The trap

trap1

Sam & Bill & Ivan Update, 7 pm EDT

There are usually two sides to every story. Also, as usual, information is often spun to the benefit of those with the scribe’s ear. There will be more to report on the story of Sam and Bill and their no-money-down real estate woes, but here’s the latest (new visitors might want to start with the post below, “Prey”, to follow the thread).

Xceed Mortgage CEO Ivan Wahl and I had a conversation today. I will relay his main points, in his own words:

“They qualified for this mortgage three years ago, and I certainly do not want anyone led to the conclusion that we lend to people who do not qualify. We don’t.”

“The interest rate we grantd on this loan was about a point and a half higher than the banks at the time the mortgage was made. Considering the circumstances, that is no gouge.”

“We have been in legal action three times with these people over the past three years, for non-payment. We ended up capitalizing the interest on their mortgage because the husband had lost his job. They reneged on their payments and, frankly, they have been a terrible payer. So, of course, why would we renew this mortgage?”

Fair question, I’d say. As the borrower reports, below, Mr. Wahl’s company has given the family a four-month reprieve to try and sell the house and get out from under their financial burden.

There’s a moral or four in here. We’ll get to them soon. — Garth

Sam & Bill Update, 12 pm EDT:

Further to yesterday’s post regarding the Brampton family of six forced into foreclosure on their townhome, even though the mortgage was current: I can now name the company involved – Xceed Mortgage – and report that CEO Ivan Wahl personally contacted Sam and Bill (not their real names, of course), following publication of the blog post and your comments.

Here is Sam’s update: “Garth, update for you on the situation.  Mr. Wahl contacted us from XCeed and apologized for the confusion.  He said he did understand our point that the mortgage company should honour its commitment to people who are not in default.  However, he stated, the sources of funds for these “B”-rated mortgagees was just not currently readily available in the market.  What we did agree on was that Mr. Wahl would extend our mortgage for a period of up to 4 months, to allow us time to list and sell the house.  A compromise solution.  Not great but it does allow each party to walk away unwounded – well, it allows XCeed to win and us to walk away without a bankruptcy.  The Bank will still make a fortune on the house considering that we have been paying $2700.00 a month for three years and when we sell it, we will be about $7K short of what we need to pay them out and pay the real estate agent the commission.  So we lose monetarily, but we don’t lose 7 years of creditworthiness.  Perhaps not the happiest of endings, but a compromise that does allow us to walk away from our mistake without 7 years of bad credit on us from a bankruptcy.  Of course, it’s not going to be easy finding someone to rent to a family of six when my husband is on UI but …”

I would like to thank Ivan Wahl for having considerably more compassion than many of the people who dropped by this site yesterday. May they never need help. — Garth

_ _ _ _

Jeannie Lee, the CBC’s  crack business host balked when I speculated mortgage rates could be 8% within five years. But that level, she said, had not been seen “since the Nineties.” Therefore, how could it be?

I was in the Toronto television studio for a scandalous piece on how this little froth we’re all watching could actually be a classic bear market trap. This happened on a day when the Royal Bank was pushing its latest affordability index, showing what a heady combo slightly lower prices and crashed interest rates could be.

It also took place as the King of Pump, LePage spokesguy Phil Soper, was forecasting a stable 2009 with prices virtually unchanged from 2008 and, of course, the end of the Dark Times. “The plucky Canadian real estate market is stabilizing and a healthy level of activity is forecast,” he said.

It’s truly hard for many people to ignore all of this. The lingering belief/hope that rock bottom mortgage rates will last forever. The Big Bank report suggesting this is a great moment to buy. The media’s slavish reports from a corporate self-promoter that real estate’s back on its starbound trajectory.

How can you blame the smitten, like Lidia  in Edmonton:

Dear Mr Turner, I would like to take this opportunity to thank you for writing and informing average Canadians like me about the realities of our Canadian housing situation. Your blog has educated me and confirmed my biggest concerns about our current economic situation.  I am currently living in Edmonton and due our recent housing pricing stabilizing, I am contemplating the possibility of buying a house with saved money. Many argued that housing price has lowered and that there will be more likely to increase once the economy recovers. Actually, recent mls listing and posting confirmed, sales activities are up in the last 3 months.

I am caught in this dilemma. I would like to be able to own a modest living place without having to pay exorbitant price. I would have loved to wait until the prices have dropped further down to buy but that’s not what’s occuring here in Alberta ( i’ve searched through MLS listing in the last 6 months, and i still cannot find a decent house for less than 250,000!!!). In fact, prices are up driven by what you have confirmed: inexperienced first time buyers. However, i am concerned that if the economy recovers, prices will soar as it has happened in previous years. I would like to be believe that’s unlikely as it happened in 2007. That’s was driven by sheer stupidity.

I notice despite the economic downturn in our province (low energy prices, layoffs, halted energy projects), prices have dropped but not by too much. Would you consider waiting further more? I am not borrowing money from the bank. My husband and i have saved enough money to buy but i am tired of paying rent and move everytime they hike our rental fee. I am confused. Thank you again for your valuable insight.

Well, Lidia, you might have noticed oil prices down to $60 this week, crashing along with gold, base metals and other commodities. The worry is that global economic recovery may be far more elusive than companies like Royal LePage or the big banks have been suggesting.

You might also have heard the Parliamentary Budget Officer predict years and years of federal deficits and hundreds of thousands more layoffs than the government’s planned for. Or maybe the British prime minister’s warning that a second wave of financial crisis is heading for us. Or increased volatility and fear on the equity markets.

