Equities & opiates

red-hot1

Bite me: Toronto condomania returns?

Months ago I said the stock market would rebound far in advance of the real economy. And so it is.

The most recent advances put the TSX back near 10,000, after plopping to 7,500 during the crash. The market has gained 30% in the last two months, leaving every other asset class in the dust. All of the losses of 2009 have been erased, with equities almost regaining their level of six months ago.

Of course, the spectacular rally could be a dead cat bounce or a classic bear trap. It would be totally unreasonable to expect such rapid advances to be held without some vicious profit-taking. But the fact the gains have been accumulating for many weeks, during which we have seen a bankrupt Chrysler, serious questions about major US banks, an escalation of violence in Iraq and Afghanistan, Pakistan choking and the Armageddon Pig Flu, makes this one credible.

At the same time, many regional real estate markets have been on a roll. Fuelled primarily by first-time buyers gorging on 3% mortgages, house prices have not only stabilized but are creeping higher. Sales declines have slowed and in some places there’ve even been reports of multiple offers. Mortgage brokers are busy again and many realtors have pulled their Mercedes off Craiglist.

So, what does this mean? Is the storm over?

Hardly. This is just some evidence of the uneven and confusing recovery process I told you was going to take place. Stock markets are convinced the bottom’s been hit, or at least is within sight. Governments have poured so much money into banks, for example, that investing in them is now a no brainer. And as global demand inches up, energy prices will cavort. Another winner. Add to the list health care companies (Boomer death watch), value retail (Wal-Mart, etc.) and beaten-down commodities (like potash and base metals).

The market advance comes even as jobless numbers suck. Investors now expect horrible unemployment for the rest of 2009 (as they should), with no return to 2007 levels for maybe five or six years. During that time, wages and salaries will continue to be under pressure and average family income will barely budge.

So, if jobs will be hard to come by, if incomes are unlikely to advance, if we’re as indebted and savings-challenged as we were a year ago, why are people back buying houses? Is this part of the swing higher that Bay Street’s celebrating?

Wrong again. There’s only one reason real estate moving, and that is the price of money. It’s an opiate. This drug has the power to turn solvent young couples into chronic debtors, blinding them to the fact the mortgages they take on will grow wildly more costly in the future, while the value of the asset purchased declines. Cheap money allows people with little cash to buy houses, and in that fashion it works exactly as did the US subprimes.

That turned out well, didn’t it?

The future of real estate is as troubled at this moment as it was a year ago, as the innocents clamour to get in.

The wise watch this, knowing only two things matter. Cash, liquidity.

94 comments ↓

#1 Real Estate Deal or No Deal on 05.04.09 at 10:39 pm

Got a bunch of both, and more flowing to me all the time.

Thanks, Garth.

#2 dd on 05.04.09 at 10:46 pm

“The wise watch this, knowing only two things matter. Cash, liquidity”

So true. Can the government keep spending if the consumer is not? I doubt it. Too much leverage got us into this mess and what is the cure? More leverage?

#3 mark on 05.04.09 at 10:56 pm

Bubbles never happen twice in a row. We due for a stock market bubble right now? With gold = $900, and oil and labour cheapening by the day, certainly the sector is poised to fly.

#4 victoria reader on 05.04.09 at 10:59 pm

As a first time stock buyer I bought some oil stock a few weeks ago on your recommendation and I am happy I did, I just wish I bought more. Only thing is I find it hard to believe this run can sustain itself. So here I am waiting for stocks to drop and they arent. I think I will buy more and go for the long haul even if this is a bear trap. Im a rookie with a tfsa burning a hole in my pocket. Keep up the good work Garth I look forward to your blog everyday.

#5 john on 05.04.09 at 11:05 pm

Hi Garth,

Is it not possible that rates will stay at this level for decades and possibly even venture in negative territory. Gov’ts must realize the problems if they begin to raise rates. I am just so confused?

And the markets are forward thinking??…that’s it 6 months of carnage and gitty up? I just don’t get it.

#6 Nostradamus jr. on 05.04.09 at 11:27 pm

>>>The future of real estate is as troubled at this moment as it was a year ago, as the innocents clamour to get in.

The wise watch this, knowing only two things matter. Cash, liquidity.<<<

…Gotta correct you on this one Garth….The wise watch this, knowing only THREE things matter…Cash, Liquidity and that it’s different in Vancouver Proper.

Garth, you seem to be taking repeated visits out here, must be just a coincidence.

#7 re-aligned on 05.04.09 at 11:36 pm

Garth said: “There’s only one reason real estate moving, and that is the price of money. It’s an opiate. This drug has the power to turn solvent young couples into chronic debtors, blinding them to the fact the mortgages they take on will grow wildly more costly in the future, while the value of the asset purchased declines. Cheap money allows people with little cash to buy houses, and in that fashion it works exactly as did the US subprimes.”

… and this is a symptom of the “I can afford it” thinking that extends only to a month by month basis. Little/no thought of the long term view here. As long as people conceive of affordability for housing and lifestyles on a month to month basis, the reckoning will be inevitable. In the immortal words of Mr. T “I pity the fool” – But I won’t bail him out. (I might pick his bones though…. ;-)

#8 bob on 05.04.09 at 11:36 pm

Man its suckes to live in burnaby. how can a dumpy house cost so much, 600,000 gets you nothing and house prices are on the rise

#9 Need to decide on 05.04.09 at 11:47 pm

Just sold a commercial building —thank goodness!!! DH wants to buy mutuals..I think we need to pay down mortgage on family home. BMO wants to sell a “product” — based on market recovery. Just applied to Service Canada for the Job sharing program for a couple staff. Looks like a good program…I can keep staff for the hours I need, and then they collect EI for the hours they would have worked. Thanks Garth for giving me some tools to work with here. Are Mutual salesman like RE agents right now?

#10 nonplused on 05.04.09 at 11:53 pm

Every time they lower interest rates they enable a new group of people who could not previously afford to buy to think they can. But the law of diminishing returns applies here as everywhere. Lowering rates from 7% to 6% kicked up a lot more buyers than 4% to 3% will. Eventually they will go from 2% to 1% maybe if the trend continues, but the number of new buyers who qualify to even make that payment will be less than they kicked up at 3% to 2%, 4% to 3%, and so on.

Getting a bunch of new buyers into the market now at 4% will offer temporary relief to new home builders who can meet the lower prices required and offer desperate sellers a market at strong but not peak bubble type prices. However it makes the problem worse down the road. We are long up the ying yang real estate as a society. Everybody who was serious about it during the boom has 3 properties. Eventually, the 3 D’s will prevail and bring those properties to market (Death, Divorce, and Bankruptcy. I know, 2 D’s and a B but 3 D’s sounds better.)

