Expectations

sask

Did you notice this comment, posted here over the weekend?

What is happening to home prices is not new where I come from. My brother just out of university got a good job in a village and built a new home at a cost in 1982 of $125,000 . It took 25 years and a total cost of $250,000 but the home is now paid off, free and clear. This home is 2500 sq ft and he spent a lot of time and money on keeping it up over the years . This home is worth only $25,000 today. He will have to move it to another community in the province before it can be sold or just live in it until he dies of old age in a village with no services left. Small town Saskatchewan a slow and painful death and a Booming Economy, Yeah, Right!

The words above may be about house values, money and Saskatchewan, but they’re really about disappointment. These are the days of failed expectations, aren’t they? Human spirits, once always inflating, are now deflating. Once houses were homes. Now they’re assets.

Once, the point of going to work and paying off your property was to gain security for your family. Now it’s to build net worth – so, I guess, you can get a bigger house. Once you expected to pay money to have shelter. Lately we’ve expected our houses to pay us money to live there.

And while I agree life in much of rural Canada can be a tough gig, for many it offers exactly the space, freedom and independence that set this gigantic nation apart from most others. In various ways, it is the best option. Be careful about judging it.

In the coming weeks our expectations will be dealt more Saskatchewan-sized blows. So, be ready. I’ve said here repeatedly that 2009 will just get worse and worse. But I’ve also said there will be no depression.

Apparently this confuses some people who want to live in extremes. When I extol the wisdom of energy self-sufficiency and a cash reserve, media pundits label me a survivalist. But when I say the economy will recover, led by the markets, the bullion desperados and depressionistas call me a hypocrite. And when I buy a distressed property in the middle of a market meltdown, well, just shoot me.

The point is this: There is no right or wrong thing to do today. This is uncharted water. GPS doesn’t work. No maps.

This is not like the Great Depression of the 1930s because the economy is being taken over by governments. It’s not like any recession in the last fifty years because we have never had this much debt or such a dependent population. And we have never had a real estate decline, employment collapse, financial meltdown, consumer crunch, stock market flop and global gulp at the same time. As a result, nobody sees what comes next.

But it will end. And when it does those with jobs and houses and health will be thankful. They will not bitch and moan about living successfully in the same place for 25 years, or feel screwed over because they didn’t get all their money back. Perhaps they’ll even judge a worthwhile life as one that harvested more experiences than cash.

But what do I know? I jump sharks.

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For today’s blog, “The explosion before us”, click here.

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83 comments ↓

#1 whateva on 03.08.09 at 10:50 pm

first!

#2 squidly77 on 03.08.09 at 10:51 pm

will there be a depression ? dont know
how long will the decession last ? dont know

i am not a gloom and doomer
i prefer unlike the ostrich to keep my head well above the ground and look into the angry eyes of the storm

there is no where to hide
goldbugs buy gold in cash and expect cash when they sell
stocks and commodities as demand lessens are going no where but down
there is no safe haven to be found

be debt free and cash heavy

someday it will be over

#3 CS on 03.08.09 at 10:56 pm

Well said! I live in (very) small town BC and we know our house isn’t going to be an asset. Did we hope it would be when we bought it nearly 2 years ago – sure we did. If we had to sell it tomorrow, we’d have to list at a price which probably wouldn’t even cover the mortgage and the real estate commission. So, we are in for the long haul. We appreciate the slow pace, the bit of acreage to grow things, the wood stove, the generator in the shed along with a couple of hundred litres of gas, and the supplies we are building up ‘in case’. We have enough room to bring the adult kids back home from the city if things go sideways. I have a fairly recession-proof part time job, and last night we figured that, along with my husband’s EI, should he lose his manager’s position (not likely, but who really knows) would give us enough to get by. And we have a cash stash too, again, just in case. Heard some losing their jobs aren’t seeing EI for 3 and 4 months due to back log. We have enough cash to get through that. My point being that we are grateful for our house and what it offers us, it is our home and we will hang onto it if we can. We are already grateful for health, jobs and home and won’t be bitching if we are still here in 15 years, we’ll still be grateful. Our mortgage is our only debt and we are grateful for that too. If things continue to get worse and people start getting grateful for what they do have and realize the culmination of a good life is not about the size of your collection of stuff and $, it will be a very good thing.

#4 Michael on 03.08.09 at 11:07 pm

The thing I find a bit odd about your “there will be up” predictions is that you seem to imply that the “up” is just around the corner (2009 will suck, 2010 it will all be better).

I am not detesting that eventually things will be up again, but I do not see this in the near future. I fully expect the unravelling of the mess we’ve gotten ourselves into to take 10 years, barring any catastrophic “acceleration”.

It is of course hard to imagine that the “way we have lived” is over and that a serious reset is coming and going to throw us back 60 or 70 years, but that doesn’t mean it can’t happen.

You are right, there is no “plan” for the future, we have never been in a situation like this before, but where you seem to read this as a positive thing it makes me wary.

Looking at past recessions and looking at the great depression the picture that is assembling for me is not a pretty one. We have pushed the envelope exceedingly not only on the economic front but on ALL fronts.

Where there was once slack in the system to deal with disruptions we have cut away all the fat in the name of efficiency and profits (so yes, I guess in the end my big concern does come back to the economic teachings).

Looking at the numbers I have available, and doing some basic math also does do anything but re-assure me that this is just a tempest in the teapot.

I guess time will tell who is right, the doomers or the cornucopians.

#5 Keith in Calgary on 03.08.09 at 11:10 pm

Garth……

As one of the ‘depressionistas”……..I agree with you that the markets will lead the recovery……….they always do……..but it’ll be in about 20 years time when everyone today is finally out of debt……..or dead.

#6 Jake on 03.08.09 at 11:13 pm

Sorry about the repost, but if you haven’t seen this you really need to. Just imagine 40 of Canada’s top celebrities pledging to be servants to our Prime Minister. It’s hard to imagine what’s being cooked up right now, but real estate and financials are just a part of it. Goebbels would be proud of this piece of work.

What’s your pledge?

http://www.youtube.com/watch?v=51kAw4OTlA0

That is one dangerous vid. — Garth

#7 rory on 03.08.09 at 11:15 pm

Garth, hi …shoot me or love me but when a new post goes up I do not comment in the ‘old one’ …my question pertains to “Gregg does Garth”.

Gregg’s pretty good…thought he led a few times too many …you were ready to go off script a tad and get us into new territory but hey his show …another day, another interview – my take anyway…back to business.

I/we have made the assumption that gov’t bailouts are bad, defict spending like these days are bad but every gov’t is doing it (G does G …hmmm).

My impression, from the interview, is that you think gov’ts needs to be involved somehow but I did not get a clear pic of what that involved should be.

Could you, would you please tell us what you think the gov’ts should be doing and of course why…Thanks.

#8 squidly77 on 03.08.09 at 11:34 pm

anyone spot a bubble ?
http://e-wavecharts.com/dowlt_index.gif

#9 Da HK Kid on 03.09.09 at 12:01 am

Garth, great interview on TVO and very palatable for the Canadian masses to digest.

For all of those who commented on the two sides of Garth, are you new? He is only trying to help the target audience. Nice dig on the RE dreamers though.

Funny, I recall when I sold my McMansion in a suburb west of Ottawa in 2003 and made a great final chunk of cash left over from the high tech meltdown and we paid off all our debts how great that felt! No more mortgage, no more car loans, student debts and LOC’s.

It was honestly the first moment we felt free and that the weight of all the excess was lifted.

Moving to a country where the housing costs are in the top five in the world kept us out of realestate so we just worked earned saved etc.

My wife and I on the tail of the baby boomers & high tech lift somehow felt our timing was never meant to be. I had faith it was just a matter of time and I believe it is now unfolding.

I used to spew out observations years ago like “Everyone wants to keep up with the Jones, but the Jones just wish you would stop!”