In fact, there are precious few good economic indicators right now. No mass rehirings. No surge in car sales. No new oil exploration. No rebound in corporate earnings.

In this sea of swilling uncertainty, it seems the only blind confidence belongs to those willing to jump into a bidding war for a home. And why? Because prices are down a little (LePage says it ended up being a paltry 3%) and interest rates have plopped. Some see it as a temporary aberration. After all, rates have only one direction in which to travel (and mortgages at 8% are moderate by historic standards).

Sadly, others see this as a generational opportunity to snag something which will never again be affordable. I would have some sympathy with this naïve view, if it were not logically impossible.

Lidia, face it: Buy a house if it’s eating you up not to have one. If that’s what you want to spend your savings on, don’t ask me to bless you. Knock yourself out. Just do it.

But if the question’s a financial one, there is only one answer: Don’t. This is a bear trap, decked out in designer colours, bamboo flooring and glass counters. If prices today make you gag, then how do you expect future buyers will be able to pay more? This economy is stuck in the ditch for the next few years, at least, and will be saddled with higher taxes for a generation after that. Family incomes will be lucky to tred water.

Far from being on the cusp of recovery, we have yet to figure out how to rescue the North American economy from drowning in a sea of debt after exporting its manufacturing jobs to China.

Read the previous post and tell me real estate is stable, well regulated and riskless.

Logic says wait. Hormones say buy. Let me know who wins.

94 comments ↓

#1 Jan on 07.08.09 at 10:49 pm

Does anyone have any stats on the number of first time buyers say, in the last five years? Because all these supposed horror stories coming up in the next few years all seem to revolve around naiive young bambies that haven’t a clue about money. Just wonder what percentage of the market are first time buyers.

#2 Nostradamus jr. on 07.08.09 at 11:16 pm

Dear Garth,

…If the world goes broke, how can anyone afford $60 oil, let alone $100 oil?…price goes down.

…Who is Canada going to borrow the $165 Billion from to cover their future deficit?

If Ottawa just prints that money, the loonie will lose value, homes will begin rising/inflating in value…and they become ATM’s again.

#3 Dodged-a-Bullit-in-Alberta on 07.08.09 at 11:45 pm

Greetings: Lidia indicates that they have the funds to buy without borrowing, if I read this correctly. I would say do some careful shopping, find a home you love in the neighborhood you wish and buy it. It will become your “home”, and without a mortage, being able to hunker down in a house not being rented from the bank is great.

#4 905er & Spouse on 07.08.09 at 11:53 pm

Thank-you for saying this Garth.

I am struggling with the same issue as Lidia.

It must be tough saying the same thing every day but people like Lidia and myself need to keep hearing this.

BTW reading Sheeple now. Great book. Really interesting to see what thinks look like from the inside.

#5 OttawaMike on 07.09.09 at 12:04 am

Driving today in my realtor friend’s SUV to his cottage on the Quebec side today to get his air conditioning running properly(Who needs AC at the cottage anyway?), we discussed the recent “record” sales in Ottawa. As former prez of the Ottawa Real estate Board he explained to me how misleading the figures are when using a single month, June 08 to June 09 comparison. If you take a 6,8 or 12 month average sales have dropped significantly. It’s all how you want to spin the numbers.

Off the record this 40 year veteran is quite bearish on real estate and predicts it will take 4 years for the interest rate increase shakeout to occur leading to a boom in POS listings.

The unfortunate couple detailed in GT’s previous post have succumbed to the 2 biggest myths in property:
A)Real estate is always a fine investment
B)Buying is always better than renting, why line the landlord’s pockets?

#6 Industrial Guy on 07.09.09 at 12:04 am

Garth,
Love the picture of the bear trap. There’s just one thing missing. Anyone who has been to Sudbury in the Spring knows. There is usually a very pissed off bear in that trap. Unlike our unlucky bruin. When us humans are trapped, we look for a reason and we usually take our frustrations out on election day.

This economy is so uncertain. How could anyone seriously think of making a lifetime commitment to a house and mortgage at this time. Forget about the insane prices and unscrupulous RE agents and foolish attempts by government to put off the inevitable. Who’s job is really safe? Unionized labour? We know thats a joke. Professionals? I wouldn’t want to be a dentist after a third of your patients lost their benefits due to a plant closure. Government?

Public sector workers better be saving for a rainy day. As deficits spiral out of control. Both Federal and Provincial Governments have really two choices. Raise taxes and risk killing any recovery or cut expenses. If we are running 60 billion dollar deficits … cuts will be brutal. No doubt the collapse of the manufacturing sector has had an enormous effect on revenues. Since manufacturing is a big generator of GST revenues, we can safely assume the losses are significant.

Since Canada’s private sector is so intertwined with government spending any National Austerity Program will no doubt push many remaining mortally wounded companies in the manufacturing sector and the increasingly battered service sector agencies over the edge. Bankruptcies were up by 31% in may. Are triple digit numbers on the way?

Let’s all hope British Prime Minister Gordon Brown’s predicted future echo of the first downturn is short lived and nowhere as deep as the first. A second downturn after a brief recovery has happened before so nothing is new here. Whats troubling here is … where is the brief recovery? We’re heading from one recession into a deeper recession. 100,000 more unemployed.

So you want to jump into this government manipulated market and buy a house? If the answer isn’t obvious to you. Maybe you shouldn’t be permitted to handle large sums of money.

Garth, if your predictions of rising interest rates and inflation may have us visit one of the more difficult times in our recent history.. Let’s look back in the history books to 1975. I don’t think any of us want to relive the “Stagflation” era of the late 70’s and early 80’s with its high 10% inflation rate and 11.9% unemployment rate. For the youngsters out there who missed all this fun. Imagine major strikes every week, taxes shooting up into the stratosphere ……ah, those were the days.