There are not an infinite number of potential buyers out there. Lowering the interest rate only brings a diminishing number of marginal buyers and an infinite number of speculators in. It will cause a temporary rally in stocks, improved clearing in real estate but probably not rising prices, and maybe some increase in consumer spending, temporary at best. In the end, once everyone has a house, vacation property, and 3 condos under development, the market is saturated. This is the stuff bear market rallies are made of.

But this is a powerful bear market rally. It could go on for a while and go higher than a sane observer might expect. I don’t know what is behind it, but a 30% rise in the stock market in 2 months is bigger than even the tech bubble managed to produce. It’s got legs. Short at your own peril here. But once it flat lines and turns down, the shoulder will be in and it’s time to grow an arm.

Unless we get hyper inflation, in which case all bets are off and the only thing that matters is how much money they print.

Either that or $295,000 for a 1982 single wide manufactured home on 0.25 acres in the middle of now where BC makes perfect sense. It has a nice 2 gar garage though.

Over $1 mil isn’t moving even with lower rates. The combination of lower prices and rock bottom financing is bringing in the Kia buyers. That’s the deal.

I still don’t understand how shocking job losses, bankruptcies of major corporations, and negative GDP translates into increased real estate buying and a super duper stock market rally but hey, I’m only human.

#11 re-aligned on 05.04.09 at 11:53 pm

Funny because it’s true dept…
http://www.theonion.com/content/news/nation_ready_to_be_lied_to_about?utm_source=a-section

#12 Sean in E-Town on 05.05.09 at 12:13 am

What about alternative energy companies Garth? Some are very de-leveraged, and, according to the market capitalizations, worth more on book than in the market. Are they just a money sponge, or do you foresee some real returns coming out of these businesses as we move into the jobless recovery phase of this economic catastrof***?

#13 Bulls eye on 05.05.09 at 12:17 am

I’m enjoying the honeymoon phase. Take advantage.

#14 Da HK Kid on 05.05.09 at 12:28 am

Once a Sucker, always a Sucker unfortunately and that is what we are having, a Pure Sucker’s rally for most.

Only a few bought into this rally and the rest forced too basically, mostly boomers to recover anything they can or be skewed until their dirt nap.

Loose 50% get back 25% is something you must do but risk is high in these plays.

I am waiting for the second leg down when there is a more straight forward play and less stupid money being thrown around to re-inflate the bubble.

Please look at this link as it a great summary by again my man Gary Shilling which is rarely available for reading unless you pay for his annual reports.

Long-Term Outlook: Slow Growth And Deflation

http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2009/03/16/long-term-outlook-slow-growth-and-deflation.aspx

#15 Republic_of_Western_Canada on 05.05.09 at 12:58 am

One word – roommates.

A couple of decades ago, the coolest thing was to have 2 to 5 guys rent out a large luxury house, and live like kings at relatively little cost. The social aspects were an added bonus. Every one had a vehicle, usually a nice newer truck or fast car outside, nearly paid off because individual rent was so low. People knew how to get along, and fights were generally restricted to the hockey arena. Roomies would work different shifts and hours, so you could go for days without seeing some of the other residents. Lots of people had firearms of all kinds too, but nobody ever got hurt.

(Women would usually set up in smaller groups with one roomie or maybe two, or live in a older house with a ‘co-ed’ group of meek or heavily stoned males.)

That was before the ‘domestic’ sickness started. Too many twenty-somethings, often under pressure of screwed helicopter-parents, now started closely emulating their own parents and the 40-something demographic which was falling like flies onto the sword of married ‘life’. This was exacerbated by the social pussification program hatched by the Lie-beral government back in 1995 as part of bill C68 and their ‘social engineering’ scheme.

Individualism, the ability to think, and a general strong male ethic were suppressed and replaced with a brow-beaten, sucky meekness. You are now supposed to consume whatever saturation marketing says you should, such as chipboard doghouses and condo complexes, or ‘enviro-fuels’ such as corn ethanol, and stay away from anything that might make more sense or have some character to it. Of course, that is often countered with a bitter anarchism like the riots we’ve seen in Greece recently.

Now untold numbers of potentially healthy younger people somehow think it’s normal to set themselves up like recluse hermits ASAP regardless of massive total debt, get married a year out of high school or college, tell everyone else to fuck right off on a daily basis, and take pot-shots at other drivers during rush hour for cutting them off during careless aggressive lane changes. Social relationships seem to consist of sitting around texting acquaintances, getting drunk while watching a wall of TVs in some tasteless sports bar, or driving through red lights while yapping endlessly into a cell phone. WTF ???

Therein lies the biggest reasons for the insane affinity for completely unaffordable house prices and finance charges. That is, over-consumption of factory-finished stuff such as housing instead of making your own, and a ‘to hell with you’ insulation mentality that you only used to see in new york city.

#16 . . . fried eggs and spam . . . on 05.05.09 at 1:01 am

“Is the storm over? . . . That turned out well, didn’t it? . . . It’s an opiate. . . knowing only two things matter. Cash, liquidity.”

C’est magnifique, n’est-ce-pas? Duz anyone have the faintest idea of what is really going on anymore? I know I’m only here for the beer, but liquor’s quicker.

To a large extent, “kash is king” and “Nostradamus Jr.” are headed in the right direction, although I still like a sizeable chunk of Cdn. equities in the portfolio.
——
Fancy taking on the East? Two links showing Nostradamus Jr. may be right in predicting Vucnovrae is the elite’s new capital! — http://tinyurl.com/cq67o4 — and — http://tinyurl.com/d4qc6q — Plus Putin visits Japan May 11-13; more biz. deals for ColumAsia (our new name when finally separate from TROC!).
——
This is a multiple choice answer. Yours, mine, his or hers flu, with any others that come along. — http://tinyurl.com/chhukf
——
Supposedly, 16 of the 19 banks may be in trouble — http://www.bnn.ca/news/9058.html — but Warren Buffett thinks otherwise, so who is right? — http://www.bnn.ca/news/9041.html
——
History, from the 1980s repeats. — http://tinyurl.com/ddyr6j

#17 Shawn on 05.05.09 at 1:04 am

A comment on big interest differentials. Mentioned by Garth a couple days ago.

CMHC mortages are limited to no more than three months interest

Non-insured mortgages typically charge the entire interest differential, no maximum three month interest applies.

Penalties to get of a 5 year mortage that had a high rate and still has say three years to go can be huge. And don’t even think about getting out of a ten year locked in interest rate conventional mortage taken out before rates really plummeted. The differential could be beyond HUGE.

And that’s how things work except for insured mortages where special rules.