“You needed that 4000sqft house so you could store all the useless broken goods and oversupply of tools and materials purchases from both Walmart, COSTCO and Home Depot!”

“Do you own all those possessions or do those possessions own you!”

I agree with Garth that we are going into a massive deflationary period. Not nationalizing the bad banks using the Swedish Model has put us right into the Japan model. Asset value will continue to drop for likely years to come and the return will be flat for many more.

Assets variable – Debt constant so best to get out while the getting is good, manage your debt and look at the freedom to invest in the new world.

Oh, btw, like Garth, my parents grew up through the depression and yes had some great advice over the last 40+ years. Some of it I took, some I didnt but overall, they were bang on!

#10 RS on 03.09.09 at 12:02 am

Garth, i don’t understand you. i thought you believed there would be a depression?! isn’t that the whole reason you suggested eating squirrels?!

#11 vicguy on 03.09.09 at 12:04 am

OK guys, I know this post is not going to make me a winner of any popularity contest, but I suggest things are not as bleak as the blog would make us believe. Look at the positives, for example, the new Canadian Auto Workers agreement with GM announced today. The workers agree to an hourly wages+benefits package reduction from $70 to $63, while retaining their right to a retirement allowance up to $100 000. This would apparently qualify GM for goverment subsidies of several billion taxpayers dollars.
Great, can you think of another group of canadian citizens making the kind of money, producing things that nobody wants? On the other hand, everybody buys hamburgers, yet their makers get minimum wages and their retirement packages are not worth unpacking.
I smell a rat here.

#12 kc on 03.09.09 at 12:14 am

Here is a tid-bit that needs to be shared. Imagine a place where you feel you are totally immune from the real world – a place of grandness and wealth – a place of stars and kings – a place where dreams can make Disneyland seem like childsplay…. Welcome to Dubia … home of MONEY.

turn the clock ahead to 2009 and mansions of the rich and famous are losing :

Stars including David and Victoria Beckham, Michael Jackson and Brad Pitt are losing £80,000 A WEEK as their luxury Dubai villas crash in value.

This makes Canadian housing losses chump change… 80K pounds is roughly 160K Can.

full story of Dubia’s crash:

http://www.marketoracle.co.uk/Article9297.html

#13 victoria reader on 03.09.09 at 12:15 am

What next? Things will cost more and people will get paid less only question is how much more and how much less.
Wish you were running in the bc provincial election Garth I wouldnt even care what party you were in my vote would be yours

#14 HJD on 03.09.09 at 12:50 am

“There is no right or wrong thing to do today.” GT

I’d put it differently. It’s impossible to know if decisions we make in response to these complex times are the correct ones. Perhaps it’s better to generally hunker down (if possible) and be cautious.

#15 . . . fried eggs and spam . . . on 03.09.09 at 12:57 am

Good price if the money’s available!

http://tinyurl.com/coc9g9

#16 Apocalypse Now on 03.09.09 at 1:13 am

Garth writes: “This is not like the Great Depression of the 1930s because the economy is being taken over by governments. It’s not like any recession in the last fifty years because we have never had this much debt or such a dependent population. And we have never had a real estate decline, employment collapse, financial meltdown, consumer crunch, stock market flop and global gulp at the same time. As a result, nobody sees what comes next.”

And yet you claim there will be NO DEPRESSION; it might be wiser to suggest, there may be no depression. If in your own words, ‘NOBODY sees what comes next’ then neither can you see that and make an unvalidated claim such as you have several times over in your last few posts about there will be no depression.

In these unprecedented times it is safer to assume the worst and then expect things to be much worse than the worst, and prepare for that. Don’t give people false hope when you yourself have no idea how bad it will get or what shoes are still left to be dropped; seems there’s a new one dropping everyday. How about the possibility of some Canadian banks following the myriad of US mega banks like Citi and BOA into Never Never Land? And no one please say that it can never happen here; we have seen too many things happen already that were never supposed to have happened!

And Garth do you actually believe that economies being taken over by governments (Soviet Union, and more recently Venezuela come to mind) is a good thing? Did FDR not take over the economy and screw things up so bad that it took the biggest war this world has seen to bring the country out of depression. Do you think Gordon Brown running around demanding a Global New Deal will make things better?

You actually expect us to believe that the same governments that never saw any of this coming when you yourself were screaming from the rooftops that the collapse was coming will actually now fix the problem? Wow! Et Tu Brutus? Have you too become a Socialist / Marxist like the rest of the gang in Ottawa, Washington and London? Come on Garth, your readers do not want CNN or BNN claptrap from you, they expect something much more cerebral. The Depression is already here; don’t be late to the party in announcing its arrival; at least be ahead of the gang that can’t shoot straight aka CNN, CNBC, CBC, CTV, Maclean’s, Torsar, Globe, Post etc. etc. etc.

#17 Basil Fawlty on 03.09.09 at 1:20 am

“Apparently this confuses some people who want to live in extremes.”
Personally, I have zero interest in a life of extremes, however one can not always control their circumstances. We live in extreme time’s and there is no easy way around this fact. You make the point that the economy will come back and cast dispersion on those that question this by calling them “gold desperados” or “depressionista’s”. What on earth is wrong with allocating say 10% of one’s portfolio to bullion?
Some kind of economy will come back, but it may well be different from our past experience and it may also be after a depression. This is only opinion, but your position that there will not be a depression is also just opinion, and hopefully you are correct.
No matter which way this thing goes we all have to realize that infinite growth is impossible on a planet of finite resources. This fact should be considered before our economy comes back or we will continue to make the same mistakes.

#18 Munch on 03.09.09 at 1:45 am

Munch says “Well said!”

Back to the entitlement theme – at a point in the future, people will be grateful for the little things in life – and that is what Munch meant when he slammed Murrikans (and Canadians) for heir “entitlement” culture.

Regards from South Africa

#19 gold bug on 03.09.09 at 1:51 am

“This is not like the Great Depression of the 1930s because the economy is being taken over by governments.”

I’m puzzled. Why are you insisting on calling a dead cat a lively dog? A depression is a depression. Who cares if it’s exactly like the one in the 30s or the previous one in the 19th century. Who cares. Not calling it a depression doesn’t make it any less a depression. Nor is calling is a depression an indication of hoping for one. Unlike a politician who wants to avoid admitting bad news or an author who needs to sell books, some people just call it what it is.

The thing that makes countries great aren’t the physical wide open spaces, it’s the metaphorical wide open spaces. That’s what made America – and to an extent Canada – great. Wide open metaphorical spaces. Nobody actually WANTS to live on the god-forsaken, drought-stricken, snow-blown Prairies. It’s what the West represents that’s important.

Could it just be that the main complaint about our situation is not that we’re getting poorer, but that governments’ response to his debacle is what’s scaring us? That Ottawa, the provinces and cities think the way out of his mess is to ratchet up the theft from taxpayers to give it to people who didn’t earn it? That it’s OK to impose MORE regulation? That the answer to unemployment is to hire MORE civil servants?

Because that’s what bugs me. I don’t need much money. But I need a lot of freedom.

But I don’t expect a politician to figure that out. By definition, anybody who seeks political office wants control over me. Revenue Minister, no less. The ultimate parasite.

I just would have hoped that a writer might have had more insight into the human condition. I expect better from writers.

#20 Gord In Vancouver on 03.09.09 at 1:52 am

….It took 25 years and a total cost of $250,000 but the home is now paid off, free and clear.

……This home is worth only $25,000 today. He will have to move it to another community in the province before it can be sold or just live in it until he dies of old age…

_________________________

Don’t laugh city slickers.

This could also happen to you if you bought a presale condo between 2006 and early 2008.

#21 Cara on 03.09.09 at 2:41 am

Garth, you have been on a roll lately. Great posts!