Well there is some good news. Thanks to the Drug Prices Review Board antidepressants are cheap in Canada.

#7 Joseph on 07.09.09 at 12:14 am

Based on your last blog in which the family of four in Toronto is facing foreclosure due in part to Hallmark cards (of all companies) moving their operations to China, and your statement in this latest blog that this foreign outsourcing of our manufacturing base is ultimately the primary cause of a lack of revenue for the US and Canadian governments, it is a wonder to me why the US and Canada do not cease trading with and pull out of China to stave off economic collapse. The USA and Canada are committing national economic suicide by adhering to these “free trade” agreements we have signed onto with international parties. We are doing nothing about this predicament because we are fearful that preserving or restoring our manufactuing base would be considered “protectionist”. The Chinese fail to allow their currency to appreciate to protect their own economic interests and keep trade “fair” internationally, but we think we owe them an apology for defending our own economic interests. What do the Chinese do with our dollars? Do they give them back to us by creating jobs for Canada and the US? No, they take our glut of dollars we have transferred to them and invest it their OWN economy. Where are the patriots in corporate North America who choose to keep the jobs here and choose to lose a few dollars in profit rather than outsource precious jobs elsewhere? Putting a profit ahead of the national interest of keeping jobs in Canada & the USA should be unconscienable in the minds of corporate North America! I can not believe what we are doing to ourselves here in Canada and the US. A willing transfer of wealth of historic proportions! Pure madness! We need to make a decision to revert back to a pre-1993 economic model where we had a greater closed economy where trading with Asia was kept to a minimum. We are bleeding profusely …

#8 Small Business on 07.09.09 at 12:45 am

I am in the same position as Lidia, in our lovable blue collar Edmonton housing market.

I take the stance that the market essentially saw a 100 percent increase in price over the course of 2 years —- this is not sustainable.

If the Edmonton market can increase by 100 percent in 2 years —- it can and possibly will crash by a large percentile in the future.

And if it happens to maintain the current price for the next 5 years you can walk in with a juicer downpayment should you decided to buy at that time.

But … Do me a favor and don’t buy… I want a reasonably priced house — sometime this century.

#9 Nostradamus Le Mad Vlad on 07.09.09 at 1:03 am

“. . . rock bottom mortgage rates will last forever. . . ” — Nothing lasts forever, which leads to . . .

“. . . if the economy recovers, prices will soar . . .” — IF? If a home is within a realistic price range — 25% down — and as long as there are two incomes coming to more than cover outgoing expenses, then yes (no granite, countertops, though).

But with manufacturers cutting jobs and sending work to cheap offshore plants, then the ripple effect on other suppliers having their business dry up, now is when one should loading up on savings.

In Garth’s words, “. . . This is a bear trap, decked out in designer colours, bamboo flooring . . . saddled with higher taxes for a generation after that.”

That is one of the key points. With politicians of all stripes spending to save their jobs (and pensions), who is going to have to pay it back? Us, and unfortunately it is becoming way too expensive to even think about having families.

Accordingly, taxes of all kinds will substantially increase, including property taxes.
——
So GS and JPM are doing precisely what Gordon Brown called a ‘second recession’. When will politicians learn to call a spade a spade? We’re not sheeple — we can handle it — it’s a triangular-hexagonical depre-recession!

Don’t forget that GS have engineered almost every major economic downturn prior to the Crash of ’29, and have profited the most from those crashes. — http://tinyurl.com/lgv44l
——
An interesting look at what has happened to Detroit. — http://www.conspiracyplanet.com/
——
Re: the increasing right-wing attacks (these ones verbal) in the m$m. — http://tinyurl.com/kqht8t
——
In case you forgot, the pole shift has begun! — http://tinyurl.com/mxb72n

#10 Steve on 07.09.09 at 1:40 am

It’s not that you, Lidia are unable to afford it, but it’s everyone else out there who wasn’t as prudent as you, who will make getting out of that home you buy all the more difficult, should you try to sell it sometime in the future.

#11 Republic_of_Western_Canada on 07.09.09 at 1:43 am

I hear mobile homes are pretty nice nowadays.
http://www.manufacturedhomesofalberta.ca/paths/Manufactured%20Homes_JPG.htm
http://www.manufacturedhomesofalberta.ca/paths/Living%20Room_JPG.htm

Put down cash on a trim unit, and you can sidestep both insane stick house pricing and imminent interest rate increases.

#12 Mike (Authentic) on 07.09.09 at 3:37 am

Is your house value down 25% and you want to re-new? No problem here in the UK!! (Crazy).

Nationwide offers 125% ‘niche’ mortgage for homeowners trapped in negative equity
By Daily Mail Reporter

Britain’s biggest building society has launched a 125 per cent mortgage aimed at customers in negative equity who want to move hopuse.

Nationwide said the ‘very niche’ product is being offered only to the firm’s existing mortgage holders.

Its availability comes despite the much tighter lending criteria introduced by virtually all lenders in the wake of the credit crunch.

Nationwide said that its existing customers in negative equity would be offered its 95 per cent loan-to-value deals, with rates of 6.73 per cent fixed for three years or 7.48 per cent fixed for five years.

The interest rates for the additional borrowing, up to another 30 per cent – rise to 7.23 per cent and 7.98 per cent respectively.

A Nationwide spokeswoman said the new deal had been available since early June.

She told The Guardian: ‘It is a very niche offer. All we are doing is allowing them to carry across the negative equity they already have.