You placed your bet that interest rates would rise, you locked in a rate. If rates fall, you lose, so sad… But stil do everything you can to negotiate it away… Does not hurt to ask…

#18 To Old Bob$ on 05.05.09 at 1:21 am

“Fuelled primarily by first-time buyers gorging on 3% mortgages”

Geez! I wonder who fed them the drug. Come on and get some, it’s cheap and there’s plenty of it.
Ya that’s it, now your hooked and I’ve got you where I want you. Let me know when you need more, of course the price may go up, depends on supply, demand and my rate of interest.

The BoC has given the Banks about the lowest rate you will ever see, yet they charge or pay how much for their services…..Credit Card anyone or how about a chequing or savings account?

#19 hal smith on 05.05.09 at 2:52 am

The 3 per centers that are getting into houses today are the real sub primers like in the US. If anything is going to lead to a US type meltdown this is it.

#20 Jay Currie on 05.05.09 at 3:20 am

Think 1930 for the market.

#21 Jack the Lad on 05.05.09 at 5:28 am

I’m pissed. I remember a month or so ago when the Dow went up 400 points because Citigroup leaked a memo saying they made a profit.

The market’s been on a roar ever since.

Everyone said: It’s a Bear Market Rally, It’ll drop again, it’s a sucker’s rally.

But now it seams the recovery in equities is real, and I missed out on the bottom.

Oh well, gotta stop listening to those Perma Bears like Jim Rogers and Peter Schiff…. LOL!

#22 David Bakody on 05.05.09 at 6:13 am

Stock Market and housing. Both these as mentioned are on shaky ground, first the markets …. many people bailed out and have lost their returns this is also coupled with many ( thousands) who have lost their jobs and drew survival money out years ahead of time. These numbers will never be calculated by the markets nor government. Now for housing …. having lived through the 80’s high interest rates (16-20%) when housing was hard to sell for those who struggled saw prices drop …. then interest rates dropped …. then wages increased …. then of course housing prices sky rocketed . Those that took a chance that could afford it did well if they stayed put and paid their mortgage off. To-day cheap mortgage money and little job security, no prospect of a wage increase and higher interest rates waiting in the wings all adds up to heartaches and disaster ….. because housing prices with increase directly proportional to interest rates having taken the fall as the industry seeks to recover lost time and money. Then again there may be a free lunch for all as big business takes the hit for the little guys and gals …… right?

So you say buy now and make money just like before …. sorry this time will be different …. much different because the money boom is gone bye bye for the working class …… and that you can take to bank!

#23 ts harpoon on 05.05.09 at 7:30 am

Garth Turner,

I am thoroughly enjoying your latest book “Sheeple”. Thanks for signing my copy. You can catch me using expletives while I read. I would like to now address all of my blog entries to [email protected] – “HEY PMSH – I DO BELIEVE THAT YOU HAVE BEEN EXPOSED!!!”

In the meantime:

China has ‘canceled US credit card’: lawmaker…WASHINGTON (AFP) — China, wary of the troubled US economy, has already “canceled America’s credit card” by cutting down purchases of debt, a US congressman said Thursday.
http://www.google.com/hostednews/afp/article/ALeqM5i4estRSYeFBIII9kezxnP4jgoGZQ

The New York Times – “Worries Rise on the Size of U.S. Debt” – The nation’s debt clock is ticking faster than ever — and Wall Street is getting worried.
http://www.nytimes.com/2009/05/04/business/economy/04debt.html?_r=3&ref=business

The Atlantic Monthly: “Why This is a Depression, Not a Recession” http://correspondents.theatlantic.com/richard_posner/2009/05/the_developing_economic_situation_and_the_obama_administrations_response_february_2-may_1_2009.php

“Some of Us Still Think They Can Get Rich Quick from the Real Estate Bubble” – A visit to a packed real estate seminar on how to “get paid to buy a house” reveals that the bubble mindset still hasn’t popped. http://www.alternet.org/workplace/139474/some_of_us_still_think_they_can_get_rich_quick_from_the_real_estate_bubble/

#24 miketheengineer on 05.05.09 at 7:37 am

Garth:

The “great disaster” is just starting. They just announced job sharing at our company. Everyone who is left will work 3 or 4 days per week….GM and Chrysler are or will shut down for the next 8 weeks….So the supply base will do the same.

This is going to drive the supply base “bankrupt”. Hence the “great disaster” starts. Thousands more will fall behind on payments, and loose their homes, loose thier jobs. Soooo Soup kitchens by xmas, defaults on homes, mass chaos after. Unemployment 20% or above. It is coming, it will come .

#25 CTM on 05.05.09 at 8:16 am

Re: #15 Republic_of_Western_Canada

Interesting, but I would only say that New York City has nothing on the particular brand of solipsism here in Calgary. It’s my town and I like it a lot, but wow.

The BMW will never love you back, Mr. Petro-Engineer!

#26 dd on 05.05.09 at 8:34 am

#6 Nostradamus jr.

” … it’s different in Vancouver Proper ….”

POP.

#27 Signal Loss on 05.05.09 at 8:36 am

So, the markets have priced-in the scary unemployment levels that will prevail in 2009, and yet the market still performs. Interesting. We must be on a landing – a mini-era of cheap money to be followed by a further drop.

#28 dd on 05.05.09 at 8:39 am

#21 Jack the Lad

“But now it seams the recovery in equities is real, and I missed out on the bottom.”

What? Do you think the market is going back to the days of 2007 anytime soon? For that to happen companies have to take on more debt (they have to lever up a lot more). The profit is not there going forward and companies will not be able to get loans. Watch the markets tumble again when expectations are not met.

#29 dd on 05.05.09 at 8:42 am

#16 . . . fried eggs and spam . . .

“Supposedly, 16 of the 19 banks may be in trouble — but Warren Buffett thinks otherwise, so who is right?”

Buffet said the worst was over just before September 2008. He is just calming the market … the banking system in the US is bankrupt.

#30 Munch on 05.05.09 at 8:56 am

At five minutes and six seconds after 4 AM on the 8th of July this year, the time and date will be:

04:05:06 07/08/09.

This will never happen again.

There ya go!

Regards

Munch

#31 Nostradamus jr. on 05.05.09 at 9:09 am

If Legacy Caucasian Vancouverites don’t see Vancouver’s future importance, how can Eastern “Centre of the Earth” citizens acknowledge it?

…Vancouver is not a Caucasian city…I am of that minority.

Here are the seven latest North Vancouver, Detached, MLS sales…

MLS # V751102 Ask $798K Sold $775K

MLS # V755358 Ask $1,299K Sold $1,275K

MLS # V762472 Ask $799K Sold $750K

MLS # V755347 Ask $899K Sold $915K

MLS # V754908 Ask $1,149K Sold $1,050K

MLS # V753494 Ask $1,099K Sold $1,022K

MLS # V761375 Ask $799K Sold $785K

#32 @Garth 2 on 05.05.09 at 9:19 am

Pardon me Garth, but this recent post of yours seems a little like your stitching reality back together to suit.

