, but only in Fred Astaire and Ginger Rogers movies.

I’m sorry, but the fundamentals are effed. Even this technical analysis says 5600 and no bottom in sight from there either. Well, 3700 to 4000, and if that level is reached, all bets are off.

#36 Jacqueline on 03.03.09 at 6:07 am

I think part of the problem with the stimulus packages and other government intervention is that it scares the hell out of people, leading to decreased consumer confidence, etc. They must be thinking something like, “Wow, this must be really bad!”

#37 Jim Tuba on 03.03.09 at 7:07 am

Went to some open house south of ottawa this weekend.
All 3 agents showing said things were pretty bad and they were seasoned agents.
Check out mls.ca . In mid february it was already packed with homes. Been looking for 2 years now and never seen so many homes listed in the country.
I still find it amazing that the same house costs less than 1/2 price 25 minute drive out of the city to a rural place(i dont mean phoney country suburb) but a place with trees, 5 acres peace,birds, quiet and neighbours 500 feet away , not 3 feet. Yeah your house is 100 years old and not 3 years old but which one would you really want to live in.? Not to mention city taxes average about 5,0000/year.
In Ottawa the city though the million dollar homes are selling fine.

#38 Outlaw on 03.03.09 at 8:05 am

32, Tony

I second your opinions with the exception of a possibly lower bottom for Dow Components (Elliot Wave Analysis). Canadian Banks will run into massive problems once foreclosures start and unemployment raises.

Apocalypse

I completely agree with your reasoning, depression we are in already, but keep in mind bear rallies happen along the way. Gold is safe indeed but there are plans to completely overhaul the world’s financial system (one world bank and currency within the next 10 years) and I dont know what plans there are for gold.

A best depression era investment was a gold miner Hawthorne Mining, was up 600% (or thousand can’t remember) while the market declined 89% over the course of the depression. (research hawthorne’s stock prices for clarification).

Outlaw

#39 JamesT on 03.03.09 at 8:31 am

“Name one other thing that is up nearly 400% over the past 8 years?

Name ONE.”

I hate ignorance. First Solar, Inc. is up 400% in under 2.5 years (not 8 like your precious gold). In November 2006 it was priced at $25/share. Currently it is $104/share. This is even after losing >60% of its value.

Yes, there is risk in everything, just talk to those who though gold was the way to go the last time it peaked and subsequently gave up 30% of that value.

There are no guarantees. Not even in gold.

#40 James on 03.03.09 at 8:35 am

We are in unprecedented times. No one can predict the outcome. Pure speculation, not much different that the NHL trade deadline, though I’d make more betting on that than anything linked to the markets.

The world is much different than the 1930’s. Larger. More complicated. Less Faith. Less Ethics. an abohrance of anything wholesome and simple. “Anything Goes”. In a world sold on convenience and having things “my way”, how can anyone say for certain if/when things will turn around? Pure speculation. The bottom is a long way down. A long way down… Remember this; the world was very rural back in the 30’s. Globally speaking, but also domestically speaking. Not anymore. Suburbia and it’s collective mindsets, it’s stranglehold on our culture, rules. Soil depletion and lack of ownership by people is at an all-time low, and getting worse. Capitlism is State-controlled Socialism. It has been for some time. We’ve been duped, because we’ve been too busy salivating over Hummers, “Desperate Housewives”, Dr. Phil, Oprah, Molson commercials and CNBCs “Squawk Box”.

Anyone have a view on smaller regional banks? Will they survive?? Can they survive??? No matter how conservative they were in lending… if people are laid off in large volumes, as they appear to be and are heading towards being… can any bank up here weather the storm – or should I call it the tsunami?? I smell nationalization on a grand scale here. Globally. Not good.

As for what’s “safe”? Land. Near a small town. Near family. Friends you know/trust. The ability to grow your own food. Some cash. You can’t eat gold. This “gold is the hedge” mentality may be a product of Suburbia – suburban thinking that one can still play the investment game and win. The day-trader’s mindset. Born of suburbia and university business classes. Investing heavy in gold when rumours are circulating it may drop to $300/oz. I’ll take 10 acres over 10 oz. anyday. (Here’s hoping the local/regional banks can survive). I’ll take the Simple Life anyday. Though difficult on the body and somewhat void of vanity and frivilous conveniences, it can also insulate one from the quagmire that flies in the face of Simplicity, and which, indeed, is the root, or one of the roots, of our current problems. Socially. Economically. Educationally. And so on…

Greed. Vanity. Pride. The trifecta of destructive vices. Part of our culture. Accepted. Encouraged. We reap what we sow. And we all enjoyed the boom, so be careful when finger-pointing blame. Simply simplify. Admit that this madness was unsustainable. Take our lumps. Raise children to be more down to earth. To avoid the sins most of us encouraged and benefited from, for a time….

#41 JamesT on 03.03.09 at 8:38 am

“Gold is safe indeed but there are plans to completely overhaul the world’s financial system (one world bank and currency within the next 10 years) and I dont know what plans there are for gold.”

Unlikely. The Euro was a great idea in boom times, but it is proving to be a miserable failure in the current global recession, and not just due to Eastern Europe. Countries like Greece and Spain are major contributing factors in the decline of the Euro.

#42 CalgaryRocks on 03.03.09 at 8:41 am

Scotiabank will rock your world! ;)

http://business.theglobeandmail.com/servlet/story/RTGAM.20090303.wscotiabank0303/BNStory/Business/home

#43 Alberta Girl on 03.03.09 at 8:58 am

I recently moved from Winnipeg back to Alberta and while I was looking to rent/buy, I was quite suprised at the number of people that have their house for sale AND for Rent. Many people I talked to have had their house on the Edmonton market for over a year now, with no luck…. Thanks for the advice Garth, I am now renting for at least a year and hopefully my cash money downpayment with still be worth something a year or two from now, when I intend to buy.

I have also noticed about 5 “Judicial Sales” of property in the area in the last month……

#44 Jonathan on 03.03.09 at 9:09 am

“Depression happens to those who do not pay attention, such as the Sucker’s Rally of 1930. This time, it’s real estate. — Garth”

True. Nice

I can’t imagine consumer and business spending falling lower than in January. Another Q4 2008 style financial shock would be needed, and right now I’m desensitized, so it would probably need to be worse. I bet discretionary spending was probably down at least 30% in January. Currently demand is slowly penting up for cars and other goods that we don’t need but want.

So part of me tells me to buy in to the market.

The other part of me reads reports that says Canadians have a rosy outlook. That means that if that rosy outlook were to be diminished, demand could drop significantly.

My biggest worry is that another shock may well be coming to the system. Not the Alt-A and Option ARMS that mature this year that may cost the US banking system another $1 trillion. Although that is not going to help any.

The shock will be in the form of rapidly rising interest rates and inflation, which would cause bonds to collapse and US currency to fall. Bond markets and US money markets I believe are much larger then equity markets, so that would definitely create panic. A rebound would act as a catalyst for this adjustment.