For this girl, the realization that a home, and health, and a job (and I’ll throw in “faith”) are the most important was made long ago. Not only by myself, but also by my husband. We’ve been rowing our little boat together for 11 years now. Over the last 5 or so, we’ve watched those around us zoom by in their power boats, trailing the toys and taking the trips. I won’t lie and say we were never a little envious. We were. But we had our life, and our priorities, on a scale. When we looked over at the Joneses, and back at what we had, and put our dreams on the scale what they were doing/buying just didn’t seem so tantalizing anymore. So, we stayed home, bought used, bought less than the bank wanted to lend us. Lived life. Nothing flashy, or exotic. But within our means. And we’ve made memories together. Good ones – that didn’t suck us down with debt.

Now, the Joneses are wondering how they’re going to pay the bills, why they bought such a big house, and why it seemed like a good idea to take a tropical vacation on VISA. The big bonuses are spent, they’ve had a taste of the good life. All that’s left is the hangover. I have friends who don’t know how they’re going to avoid bankruptcy. It just didn’t seem to occur to them to save some of that cash for a rainy day. Now, I am saddened, but also relieved that we didn’t dig ourselves into the hole along with the rest of the dodos.

I do wonder though… all our prudent saving (6 – 12 months of living expenses saved in cash) and debt-avoidance (nothing owed but our mortgage) is going to be enough if all this really gets as bad as some are saying it will. Since no one seems to know what is coming next – Armageddon, or a one-year-hiccup.

Ah well. The same attitude of “keep on rowing, at least we have each other” will take us through whatever squalls boil up in life.

I’m in school. Drowning in homework, but if I keep swimming I’ll come out a nurse. That’s a pretty safe recession-proof field. Always bums to wipe, and pillows to fluff.

#22 Jon C. Coates on 03.09.09 at 6:02 am

Aw, Garth, you haven’t jumped the shark yet. I’m sure you have much to tell and advise us. BTW, I really like your column today. It sums up how I feel – a house is a home. It is not a potential monster if its all paid for. And, I don’t really give a damn what it might sell for because I look at it as a little piece of security in my old age. Its well insulated, the appliances are as energy efficient as I could afford to make them. Now, if we could only shift out the useless bunch of drones who run our power commission and get the back being publically owned and life would start looking fairly rosy.

An interesting thing – when I got my house paid for – 6 months before I turned 65 and my long term disability insurance ran out, a friend advised me to go to the bank, remortgage my home and buy stocks. If I had followed his advice, I’d be at the end of my tether. Today, he’s dead, his wife is in fragile financial straits and I’m living a modest, happy life.

#23 Samantha on 03.09.09 at 6:29 am

I left BC (Kelowna) when I saw the writing on the wall. Low income, and everywhere – the cost of shelter skyrocketing.

Now, my husband and I live in a rural prairie town. Our home is very nice with solid 50’s era construction (double 2×6 ship lap, good energy efficient upgrades and situated on a large lot by a lake cost us: $35,000.00. No, I didn’t drop a 0. With our down payment of over 25%, we are left with a small mortgage (which we are trying to pay down quickly) of $182.00 per month.

Our home is not our “asset” – it does covers them, however (keeps the snow and rain off). We had to live within our means and adapt to the changes occurring around us.

Rural life is not utopia, nor is it for everyone. There can be challenges and you need to do your homework first. For example, what health care and other services (diversification of services/goods) are available? We have to travel for specialist health care or certain tests. However, we have adapted to that as well. It’s part of the tradeoff we were willing to make in order to create security in a low-stress environment.

I agree, Garth – there are no maps for these times. But, I wonder if there ever really was a map or plan that nicely spelled everything out? Life is a series of zigs, zags, curves, and dead ends are just barriers to jump. It’s doesn’t hurt to learn from other people’s wipeouts, though.

Bob Dylan sang it best: “The times, they are a-changin’.”

So, keep adapting and don’t rule out rural living. It just might be the best move you ever made.

#24 pbrasseur on 03.09.09 at 7:17 am

squidly77 #8

“anyone spot a bubble ?”

If that chart considered inflation it would be far less scary. Yes the market is worth more $ today, but each $ is worth far less.

If you consider that you get a pretty steady curve.

#25 wpepper on 03.09.09 at 7:26 am

What is the difference between Power of Attorney in Canada and someone just walking away from their home in the US? What if someone in Canada went bankrupt? Do they still owe the difference on their home?

They have foreclosure. We have power of sale. Under POS the lender sells your property but must do so at market value. You are still liable for any shortfall, plus costs. Bankruptcy wipes your legal obligation away, but should be a desperate, last resort. — Garth

#26 ALC on 03.09.09 at 7:36 am

This is not uncharted water. If you want to see what happens and how it looks when government takes over the economy (politic higher priority than economy) take a look to…. Cuba.

#27 JamesT on 03.09.09 at 8:39 am

#16
“Did FDR not take over the economy and screw things up so bad that it took the biggest war this world has seen to bring the country out of depression.”

You do realize that the GDP in the US bottomed in 1933 and and was above 1929 pre-crash levels before the start of WW2?

http://en.wikipedia.org/wiki/File:Gdp20-40.jpg

So despite your bogus claims, the US economy reached it’s bottom and started the slow recovery process shortly after FDR took office.

There was a shallow recession in 1937 that is the spark for all of the right-wing talk about WW2 saving the US economy, but the numbers tell the true story.

You probably expect things to turn around overnight, without realizing that it can take closer to a decade to repair the damage caused by credit, speculation and over-leveraging.

#28 JamesT on 03.09.09 at 8:47 am

“This is not uncharted water. If you want to see what happens and how it looks when government takes over the economy (politic higher priority than economy) take a look to…. Cuba.”

What a poor example. The state of Cuba’s economy couldn’t have anything to do with the grudge the US has held on it for the past 60+ years.

#29 Toronto C9 Renter on 03.09.09 at 9:07 am

If you think you’re having a hard time selling your house, check out this one from Guava.ca…

234 HEATH ST. TORONTO

Price Change. Oct 26: $1,275,000 Dec 21: $875,000 Feb 17: $849,000 Mar 2: $839,000

(Think they finaly gave up or possibly leased it, since the signs went down last week and it was removed from MLS)

#30 DG on 03.09.09 at 9:18 am

Here’s something interesting… Virtually all of my close friends are doing well financially, better in fact than they have done in years. The common thread among them all (including me) is that most of them are self-employed or otherwise entrepreneurial. Instinctively we understand that our actions at work have to create value, so we all seem to be quite well suited to these times.

Some context: my wife and I are in a financial hole because of two failed businesses. Ironically we nearly doubled our money by buying a place in Calgary just before the boom, and selling it in 2007. That would have been great if the businesses hadn’t eaten all of that profit and then some. All told we’re down about $600k.

Now we’ve hacked our living expenses down to the bone and are both doing consulting work that is extremely lucrative. We’re doing work that has been outsourced by companies who until very recently used to do it in-house with a much larger team. It’s entirely results-based, but our income is many times the average Canadian household income. Our pile of credit card debt will be paid off within three months and then we’re on a mission to save, save and save… and buy property that is relatively remote, and which will allow us to be at least semi-self-sufficient. The work we’re doing will continue for three years, perhaps five, providing we continue to perform and deliver, which is fine by us.

Our expectations aren’t about a McMansion and SUV, but rather creating independence and security on our own terms. We’re excited about these times, perhaps foolishly so, but time will tell.

The key, I think, is to embrace opportunity in the way things are, rather than hope the economy miraculously returns to the way it was.

#31 DG on 03.09.09 at 9:20 am

Oh, one more thing on the great interview — isn’t Alberta an exception when it comes to the “walk away from your house” option. My understanding is that the bank only has a claim against the house itself, and can’t touch your other assets if you walk away.