Housing in Canada has not declined to anywhere near the levels that were seen in the US, even a year back. The banks that have said we would not have a US-style crash have been correct so far… and if equities continue to stabilize (even with profit taking), our banks will definitely be correct.

Meanwhile your comparison of 0/40s to sub-prime and Alt-A products is not being tested; without significant domestic real estate depreciation, there will very little equity shortfalls in owners’ balance sheets.

Anyone that recently invested in a generator, food supplies, bunkers, and squirrel pate will be feeling a little silly right about now; that investment class can’t be doing too well compared to stocks.

While I feel that the policy measures, plunge-protection team manipulation, and clear media control are certainly leading us down the wrong path (i.e. continued GDP dominance by finance), I fail to see any secular movement taking a firm hold of people. I would *love* to be wrong here, but I fear the worst.

For you to be right Garth, we need a massive downturn in stocks, a retest of a 6500 DOW or similar. Are you forecasting something like this?

Buy a good economics text. You badly need one. — Garth

#33 Nostradamus jr. on 05.05.09 at 9:32 am

Garth, your bunker may not be safe enough, you may need to build a moat and hire guards.

…What the following Headline tells me is that Oshawa’s proposed $3 Billion Bail Out may really be a “Stop Gap” EI/UI payment to tide over Southern Ontario.

>>>US Government Will Lose All $8 Billion It’s Given To Chrysler<<<

http://www.businessinsider.com/us-government-will-lose-all-8-billion-its-given-to-chrysler-2009-5

#34 $fromA$ia on 05.05.09 at 9:41 am

Garth I am divulging this information to you so please comment on it.

I called a mort broker yesterday.

-Zero down and 35 years is still around.
-Was willing to lend me $530,000 for a $70,000 income.
-They said that there are lenders offering mortgages to people who have just recently got a job (less than a month not 3) pay stub and a letter of employement only required from their employer!
-the broker was telling me to buy,buy,buy!
-floating rate 2.75%
-fixed rate 3.75%

So, as you’ve mentioned before assets are worth more than cash. People feel they have to spend! Gold is up too because of the Amerikan $. I am pretty sure the Amerikans are pushing the TSX up while their money is still worth 15% more. It’s not all Canadians here.

What we see here is a Bear Market rally in real estate manipulated by loose lending and cheap money.

This Government, rather than admitting fault for 0/40 is going to inflate it’s way out of this housing crisis.

Please comment.

#35 Boombust on 05.05.09 at 9:46 am

I’m not sure what all the hubbub is about. Sales in Metro Vancouver are -9% From April ’08-’09.

I have seen all kinds of price reductions, particularly in the eastern suburbs like Coquitlam/Port Coquitlam.

I would find it hard to believe that the market has “bottomed” after only one year.

#36 KenCan on 05.05.09 at 10:01 am

Garth, I have been reading your blogs on a daily basis for the past 8 months or so. I have been contemplating buying a house this year and everything seems to point to prices would be lower as we move deeper into the recession. However stupid buyers (they think they are taking adv of low int rates) and greedy RE agents/sellers are driving the housing prices even higher.

Question: where do these ppl get mortgages then? Aren’t lenders concerned about whether the borrowers will be able to pay when int rate increases in the future, given unemployment will increase and salaries wont be hiked?
Arent the government agencies concerned about this becoming the CANADIAN SUB-PRIME Crisis?

When will sense be knocked into them? we are approaching the peak season for house selling and all indicates that prices will go up in the summer!!
so how long do ppl believe the wait will be? end of summer? next winter? next year?

#37 @Garth 2 on 05.05.09 at 10:13 am

Buy a good economics text. You badly need one. — Garth

Well, my question is open to other commenters then…

What is the sustained effect of a stabilized DOW (i.e. above 75800), a bottomed and possibly reinvigorated commodity market, a promised year-long BoC rate holiday, and a subservient FIRE-industry driven popular press machine do for real estate in, let’s say, Toronto?

#38 Calgary_police_state on 05.05.09 at 10:54 am

Garth,

Condo’s here in Calgary still are around $300K. Thats also about what SFH homes cost. Isnt oil supposed to hover endlessly around $50 a barrel for years? So with that in mind there should be a slow decline in housing. However, people are waiting to pounce for deals here. So how much prices will drop is anyone’s guess. It certainly isnt any boom anymore. The Republic of Western Canada dude highlights some points applicable to Calgary, which seems increasingly like New York City. It is very claustrophobic here, and the ecospace wasnt designed for this population, hence the feeling of stagnation.

You mention first time homebuyers. Why with declining prices anyone would want to buy a over $300K SFH and watch their house lose value over the coming years is strange. Better to hold off and rent, dont you think? Im in no hurry to buy what according to market value is a $310K house worth really $180K at best. Look at the stats prior to 2004. They will tell you that Calgary remains in its deluded state and its best not to buy, anything regarding housing. Make the realtors and deluded homeowners sweat as their equity vanishes from the false oil boom.

#39 lgre on 05.05.09 at 11:05 am

“Buy a good economics text. You badly need one. — Garth”

Yeah no doubt..lol

I guess your wannabe counterpart is stil drinking the kool-aid.

#40 Jeff Smith on 05.05.09 at 11:05 am

#24 miketheengineer on 05.05.09 at 7:37 am

Garth:

The “great disaster” is just starting. They just announced job sharing at our company. Everyone who is left will work 3 or 4 days per week….GM and Chrysler are or will shut down for the next 8 weeks….So the supply base will do the same.

This is going to drive the supply base “bankrupt”. Hence the “great disaster” starts. Thousands more will fall behind on payments, and loose their homes, loose thier jobs. Soooo Soup kitchens by xmas, defaults on homes, mass chaos after. Unemployment 20% or above. It is coming, it will come .

********************************************

Oh Cheer up!! Seems like the economy is improving; stock market is going up. With the amount of money they are printing, I don’t see why the economy will not improve. I know we will pay for it in the long run but at least it appears the economy is responding to the stimulus in the short term.

#41 905er & Spouse on 05.05.09 at 11:10 am

Hey Nostradamus jr. (West Vancouver Citizen Jr.),

Are you a RE?

How did you get the last 7 MLS listings otherwise?

No wonder you are trying to lure people to buy in West Vancouver.

You have been making sales pitches on this board for months and have fooled a lot of people.

#42 PTDBD on 05.05.09 at 11:15 am

One interesting equity relationship to chart is the inverse movements of the USA dollar and the S&P.

#43 Just a Carpenter on 05.05.09 at 11:24 am

Some say Oil, some say Gold, the question begs to be asked why not Potash? Six months ago was the time to buy. Gues who has the largest reserves on a much needy commodity. Can’t grow your carrots in oil or gold!