While this will severely damage the economy, it will cause inflation. So I’m not so sure holding paper money is advantageous over equities either way, at least not in the long term.

A good temporary investment I am considering:

-Invest 40% of portfolio back in to commodities and transportation stocks.
– Invest 10% in platinum – not gold, as it should go up if vehicle production increases, is rarer than gold, and it is a precious metal, therefore protecting on the up and downside.
– Keep 50% in cash.
– Sell stocks when market rebounds and buy bonds when they collapse (should offer good long term returns).

#45 Bill-Muskoka (NAM) on 03.03.09 at 9:18 am

Well, there certainly are a lot of DEPRESSED people, which is how I consider a Depression. But, hey, those who gamble their money in the markets have all kinds of meaningless terms to describe their meaningless activities and BS each other in the never ending game of ‘Where’s My Money?’

I bet there is a group writing the new ‘Holy Handbook of Investment Terms’ in a secret place somewhere. Watch, there will be a flood of new terms no one has a clue what they mean come forth. It has worked so well for other religions, why not The Money Changers?

Maybe they will build the Ultimate Computer for trading, and like several movies in the past have depicted, let it take control? Hmmmm…Let’s see how that scenario worked out? We had ‘Collosus: The Forbin Project’, ‘Fail-Safe’, ‘War Games’, ‘I-Robot’, and ‘the ‘Terminator’ series.

Tom, Clancy did two books (at least) on the subject, and every time the geeks gave the people the goose!

HEY! Isn’t that how this whole mess started with the automated computer trading last year? Yes, they had to shut the system down because the trigger levels were set wrong and trillions went into cyberspace. Oh, and what was that blurp about someone hacking into their systems?

Well, you can bet Microsoft played a part with their ever reliable, hacker proof operating system? ROFLMAO! They don’t call it ‘Windows’ for naught!

Have a most pleasant day!

#46 jeff on 03.03.09 at 9:26 am

re post #21

Mr Fawlty,

You’ve defined the term “recession” , not depression. There is no excuse for that, unless, of course, you’re from Barcelona!!

#47 smwhite on 03.03.09 at 9:40 am

Watching the lemmings run to the safety of the American dollar. Ah to be the cure and the disease!

Lack of market confidence helps continue this bitter cycle, the DOW @ 5K…

Its reassuring to know that the financial companies that helped cause this panic and crisis are the ones that have all that tax payer money and using it to buy equities and assets at .50 on the dollar.

Market manipulation at its best. For theses banks to emerge out of this shit storm in a position of strength, they need to be able to invest at what, 1985 market levels? In this environment, if your a little guy you have to be on the sidelines darning a pistol with a hair trigger, not for the faint of heart.

#48 Skeptic on 03.03.09 at 9:40 am

#28 nonplused wrote:
We learned in the last couple of weeks that Eastern Europe is about to fail and that they will take many Western European banks with them, possibly killing the Euro. Briefly, what happened is that Western European banks rushed into the East selling mortgages and such, denominated in Euros. However, the mortgagees all get paid in local currencies, which have collapsed. Defaults are following and that is where we are at now.

I’m sorry my friend but you’r just talking out of your ass. I have close ties to Eastern Europe and I can tell you:
1. Local currencies have NOT collapsed. Check any FX stats if you don’t believe.
2. How many bad mortgages do you think Western banks sold in Eastern countries? Not that many I can tell you.
3. Even if ALL the Eastern European countries go bankrupt tomorrow, the Euro will not collapse simply because their economies are not very tightly coupled. Eastern countries are not in the monetary union and they were not even in the economic European Union 4-5 years ago.
So first educate yourself before you spill your “expert” rhetoric!

#49 MikeB on 03.03.09 at 9:58 am

BOC drops interest rates to .5% lowest in history.
YET the BOC claims that an economic blessing come next year. If all will be well in a year then why the drop in interest rates Mr Carney. Ohhh right… he doesn’t do spin.
Will this rate cut effect mortgage rates. Not if the banks have anything to do with it. But borrowers beware… rates today on a very expensive home and over 200K mortgage means that rates will be higher in say 5 years and cheap money won’t mean much on that 200k mortgage. In the first 5 years you are most likely not going to even touch principal in a mortgage that size. Of course , as many bloggers here know, there are plenty Torontonians who have way bigger mortgages than that. Now those are greater fools.

#50 dd on 03.03.09 at 10:00 am

#13 Mi Too Bitz,

Obvisouly you are not in the energy sector. People are very worried in Calgary. Very.

#51 dd on 03.03.09 at 10:01 am

#14 Investx,

You handle is Investx, why? Fundamentals baby, fundamentals.

#52 TUT on 03.03.09 at 10:22 am

Stop bickering about terminology: Neither “recession” nor “depression” but “deprecession”. It rhymes with depreciation, and deep-recession.

Anyway it does not matter how we call it. I don’t care if the cause of death is “heart failure” of “stop breathing” for the results a rather similar.

Instead, let’s try to find collective actions that can be carried on by normal people like you and me. Better if we try to avoid individual salvation recipes (the S&W and similar stuff) because they aren’t going to work either.

In tough times we need to cooperate, like in a natural disaster, because the help from the authorities will (and always will be) too small and too late.

#53 Navi on 03.03.09 at 10:25 am

All this doom and gloom and “we’re in for 30 years of Japanese stock market hell” tells me that it’s time to buy.

When despair is at its zenith, when people are liquidating stock positions out of fear… take advantage and retire 5 years down the line.

Seriously… if you pick a few businesses that have consistent, strong cashflow and are still paying out high dividends mid-year go all in.

You’ll have locked in at a high dividend yield for perpetuity and will be set for life in terms of income.

#54 Keith in Calgary on 03.03.09 at 10:29 am

Three Sisters Mountain Village, the upscale Canmore resort specializing in high-end properties, is in receivership.

Officials with the company, the largest developer in Canmore, declined to comment, but a notice posted on the locked front door of the company’s sales office Monday advises that PricewaterhouseCoopers was appointed receiver on Friday.

http://www.calgaryherald.com/Business/Canmore+megaproject+developer+receivership/1347914/story.html

#55 Might As Well Be Concerned on 03.03.09 at 10:37 am

#37

I heard that taxes on homes/small farms out of the city are much lower. We’ve always thought about living there. My wife is a survivalist who grew up on a farm in a foreign country she likes that.

Anybody care to comment on homes with say a couple of acres and an hour or so away from the city? She likes growing vegetables and some chickens for personal consumption.

#56 pbrasseur on 03.03.09 at 10:39 am

@ Alex #20

“Garth, give it up. Stocks aren’t going to rally. At least not for another 50 years.”

Are you wearing diapers?

I mean some people (including many journalists) who have never seen a REAL recession in their lives seem to think this is the end of the world.