‘It’s not about additional borrowing or additional risk. The maximum borrowing we would consider is 125 per cent overall, but that doesn’t mean someone can automatically get that.

‘We would go through our normal procedures, looking at income, outgoings and so on.’

Mortgages worth up to 125 per cent of house values were offered by doomed lender Northern Rock before it was rescued by the Bank of England in 2007.

Ray Boulger at mortgage broker John Charcol described Nationwide’s new product as a ‘really consumer-friendly move’, adding: ‘There are at least two other major lenders actively looking at introducing something similar for existing customers.’

The latest house price survey from Halifax yesterday showed they resumed their downward trend during June – dropping by 0.5 per cent.

The fall, which followed a 2.6 per cent rise in May, left the average UK home costing £157,713, in line with prices during the second quarter of 2004, Britain’s biggest mortgage lender said.

But the group said there are signs that the rate at which house prices are falling is easing.

#13 David Bakody on 07.09.09 at 5:53 am

Lidia, face it: Buy a house if it’s eating you up not to have one. If that’s what you want to spend your savings on, don’t ask me to bless you. Knock yourself out. Just do it.

Ditto from me Linda ….. Put the Coffee on … But choose wisely, perhaps a home that you can live in for many years making modest renovations ( new windows, doors, flooring and opening up the kitchen) enjoy each but do not go hog while ….. yearly projects …. close to bus routes and schools. Then save wisely ensure your mortgage falls into the good old 40% rule (TDA) …. enjoy life and do not, repeat, do not fall into the bigger is better rule ….. the new rule is: less is more …… spend money on winter trips south while your friends are staying home dreading and speculating while y’all kick back with a “Singapore Sling” knowing our home is almost paid for and we care not about interest rates and if worst comes to worst we will sell for what market bears and remember the fun we had having a home to come home to.

Off to Tim’s and then to my daughter small home to scoop the grass as she and my granddaughter have continued on to Venice and Rome having done just what I have told you what to do. She saved air miles and took every tax advantage to get a good refund to help pay for it so she will have very little debt on return.

#14 Bottoms_Up on 07.09.09 at 6:35 am

#1 Jan on 07.08.09 at 10:49 pm
——————————————-
I read somewhere (sorry, can’t find the link) that only 40% of residential real estate sales in Canada were to people buying a HOME. The other 60% were investors/speculators/flippers. The real estate market will wake up dreary-eyed once investors get out of the game and the average family realizes they cannot buy the average home….

ps. “The King of Pump” also likes to feed on children…FTHBs

#15 Adam on 07.09.09 at 7:41 am

amazing that you can look across the boarder and see the future and very few ‘get it’… An interesting ‘hedge’ for a house buyer might be shorting the Canadian banks- when mortgage rates rise and folks finally figure out that you can’t sustain a million dollar mortgage working at Tim’s it’ll be the Canadian banks on the other side of that default…. and here’s another 8% rise in Canadian housing starts… nice one.

#16 ally ally oxycontin free on 07.09.09 at 7:45 am

You can ‘make light’ of the uncertainties in the RE market, but they wreak total havoc among communities where ‘micro funds’ are in play. Some of these poor folks are destined to be forever captive to the corporate company store.

Real Estate Bubble Bursts in African Village 7/8/2009
A remote rural village in the mountains of Guinea doesn’t have running water or electric lights, but it has one up-to-date feature: a housing bust. Robert Guy Matthews reports.

http://online.wsj.com/video/real-estate-bubble-bursts-in-african-village/1C61B749-CEDB-476E-B96C-A3EC11C65D32.html

#17 cheapos on 07.09.09 at 7:46 am

another stimulus package is needed to help the global economy. 1.5T is not enough, 1.5 sound too small we’ll make it 3; 3 sound like a reasonable number. What is T stand for again aahhhhhh who cares nobody pay attention anyway. 3 sound cheap.

#18 Signal Loss on 07.09.09 at 8:50 am

Oil isn’t going to stay down below $100, though, surely. With the US and China aggressively buying oil to top up their strategic reserves, nobody investing in new capacity, and the ongoing expansion of the middle class in India and China (sort of – current and future social unrest notwithstanding), oil will stay high won’t it? And if it does, doesn’t that mean that the market our correspondent is living in will remain robust?

#19 Rick on 07.09.09 at 8:53 am

Wow a single kid bought 539k home?

http://www.yourhome.ca/homes/article/663211#comments

#20 wakeup & smell the coffee on 07.09.09 at 9:07 am

to Meggie:

“my husband is a municipal civil servant and he could have taken TWO-THREE times his salary in the private sector”

Thank you for bringing this up. This argument used by public employees is one of the smoke screens.

Public employees’ golden pensions cost tax payers 37% of their wages every year.

http://bnac.org/

See publication: BN49 The need for transparency in public sector pensions

#21 lgre on 07.09.09 at 9:13 am

Garth, I dont get why you get emails asking if they should buy..if they read your blog they know the answer..man, I’m not surprised that the market is up..look who’s buying.

#22 calgaryrenter on 07.09.09 at 9:16 am

There is more of this to come….

http://www.calgaryherald.com/Business/sues+former+Calgary+area+employee+inflating+real+estate+values/1773990/story.html

#23 dd on 07.09.09 at 9:23 am

#2 Nostradamus jr.

…If the world goes broke, how can anyone afford $60 oil, let alone $100 oil?…price goes down…

The worlds not going broke. And people will pay that price for oil if they want to eat. Food, transportation, if fact all life as we know it runs on oil. This is the one commodity we cannot do without.