#32 TOguy on 03.09.09 at 9:34 am

That same disappointment extends to stocks, but in that case it’s even worse. I started investing in 1998, and after spending thousands of dollars in commissions, I have also lost thousands of dollars from my initial investment. I expect stocks to return to their early 80s valuations, possibly even 70s. Even though 7% after inflation was the long term return for stocks for centuries, that is all going to change. Margins are being squeezed in every industry, and economic and earnings growth will be permanently lower. That’s why stocks from hereon in will be flat at best.

#33 MissedTheBoat on 03.09.09 at 9:40 am

RS – #10

“Garth, i don’t understand you. i thought you believed there would be a depression?! isn’t that the whole reason you suggested eating squirrels?!”

I’m with you. Garth seems to be back pedaling at an accelerated rate! And not in a responsible way at all!

I guess it’s the politician’s way….sigh. Change the tone/content of the blog and then use semantics to gloss it all over. And then blame us for misunderstanding – on a mass level.

But the older post will be the writing on the wall, Garth. A lot of people are confused….and have lost faith in your credibility; you forked-tongue devil you….lol.

And to add insult to injury you are now making your loyal followers out to be at fault. Suggesting that, “Apparently this confuses some people who want to live in extremes.” Man, you are the one who introduced some of us to this new theology! We were going about our daily business, not spouting off about any depression. And for the record, I was not happy with all the doom and gloom talk, especially since I do want President Obama to succeed. To see RUSH Limbaugh and his ilk *wink, wink* have an aneurism would be such a — RUSH…lol.

Talk about a bad prophet….grumble….

So, where did I suggest eating squirrels? — Garth

#34 smwhite on 03.09.09 at 10:00 am

Its obvious to very few that this is a DEBT problem and nothing else. The government is trying to claim a “credit” problem, which shows why their attempts at bailing out the system will fail. The majority are up to their ears in debt and this deflationary period isn’t helping the puppet masters pulling the strings.

As squiddly states in #8, look at the early 80’s when Reagan-omics started to take charge and in the late 90’s when Clinton decided regulation was bad.

That’s why when you consider the DOW at 5000, it isn’t that ridiculous.

Musical chairs for grown ups. So while the powers that be keep pushing on a string, unable to figure out why the consumer has stopped dead in their tracks, confidence continues to wane.

So was it economic growth or just the inflation ponzi scheme that has “propped” up prices for the past 25 years?

Wonder what the size of the next bubble we create will be?

#35 vtj on 03.09.09 at 10:08 am

To quote Garth:

“Perhaps they’ll even judge a worthwhile life as one that harvested more experiences than cash.”

Everyone should print this and slap it on their foreheads as a daily reminder of what’s bloody important.

Thanks, Garth.

#36 Herb on 03.09.09 at 10:17 am

Enough of this gloom and doom. Start the working week off right and absorb this bit of welcome news: http://www.ottawacitizen.com/business/fp/Marley+economics/1368612/story.html

One cannot blame the victims enough. First they spend themselves into financial oblivion, then they retard the real economy because they don’t have any money to spend or refuse to spend the money they have because the ingrates suddenly have discovered prudence. It will end well, however, because sooner or later they simply will have to spend!

The thought of business professors who fostered the corporate environment that got us into this mess now offering solutions (or at least reassurances) is revolting. Was it consumers that created the financial “instruments” that burnt the financial sector? And if our banks are in that great shape, isn’t it because the taxpayer/consumer relieved them of $75B of greed gone bad?

#37 Toronto C9 Renter on 03.09.09 at 10:20 am

#32 TOGuy said: “That same disappointment extends to stocks, but in that case it’s even worse. .. stocks from hereon in will be flat at best”

Toguy, I understand the disappointment, but disagree with your conclusions. First, some stocks have done remarkably well through this. Kinross for example was at $8.75 in October and is now north of $20.

Right now I’m personally focussed on commodities — very much doubt they’ll stay at these prices for ever.
As an example the canadian Oil ETF “HOU” is just coming recently off a low of $4.08 in Feb and is already back to $6.50

#38 wondering on 03.09.09 at 10:36 am

I think the pain in the West is yet to come. Garth’s story about getting three plumbers working for the same wage isn’t ringing true for me yet. I’m in Victoria, trying to find firms to repair a rock wall. 90% of the companies I call to get quotes from either don’t call me back, or don’t show up for the estimate appointment in the first place.

They’re obviously feeling no pain.

#39 905er & Spouse on 03.09.09 at 10:40 am

Garth, do you think there is any chance public sector pensions could be in deep trouble- scrapped altogether?
How about “safe ones ” like the biggies in healthcare and education? Thanks…

No. — Garth

#40 RS on 03.09.09 at 10:42 am

“So, where did I suggest eating squirrels?” — Garth

Okay Garth!

Nov 9, 2008 you said:

8. Get a weapon and learn to hunt. In the last Depression, deer and squirrels almost became extinct. Think about it.

9. If dining on rodents is not appealing, then this is another reason to move into a rural area. Chickens are easy to raise, and are one of the most efficient machines on earth for converting feed into protein.

Got ya – You crazy bag of rocks! (I mean this in the most loving way possible!) Ha ha!

Rs

That posting was prefaced with this comment: “As I write my new book I have been asked for some pointers on surviving a depression. Here are a few…” In other words, my suggestions were in response to queries about what to do if a depression occured. I have never said there would be one, nor do I believe that now. The odds of a collapse happening now are the same, 15-20%. Read more carefully, lest you look foolish. — Garth

#41 Jonathan on 03.09.09 at 10:51 am

To call out that there will be no depression is a bit ridiculous. I have no model to suggest that we will have one, but I think the odds are even.

Government intervention will have detrimental consequences. If all goes to plan, US taxes will have to rise 25-50% over the next 8 years to compensate BB’s retirement and stabilize current deficits. That’s bad enough.

But it won’t go to plan, as all this printing of money will cause massive inflation and depreciate currency. This will cause interest rates to rise and make debt and borrowing unbearable. Read the headline news today from Warren Buffet. This isn’t apocalyptic, it is just common sense.

It is not a great time to have your faith in governments who are borrowing 2.5 trillion this year and from who? Lending countries are running current account deficits. Japan, Middle East, Russia and soon China. That means fewer dollar bills to be lent. The few private businesses that might need those dollars for investment purposes will now have to compete for them with burgeoning governments. Not only will real interest rates rise, but investment will flounder. This will hamper exports even more, which will lead to even less lending. Your only hope is to attract domestic savers at much higher interest rates.

US citizens, government and businesses are already paying 20% of its GDP in interest payments. As GDP shrinks and more debt is tacked on, this percentage will increase. Interest rates are currently at 2.8-5%. What happens when interest rates rise 10-20%? If you don’t think that won’t happen then you were sleeping during the 70s and early 80s.

#42 Yes We Can't on 03.09.09 at 10:52 am

In the 1930’s there were a few countries whos economies WERE taken over by the government. Italy, Spain, Germany and Russia come to mind and probably a few others.

One of Chamberlain’s demands to Hitler was that he go back to the gold standard.

#34 smwhite…..you are correct, the Dow should be around 5000. This bubble has been growing for a long time and house values were a result, not the cause.

It is convenient to put the spin on that morgage holders are the problem rather than Ponzi scheme banking models.

#43 Bill-Muskoka (NAM) on 03.09.09 at 10:59 am

#9 Da HK Kid on 03.09.09 at 12:01 am

Love your wisdom. We need more of that for everyone.

George Carlin certainly defined ‘Stuff’ and all its ramifications. Smart man and I miss him already, but his wit lives on like Mark Twain’s.

We need a lot more foundational philosophy and a lot less so-called ‘facts’. The masses have been trained to accept percentages as gospel, but few understand what they represent in real life. Reality is more than mere numbers…it is about people and how things affect THEIR lives personally.

We got a tad bit of snow and lots of freezing rain last night. I see some neighbors determinedly trying to control nature. Me, I check the weather forecast and Nature will deal with itself tomorrow…no need to go break my back today.