#44 rory on 05.05.09 at 11:26 am

Hi all…

Over at http://www.oftwominds.com/blog.html we have a good article on, again, US RE titled: Homeownership and Wealth Accumulation/Destruction.

“Despite the usual lies and legerdemain of the Federal Reserve, it now seems that home equity of those 50 million households with mortgages (25 million households own their homes free and clear) has shrunk to a decidely non-wealth-building 15%.”

“As to the Fed’s claim that the equity of homeowners as a group stands at 43%, she points out that what the Fed neglects to tell you is that roughly a third of them have their houses free and clear. Lo and behold, some basic arithmetic reveals that 67% of homeowners with mortgages have equity of less than 15%. That, Stephanie comments drily, suggests the “destruction priced into the credit markets hardly seems out of whack with potential reality.”

If home ownership is roughly 66% then this means:
33% rent or live somewhere
22% own homes free and clear
44% have mortgages w/ only 15% equity on average and RE prices continue to fall.

I don’t know what else can be extrapolated from these numbers but it tells me there are huge numbers that have no money (assume most renters have as much savings outside of homes as homeowners).

In other words we have huge potential differences between the haves and have nots (landowners and serfs from the bad old days) (assume 80% of net worth is in property???). Never a good thing…IMO.

Plus all the US banks/gov’ts are on the hook for this …another topic what is better – recourse or non-recourse mortgage loans.

Maybe someone can shed more light as I am starting to ramble.

#45 MikeB on 05.05.09 at 11:37 am

Dead Cat Bounce is putting it mildly….even the most bullish of stock market pundits think this is way too high for way too fast….Expect a minimum 50% retrenchment.
Expect earnings to be flat to negative and that will take the wind out of the sails of this BS market…
Real Estate… when you start to see “offer nights” that’s when I bow out… thank you very much…. As the stock market pros say when everyone is anxious to buy and panicking then it is usually a good time to sell …. Some things are selling but mostly bottom end or entry level and the occasional higher end home but at a steep reduction. The buyers are just not willing to buy at full pop unless they are real schmucks…which alot are seeing as they are playing russian roulette with their finances. A house is a home not really an investment unless you can time it perfectly both in and out… most cannot so they SHOULD buy what they can afford and when they need… Because realtors and professional flippers are in the market, certainly here in Toronto, they know that they can pick up a house and live in it for six months to a year and then sell with a profit that is immediately bankable without capital gains attached.. This is happening all around the world which is why real estate is so high.. Not like populations are getting larger world wide or land is evaporating BUT it is that the pros who make commission or flip stuff see an opportunity to make some fast easy money… and they do…they do…

As for the sub primes not turning out well… certainly not but what about the next wave… is that just going to be brushed aside because of some exuberant buying and trading… The Alt A and Option Arms I am told are much worse and should come on stream by late this year and full swing by next year…. Enjoy your summer because the fall will be bad IMO.

#46 mathew gibson on 05.05.09 at 12:08 pm

#15

That was quite possibly the most rediculous post I have read on this forum/blog in a very long time.

To actually believe that Liberal policy shifted Canadian society to such a degree that frat boys leaving shared accommodation caused the housing boom?

Wow.

It reminds me of a long-ago spurious-science competition from the Omni magazine. The winner was:

“Turkeys cause winter”

I think your entry here tops that.

#47 Aston on 05.05.09 at 12:55 pm

In my incessant house hunting, I’d say that the higher-end properties have come down in price much quicker than the entry-level properties… most likely fueled by first-time buyers who are taking full advantage of cheap credit. I’ve listed a few examples here, although I wish I had some hard data to back up my observations. (I doubt that the VREB will give us more data anytime soon!)

It can only be a matter of time before the price reductions in the high-end market hit the sub-$550,000 market.

#48 smwhite on 05.05.09 at 12:59 pm

#43 Just a Carpenter

Hedge your bets, pick all three, add some base metals and natural gas in there too.

#45 Mike B, what you said… 100% agree. Canada is now officially the last country to the RE dance. And we’re showing up when everyone else is leaving(or gone as is the case in the USA).

If we had have maintained economic policy simalar to the Aussies, we’d not have had to resort to blowing that one last bubble.

#49 smwhite on 05.05.09 at 1:02 pm

#37 @Garth 2

Its called inflation(or people betting on inflation), and if its rearing its ugly head enough right now to “trick” people into thinking its a recovery, then the “hyper” term could start poking up a lot more.

#50 PTDBD on 05.05.09 at 1:13 pm

Dear Mr. Garth Dude, why did you censor my post on the “Grand Unified Theory” which explains all? Please check your bit bucket.

No censor took place. — Garth

#51 ncoffee on 05.05.09 at 1:42 pm

I’m not about to put money into real estate at this point, don’t get me wrong — but things are going a lot better than many/most here predicted. Remember the concept of the “faux spring”? I certainly remember Garth telling me not to even bother trying to sell my house this March, because I’d missed the boat already. It sold in 3 days flat with multiple offers.

On this blog, for more than a year, we’ve all been talking like RE would be dead by now, definitely, for sure … but it’s not. Now we’re talking about five years from now, when people have to renew their mortgages at a higher rate, and how everyone will be screwed THEN.

Come on. I’m gettin’ blue balls from hanging around here, people! … Anyone else feeling this way?

#52 No Fool.... on 05.05.09 at 2:11 pm

I think everyone needs an a degree in ECONOMICS and in Finance to fully understand what’s going on here…..a book just won’t cut it. Luckily, I’m working on both.
Here’s the rub.

The TSX/NYSE WILL lead the the economy out it’s death spiral. Be assured of this.

Job creation/losses are always a laggard. It usually take 8 -16 months. This is well documented.

A end of the fall of US house prices will signal the inflection point of the world’s economy.

Generators and squirrel recipes will not be needed this time….though keep it in your back pocket in case.

#53 dd on 05.05.09 at 2:30 pm

#51 ncoffee

“I’m not about to put money into real estate at this point, don’t get me wrong — but things are going a lot better than many/most here predicted.”

So what has changed? Companies and bank are still up their neck in debt. Can you say delever?

#54 dd on 05.05.09 at 2:33 pm

#43 Just

… why not Potash? …

Why not food? Can farmers get loans for Potash? Potash sales have dropped off a lot this spring. With less fert being applied, crop yield decline, and food costs increase.

#55 dd on 05.05.09 at 2:35 pm

#31 Nostradamus jr.

… Here are the seven latest North Vancouver …

Is this your idea of a long term trend line?

#56 Grumpydawgs on 05.05.09 at 2:35 pm

I got a letter from the bank yesterday advising me that ” costs associated with lending had gone up” and therefore the rate on my credit line increased 1% effective immediatley. I am a AAA client, so I ask myself what happenes to all the marginal players who just got suckered in with a downpayment based on the PCL? Are rates going to stay down for as long as marc Carney suggested? I don’t think so personally. Inflation is raging and the sales job the government is doing to restore ‘optimism an confidence’ will will successful but not in the way most think. This is a wild fire of cash inflation coming over the mountain to a community near you.