What arrogance, this is becoming ridiculous.

#57 MikeB on 03.03.09 at 10:48 am

As was the basis for much of Garth’s writings, we must look to our neighbours to the south to see our own destiny. They are our largest trading partner and many of our day to day clients are US based. So we must keep our eyes on the big dog not really see Canada in a bubble.
As reported yesterday, consumer debt in canada is staggeringly high, higher than the US. We are no different but THINK we are different.
On top of that we have big hitters like Warren Buffet saying things are bad and getting worse.

http://finance.yahoo.com/tech-ticker/article/197344/How-Low-Can-the-Market-Go?tickers=^dji,^gspc,^ixic

Plus yesterday Nouriel Roubini made a chilling statement about how the global economy is in a sychronized recession and believes this could last at least 36 months. No longer considers it a U shaped recession but more likely an L-shaped japanese style stagnant economy. His words… this is really scary stuff.

http://finance.yahoo.com/tech-ticker/article/197164/Even-%27Dr.-Doom%27-Is-Scared-Economy-Much-Worse-Than-Roubini-Predicted?tickers=^dji,^gspc,QQQQ,DIA,SPY

And people want to buy houses… wow I just don’t get it.

#58 Jon C. Coates on 03.03.09 at 10:50 am

It doesn’t happen often, but I agree with Garth – there will be no depression. There are simply too many safety nets in place to backstop our economy: first, the number of government employees is high and their incomes are assured. Next, for many people, the value of their homes is a matter of indifference because they have taken the long term view that their house is their home, not something which will be treated as a credit card to be tapped into to sustain an unsustainable lifestyle. Further, the real value of most companies listed on stock exchanges is sustained by hard assets. Then, we have a full range of institutions that never existed during the Great Depression – EI, Old Age Pensions, CPP – QPP, deposit insurance and an inclination of governments to spend rather than to retract – of central banks to increase the money supply rather than retract it.
Want to learn about the Great Depression, read John Kenneth Galbraith’s “The Great Crash, 1929”. This book clearly traces the many missteps taken by governments. Even the stock brokers on Wall St. aren’t throwing themselves out of their windows, more’s the pity. If these rats haven’t deserted the ship, its probably because the ship is in little danger of sinking.
If you are overextended, you may be in trouble. But, as long as you have a job or an income of some sort, you can weather the storm

#59 Republic_of_Western_Canada on 03.03.09 at 11:10 am

Morgan Stanley Real Estate:

…reducing commercial development within the resort by 90 per cent and cutting 2,500 approved dwelling units, citing “far too much density for true long-term sustainable value.”

Really? Did they determine this thru ‘market research’ or the impossibility of moving that many units in a place with a 2-hour commute (one way) to Calgary?

http://www.calgaryherald.com/Business/Canmore+megaproject+developer+receivership/1347914/story.html

#60 Alberta Ed on 03.03.09 at 11:16 am

The real estate shills in Calgary at CREB and the Calgary Herald say things are picking up and it’s a great time to buy. Meanwhile, the Three Sisters luxury resort in Canmore has gone belly-up. Yup. Never better.

#61 David Bakody on 03.03.09 at 11:18 am

Let me try and explain wrt to 1930 …. (Country people will get it quick) here in Canada we have an early spring thaw and then a a short cold snap …. there are always a few who enter out on the ice and fall through and yes some drown! Get it?

#62 ncoffee on 03.03.09 at 11:21 am

#13 – Re: “I believe that the depth of this recession is deep…but everyone seems very calm, even happy. I don’t smell any fear or panic. What has your guy’s experience “around the water cooler” been?”

I’m in Calgary too, and this has also been my experience here as well. Most people I talk to (in their 20s-30s, mostly) seem to think this is a good time to buy a house, or even an apartment (!), because the numbers have dropped. A couple people I know feel like they’re getting in over their heads with zero-down/40 yr mortgages, but those people also are doing nothing to change that situation, and are just waiting for the value to come back. None of them want to hear anything negative about the future of the market, and think I’m crazy trying to firesale my home at a time like this. And okay, compared to someone who sold last year or even last month, maybe I am, but that isn’t where these people are coming from — they want to sell when their SFH is worth $600,000+; that or nothing. Me, I just want cash in hand rather than a 20 year mortgage during these nasty times.

But Jesus, their heads would explode if I pointed them in the direction of this blog, that’s for sure … but it’s hardly worth pointing to, due to the excess amounts of cognitive dissonance around the city these days. (It’ll help me sell my place, though!)

#63 newfangled on 03.03.09 at 11:56 am

#16 dd

“I was hearing that commerial real estate has not cause the cold like the residentual, however, it will be next. A way to play this would be the SRS Proshare US Real Estate ETF. Goes up when US commercial real estate goes down.”

For anyone considering the various bear/short/inverse ETFs, do a bit of poking around online first.

They double the daily % gains or losses, rather than acting like a true short. There are many examples of people who’ve held the 2x inverse Financial and RE ETFs since 2007, but they’ve actually LOST money because of how the math works out.

These are good for short-term moves, but the churn of a volatile market wipes out any gains long-term.

#64 Got A Watch on 03.03.09 at 12:14 pm

Garth says “Yet, there will be no Depression”. Huh? LOL

Recession? Depression? What’s the difference?

“Before the Great Depression of the 1930s any downturn in economic activity was referred to as a depression. The term recession was developed in this period to differentiate periods like the 1930s from smaller economic declines that occurred in 1910 and 1913. This leads to the simple definition of a depression as a recession that lasts longer and has a larger decline in business activity.

So how can we tell the difference between a recession and a depression? A good rule of thumb for determining the difference between a recession and a depression is to look at the changes in GNP. A depression is any economic downturn where real GDP declines by more than 10 percent.”

-GDP declines by 10%- check -we will see that soon, and more

OR:

Economic Depression

“Though there is no widely accepted definition for an economic depression, according to an article in The Economist, there are two rules of thumb found widely on the internet. One is a decline in real GDP exceeding 10%, and the other is a recession lasting 3 or more years”

As a resident of Ontario, where we have been in a recession for about 2 years already, a 3 year recession is a given.

Garth, what are you talking about? Take off the rose colored glasses. You honestly think we won’t meet and exceed those easy definitions of a Depression?

I’d say a Depression is a lock. It’s here, it’s now, it’s global. We can debate how long it will last, but denying it exists seems delusional. Spare me the snarky comeback, how about some facts to refute the above?

#65 confused and a little crazed on 03.03.09 at 12:16 pm

Heelo Garth,

you will not say we are definitely going into a depression becayse yiu want to be blamed for going into a depression…it is based on the self fulfilling profecy principle. What you believe…will come true because you, yourself will create the conditions to support it, subconsciously. If you didn’t think a depression wasn’t a possibility …then you wouldn’t have written your book ” After the crash” Some ideas there could be perceived a depression survival tactics

#66 Investx on 03.03.09 at 12:16 pm

Mi Too Bitz :

“What has your guy’s experience “around the water cooler” been? Anyone buying a shotgun and a bible and running for the cabin in the hills?”