#24 smw on 07.09.09 at 9:30 am

#19 Rick

That link, silliest rationalization I’ve seen in my life, just how much of that 500K is being paid off with a 1500 a month mortgage? Oh, thats right none, cause its a 35 year term.

Tarabay said his pre-approved five-year mortgage rate of 3.7 per cent means his monthly payments would be around $1,500, which is manageable for him.

He estimates that the same home would have cost more than $400 extra in monthly payments a year earlier, when five-year rates were at 5.7 per cent.

So homes were unaffordable with rates at LAST YEARS historical lows, and with the downward pressure on home prices?

Nobody understands principal, the rate number is the shiny, glossy hypnotizing thing it seems.

You could get a 10% a year return when the cost of a home was 200K even to 300K, but expecting 10% on 400K+ homes, well, with salaries projected to only gain a modest 1% – 3%, makes you wonder who the future buyers are if they don’t keep rates at 0.25%, forever?

Debt slaves, to the front of the line.

Rick, as your frustration showed yesterday, better be ready for the increase in the tax base to cover CMHC’s loses.

#25 PTDBD on 07.09.09 at 9:38 am

Exit strategy for stimulus packages – let’s have another stimulus!

Canadians loan $10 Billion to IMF. Is this another bailout? Is this a stimulus – didn’t Harper say “no” to more stimulus? Who is the IMF? What do they do? Who runs it? What guarantee do we have of getting our money back? Was this in the election platform? Is it in the Budget? Where does the money come from?

Once the IMF loans money to a struggling economy, what kind of control can it exercise on it?

This didn’t get any comments yesterday – it can’t be important in a discussion about our mortgages and home ownership.

#26 Toronto C9 Renter on 07.09.09 at 9:53 am

to #19 Rick….

Agree that Star article on the kid buying the 539k home is pretty silly. (By the way I assume he had a decent down payment to get the monthly payments at that level.)

In any case, you never know what his strategy is. If, for the next couple of years, he plans to invite a couple of friends/roomates — paying lets say 700/month cash — might work out quite well.

#27 Herb on 07.09.09 at 10:04 am

Joseph @ #7,

China did not pull itself out of “Communism” by its own bootstraps. Western governments and corporations sank an awful lot of money and know-how into branch plants and joint ventures to profit from lower production costs. And their share of the profits continue to flow into Western corporate and private accounts.

Don’t expect Chinese exports to be impeded by the West. As long as profits from Chinese sources flow into Western accounts, the effect on Western economies simply doesn’t matter. Only the personal bottom line does for corporate owners and shareholders.

It’s turning into a cartel to boot. Try to buy something not made in China these days. It’s like trying to buy gasoline from another source than oil companies.

#28 wakeup ...... on 07.09.09 at 10:14 am

To Joseph, comment no. 7.

This “transfer of wealth of historic proportions (to China)! Pure madness! ”

Consider my little story. A few years ago, I was defrauded in a contract. They looked so incompetent, I was secretly laughing at them.

Guess what, it went to court and they won. They had been laughing at me all the way to the bank.

The morale of this story could be never laugh at an incompetent person.

#29 Soper Eats Babies on 07.09.09 at 10:16 am

28-year old first-time “homebuyer” Johnny doing his bit to inflate bubblicious GTA market with a Garage Mahal of his own:

http://www.yourhome.ca/homes/article/663211

If feel for this kid, I really do…

#30 Bailing in B.C. on 07.09.09 at 10:40 am

Toronto C9 Renter Rick smw

If I’m not mistaken Johnny must have had roughly $175,000 deposit to get his payments down to $1500 per month. That’s a lot of money for a 28 year old to put together. Perhaps he is a wunderkind or perhaps his parents gave him a sh#t load of money to get out of their basement.

#31 VOODOO on 07.09.09 at 10:45 am

28-year old first-time “homebuyer” Johnny doing his bit to inflate bubblicious GTA market with a Garage Mahal of his own:

http://www.yourhome.ca/homes/article/663211

If feel for this kid, I really do…
———————————————————-
He lives at home, owns a business and is a jewelery designer….not your typical FTHB and likely has hundreds of thousands saved for a downpayment. Nice how the article choses someone like this to feature as a FTHB, rather than a struggling family with 3 children…

#32 timbo on 07.09.09 at 10:52 am

#2 Nostradamus jr.

“If Ottawa just prints that money, the loonie will lose value, homes will begin rising/inflating in value…and they become ATM’s again.”

True to a point except homes will drop in price and start massive defaults. Home prices do not rise with higher rates. Higher rates that some are crying for bring on a contraction in the economy when debt is used to spur on purchasing.

When we finally realize that outsourcing off-shore is taking more and more purchasing power away then and only then can we break the cycle. You build it here and buy it here and the money stay’s in the system. Incomes have remained flat since we started the offshore Walmart economy and debt has become more and more part of trying to keep the illusion alive. This is coming to an end and with political strength we can turn this around.

#33 VOODOO on 07.09.09 at 10:55 am

More spin (from Ottawa):

CMHC press release (note the headline):

“Ottawa single detached starts increase 6% in June”

Data contained within the release:

1) total starts down 8.4% (year over year)
2) year-to-date starts down 33.4%!! (3230 units vs. 2150)

This spin is ABSOLUTELY SICKENING!!!!

#34 VgnBkr on 07.09.09 at 11:08 am

to Meggie:

“my husband is a municipal civil servant and he could have taken TWO-THREE times his salary in the private sector”

Perhaps, but he would have actually had to do some work. If he could have gotten TWO-THREE times the salary in the private sector to sit on his ass all day, work 10-4, take 2 hour lunches, and retire at 50 with a $60k/yr pension, he would have taken that job.