I like what Warren Buffett said a long time ago about buying the stocks in companies that make the things that people use everyday. But….Mr.Carney, exactly one year ago a gallon of milk was $2.99, I had to pay $5.10 yesterday at the same store under the very same conditions except that maybe inflation has started to rage out of control and the government will be forced off the razors edge hedge game of selling optimism with one hand and putting out a conflagration with the other. The game has to come to a fiery conclusion as the track is running out of glide space, very soon. Mr. Carney, you can’t have both.

#57 cheap money everywhere: people buying on 05.05.09 at 2:36 pm

With the govt. throwing money around, and dropping rates to almost zero, people are buying stocks & houses, hoping to obtain a better return.

Especially with the coming inflation, and drop of the dollar, they feel they can better protect their money this way.

Addionally, people are buying homes in Toronto, and will continue to do so until next summer, as they hope to
a) buy near/at the bottom, and
b) save the 8% pst

#58 meggie on 05.05.09 at 2:41 pm

ncoffee
I couldn’t agree more. The majority are so “down on almost everything and everyone” it has become depressing to visit this forum. I mentioned how we could try to be more upbeat and encouraging; be part of the solution. Garth ,in his predictable sarcastic manner, replied “sure mom”.

Case in point.

#59 East 905 on 05.05.09 at 2:43 pm

#51 – Hanging out on this blog for the past year has taught me to question info in the MSM, has given me perspective on what’s going on outside of the Centre of the Universe, and given me tips on how & when to bargain for stuff my family needs.

Today I also learned that turkeys cause winter. All my questions are eventually answered by someone on Garth’s blog.

#60 @Garth 2 on 05.05.09 at 3:10 pm

#49 smwhite

Yes, exactly. Inflation. Inflation which penalizes savers, rewards debtors and seems to be the western world’s chosen mechanism used to stabilize real asset prices. The money-printing and additional measures used in the US to shore up not only banks but the credit-positions of mortgagees in dire straits… are in effect a price control. This is a basis argument for stagflation, but in Canada, it appears prices are holding fairly well, barring the occurence of another exogenous shock.

The problem is this: Garth predicted a Canadian real estate crash. It has not happened. The faux spring market is nearly over and its turning out to be healthier than I expected. Most home owners, especially those though bought pre-2007, are perfectly fine with a 5-7% correction; Everyone knew it would happen eventually. However, noone wants to go through a 20% or greater correction. Let alone a prolongued anguish-ridden peak-to-trough 30% decline.

Do we have the ingredients for such a serious erosion of wealth? Perhaps, but should you act decisively? Garth says yes. To date, that hasn’t panned out. Meagre inflation alone will not spur sell-offs. We need disaster, 15% interest rates, a separatist movement, an Asian crisis, or some other force to move us in that direction. What will it be?

To date, I would guess the advice given here has not saved or earned anyone a dime.

#61 David on 05.05.09 at 3:14 pm

The fact that there are millions of people who can not or refuse to understand asset bubbles might be wonderful news for realtors and brokers temporarily given a reprieve by a small wave of new buyers determined to believe otherwise. Postponing the really bad news for more days and enjoying the brief spring rally undoubtedly is the best possible medicine for a very sick patient. Hardly, but false optimism works wonders.

http://www.counterpunch.org/baker05052009.html

#62 gold bugger on 05.05.09 at 3:19 pm

KenCan writes: “…greedy RE agents/sellers are driving the housing prices even higher.”

/clears throat:

It is not “greedy” to earn a living convincing buyers to buy things.

It is not “greedy” to maximize the return on one’s asset(s).

Realtors and sellers do not control prices. BUYERS do.

Maybe you can borrow @Garth2’s economics textbook after he buys/borrows one.

#63 Dave on 05.05.09 at 3:25 pm

I don’t know the statistics on home sales recently, but I do know 80,000 people were laid off last month. That’s much higher than the U.S per capita in their highest month. You must remember, the E.I cheques will run out eventually. Six months from now, those 80,000 won’t be collecting cheques. Where will the money come from? Thousands are laid-off every month. Companies aren’t just going to start hiring in a few months from now.

Things look grim for real estate, regardless what the sales statistics of the last month tell you. All the people that have been laid off the past 8 months, will they have a job a year from now? many many of them wont

#64 Dave on 05.05.09 at 3:28 pm

What? Do you think the market is going back to the days of 2007 anytime soon? For that to happen companies have to take on more debt (they have to lever up a lot more). The profit is not there going forward and companies will not be able to get loans. Watch the markets tumble again when expectations are not met.
———————————————————–

governments have money and printing presses and a lot of what’s happening on the TSX is because of commodity purchases from foreign governments in an effort to build reserves.

#65 Chris in England at the moment on 05.05.09 at 4:04 pm

ncoffee #51: “I certainly remember Garth telling me not to even bother trying to sell my house this March, because I’d missed the boat already. It sold in 3 days flat with multiple offers.”

I don’t pretend to know what is happening in Canada, but I can comment on what is/has been happening here. Last July, after a long wait, I heard our family had been accepted as permanent residents of Canada. We immediately put our house on the market and there it languished until 2 months ago, eventually selling for CAN$90,000 less than it had been valued at 8 months before.

We had a young couple about to buy it in January but the day we were expecting them to make an offer the husband lost his job so they had to pull out. Our prices have been going down for easily as long as the US housing market prices, and although there has recently been a little upturn in sales due to the time of year, it is expected that prices have another 8% to fall. Without obsessively following every twist and turn, it seems this relentless downward trend will have lasted about 3 years by the time this last 8% bites the dust.

By contrast, prices in Canada have only been decreasing since about last October, so we are looking at only 6 months of this so far. No, it’s not exactly the same and can’t be, because Canada’s house price slide started so late in comparison, but I can’t see how Canada can start recovering when we (UK) and also the US continue to slither downwards. It doesn’t make any sense, and I am tempted to agree with those who post about youngsters wanting to get into the housing market and seeing the current price decreases as a good point from which to launch themselves.

I think the eventual results of the “economic downturn” as we politely call it here, will take a good bit longer to reveal themselves, and I also think that the current upturn is mainly due to newer house buyers getting in at a level they think is a good deal (compared to how things have been in the last couple of years).

When we move in a few weeks we will have a nice pile of money but I am not tempted to spend it on a house. I’m going to wait and see what happens. Whatever it turns out to be, house price recovery is not on my guess-list. I want my $90,000 back, and I’m going to get it!