I noted two months ago that I got an increase to my credit card. A friend just mentioned to me yesterday that he just received significant increases to both of his credit cards without asking for them.

No credit crunch there. We both have decent credit scores. I wonder if this is the case with most consumers that have good credit.

#67 smwhite on 03.03.09 at 12:16 pm

Paul & Volcker exchange…

http://www.youtube.com/watch?v=hteimSh42Gk&feature=related

#68 confused and a little crazed on 03.03.09 at 12:17 pm

sorry that don’t want to be blamed for going into a dpression

#69 ralph on 03.03.09 at 12:26 pm

They are going to use gold to make urinals with.

#70 Bob Bagina on 03.03.09 at 12:33 pm

Word on the street is that the Saudis are planning on calling in US debt, putting the final dagger in the heart of the American economy. Russian and Chinese troops, buoyed by Indian conscripts are embarking upon an all out territory and resource grab. World War III is not that far off.

Just kidding ……

Big money is changing hands and fat cats will continue to put on the pounds, while Pollyanna grovels for a handful of sourdough.

#71 TheComingDepression on 03.03.09 at 12:44 pm

This will be Garths’ undoing…GOLD/SILVER. ( There is 5 times more GOLD than SILVER) He does not like it, he does not understand it, he has not researched it.
A few years ago a writer wrote an article in the GLOBE AND MAIL, that GOLD will go down to $300. (it was $600) I stated he better do some research because it will be going to $1000 PLUS. He laughed at me stating I was just another Gold bug. I have researched it since 1979.. mines, graphs,geologists, articles,manipulation techniques,collected it,saved it and studied it to no end…By holding GOLD.. I have (since 1979) beaten all the “markets” in the world to date..( except Art)

#72 kc on 03.03.09 at 12:45 pm

If anyone is wnating to read a great article about why as consumers, the game is OVER. here is an eye opening tabulation. For those who feel so strongly that we are in this small hic-up and things are going to be rosy in a few months – read this and see if you still feel so chipper. Without manufacturing jobs we are toasted.

The End of the Consumer Credit Empire: Stairway to Retail Heaven

http://www.marketoracle.co.uk/Article9219.html

#73 PTDBD on 03.03.09 at 12:46 pm

Word of the Day to look up: “The Bezzle”

#74 Illusionist on 03.03.09 at 1:08 pm

What happened to the belief that Canada’s economy was one the best in the world? We are falling same as the US just in slow motion, recovering will be the same

#75 RS on 03.03.09 at 1:14 pm

I’m so confused!

#76 Mike (authentic) on 03.03.09 at 1:14 pm

29 gold bug on 03.03.09 at 12:27 am “…gold was mauled…” Down five bucks on a thousand is “mauled?”
Name one other thing that is up nearly 400% over the past 8 years? Name ONE.”

1. Since January 2008, HiT Software recorded a 400% increase over the previous year in the number of evaluations of its products to support projects employing business intelligence, data warehouse, data mart, database synchronization and database migration efforts.

2. Less than three years since purchasing global energy leader Stock Equipment Company, Inc., Riverlake Partners LLC sold the company to Schenck Process of Darmstadt, Germany, making more than 4x its initial investment.

No bubble here:

http://goldprice.org/images/monthly_dollar.gif

Mike

#77 North Vancouver Citizen Jr. on 03.03.09 at 1:15 pm

…..Many private emails continue requesting I post more “outside the box” ideas and suggestions.

1/
Reintroduce genuine “Family Time” by limiting your household’s TV viewing to only…PBS Specials, American Idol and Vancouver Canucks Hockey.

2/
Hand wash and dry the family’s dinner dishes….. stop using the dishwasher, it knits the family closer and its also “Green”.

3/
Grow a Carrot Garden and raise Rabbits….it will provide vegetables, meat and warm winter comforters for your family’s beds.

4/
Play only “Progressive” Slot Machines at your nearest Casinos….They have the best % return for your investments.

5/
Move to Vancouver Proper…rent or buy a home…it doesn’t make a difference short term, but at least you will be living in the next Financial/Trade/Leisure capital of North America.

…Good luck to all in the biggest Deflationary World Economy since a long long time ago.

#78 Malu on 03.03.09 at 1:25 pm

We have extreme drought all over the world – China, Argentina, Australia, Iraq, Africa, The United States (Texas, California). It is estimated that 104 million people are in danger of starvation this year due to drought conditions – 10 million in Kenya alone.

Look around the produce department in your grocery store. All lot of what you see comes from California. In the Central Valley of California the farmers will this year be allowed only 15% of the required water for irrigation. Many are choosing not to plant.

We simply cannot sustain growth on a finite planet with finite resources. Once we all come to that realization, whether or not the TSE recovers seems a moot point.

#79 Investx on 03.03.09 at 1:28 pm

#22 KC:

“Before when stocks were bought the majority were purchased for the dividends they supplied. Today it is like the perpeptual elevator, roll the buy sell numbers and not the divs, now think hard about this one… FUNDS on FUNDS on FUNDS… doesn’t this sound like some crazy ponzi scheme….?? ”

Your post reminds me of a blog post “The Stock Market is For Suckers” by billionaire and NBA team owner Mark Cuban. An excerpt:

“The stock market is by definition a ponzi scheme. As long as money keeps on coming in, then there is someone to take the stocks from the sellers.

I’ve said it before,a stock that doesnt pay dividends is valued like a baseball card. Just whatever you can sell it for. The concept that you own “your share” of the company is a joke. You are completely at the whim of the CEO and board who will dilute you on a daily basis with stock options, then try to buy back stock to cover it up and push up the price, rewarding the shareholders who get out, rather than those that continue to hold
the shares. Meaning you.

The stockmarket used to be about investing capital in companies that came public or did secondary offerings. That money was used to create amazing businesses and return dividends back to people who truly were investors. There once was a day where most companies paid dividends higher than the interest rates on their bonds. Why ? Because stocks are inherently more risky. If a company goes belly up, bondholders collect first, shareholders usually
last. People could buy and hold stocks, and get paid real cash money for being a shareholder in the company at rates far higher than the divident yields we see today. If the company did well, the dividends went up. Investors who held, actually got all their money back in dividends at some point and the rest was gravy. The good ole days.

But that changed when mutual funds came along and started marketing the concept of growth as a way to attract investors.”

Full post: http://blogmaverick.com/2006/01/03/the-stock-market-is-for-suckers/

#80 Matt Stiles on 03.03.09 at 1:33 pm

Garth,

I wouldn’t be too optimistic on corporate profits. They’ve been getting destroyed, even as forward estimates remain in the clouds. For example, the S&P 500 earned about $26 in 2008, giving it a 1 year P/E of 26.6 at today’s price of 696. That’s not what the media will tell you. They’ll tell you “stocks are cheap” based on fantasy “operating earnings” or based on “forward earnings.”