#35 if you don't like it on 07.09.09 at 11:14 am

Nothing but party poopers on here now, just keep harping the same stuff.

#36 dg on 07.09.09 at 11:29 am

It’s oil that caused the overall economic meltdown. It became to costly causing the whole economic system to seize up and shudder.
Once we stabilize this yo yo ride and diversify away from just using oil…….the bankers will be back to business creating new financial tools that we will play with until they breakdown from over speculation. It’s the cycle of development.
Have you got your all day ride pass kiddies?

#37 PTDBD on 07.09.09 at 11:41 am

A solution for economic servitude to the Fed?
http://www.webofdebt.com/articles/california_dreamin.php

Garth – any comments on this approach? I realize your time is limited.

#38 Real Estate Deal or No Deal on 07.09.09 at 11:43 am

Hey Garth,

Your last statement sums up what I was going to say about your recent thought about going back into politics.

You are a much greater Canadian serving those that want to hear what you have to say than being muzzled by politics.

Sort of like trying to kiss a girl that is leaning away from you. It can’t be done successfully.

I tried it in grade 6, in a tree.

It ended very badly.

#39 timbo on 07.09.09 at 11:52 am

here is a hard luck story that will bring tears to your eyes.

http://lansner.freedomblogging.com/2009/06/11/real-housewife-saves-coto-home-from-foreclosure/25593/

“Thanks for all your letters of concerns and offers of financial aid, I am really touched. I probably will sell the house — 8,500 feet with a guest house on a 1.2 acre lot with 6 garages is more than Colton and I need. My $6.5 million house is now worth $5 million, but the next house I buy will be cheaper, too.”

poor girl..

#40 malbadon on 07.09.09 at 11:54 am

Bailing in B.C. on 07.09.09 at 10:40 am
If I’m not mistaken Johnny must have had roughly $175,000 deposit to get his payments down to $1500 per month.
============

You aren’t. I am unable to come up with any form of a mortgage at 3.7% that allows a 1500 payment on 539000. Its absolute fabrication.

Even a 40 year amortize can only get your 1500/month @3.7% if you only borrow 380k, 35yr can only be 355k.

There is 184,000 is unaccounted for money coming from somewhere that this article conveniently omits in its effort to pump the “affordability” of homes to buyers.

#41 Mrs Loquacious on 07.09.09 at 12:00 pm

#29 –

28-year old first-time “homebuyer” Johnny doing his bit to inflate bubblicious GTA market with a Garage Mahal of his own:

http://www.yourhome.ca/homes/article/663211

If feel for this kid, I really do…

——–
Don’t feel sorry for him; he just scored some free advertising! I wonder if he’ll be able to manage the mortgage payments if/when they go up to $3000/month?

If not, I suppose his parents might be willing to take him back with open arms. Maybe.

#42 BOOM on 07.09.09 at 12:35 pm

Sure, Eduardo… I believe three and a half months ago you were predicting 6-7 gas for the summer.

http://www.greaterfool.ca/2009/03/22/underground-in-edmonton/#comment-23363

http://www.greaterfool.ca/2009/03/22/underground-in-edmonton/#comment-23364

Of course, since you’re such a genius when it comes to natty, we’ll be seeing you at the NGX Stampede party tonight, right? Unlikely.

#43 rory on 07.09.09 at 12:38 pm

#32 timbo you said: “This is coming to an end and with political strength we can turn this around.”

Globalization, as we know it, will come to an end when it is too expensive to maintain it …our standard of living has to come down as we cannot live in isolation.

It is impossible here in Canada to only consume what we produce, and keep our std of living, so that means we need to go outside our borders to buy and we need to sell stuff to others to get money to buy.

For example, who will buy our $30k autos when you can get them elsewhere for 1/2 the price …when our autos come down to $22K and theirs goes up to $22K then things will start to get better…but still a lower standard then now.

Canada, and the rest of the so called developed world cannot live in a bubble different from the rest of the world as we all knows what happens to bubbles ….kaboom! Our standard of living is going down and nothing can stop it, and that includes politicians most of all – political will or not…IMHO.

PS – let us close our borders, employ more gov’t workers to get everyone working, subsidize all kinds of internal industries, and sell in a closed loop …me thinks they called that communism and the people were well – not really well off unless you were a politician…let that political will loose – NOT…again IMHO.

PS2 – hey in a closed loop we can keep RE really high so everyone wins …just mandate prices rise 3% per year for ever …wow …utopia…another not.

PS3 – a lower std of living does not imply that we will be poverty stricken. It, IMO, will mean a lot less disposable income and maybe a stay at home parent as not enough jobs to employ 2 per family.

#44 BigAl (Original) on 07.09.09 at 12:42 pm

#7 Joseph
As much as economists want their field to be considered a hard, pure science, it is not. Go to any university and the economics department will mostly be under the Social Science faculty (in some schools, under the Business school). There is a good reason for this. It’s not an exact science, hence the ever-present predication of ceteris paribus.

500 years ago we all bowed down to the religion leaders on the pulpits, hung on their speeches, dictates, and directions for life. We are still that flock always following the leader. We still have the pulpit, but we’ve just replaced the religious preacher with economists and MBA’s and the talking heads on the business news shows. We look to them now to confirm and expound on our consumptive way of life, to forgive us our fiscal trespasses. Now, instead of angels on our shoulders noting our good deeds and bad, we have equifax and trans-union doing it. Our guideposts have changed. We don’t have a spiritual deity, we have financial gurus. Economics has not replaced religion, it IS our religion now.