#66 lgre on 05.05.09 at 4:07 pm

ncoffee – the only thing driving the market is the LOW rates, if Carney would of kept the rates steady not even raise them..the market would of been where it was in the winter..down.

I had a friend of mine buy a house in March with his gf, they used a CC for their initial $5k deposit..up to their eyeballs in debt and they still bought…that’s the caliber of people buying..do you think that will end well? I dont

#67 Live Within Your Means on 05.05.09 at 4:15 pm

House linked to arson ID’d
Suspicious blaze spotted inside home as forest fire raged in woods outside
By DAN ARSENAULT Crime Reporter
Tue. May 5 – 5:59 AM

Fire and police vehicles as well as a number of uniformed officers could be seen at 36 Aarons Way in Fergusons Cove last week. Halifax fire officials are investigating the house fire on the outskirts of Halifax as a possible case of arson.(TIM KROCHAK / Staff)

Halifax regional fire services identified a $420,000 home that’s at the centre of an arson investigation from last week’s major fire that started in Spryfield.

“We investigated . . . 36 Aarons Way,” fire service spokesman Dave Meldrum said Monday.

Aaron’s Way is near York Redoubt in Fergusons Cove.

He said the investigation began after firefighters arrived at the house to battle the rapidly growing wildfire.

Firefighters realized there was a fire inside the house and “they saw stuff that made them believe that this was a suspicious fire,” he said.

“It didn’t take the investigator long to confirm that it was, indeed, suspicious.”

The house’s owner is listed as David Glenn Llewellyn and the 2009 taxable assessment is $419,200. Mr. Llewellyn borrowed $426,500 to purchase the house in November 2006.

Is this another example of a 0/40 mtg?

#68 jess on 05.05.09 at 4:33 pm

more mortgage problems

http://www.thenation.com/doc/20090518/wright?rel=hp_currently

#69 MaW on 05.05.09 at 4:57 pm

“Experts urge buying for long haul – Slower price hikes mean profit on resale may take little longer”

http://www.calgaryherald.com/Experts+urge+buying+long+haul/849817/story.html

#70 john m on 05.05.09 at 5:47 pm

Personally i think its a sucker’s rally,how can it be sustainable when the economy behind the scenes is falling apart more so every day.The banks in Canada haven’t yet had to deal with whats coming as more people walk away from their homes.The billions in government bailouts have to be repaid,wages are dropping,jobs are disappearing faster every day.The real estate crash is being escalated daily with easy money.I personally see a hell of a lot more negatives than positives in all aspects–this guy is sitting tight and checking out some good squirrel hunting grounds :-)

#71 Nostradamus jr. on 05.05.09 at 5:51 pm

#50 PTDTB

…Try posting here on “Immigration”, the world’s real problem and see how fast you get “deleted”.

lol

#60 @Garth 2

>>>Do we have the ingredients for such a serious erosion of wealth? Perhaps, but should you act decisively? Garth says yes. To date, that hasn’t panned out.<<<

…Wait till the Great Depression hits Ontario…jmo…can you say Toronto is the next Detroit….the $3 billion bailout, if it pans out…is another term for short term EI/UI.

…The smart money is bailing Ontario and moving west…to…drum roll please…Vancouver/Hongcouver, the next Financial/trade/culture/leisure capital of North America.

…You heard it here first…

#72 Alister on 05.05.09 at 6:39 pm

In Zimbabwe real estate and stock markets went straight up while the economy went straight down. Now those people are starving even with wages in the bilions per month. Iceland is another.

Rising stock prices are just the result of free money that needs to find a home and has absoluely no relationship to the health of the economy. Stock markets are the first to tell you that central bank inflation is working – for now.

#73 JO on 05.05.09 at 6:54 pm

The sentiment being experienced in GTA housing and the markets is remakrably positive, and shows signs of a spectacular bull trap. Make no mistake, this is the final hurrah before the true big one. I have overheard at least 2 people talking up how they bought new homes and were so excited..most of the stock and home buyers over the last 2 months have been amateurs/rookies.

The key market remains the long bond (government bond..TLT is a good proxy). It is flashing huge red signs, regardless of the chance for one last bounce up (lower rates) in the next 2-3 months. The Fed is playing a huge game of chicken with the bond market. It will, without one shred of doubt, end very badly. Look for a major bear market to begin by fall/late 2009 and lasting at least 3-4 years. Imagine: The record level of debt, much of it mortgage debt taken on by the weakest and marginal borrowers, coming due for renewal in 3-5 yrs with 10 yr gov’t bonds at 6-9 % rates, and by the way, add in 1-2 % in default premiums that are coming down the pipe, and witness a massive housing crisis before our eyes. Most are locked into 5 yr anywhere from 5 down to under 4. 2011 onward, renewal comes up and banks say, “sorry !!, if you want us to renew, got to pay 7-9 % and put down 10K cash”…power of sale anyone ?…of course, i do not wish that on anyone. I am sick and tired of seeing the frugal savers being punished with 1 % interest rates and waiting for cheaper prices/cooler heads to prevail, but instead we get a bunch of greedy weak borrowers with 20K using a BS government “insurance” program inflating home prices…this will end very badly folks.

JO

#74 Da HK Kid on 05.05.09 at 7:30 pm

Guys, Stimulus = Inflation and Bernanke is doing just as Greenspan did with the help of little Timothy Geithner.

Their plan is the ONLY one to try and get a foothold on the economy however the risk is very high to the downside short term. They wanted simply to avoid what was done during the Great Depression.

The long term effects however WILL BE REAL AND PAINFUL!

You can try and time these rallies and if you missed the first one come on board for the second.

However, if you buy into the RE market now you will be punished.

You have to remember 1930 and that we are likely in the same downtrend in which the oversupply of stimulus could draw the recovery out for a significantly longer period than 35-40 months.

At least in 1930, the markets dumped, and a reset formed. This approach, as scrutinized by most sane economists shows a terrible ending which is long and stagnant like Japan’s.

I believe, they believe in some type of hybrid solution but it’s so full of holes, it could sink quickly. Good messaging via Obama, good media push and coverage and overwhelming manipulation is something the 1930’s didnt have.

See the comparison with the Great Depression at the link below showing Industrial Production, Global Trade, Stock Markets & National Budgets.

http://www.spiegel.de/international/world/0,1518,grossbild-1507531-621979,00.html

Do the Math!

#75 Claudius Emeperor on 05.05.09 at 7:30 pm

It is the classic sacker’s trap/rally on equity markets, both stocks and real estate. With the expected adjusted Price to Earning ratio the stocks are overvalued at least 50 percents at the moment. Real estate in Canada is overpriced at least that much.
This will result after the crash in equity prices much lower from where they should be.
US recession again will be mild compared to the Canadian one.
TSX will hit 6000 and house prices in Toronto will go bellow 300 k for single family home.