Keep in mind that at the bottom of other major bear markets like ’33 and ’74/’82, the trailing P/Es trough was about 6 or 7. I write about this often, and mentioned it last week in an article on my blog:

http://futronomics.blogspot.com/2009/02/equities-buy-em-or-run-for-hills.html

#81 TS Harpoon on 03.03.09 at 1:42 pm

Keep up the great work Garth Turner.

Conference Board of Canada:

Provincial Outlook Economic Forecast: Winter 2009

This quarterly economic forecast provides highlights of the Provincial Outlook report, which presents the short-term outlook for Canada’s provinces.

Document Highlights:

The U.S.-led global recession has dragged Canada into recession. Canada’s economy is expected to contract for three consecutive quarters, going back to the fourth quarter of 2008, resulting in a 0.5 per cent decline in real GDP this year.
Only four provinces will record any growth this year—Prince Edward Island, New Brunswick, Manitoba, and Saskatchewan.
The precipitous drop in oil prices and the credit crisis has been detrimental to energy expansion plans. The massive pull back in oil sands expenditures will push economic growth in Alberta into negative territory this year for the first time since 1986.
While the Vancouver 2010 Winter Olympics will shore up economic prospects in British Columbia next year, the economy will still contract as forestry, manufacturing, and construction falter and the domestic economy loses ground this year.
Ontario’s economic woes will deepen in 2009. The economy will suffer blows from the underperforming manufacturing sector and from the rapidly weakening domestic economy. Large job losses are expected in 2009.
Quebec’s export-dependent economy is also exposed to the global slowdown, and real GDP will contract this year.
Real GDP in Newfoundland and Labrador will falter in 2009. The mining sector is expected to plunge, but the domestic economy should remain healthy.

#82 David on 03.03.09 at 1:46 pm

When it comes to bailouts, all the talk about the moral hazard gets thrown out the window. Bad behaviour is to be rewarded lest we enter a new Dark Ages. The larcenists and gamblers from the real estate bubble era deserve to fail as do all their bubblista cohorts. A pox upon their houses.

#83 Dave on 03.03.09 at 1:56 pm

…gold was mauled…”

Down five bucks on a thousand is “mauled?”

Wow. How far will a politician go to defend funny money?

Name one other thing that is up nearly 400% over the past 8 years?

Name ONE.

——————————————————–

uranium….shhh, everyone is still sleeping on that though

#84 R Alton on 03.03.09 at 2:08 pm

Garth
You sound a little like the people I know that are invested in real estate. They believe prices will pick up because that’s what they want to believe, it is what they have a vested interest in believing.
I agree that in the past equities have tended to recover sooner than the rest of the economy, but not to the extent you might believe, especially since gains are assymetrically realized . When I worked in the business the greatest financial gains were realized by a fairly small number of investors – we called the remaining majority investors – donators ) You need to dig a little deeper when evaluating equity gains. When indices are low, they are re configured. The dogs are thrown out, and more promising companies substituted. The indices most monitored are sometimes quite narrow (ie. Dow – 30 stocks). Even large indices – do not reflect what happened to all of the companies no longer trading – and there are lots even in good times.
Performance data from the financial services industry is as suspect as that from the National Real Estate Association.

#85 R Alton on 03.03.09 at 2:16 pm

http://www.theglobeandmail.com/servlet/story/LAC.20090226.RBERMAN26/TPStory/?query=change+dow+jones

Just thought I would add this link – from the Globe Feb/06/09 – Does Dow Need a Nip and Tuck? The proposal is that GE, Alcoa, B of A, Citigroup and GM be replaced with better performing stocks.
I once saw an analysis of how mutual funds have performed, but with one that reflected all of the funds that folded. I’ve also seen stats of stock market performances that do not strip out defunct and poorly performing companies. – As always things aren’t quite what the industry would have us believe.

#86 dd on 03.03.09 at 2:22 pm

#32 Tony

“price of oil in US dollars will be in the mid-fifties next month.”

So how is this suppose to happen with more layoffs and consumption for oil falling?

#87 Jelly on 03.03.09 at 2:22 pm

“By the way, I read house sales have started to surge a little.

So, for some of us, this could be the Spring of 1930 all over again.”

Correct me if I am wrong but I think Garth means that there will be a sucker’s rally in real estate this spring as has happened already before a collapse.
I do not know if it is simply because of the spring market or low interest rates and a drop in prices but there does seem to be a bit more building in Calgary than I thought. 20 houses being built in a company that had previously sold only 4 in one month.
Could be a few reasons obviously,

Care to go into more detail Garth?
(We are all dying to know, I am sure)

#88 dd on 03.03.09 at 2:24 pm

“#27 Increasing that 1% ….so, I didn’t put any money in RSP”

So I did and got a $5000 refund. I am just in cash.

#89 dd on 03.03.09 at 2:28 pm

#25 Apocalypse

“These times we are living in have absolutely no precedent; comparing events of today to the thirties is comparing apples to oranges.” – People are still comparing.

“The truth is that nobody really knows how bad things will get, or how quickly there will be a recovery.” – They have a good idea what is going on. You read it daily about what the fed is doing.

“it will be a miracle if we come out of this before 2015” – I though you said nobody knows what is going to happen?

#90 dd on 03.03.09 at 2:31 pm

#24 Irvine

“how has oil crashed? It’s still near 40 bucks a barrel even in the darkest of economic times for the USA.”

“40 bucks for a bucket of oil is quite good.” – not when it cost 50-60 to produce!

#91 Mathematically Challenged on 03.03.09 at 2:39 pm

Garth is predicting that tomorrow the sun will rise again.

And again, Garth will be right – as usual.

…. Yawn…

#92 VooDoo on 03.03.09 at 2:49 pm

Garth, is it true that realtor fees can be deducted from taxable income?
Thanks.

No. — Garth

#93 dekethegeek on 03.03.09 at 3:10 pm

#30 Mark
“The Vancouver Sun did a hilarious story on real estate last weekend its a great time to buy……..”
Unfortunately propaganda isnt dead. The Vancouver Sun and the Province still don’t get it. They sell their souls to the highest bidder(which every weekend is the “Real Estate” suppliment)
Their subscription rates are tanking in the toilet and they cant give their papers away at the Skytrain stations for free ! The North American newspapers are becoming increasingly irrelivant, time to switch to a “Kinder” and at least save trees. The local vancouver newspapers are good for one thing, wrapping dead fish.

#94 Bonnie N BC on 03.03.09 at 4:19 pm

The Chaos Economy

Is it only me or do you feel like we are on the island of Jurassic Park without the palaeontologist?

I have to tell you Garth, I am tired of all the bad news. We all cast our futures on a theme park of spend, spend, spend without a basic understanding of sustainability. Now, that giant T-Rex of derivatives is coming to eat to us whole.