And I call it a religion because it is just as subjective as the old religion was, just as fallible and subject to error, and able to cause unnecessary suffering. It is also filled with billions of sheeple, and zealots and dangerous belief-sects.

Free Trade is one of those dangerous sects. Believers are vehement in their belief in this theory, they are just like religious zealots. Arguments against free trade are treated just like heresy.

Free trade, the ideas behind it, its stated goals, only work on paper – utopian paper. This land of milk and honey of free trade has been CLEARLY disproven now in practice. The defenders of it say wait and we will see the rewards later. I say when? 20 years? 50 years? 1000 years?

#45 squidly77 on 07.09.09 at 12:44 pm

Once again Garth has attacked an innocent person who has come to ask him a reasonable question. Check out the post here june 27-09
http://www.gregwilliamson.ca/

hes taking another run at ya..
third post down

#46 rory on 07.09.09 at 12:50 pm

To meggie on gov’t pensions:

We, or at least the 4 that have posted yesterday and today, that keep commenting on public service pensions much to your displeasure are waiting for your rebuttal.

You have been given links to read and comments to address …please prove us wrong…emotional heart breaking stories about having to wait until 57 to retire are not allowed …facts please.

#47 dd on 07.09.09 at 1:12 pm

#36 dg
…It’s oil that caused the overall economic meltdown….

High oil prices didn’t help, however, it is years of over spending that caused the economic meltdown. High oil prices just brought the western world to its knees sooner. We are levered to the hilt and nothing will turn this economy long term around until live within our means.

#48 ncoffee on 07.09.09 at 1:15 pm

Re: #45 squidly77

Here we go again … Whee!

Actually, despite Greg’s obvious want to milk himself some of Garth’s special juice, he seems like he’s being pretty genuine to me. I don’t agree with him ultimately, but he’s at least trying to be reasonable and defending his side of the debate in a generally up-front manner. More respectable than a lot of the trash talking that goes on in the comments here.

… But, as I’ve said before, there’s more entertainment to be had here by a long shot; GF is my favorite soap opera of 2009 easily.

#49 dd on 07.09.09 at 1:19 pm

#18 Signal Loss

…Oil isn’t going to stay down below $100…

For the short term I think it will however longer term I really believe the sky is the limit. Of course when energy shoots up again the world economy will slide into recession again. Then demand will back off, oil will fall somewhat. And repeat.

#50 dd on 07.09.09 at 1:21 pm

#25 PTDBD

…Canadians loan $10 Billion to IMF. Is this another bailout? Is this a stimulus – didn’t Harper say “no” to more stimulus?…

Ya. And he said that we would have a balanced budget to.

#51 diabolo on 07.09.09 at 1:23 pm

http://www.yourhome.ca/homes/article/663211

Who moves to a half a million dollar home (inflated)
directly from parents basement ??
This guy couldn’t even afford a rental shack before this…
This article is absolute crap…

#52 dd on 07.09.09 at 1:30 pm

#22 calgaryrenter

So the bank is going to sue a mortgage specialist that approached people to allegedly buy real estate at prices that had been intentionally inflated over market value in exchange for fees between $20,000 to $70,000.

The court should laugh at this one. Shouldn’t they have had there own appraisals done before mortgage sign-off?

#53 Just a Girl on 07.09.09 at 1:32 pm

#44 Big Al: “As much as economists want their field to be considered a hard, pure science, it is not. Go to any university and the economics department will mostly be under the Social Science faculty (in some schools, under the Business school). There is a good reason for this. It’s not an exact science, hence the ever-present predication of ceteris paribus.”

Maybe it’s a better fit under the Fine Arts faculty ;)

#54 joel brico on 07.09.09 at 1:37 pm

re: Ivan Wahl’s so called “compassion”

few thoughts:

1) people don’t read – they just saw the ALT B and made their conclusions. We are quick to judge with out all the facts – I know I am guilty
2) I think the bank “Exceed” saw a chance to take this loan off the books and this super low interest rate would bring a very very short sale if any
3) Lack of Alt B credit I assume is true: the “mother ship” of capital – most likely one of the big banks has issued new guidelines for lending – get the risky loans off the books and do not renew and resell the RE in this current market.
4) I will go out on a limb and say the “lenders” are using a computer programs to find a certain customer profile: (risky loans in a RE profile that can sell now to non ALB borrowers in this low interest rate environment) The goal is to inprove the Banks’s balance sheet.
5) real unfair to SAM and Bill – since these ALT B lenders promoted these mortgages as a way to “Rebuild” credit.
They made all their payments like they promised.

Personal note:

I hope Bill and Sam can get out and move on without personal and financial damage. It also gives the opportunity to re-evaluate their situation and priorities that they value. MY renting in the over priced Calgary market gives us extra cash to:
1) Max out the Kids RESPs – Bill and SAM have 4 kids – they will need an education – We have a fully funded RESP program for our two kids.
2) Max out our RRSPs and TFSA – We will need cash flow to live in the future
3) Have a 6 month of living expenses saved up now
4) Limit the taxes we pay (property, CMHC, etc.) and take advantage of the tax breaks (RESP, RRSP, TFSA)

When we feel we are missing out and get the feeling we are getting ripped off paying the landlord’s mortgage. I go back to the numbers and figure our rent is equal to 9 days mortgage interest on the house we rent based on the best 5 year rate and the current value of the house and 25% of our hard earned money as a down payment. Not even factoring property taxes, insurance etc.