Got up this morning and it is a good day. We are warm, have food, and our home, family, and friends. Life is GOOD!

#44 Jelly on 03.09.09 at 11:24 am

Garth,

You seemed to previously believe in at the least the possibility of a depression, now you say there is not going to be one. Are you trying to sound more positive to improve the negativity and doom and gloom of the media and all the experts out there?
That is the only reason I can think of, you are not the type of person to flip flop or sway your beliefs easily.
You must want to help the economy a bit so this is probably why you are sounding more positive.
You have quite the following on your blog and a lot of people are reading it.
Am I right?

I never called for a depression, but rather stated the odds of such were 15-20%. I have not wavered from that view. However if there is a one-in-five chance of something happening to me, I sure as heck prepare for it. — Garth

#45 Puzzled on 03.09.09 at 11:25 am

Gregory Knox’s Letter to Troy Clarke, President of GM
I received this in an email and verified it’s authenticity at Snopes. It is definitely a must read and is one of the greatest responses to the requests for bailout money I have seen so far.

Gregory Knox, a supplier for the “Big Three” auto makers, received a letter from Troy Clarke President of General Motors requesting support for the auto bailout. His response is classic, and has to make you proud that there are still right thinking Americans who are not afraid to tell it like it is.

http://commonsenselogic.blogspot.com/2009/01/gregory-knoxs-letter-to-troy-clarke.html

——————————————————————————–
Abridged letter from Troy Clarke, President of General Motors–followed by a response from Gregory Knox, President of Knox Machinery, a manufacturer of precision machine tools which, supplies the auto industry.

Dear Employee,

Next week, Congress and the current Administration will determine whether to provide immediate support to the domestic auto industry to help it through one of the most difficult economic times in our nation’s history.

Your elected officials must hear from all of us now on why this support is critical to our continuing the progress we began prior to the global financial crisis… As an employee, you have a lot at stake and continue to be one of our most effective and passionate voices.

I know GM can count on you to have your voice heard. Thank you for your urgent action and ongoing support.

Troy Clarke President General Motors North America

——————————————————————————–

RESPONSE: From Gregory Knox:

In response to your request to call legislators and ask for a bailout for the United States automakers please consider the following, and please also pass this onto Troy Clark, the president of General Motors North America for me.

You are both infected with the same entitlement mentality that has bred like cancerous germs in UAW halls for the last countless decades, and whose plague is now sweeping the nation, awaiting our new “messiah” to wave his magical wand and make all our problems go away, while at the same time allowing our once great nation to keep “living the dream”?

The dream is over!

The dream that we can ignore the consumer for years while management myopically focuses on its personal rewards packages at the same time that our factories have been filled with the worlds most overpaid, arrogant, ignorant and laziest entitlement minded “laborers” without paying the price for these atrocities and that still the masses will line up to buy our products

Don’t tell me I’m wrong. Don’t accuse me of not knowing of what I speak. I have called on Ford, GM ,Chrysler, TRW, Delphi ,Kelsey Hayes, American Axle and countless other automotive OEM’s and Tier ones for 3 decades now throughout the Midwest and what I’ve seen over the years in these union shops can only be described as disgusting.

Mr Clark, the president of General Motors, states:

There is widespread sentiment in this country, our government and especially in the media that the current crisis is completely the result of bad management. It is not.

You’re right. It’s not JUST management. How about the electricians who walk around the plants like lords in feudal times, making people wait on them for countless hours while they drag ass, so they can come in on the weekend and make double and triple time for a job they easily could have done within their normal 40 hour week ?

How about the line workers who threaten newbies with all kinds of scare tactics for putting out too many parts on a shift, and for being too productive (mustn’t expose the lazy bums who have been getting overpaid for decades for their horrific underproduction, must we?!?!? Do you really not know about this stuff?!?

How about this great sentiment abridged from Mr. Clarke’s sad plea:

Over the last few years, we have closed the quality and efficiency gaps with our competitors.

What the hell has Detroit been doing for the last 40 years?!?

Did we really JUST wake up to the gaps in quality and efficiency between us and them?

The K car vs. the Accord?

The Pinto vs. the Civic?!?

Do I need to go on?

We are living through the inevitable outcome of the actions of the United States auto industry for decades.

Time to pay for your sins, Detroit .

I attended an economic summit last week where a brilliant economist, Alan Beaulieu surprised the crowd when he said he would not have given the banks a penny of “bailout money”. Yes, he said, this would cause short term problems, but despite what people like George Bush and Troy Clark would have us believe, the sun would, in fact, rise the next day And something else would happen where there had been greedy and sloppy banks new efficient ones would pop up. That is how a free market system works- it does work if we would let it work.

But for some reason we are now deciding that the rest of the world is right and that capitalism doesn’t work – that we need the government to step in and “save us”. Save us, hell ! We’re nationalizing; and unfortunately *too many of this once fine nations citizens don’t even have a clue that this is what’s really happening. But they sure can tell you the stats on their favorite sports teams – yeah ? THAT’S important? * Does it occur to ANYONE that the “competition” has been producing vehicles, EXTREMELY PROFITABLY, for decades now in this country?…

How can that be???

Let’s see?

Fuel efficient ?

Listening to customers?

Investing in the proper tooling and automation for the long haul?

Not being too complacent or arrogant to listen to Dr W Edwards Deming 4 decades ago

Ever increased productivity through quality, lean and six sigma plans?

Treating vendors like strategic partners, rather than like “the enemy”?

Efficient front and back offices?

Non union ‘DejaVu Sans Mono'”?

Again, I could go on and on, but I really wouldn’t be telling anyone anything they really don’t already know in their hearts.

I have six children, so I am not unfamiliar with the concept of wanting someone to bail you out of a mess that you have gotten yourself into. My children do this on a weekly, if not daily basis, as I did at their age. I do for them what my parents did for me (one of their greatest gifts, by the way). I make them stand on their own two feet and accept the consequences of their actions and work them through.

Radical concept, huh?

Am I there for them in the wings? Of course. But only until such time as they need to be fully on their own as adults.

I don’t want to oversimplify a complex situation, but there certainly are unmistakable parallels here between the proper role of parenting and
government.

Detroit and the United States need to pay for their sins.

Bad news people. !!! It’s coming whether we like it or not.

The newly elected Messiah really doesn’t have a magic wand big enough to “make it all go away”. I laughed as I heard Obama “reeling it back in” almost immediately after the vote count was tallied. “We might not do it in a year.” Where was that kind of talk when he was RUNNING for office?

Stop trying to put off the inevitable.

That house in Florida really isn’t worth $750,000.

People who jump across a border really don’t deserve free health care benefits.

That job driving that forklift for the big 3 really isn’t worth $85,000 a year.

That couple whose combined income is less than $50,000 really shouldn’t be living in that $485,000 home.

Let the market correct itself people. it will. Yes it will be painful, but it’s gonna be painful either way, and the bright side of my proposal is that on the other side of it is a nation that appreciates what is has, and doesn’t live beyond its means and gets back to basics and redevelops the work ethic that made it the greatest nation in the history of the world – and probably turns back to God.

Sorry – don’t cut my head off, I’m just the messenger sharing with you the “bad news”.

Gregory J Knox
President
Knox Machinery, Inc.
Franklin , Ohio 45005

——————————————————————————–

#46 Da HK Kid on 03.09.09 at 11:55 am

Thomas L. Friedman: The Great Disruption

Sometimes the satirical newspaper The Onion is so right on, I can’t resist quoting from it. Consider this faux article from June 2005 about America’s addiction to Chinese exports:

FENGHUA, China – Chen Hsien, an employee of Fenghua Ningbo Plastic Works Ltd., a plastics factory that manufactures lightweight household items for Western markets, expressed his disbelief Monday over the “sheer amount of [garbage] Americans will buy. Often, when we’re assigned a new order for, say, ‘salad shooters,’ I will say to myself, ‘There’s no way that anyone will ever buy these.’ … One month later, we will receive an order for the same product, but three times the quantity. How can anyone have a need for such useless [garbage]? I hear that Americans can buy anything they want, and I believe it, judging from the things I’ve made for them,” Chen said. “And I also hear that, when they no longer want an item, they simply throw it away. So wasteful and contemptible.”