Here I am watching the vote on the Budget Implementation Act and it seems more like a square dance than a serious life and death scene in Jurassic Park where many people exist.

And that’s the point – people outside of Ottawa are in serious trouble not because they are stupid or gullible but because they did not understand that the theme park was designed to divert their lives for obscene profit of bankers who remain nameless other than that Made off guy.( Yes spelling noted.)

As to gold, or diamonds or USD and whatever you think will keep you safe from the dinosaurs of excess – go read Garth’s blog on Xurbia. We can move forward if we prepare within our means and weather the storm.

“Is there no where to hide?”

No Garth, just a way to survive. Palaeontogists please apply.

#95 Dave on 03.03.09 at 4:41 pm

a lot of you pat Garth on the back for calling the real estate/credit problem. I’m completely baffled that so many of you are going against his opinion of an eventual stock market rally now.

This leads me to believe that some people simply love misery. A lot of you aren’t market students, you’re just miserable. Garth, like any reputable financial visionary, is calling things the way he sees them.

Its obvious that some of you are exactly like the people that thought real estate would fly forever, just with the opposite outlook.

In years past, I went on real estate boards to get a grasp of what the sentiment was there- I thought their ideology was ridiculous. I find a lot of the same ideology on here! I’ll say it again, most of you aren’t market students, you’re just miserable! You were correct with this downtrend (so was I). Don’t misinterpret a general negative frame of mind as a good market analyst. Your outlook is just negative and the market has turned in your favour

#96 Hcase on 03.03.09 at 4:46 pm

#65
There is an easy way to explain the difference between recession and a depression ?

1 : A Recession is when your neighbor losses his Job.

2: A Depression is when you lose YOURS!!!!

#97 vtj on 03.03.09 at 4:48 pm

#93 Voodoo:

Actually, you can deduct realtor fees from taxable income if in the process of selling your home you moved to a new home which is at least 40km closer to where you work:

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns206-236/219/wh-eng.html

That has always been the case. But it wasn’t the question. — Garth

#98 pbrasseur on 03.03.09 at 4:56 pm

Dave 84 (about gold)

“Name one other thing that is up nearly 400% over the past 8 years?

Name ONE.”

That alone should make you worry my friend! Care to spell B-U-B-B-L-E…

#99 Too Old Bob$ on 03.03.09 at 4:59 pm

recession -the act of receding or withdrawing.
depression- the state of being depressed.

Words used to describe the Economy. Also words used to describe feelings and maybe your spending habits.
Most young people don’t know the difference, life goes on. Older people with mortgages, bills, debts and investments, well they get it. You have to realize that even in these various states, they really don’t apply to everyone. Some people take advantage of economic woes. Investors that spend wisely and manage their living expenses may buy commodities, land and buildings. What they do is sit on it for years, rent it, lease, farm it and let inflation run it’s course. Then, hopefully sell for a profit. This strategy can be used to buy stocks that have always paid dividends and held for almost ever. As long as they keep paying dividends, your value increases and may eventually pay for all your initial deposit. Some stocks are down quite a bit, but there dividend yield is up. Watch what happens if the market doesn’t come back anytime soon, stock splits, lower the cost so people can afford to invest. Yep! sometimes it works, just remember to do the research.
Speaking of depression, my father (grade 8 education, but went back to school at age 40) rode the rails back in 1928- 1929, anyone see people hanging off the Box Cars yet, I hope not, but then we aren’t quite there yet are we.

#100 Ruhh on 03.03.09 at 5:02 pm

So if all is going to be rosy again, why bother with XURBIA?
Not criticizing here, I just don’t get where you’re going these days. I’m guessing a suckers run this spring both in housing and in stocks but then I think S(really)HTF.

on another note…

Jim Rogers – expect to see civil unrest
http://www.youtube.com/watch?v=LBRHmZiAEcs

Xurbia is about renewable energy, sustainable development and living to achieve more control, self-sufficiency and preparedness. These should be goals of everyone, always. — Garth

#101 Increasing that 1% on 03.03.09 at 5:15 pm

#89. dd: on 03.03.09 at 2:24pm

“#27 Increasing that 1% ….so, I didn’t put any money in RSP”

So I did and got a $5000 refund. I am just in cash.
—————————————————-
Yeah, wish it were that simple of a decision.

There were so many factors to consider, and it came down to forego the RSP contribution for now, mainly due to all the ‘disharmony/unsurety’ of what’s ahead.

If I had a lot more cash available at this time, I would try to max out my contributions, in something with the lowest risk possible RSP-wise and bank wise. But that’s not the case…

As #76. RS said
“I’m so confused!”

Same.
There’s so much information, plans to adapt needed…it’s craziness…

#102 Got A Watch on 03.03.09 at 5:32 pm

Garth, I didn’t want to be too rude, I thank you for your efforts.

I know calling it a “Depression” for a public profile figure like you means getting attacked by the clueless, like the Realt(ho)rs (TM). People in deep denial don’t like getting their bubbles burst.

But I think it’s now safe to use the dreaded “D” word in public. Heck, the local A-Channel anchor (who probably got the chop today) was using the real ‘D’ word routinely back in October or November for a couple of weeks. Then she mush have got a call from head office, it is back to a “Recession”. I guess it got downgraded by the executives. Can’t scare the sheeple.

You just have to revel in your evil Dr. Doom persona. Start wearing a black cape, and swirling it dramatically. Adopt an evil sneering laugh. Twirl your mustache. Carry a cane with a sword blade.

I do. — Garth

#103 Dave on 03.03.09 at 5:46 pm

Dave 84 (about gold)

“Name one other thing that is up nearly 400% over the past 8 years?

Name ONE.”

That alone should make you worry my friend! Care to spell B-U-B-B-L-E…
—————————————————–

you’re clearly sleeping. It sits at roughly $72 a pound and was $7 a pound in 2001. Its 6 year average is 586.27% while gold bullion in the past 6 years is 152.37%.

you asked for something that outperformed gold and I provided. You’re going to have to do a bit more research outside of gold itself to make statements like that. Now go back to your bunker, clown

#104 timbo on 03.03.09 at 5:47 pm

http://www.cnbc.com/id/15840232?video=1050674027&play=1

last couple of minutes caught my ear.

watch this and ask yourself if by bailing out companies and homeowners are we creating a bigger monster in giving people the option to take the easy way out instead of paying their debts.

#105 BigAl on 03.03.09 at 6:00 pm

The message I get from this blog and other sources is one of opportunity for me and many others. Fear and fretting will get you nowhere.

I went back and read the following regarding fear, courage, and opportunity.