I have a friend – an agent in Boca Raton Florida who sent me recently info on house of sale – 2300 sqf, 2 garage, pool home in nice neighbourhood for 220 k.
Average income – 91 000 USD per household, crime rate – 24 percents of the US national average.

#76 Chris in England at the moment on 05.05.09 at 8:00 pm

So they begin to admit it’s a little more serious – but hey – not as bad as 1921!

A few weeks ago the talk was about the worst recession “since the end of the second world war”, now we rewind back to 1931. Only another 10 years in the wrong direction before the UK has to admit it is totally stuffed.

http://news.bbc.co.uk/1/hi/business/8034879.stm

#77 dd on 05.05.09 at 8:09 pm

#72 Alister

“Rising stock prices are just the result of free money that needs to find a home and has absoluely no relationship to the health of the economy.”

True for the short term but money needs to earn income over the long term.

#78 dd on 05.05.09 at 8:12 pm

#71 Nostradamus jr.

…Try posting here on “Immigration”, the world’s real problem and see how fast you get “deleted”…

Not if you have valid questions and answers that involve facts.

#79 pablo on 05.05.09 at 8:25 pm

Hello Garth

Took this from our government website, news.gc.ca

209 million working capital loan
1 billion interim loan
1.11 billion medium term restructuring loan
1.45 billion debtor-in-possession loan

3.86 billion dollars in total

Chrysler directly employs 10,000 men and women, thats comes out to $386,000 per employee and if you combine the 40,000 they employ indirectly along with the other manufactures it totals $77,200 per person @ 50,000. I would think that money could go a long way in retraining or shoring up existing pension plans which will more than likely be the next money grab. The sad thing about it all is that Flaherty was quoted in the globe and mail as saying he wasn’t confident that it would ever be repaid. Something very wrong with this picture!

#80 Basil Fawlty on 05.05.09 at 8:34 pm

This article inticates strong insider selling in the equity markets.

http://www.businessinsider.com/insider-selling-at-a-furious-pace-2009-5

#81 Glenn on 05.05.09 at 9:16 pm

I would love to know the name of the marketing genius that decided a “welcoming image” is a snarling harpy with an obvious mental disorder or two.

The humor can be found in the fact that most men will see a face very much like that up to and during the all but inevitable divorce proceedings.

Guys, save the condo cash for a trip to Floripa, Brazil ( http://www.nexussurf.com/divas.php ). Odds are in your favor guys, during peak season its 8 sexy young Latina’s for every one Anglo guy. Virtually guaranteed not to see the sour puss that most Western feminists sport 24/7. Word to the wise.

#82 Sean in E-Town on 05.05.09 at 9:21 pm

Just for all of those who see prolonged 70’s style inflation in their future, a little Paul Krugman for you… http://krugman.blogs.nytimes.com/2009/05/04/a-history-lesson-for-alan-meltzer/

This is not Germany’s balance of payments crisis, this is Japan’s zombie debt crisis. Say hello to a lost decade.

#83 Da HK Kid on 05.05.09 at 9:25 pm

Reports are emerging that the majority of the mega banks including jp morgan, goldman, citi and bank america are in need of “substantial” new capital or they will fail, other reports are claiming that the policy of too big to fail will be abandoned, probably because there is no other choice because there is no more cash available and because the situation is deteriorating further

Can the implosion be far off?

#84 KenCan on 05.05.09 at 9:25 pm

#62 gold bugger

so you believe the RE agents and lenders are not greedy
The higher the RE prices remain, the more commission they make
They are fooling buyers to buy at high prices, even when they know those buyers will face difficulties when rates increase
To me, that’s greed!!

#85 Concerned Citizen on 05.05.09 at 10:23 pm

Garth,
Thank you so much for running this blog.
I look forward to reading it everyday.

#73 Jo,
I love reading your comments, you are one of my favorites.

#86 Gord In Vancouver on 05.05.09 at 10:27 pm

More proof that Garth was right.

http://www.vancouversun.com/eBay+close+Burnaby+facility+about+jobs+lost/1566447/story.html

#87 dd on 05.05.09 at 10:30 pm

#83 Da HK Kid

… majority of the mega banks need of “substantial” new capital or they will fail … Can the implosion be far off? …

No implosion. We just went through that. But alot of capital will be needed to pull all out of the fire and a reduction in debt. Banks will have to lend less, companies and people will have to borrow less. The magnified returns of debt will not be there going forward.

#88 Got A Watch on 05.05.09 at 11:04 pm

There is a word to describe anyone who rushes out to buy a house this year: idiot.

There is no cure for this disease, it will be fatal to the wallet in almost all cases.

Yes, if you can buy a wreck like Garth for a fraction of what it should go for, it may be a good deal. But that type of sale is maybe 1% of sales, the rest are paying way, way too much, and their huge error will become apparent in time.

#89 dbg on 05.05.09 at 11:56 pm

This blog should be called “These are all the Daves that I know”.

#90 Glenn on 05.05.09 at 11:58 pm

#82 Sean in E-Town on 05.05.09 at 9:21 pm

This is not Germany’s balance of payments crisis, this is Japan’s zombie debt crisis. Say hello to a lost decade.

DING DING DING!

We have a WINNAR!

Did Japan EVER recover from their last recession?

#91 Bill-Muskoka (NAM) on 05.06.09 at 8:14 am

Garth,

Your next book should be ‘Dumb & Dumber: A Tale of RE Addicts!’

#92 fa on 05.06.09 at 1:23 pm

i was hoping Calgary SFH price will drop by 15% or more. but looks like that is not going to happen in at least next 1-2 years. i have sizeable CAD and USD saving but perhaps should not buy a house now even if i can may be pay off the mortgage in 5 years. just too much interference in the markets. only the insiders can make anything out of it. rest can just guess and pray. even holding the money in money-market/gic does not feel great. being screwed and can not do anything about it.

#93 Alister on 05.06.09 at 6:32 pm

#77 DD

All I was saying is that rising prices are a monetary event, not an economic event.

Because stock prices and real estate are rising, people think the good times are back. That may or may not be the case. In the 70s we had rising prices and high unemployment. I know because I lived thru it. I worked for two companies that went bankrupt and at the end of 1982, I had no pension, no longer holidays, no health plans etc. Back to the starting line after 10-12 years.Chrysler workers know what I’m talking about.

Prices that rise in a poor ecomomy give an illusion of good times, and the illusion can vaporate overnight when the prices bust.

#94 dd on 05.06.09 at 7:58 pm

#93 Alister

… Because stock prices and real estate are rising, people think the good times are back. That may or may not be the case …

Totally agree. If earnings do the follow the stock rise then you could see a PE of 25+ for the market as a whole. Very expensive.

Fundamentally the economy is in the tank and has a couple of years to pull itself up.