Let’s today step out of the normal boundaries of analysis of our economic crisis and ask a radical question: What if the crisis of 2008 represents something much more fundamental than a deep recession? What if it’s telling us that the whole growth model we created over the last 50 years is simply unsustainable economically and ecologically and that 2008 was when we hit the wall – when Mother Nature and the market both said: “No more.”

We have created a system for growth that depended on our building more and more stores to sell more and more stuff made in more and more factories in China, powered by more and more coal that would cause more and more climate change but earn China more and more dollars to buy more and more U.S. T-bills so America would have more and more money to build more and more stores and sell more and more stuff that would employ more and more Chinese …

We can’t do this anymore.

http://www.iht.com/articles/2009/03/08/opinion/edfriedman.php

#47 jess on 03.09.09 at 11:59 am

– a peace bubble – most of the planet is tired of the war bubble

#48 lgre on 03.09.09 at 12:23 pm

Garth I noticed you changed your tune in the last few weeks along with buying into something that you say will keep on falling, POS or not..I know the banks to be very greedy so it makes me curious as to how ‘great of a deal’ you really got on the house.

I guess something is brewing and you are in the front lines to witness it..as for us, we are still in the dark.

#49 kitchener1 on 03.09.09 at 12:23 pm

Garth, depression is really subjective. In terms of conracting GDP greater then 10% we probely will not hit the defination of a depression.

The difference is that for people on the street, it may very well feel like a depression to them. It will depend on people, Garth you have been prudent with finances and have had many high paying jobs in your lifetime.
Same with many boomers in your age range.

For people in their mid 20’s to early 30’s it will be a much harder hit as most are in debt due to school or bad purchases.

As for people crying about Garth buying a house now, you don’t really know the big picture and what his plans are? If its for a business it mightbe the right choice as it will provide a good tax writeoff at the end of the year to offset all the revenue that Garth is raking in on his books :).

#50 CM on 03.09.09 at 12:33 pm

I missed all of Garth’s interview with Alan Gregg except for the last couple of minutes, where he sounded almost – shall I say – upbeat? I won’t say any more until I listen to the whole thing, which is downloading in podcast form as I write.

I don’t know what to think anymore. I feel kind of numb, as you do when you’re in a situation where there is no clear direction. It’s like slogging through a snowstorm with your head down. If you stop, you freeze to death, but even if you keep going, you have no idea where you’re headed.

Orwell’s essays written before WW2 are sounding awfully modern right now. I can’t seem to read fiction at the moment, even “serious” fiction. I just can’t get into it.

One thing he mentioned was the peculiar non-realization of an impending war in Britain, even, as he said, that anyone with a brain could see it coming in 1936. He said that it’s amazing how easy it was to ignore things when you live on an island with a stong navy.

He also mentioned that a military dictatorship is always run by an army. A naval or air force one wouldn’t work, although the USAF were flinging around the idea of “total spectrum dominance” or some such drivel not long ago.

I think they’ve had to downgrade their expectations somewhat.
—–

Re Obama’s fans and their “I pledge…” video (Jake – #6) – that is downright scary. What are those people on?
Whatever it is, I don’t want any.

—–

Speaking of military dictatorships, how about this for another scary thought.

MacKay for next NATO head?

http://www.thestar.com/news/canada/article/598899

(NATO wouldn’t have been the adjective I’d have used for that noun, but this is a family blog.)

I’d heard rumours of that several months ago.

When young Peter started jumping up and down about supposed Russian incursion in Canadian air space while the Lord of Creation was visiting from the south (and the news sites picked it up and spread it around), I thought the NATO bid might have been behind it. Biden seems to be backing him up on it, since it’s only one step from a Canadian head to a U.S. one, once you wrestle it away from those pesky Europeans.

Now we know why MacKay insisted on poking the Russians in the eye. If there’s no Russian threat, then that nice, cushy little NATO job just might disappear.

I wonder if they’ll give him a uniform?

Eeeeeewwww.
_____

#51 PTDBD on 03.09.09 at 12:48 pm

Trooper Diab, of the Royal Canadian Dragoons, Petawawa, Ont. – Rest In Peace.

Our thoughts also go out to the four other Canadian soldiers wounded.

#52 Increasing that 1% on 03.09.09 at 1:19 pm

#21. Cara

“I’m in school. Drowning in homework, but if I keep swimming I’ll come out a nurse. That’s a pretty safe recession-proof field. Always bums to wipe, and pillows to fluff.”

In general, yes, Nursing, is more in demand than other jobs, and still needed during recession/depression.

Aren’t many jobs in which employees are required to still work on stat holidays, classified as ‘essential services’, considered more safe.. ?

Of course, in Nursing there are many, many types of positions, that don’t involve the tasks you mentioned.
There are also many levels of Nursing education and experience.
You could be a Personal Support Worker doing what you said..

Nursing is a very politically manipulated profession. It’s always brought up in every election campaign. Also, when there’s budget cuts to be made, though they were screaming for nurses a month before, nurses are still often going.

There was a rally last week by Ontario Nurses and health care providers, protesting the loss of 1000 jobs.

Nursing demand also comes in waves… in the early 90’s there were hiring freezes in T.O. In less than one year hospitals went from screaming for Nurses, to not hiring.

There are currently signs of slowdown of hiring…
It’s all budget -related…not whether there’s a shortage of Nurses, but a willingness to pay to have them

Nurses are not safe either. If one gets something, when things get worse, it could be just whatever one can get, which means location, hours, conditions, staff levels, you take whatever…

#53 Jay Currie on 03.09.09 at 1:30 pm

“Money Morning’s Martin Hutchinson as saying “I said in December that the recession could be ‘bloody-L shaped.’ With the huge deficits, that now looks the most likely outcome – and believe me when I say that it will be very bloody”. It also references a March 1 New York Times article where Nouriel Roubini said the recession could last a total of 36 months, and that the U.S. slump – instead of following a typical “U” shaped rebound – “may turn into a more virulent L-shaped near depression”. ” http://www.stockresearchportalblog.com/2009/03/us-recesssion-%E2%80%93-how-long-will-it-last/

We do have guidance, charts and GPS…and most of them are pointing in the same direction: either a hard recession for three or more quarters or a recession leading to years of depression. I think you are about right on the depression outcome being a 10-20% chance. However, all it takes are a few bad decisions by the US Administration and a failure by the Canadian government to keep a fiscally responsible agenda and we could be in the glue.

#54 Makeorbreak on 03.09.09 at 1:40 pm

Garth, how can you so positively affirm there won’t be a Great Depression II?

Your September 21 entry picture:

http://www.greaterfool.ca/wp-content/uploads/2008/09/depression.jpg

I am curious as to what made you change your mind. Things have not improved between when you started your blog and now. On the contrary, they are getting worse by the day.

May I refer to the said entry of September 21, 2008 :

——————-
“The events of this time are historic, so remember them.

The American government has admitted that unless it spends $700 billion – an unprecedented gamble for taxpayers – there’s a good chance of a new Depression. For those unsure of what this means, it is runaway deflation. The value of money soars as the value of commodities plunges.

Wages fall as prices collapse, but debt remains static. That means financial obligations become harder and harder to meet, leading to widespread defaults, personal bankruptcies, foreclosures and bank failures. The whiff of this is already in the air. Bear Sterns, then Lehman, then Merrill, then almost AIG, along with Freddie and Fannie. This string of disasters is unprecedented since the 1930s, as is the current misery in the American housing market.