Taken from Faulkner’s Nobel speech:

“Our tragedy today is a general and universal physical fear so long sustained by now that we can even bear it. There are no longer problems of the spirit. There is only one question: When will I be blown up? Because of this, the young man or woman … today has forgotten the problems of the human heart in conflict with itself…

He must teach himself that the basest of all things is to be afraid: and, teaching himself that, forget it forever, leaving no room in his workshop for anything but the old verities and truths of the heart, the universal truths …

“Until he learns these things, he will write as though he stood among and watched the end of man. I decline to accept the end of man. It is easy enough to say that man is immortal because he will endure: that when the last ding-dong of doom has clanged and faded from the last worthless rock hanging tideless in the last red and dying evening, that even then there will still be one more sound: that of his puny inexhaustible voice, still talking…

“I refuse to accept this. I believe that man will not merely endure: he will prevail. He is immortal, not because he alone among creatures has an inexhaustible voice, but because he has a soul, a spirit capable of compassion and sacrifice and endurance…”

#106 Dave on 03.03.09 at 6:03 pm

That alone should make you worry my friend! Care to spell B-U-B-B-L-E…

—————————–

its moronic statements like this that ensure there will always be a herd….assuming there is an over-supply and bidding wars of everything simply because its popular culture.

Read and research prior to assuming everything that goes up that you don’t know about is a bubble. Government panic purchasing alternative energy means to provide baseload energy is a bubble too?

or maybe you believe a billion generators or millions of windmills will supply the worlds energy needs?

i think you’re living in a bubble

#107 Trailtom on 03.03.09 at 6:19 pm

Hello, I live in Trail B.C. The home of a large teck cominco lead smelter.
Last month they laid off all the contractors. The fellow I was working with today, told me he was one of the last three guys left, out of 40. And that is just one crew.
At lunch I overheard 2 people behind me talking about hoping to be back to work soon. Both of them.
This spring when all the EI runs out, and all the houses hit the market……… .

#108 North Vancouver Citizen Jr. on 03.03.09 at 6:30 pm

Early Preparation

….If asked, I humbly will accept to run for a Federal seat in our next National election.

No particular Riding comes to mind, but since my “outside the box” thinking continues so productively, I could also contemplate running as Dictator if the Citizenry of our fair land so prefer.

N V C jr.

#109 Jeff Smith on 03.03.09 at 7:07 pm

More layoffs! When is this going to stop?

http://www.thestar.com/business/article/595909

#110 cw on 03.03.09 at 7:09 pm

Garth, please help me understand.
Yes, we know the housing market has just started to collapse in Canada – probably will run for another 2 years or so.
The US housing market is trying to find a bottom (since it’s been collapsing for the past 2 years).
Now, my question is currency.
USD has been declining since 2001. That is when the housing bubble started to build. It took 5 years to peak the housing bubble. In a since the properties were hedging against inflation in the USD.
Since July 08, USD has rebounded about 20-30% and houses has dropped about 30-40% on average. In real value, there was really no changed since 2001.
Now, in Canada. The CAD has been on an uptrend since 2001 and houses has been also on an uptrend. Thus, Canadians has been enjoying a rise in property values as well as appreciation in CAD. Now, could it be that since CAD has already dropped 30% to the USD, our property value is already cheap on a global basis?
Also, if we are very concerned about inflation in the near future, would property prices and stock markets not rise as a function of inflation and all the money printing?

#111 Jeff Smith on 03.03.09 at 7:11 pm

Now that’s not right ! I remember a few years ago Stelco was under bankruptcy protection. They were allowed to steal all shareholders money in the restructuring. That is like a pseudo bailout supervised by our government. So what do they do right afterwards? Sell the company, and now people are being layed off. What a bunch of thiefs!

http://www.thestar.com/business/article/595909

#112 timbo on 03.03.09 at 7:18 pm

grab a coffee and watch…interesting

http://www.pbs.org/now/shows/446/video.html

#113 jess on 03.03.09 at 7:23 pm

Public pension funds across the U.S. are hiding the size of a crisis that’s been looming for years. Retirement plans play accounting games with numbers, giving the illusion that the funds are healthy.

The paper alchemy gives governors and legislators the easy choice to contribute too little or nothing to the funds, year after year.

30 Percent Shortfall

The misleading numbers posted by retirement fund administrators help mask this reality: Public pensions in the U.S. had total liabilities of $2.9 trillion as of Dec. 16, according to the Center for Retirement Research at Boston College. Their total assets are about 30 percent less than that, at $2 trillion.

With stock market losses this year, public pensions in the U.S. are now underfunded by more than $1 trillion.

That lack of funds explains why dozens of retirement plans in the U.S. have issued more than $50 billion in pension obligation bonds during the past 25 years — more than half of them since 1997 — public records show.

The quick fix for pension funds becomes a future albatross for taxpayers.

http://www.bloomberg.com/apps/news?pid=20601109&refer=home&sid=alwTE0Z5.1EA

#114 Sun Yat-sen suit on 03.03.09 at 7:30 pm

Credit cards still keep popping through the mail..

Past couple of weeks: Amex Airmiles and RBC Platinum Visa.

#115 Might As Well Be Concerned on 03.03.09 at 7:38 pm

What no “day after” bounce! Looks like everyone is waiting and don’t want to catch a falling knife. The bounces during the day are day trading activity.

#116 poorguy on 03.03.09 at 7:44 pm

“Even through deeply troubled times like the Great Depression and a stint in bankruptcy protection, the mighty Stelco operation continued to run, its steel mills fuelling the Southern Ontario city of Hamilton”

http://business.theglobeandmail.com/servlet/story/RTGAM.20090303.wstelcostaff0309/BNStory/Business/home.

Recession or Depression?

#117 dekethegeek on 03.03.09 at 7:49 pm

Hmmmm,
“The Crash of ’29”
“The Dirty 30’s”
Come on folks, Lets put our heads together and come up with a nifty moniker to describe these lousy times! Gotta have some fun with it !
“Meltdown Millenium”
“Nasty 09″
” Brokeback Bankers Ball”
” Subprime Decade ”
Help me out here……………..

#118 Sondra on 03.03.09 at 7:50 pm

A major Canadian bank has sent out letters to their clients with unsecured lines of credit.

The original agreement was prime plus 3% for the credit.
Now the line of credit is prime plus 6%.

The broker I spoke with said this was in her opinion another new first.

#119 ottawanonfedworker on 03.03.09 at 8:16 pm

Off topic a little bit, but here is finally some proof that prices are on the decline even in Ottawa:
http://www.grapevine.ca/cgi-bin/listing.cgi?id=17648
LARGE house, LARGE lot (by suburb standards) and three car garage in well established and normally sough after area? Under 400k!! Wow…

#120 Carole AB on 03.03.09 at 8:29 pm

After dropping interest rates to 0.5% CBC reported the Canadian Gov’t was also going to engage in “quantitative easing” Isn’t that increasing the monely supply by printing money?? ? If Canada gets out of this with just a recession we will be extremely lucky.