If the gamble to the south of us does not work, then the results will be worse than if Washington had not even tried. The government’s ability to manage the economy will have been discounted, the greenback will fall, foreigners will question the value of American paper, Wall Street will plummet, the financial sector will be decimated and it will take a decade for the damage to be even slightly repaired.

In such a scenario, Canada would be affected instantly – as it was in the Thirties. Canadians, after all, are just as indebted as Americans, with just as little saved, and just as much of their equity sitting in residential real estate. In fact, we are even more susceptible to grief, with a commodity-based economy and most of our product flowing south.

So, will the bailout succeed?

As I write this, it is unknown, although the massive rally on stock markets Friday showed many traders think it will. But then, they believed in Bre-X, too. Yeah, and Nortel and Cisco. US lawmakers are working hard to approve this deal before the bright light of public scrutiny can be shone from below. There are many who rightly question why the blood should flow on Main Street, amid foreclosures and erased middle class wealth, while the manipulators on Wall Street get bailed.

Rest assured, the entire governmental machine will be backing this rescue, including Obama and McCain. Trillions of dollars are now at risk, since Bush and Paulson have rolled the dice so dramatically.

Odds are there will be no immediate worsening of the situation, and a pervading sense the worst is in the rear view mirror. Bay Street economists will dance hard. Central bankers will pray. Political leaders will hope against hope collapse does not happen on their watch. Almost nobody will be telling citizens the truth. As a result, those Canadians even paying attention will breathe a little sigh of relief, and continue on as they have in the past.

God rest their souls.”
———————–
As of now, the bailout hasn’t succeeded. Jobs are being lost at an increasing speed. The markets are down since September.

So what is your explanation? Why don’t you stand by what you’ve advocated for so long, especially because all indicators point to that direction? Your blog is becoming less and less credible.

That entry was written six months ago, and accurately described the situation then. At no point then or now have I asserted there would be a depression, but assessed the odds at 15-20%, which remains the case. If it disappoints you than millions of families will not be plunged into despair, you have a problem. — Garth

#55 Dave on 03.09.09 at 1:45 pm

Oh my gosh, you people are miserable!!!!!

I cannot believe the heat Garth is taking for seeing the light at the end of the tunnel. Any prudent financial person would do as he’s doing. Its as if people on here don’t want things to get better! Some people are taking offense to his views as if he betrayed you all, haha. What a joke!

go hide in your bunkers. The world leaves you behind.

#56 CM on 03.09.09 at 1:57 pm

Just listened to the podcast.

Good stuff.

And no squirrels were harmed in the production of the interview. :)

#57 TheComingDepression on 03.09.09 at 2:16 pm

Garth where did you pull this “there will be no depression” clause out of? Your feelings? A graph? You read it somewhere? Your wish? And the 15%-20% there might be a depression? I think you meant that unemployment will be 15%-20% which makes it a “DEPRESSION”. Want to see what a TRILLION dollars looks like? Click the name above.

Time to start a new web site, bucko. — Garth

#58 jess on 03.09.09 at 2:26 pm

new york times magazine : the sums foreclosurevile

http://www.nytimes.com/2009/03/08/magazine/08Foreclosure-t.html?pagewanted=1

…”empty houses houses, or 1 in 13, are vacant. Most of the vacant houses are owned by lenders who foreclosed on the properties and by the wholesalers who are now sweeping in to pick up houses in bulk, as if they were trading in baseball cards. ..
A few months ago, he met with Luis Jimenez, a train conductor from Long Beach, Calif. Jimenez had purchased a house in Brancatelli’s ward on eBay and had come to Cleveland to resolve some issues with the property. The two-story house has a long rap sheet of bad deals. Since 2001, it has been foreclosed twice and sold four times, for prices ranging from $87,000 to $1,500. Jimenez bought it for $4,000. When Jimenez arrived in Cleveland, he learned that the house had been vacant for two years; scavengers had torn apart the walls to get the copper piping, ripped the sinks from the walls and removed the boiler from the basement. He also learned that the city had condemned the house and would now charge him to demolish it. Brancatelli asked Jimenez, What were you thinking, buying a house unseen, from 2,000 miles away? “It was cheap,” Jimenez shrugged. He didn’t want to walk away from the house, but he didn’t have the money to renovate. The property remains an eyesore. “Generally, I’m an optimist, but none of this makes sense,” Brancatelli told me. “Trying to give order to all this chaos is the big challenge.”

#59 Domocratic on 03.09.09 at 2:34 pm

Let us all remember that opinions are just those, opinions. As the information that made you form the opinion changes, so will the opinion itself.
This catastrophe is uncharted waters and even people like Buffett, Soros, et al. are scratching their heads as to what happens next.
One guy I would like to hear from is Martin Zweig though-he always seemed to be ahead of the curve.

#60 smwhite on 03.09.09 at 3:14 pm

#50 CM

How else do you suck Canada into all American’s dirty little games?

Time to leave Afganistan and let the American’s finish the bullshit they started when they were supporting the “Mujaheddin” in the early 80’s against the boogeyman of the time, the scary Russians.

Keep focused on death, war and terror, forget about the death, war and terror committed by our own politicians and banks over the past decade.

PS Did I read right, Calgary housing starts down 75%?

http://www.calgaryherald.com/business/Calgary+housing+starts+plunge+February/1370102/story.html

#61 smwhite on 03.09.09 at 3:19 pm

#42 Yes We Can’t

This bubble has been growing for a long time and house values were a result, not the cause.

Well put, a lot of that “bubble” money was moved from stock into real estate before the .com crash…

#62 Carole AB on 03.09.09 at 4:17 pm

Very good interview on TVO Garth. I even managed to get my husband to watch, who also said it was good. It clarified things from your book for me. I also was relieved by the light at the end of the tunnel aspect. I was wondering though if there has ever been a deflationary spiral not associated with a depression? Perhaps this is what has some confused.

#63 Avalon Shawn on 03.09.09 at 4:20 pm

We got carried away folks when …

Jets got gyms, Spas served canines, depots killed independents , Imax replaced drive ins, orange paint was dubbed Tahitian Sunrise, coffee became complicated, and the Olympics’ hosted the dream team.

Really though we are lost in this self imposed abyss because corporations became unchecked and unruly penetrating all aspects of our daily lives, and complicating the hell out of our products….. and now we pay the price.

I remember my first experience in a Costco in Southern Ontario, I walked in looked at the buffet of products stacked and racked a hundred feet high. I thought what would a new immigrant think about this site..wasteful and shameful really.

Its not too late though it is time to focus on small towns again rebuild downtowns, spend your cash with the independent shops..those who are left that is.

#64 Bulls eye on 03.09.09 at 4:21 pm

This Blog keep us forward thinking – like the markets. This economy is by design to cleanse the boomer generation of there retirement which will affect many sectors. The prudent ones ( the ones will with the squirl recepie) will go through the tough times a lot better than those who are careless with their decisions. Remember – this blog started with Garths first book (The Greater Fool, 2008) a time when only a few readers would communicate there thoughts. The scary thing is that this site has become a resource for big decisions makers. I followed my gut feeling which is supported throught this site and sold my home – we are renting for awhile now and waiting for a fantastic opportunity to come. Many are right in there assumption and it shouldn’t be communicated that there is a 15-20 percent chance of a depression but rather, 15-20 percent of people will go through a depression – those unemployed. Maybe if you are the lucky ones to keep your job and and don’t see an end in sight, think twice cause all those cars parked across the street in from of the house isn’t a party – it’s the new reality.

#65 Bob Bagina on 03.09.09 at 4:22 pm

Two cheers for the Da HK Kid comments on the non-sustainable nature of our lives. Unrelenting growth dependent on debt and reliant on infinite resources coupled with individual greed/interest clearly hasn’t been working.