Here is an interesting debate to watch with Frank Biancheri, the head of Euro 2020. He says they have 10 million subscribers worldwide with the majority in the US.

http://www.france24.com/en/20090227-the-debate-from-the-crises-to-civil-wars-1

#121 Carole AB on 03.03.09 at 8:35 pm

Sorry: wrong link above on debate with Leap 2020 head

http://www.france24.com/en/20090227-the-debate-from-the-crisis-to-civil-wars-1

#122 timbo on 03.03.09 at 9:09 pm

here’s is a question

is AIG holding most of the CDS of the failed investment houses?

and if so then the FED is covering AIG’s CDS insurance on the bad loans that are defaulting and paying also the loan default out to keep the regular banks solvent

I might of missed something here but forced to pay the insurance on a loan that failed and paying also the loan balance to keep things rolling is huge ..and how much does AIG hold in CDS? If true this would panic everyone if it were truly explained and if false tell me what I missed please?

http://www.washingtonpost.com/wp-dyn/content/article/2008/12/28/AR2008122801916.html

#123 Another Albertan on 03.03.09 at 9:23 pm

Re: The Three Sisters…

A good friend of mine knows the former CFO of that development in Canmore. Apparently he left quite a while ago because he was not impressed with management and their lack of ethics.

In retrospect, management could have probably used the $14M they paid AltaLink and SNC-Lavalin to cut and blast a trench through rock in order to put 4.4km of double-circuit 138kV transmission lines underground.

They wanted an unobstructed view of the mountains and they paid a very pretty penny in order to get it. They were clearly swinging for the fences in trying to develop and market their paradise. Unfortunately, they struck out.

#124 Grantmi on 03.03.09 at 9:28 pm

BC Fraser Valley numbers are in….

not good!!

http://www.fvreb.bc.ca/statistics/Package%20200902.pdf

#125 OttawaMike on 03.03.09 at 9:46 pm

Bank of America and Citi are the 2 prime U.S. financial institutions that are insolvent. There are many smaller ones as well. The govt. will be getting the staff in place to “stress test” all of the troubled banks over the next 2 months. This 2 month time frame will allow the US govt. to assemble the thousands of additional staff it will require to nationalize the insolvent banks. It may be a short period under nationalization but this is the only thing that will set global markets at ease and start the long recovery, remember for the 1st time US consumer debt is now = to US GDP(13.8 trillion$) And yes we should care about this here in Canada.

#126 kc on 03.03.09 at 9:47 pm

80 Investx

Never read that one before thanks for the link.

#127 . . . fried eggs and spam . . . on 03.03.09 at 9:50 pm

Tried getting a US$500 Trillion bailout from either the Romulans or Klingons, but no dice. They’re broke as well. May try the Farengi next!

A report today had pix of auto factories thruout the world, all with loads of unsold inventory. The latest is Toyota, who have leased a freighter to hold (either) 2,500 or 25,000 cars / trucks / vans (not sure of the total amount). People are leasing short term only now, not buying.

A day or two ago, all bank accounts were frozen in Ukraine. Doesn’t seem to have made much difference, ‘tho. — http://tinyurl.com/ak7wgd

This is one result of what happens when loads of people begin withdrawing their savings, and hiding the proceeds in their mattresses. — http://tinyurl.com/ap8myw

When Garth had his political blog, I speculated that the Dow and TSX would settle at 2500 – 3000, with the NASDAQ coming in around 500; James – Chatham said no way, it won’t go that far.

Peter Schiff (don’t know how accurate he is) says the Dow COULD fall to 850 points, so I revise my figures to 1,000 – 1,500 and NASDAQ to 100. What the hell! If correct, I’m a hero; wrong, who cares?!

#128 Eduardo on 03.03.09 at 10:02 pm

Garth,

I have one more question regarding inflation vs deflation. In your opinion what is preventing the US from using quantitative easing from inflating the economy? You cite the trillions being spent, but there is nothing preventing it from being 10s of trillions.

You have said that you see no problems with increasing the money supply due to the amount of “deflation” occuring in housing. So why can’t the govts around the world, most notably the US increase the money base to buy its own bonds and then continue feeding this money into the economy until they see inflation?

Thanks

Because nobody would buy US debt. — Garth

#129 Basil Fawlty on 03.03.09 at 10:04 pm

Video wih US economic stats.

http://www.youtube.com/watch?v=siuGd1mGDEM

#130 char on 03.03.09 at 10:05 pm

In fact the ’30s depression WAS real estate led, begining with the Florida real estate crash in 1926, followed closely by California real estate. 1926=2005.

You are correct, but those had little impact outside of the regions, and no dire consequences for lenders. — Garth

#131 Gord In Vancouver on 03.03.09 at 10:21 pm

#3 paulb, #30 Mark, #94 dekethegeek

Vancouver media pumps its real estate market because Feb. 2009 sales are above those a month earlier.

What did you expect?

A 10% gain over pathetic January 2009 sales figures would’ve triggered a pumpathon. When Remax is one of Global BC’s largest sponsors and the print media relies heavily upon real estate classified listings, this “blast from the past” should surprise no one.

It’s also obvious that some of the local media people appear to be very apologetic for the doom and gloom reporting that’s been present lately.

#132 Bill-Muskoka (NAM) on 03.03.09 at 11:04 pm

#129 Eduardo on 03.03.09 at 10:02 pm

Reminds me of the scene in Star Trek IV where Dr. McCoy says ‘My God man, are you a Doctor or a Butcher? You are using techniques from the Dark Ages!’ LOL

#133 Bill-Muskoka (NAM) on 03.03.09 at 11:10 pm

#128 . . . fried eggs and spam . . . on 03.03.09 at 9:50 pm

Amazing how many ethical and morals lessons we all learn from Star Trek, eh?

Personally I wouldn’t trust the Ferrengi as far as I could kick the N.C.S. Enterprise into Warp! Afterall, the Ferrengi have been running the show for decades. Just look where it has gotten us?

I say ‘Beam them aboard the Klingon Cruiser where they will be no Tribble at all!’ LOL Maybe we will luck out and there will be a distortion in the Space/Time continuum and there partticles will never be togerther again?

Heck, maybe ‘Q’ can use them?

#134 Bill-Muskoka (NAM) on 03.03.09 at 11:20 pm

#35 Future Expatriate on 03.03.09 at 3:31 am

Corporate ‘prospects’ are now defined by the size of BC Bud Doogies, or number of lines of white powder in the Board Rooms! LOL

#135 Bill-Muskoka (NAM) on 03.03.09 at 11:22 pm

#109 North Vancouver Citizen Jr. on 03.03.09 at 6:30 pm

Hey, I will give you the parachute! Here, try this one, made in China and only used ONCE! Happy Landing!

#136 Bill-Muskoka (NAM) on 03.03.09 at 11:23 pm

#70 ralph on 03.03.09 at 12:26 pm

Gold urinals? Naw, Sodumb Insane tried those. They just get No Respect! LOL