If your into “the Secret” though you may believe that the universe is infinite along with the satisfaction of our material desires, but the likelihood of infinite empty space between your ears is inversely connected.

And what terrible times we live in when something like “the pledge”, basically promoting service to others and enhancing our social capital, is shot down with contempt and malfeasance. How pessimistic and self-interested we’ve become.

#66 mountainchar on 03.09.09 at 4:26 pm

Hi Garth,

Take a glance into the NZ crystal ball to see where the overpriced Canadian urban condo market is headed…..

http://www.stuff.co.nz/editors-picks/2205756/Flood-of-cheap-flats-as-values-fall

Stay the course, you’re doing a fine job – the Canadian coal mine needs more canaries.

Matt

#67 lgre on 03.09.09 at 5:10 pm

Hoping for a depression should be the last thing on anyones wish list even if you are in a good place right now..it would be devastating..prices of homes need to adjust but the economy needs to get better or we are all in trouble.

#68 Dave on 03.09.09 at 5:32 pm

Garth where did you pull this “there will be no depression” clause out of? Your feelings? A graph? You read it somewhere? Your wish? And the 15%-20% there might be a depression? I think you meant that unemployment will be 15%-20% which makes it a “DEPRESSION”. Want to see what a TRILLION dollars looks like? Click the name above.

———————————————–

this guy is way too much. I can feel his anger through my screen.

helpful hint: go outside, look at the sunshine, take a breathe of fresh air…

#69 Glenn on 03.09.09 at 5:34 pm

Good God, I bust my ass in the military for 14 years and I get a measily $3000 a month. With Canadian soldiers getting much less I assume.

Meanwhile, some union slug shuffles around the GM assembly line, gets on his drippy loud harley to ride home to his shrill bloated wife, and gets $70 an hour PLUS benefits?

No wonder the world is falling apart!

#70 marnic on 03.09.09 at 5:56 pm

Garth:

Don’t shoot the messenger here, but even Ilargi–who I must say I enjoy reading–over at The Automatic Earth is having a go at you today.

He’s just pissed he can’t post on this site with his beet-powered Mac. — Garth

#71 ThumbsUp on 03.09.09 at 5:57 pm

“still hope we can do better than the Japanese did, but it’s not at all obvious that we will.”
– Paul Krugman

source
http://krugman.blogs.nytimes.com/2009/03/09/japan-reconsidered/

#72 TorontoBull on 03.09.09 at 6:07 pm

@ Garth,
it seems you are a star…for the wrong reasons:
http://theautomaticearth.blogspot.com/
Quick question about your book. Why didn’t you consider education as an investment strategy?

Thx

I do not mind being criticized when I am right. — Garth

#73 Dan in Victoria on 03.09.09 at 6:22 pm

Well Garth,I read your post last night and proably 5 times today.It made me remember when we were growing up,two bedroom house,one central oil burner for heat,galvinized wash tub for a bathtub,4 kids in a 10×10 bedroom,apple boxes to sit on for chairs at dinner.A diet of moose,deer, salmon,hamburger and stew,and produce from our garden.Never had the fancy gadgets or nice clothes.Used to put lino in the bottom of my shoes when they wore out,my brother and I used to share a pair of runners for gym class.You know what? Never went hungry and always had a roof over our heads.Fast forward 35 years.You know what all this will pass in time,people will adapt,life will move forward.The smart ones who listen,think clearly and critically,observe,inquire and don’t jump to conclusions will be the ones that benefit from the information,sources etc.that are provided here.Thanks for this and your xurbia site Garth press on!

#74 Cendrine on 03.09.09 at 6:45 pm

#69 Glenn

That 70 bucks includes benefits. My BILs make about 34 dollars an hour. The GM guys seem happy enough to take a freeze on wages, pay 30 bucks a month for health benefits (retirees pay about 15 bucks a month). Anything to save their jobs, if you go by reaction from workers in the news.

BTW, nurses make about the same at the top of the scale and the wage scale seems to be a big factor in job cuts when times are tight. Someone told me several years ago that nurses essentialy negotiated themselves out of jobs in 1988. After I moved in 1989, I could not find work for twelve years.

#75 Herb on 03.09.09 at 6:58 pm

I will salute the stars of “The Pledge” video (at Jake’s #6) when they have given back the millions they have collected over and above what their “talents” really are worth. They have made their money using the same marketing and methods to separate the dumb from their cash as any corporate crook. No one should be “scared” by that vid, but a lot of people should be disgusted by it.

Don’t know how “unrelenting growth” (using Bob Bagina’s expression at #65) became a corporate principle, but the only thing that grows unrelentingly is cancer – until it kills its host and thus must die itself.

#76 @Garth 2 on 03.09.09 at 7:00 pm

I do not mind being criticized when I am right. — Garth\

Quote of the day!!!

#77 Prairieboy on 03.09.09 at 7:32 pm

Last July my nephew, just out of university ,landed a great job and then purchased a condo in Saskatoon.This is the son of the man with the $25,000 home. The condo cost $200,000 and he got a 0-40 motgage on it. His father called me the other day and asked me about the sale of the condo becase the boy wants to start a family with a new girlfriend. Getting married in July he said. Tell him to sell the condo now and take a loss on it if he must. Tell him to act fast or he will be in it for 40 years and what will it’s value be then?

#78 Sail1 on 03.09.09 at 7:38 pm

Garth, good look ahead, well done.

Are you working on your next book? I have indirectly sold 15 copies of After the Crash to friends and family. We have had some good sparring due to the content. Regardless of what some of these Bozo’s on this blog think, life will go on. Some people should be on medication, they just can’t lift the veil of depression.

#79 Taxpayer like you on 03.09.09 at 9:02 pm

74 Cendrine (responding to 69 Glenn)

It sounds like you’re equating nurses wages to GM
line workers wages. There should be no comparison.
Please correct me if I misunderstood.

75 Herb responding to BB 65. A few different viewpoints on this vid. Some see it as a brain-washing tool to follow the new leader. Others see it as a harmless pep talk for the general population. I do like Herbs comment about
giving back all the millions. That would be the right thing
to do.

45 HK kid brought up deep topic about unsustainable growth. He mentions not only the ecological component, but the economic one ie – the market. I think I have a lot
of “stuff”, and my disposable income is high enough that
I can buy more “stuff”, but when do we say enough is
enough, I just dont need that?

#80 Jonathan on 03.09.09 at 9:59 pm

My coworker sold her place in December. Her Mississauga condo was on the market for a couple weeks and was sold above asking price without any conditions. I had to say I was surprised.

The guy who purchased her place already lived in the building. He made the purchase so that he could rent it out. Unfortunately my coworker was put in a situation to show her place to his prospective tenants prior to the closing date.

Then came the initial closing date. Turns out that his financing was not secured nor had the unit been rented out yet. He asked for a week’s extension.

The next week it was revealed that the purchaser could not secure financing. The real estate agent communicated that the purchaser already had outstanding debts with some shady lenders revealing what a credit basket he was.

I was enlightened. It didn’t make sense why a financially sound person would purchase a property in this market – unless it was an absolutely great deal.

To all of you who sell your home, beware that you are more likely than ever to be dealing with the most financially risky individuals. Make sure you demand that the buyer proves to you that their financing has been secured well before the closing date.

#81 Future Expatriate on 03.10.09 at 1:12 am

Great… no short sales in Canada… just tons of “bankruptcy” sales.

#82 Midget Porker on 03.12.09 at 6:49 pm

I loved that episode of happy days

#83 Midget Porker on 03.12.09 at 6:55 pm

#74 Cendrine

Klein cuts jobs with a slash and burn attitude in about 92′. The Nurses may have negotiated themselves out of a job in Canada, but into jobs in Texas; where the vast majority still remain. There may not be a nursing shortage if things were done differently.

P.S. Most people wouldn’t do the job of a nurse for $200.00 an hour.