#55 MenWithHats on 07.09.09 at 1:45 pm

Garth :
Simple solution to continually having to say the same thing over and over .
112 point, bold face, headline that reads DON’T BUY RE .
Kevin Page is saying our structural deficit will reach 170,billion in no time flat .
Harpo and the leprechaun swear they will not cut spending or raise income taxes .
Wonder what magic formula they will use to pull this
off .
This scenario is impossible on this planet .

#56 Just a Girl on 07.09.09 at 2:03 pm

#36 dg on oil and the economic meltdown.

You know, if we made one huge world map, with layers and layers of transportation lines …. flights, and ground routes, and sea routes, and other forms of movement, requiring energy consumption, moving goods and people, and products and services … all the actions that are part of our world ‘economy’ …. the map would be obliterated black. This is globalization.

We have a global world because we move stuff from A to B with cheap energy.

What happens when the supply of energy is uncertain, or the cost of energy soars … well the low hanging fruit is almost gone, and we all know how a yo-yo works.

That’s my take on things. The world economy is going to be volatile for quite some time.

#57 dave99 on 07.09.09 at 2:06 pm

Regarding our friend Johnny…

$539k house, 10% deposit, 3.7% interest =$1496 interest payments monthly.

I realize that doesn’t include principle, CMHC premium, utilities & taxes.

However we’re dealing with a newspaper article and not a contract. I’m guessing the writer simply mistyped/mistranscribed what Johnny had said.

#58 905er & Spouse on 07.09.09 at 2:07 pm

Garth,
A little off-topic… Thanks for the eye-opening read of ‘Sheeple’. It really confirmed my worst suspicions of the state of Canadian politics and especially the truth about Harper and his cronies. I really hope it can enlighten the public as to his cunning, power-tripping nature and deceptiveness.

I got called to do a Federal Harris-Decima Poll the other week. They asked a lot of questions about climate change. One question asked if Canada was doing enough in this area. I answered “no”. It was interesting because then the interviewer went on to explain what has been done in the Alberta tarsands to reduce emissions. Then the interviewer asked me questions about my opinion of the tarsands.

One was not an actual question but rather a statement, “The Alberta tarsands need to clean up their act” I was actually tempted to respond that I disagreed after being “educated”. Also the statement is designed to provoke a gut reaction of the opposite stance- basic psychology. I felt funny like I was being manipulated by the questions. I think I can see the greater picture now. Rig the questions for a certain response to justify your actions. Cynical, yes, but probably true.

#59 timbo on 07.09.09 at 2:08 pm

#43 rory,

Ok, so your solution is to keep trade free to imports that support vastly lower wages forcing down your own standard of living to compete.

With this in mind as a model it forces other emerging markets to compete against each other for the manufacturing end of the system which drives prices lower. Hence now with manufacturing at penny prices a devaluation of currencies is the only thing that can still drive down prices on the manufacturing side.

I do not endorse communism as such was implied or telling the world go to hell. I am stating what has happened period, or did this all happen another way?

You say
“a lower std of living does not imply that we will be poverty stricken. It, IMO, will mean a lot less disposable income and maybe a stay at home parent as not enough jobs to employ 2 per family.”

contradiction?
lower wages force more people to take on more work as long as debt remains the same. lower means less which means shrinkage. Deflation.With the amount of debt in Canada people will not be able to afford to sit at home.

Deflation means more wage is used to pay for essentials..which restricts demand which forces job cuts which force down wages…….repeat.

Without keeping a level playing field you will outsource everything until you have reached a minsky moment.

#60 kitchener1 on 07.09.09 at 2:27 pm

Garth, I know this is not a political blog, however I wanted to comment on Harper’s photo blunder today…

I will give Harper and his conservative crew on thing, they are excellent stragetist’s…

Whats the most effiecent, cost effective way to portray their point that Stephen Harper is a leader and a worthy PM in the face of possbile fall elections?

Have him show up late to a photo shoot at the G8, it will subconsciously show all of the G8 leaders standing around waiting for his holiness Harper. Second time it happened, it gets massive free air time via all Canadian news stations. No other news station in the world cares.

The conservatives are one well oiled political machine.

#61 TrueGritCalgary on 07.09.09 at 2:58 pm

#57 dave99 , I was just about to run the numbers when I saw your post. I am also thinking that he has a interest only mortgage. Pretty dumb if this is the case.

#62 TJ on 07.09.09 at 3:09 pm

Kudos to you, Mr. Turner, for helping Sam and Bill.

In this time of uncertainty, a helping hand from an expert with a heart, is most welcomed.

*Also the mortgage company was very helpful – (** I would be rather sweaty if I got a call from Mr. Turner, but that’s another issue).

I can hear the blogdogs applauding.

This is also a cautionary tale.

#63 JAY on 07.09.09 at 3:31 pm

Can anyone telle me whne the employement numbers come out for June.

#64 smw on 07.09.09 at 3:48 pm

#50 dd

How else are you going to get glowing economic reviews from the IMF?

$

#65 jess on 07.09.09 at 3:48 pm

“The world economy is going to be volatile for quite some time.”

…the plot thickens
Switzerland makes it perfectly clear that Swiss law prohibits UBS from complying with a possible order by the court in Miami to hand over the client information. In addition, on the basis of the Federal Council’s decision of principle, UBS will by no means be in a position to comply with such an order. According to that decision, all the necessary measures should be taken to prevent UBS from handing over the information on the 52,000 account holders demanded in the U.S. civil proceeding.
http://www.ejpd.admin.ch/ejpd/en/home/dokumentation/mi/2009/2009-07-08.html

#66 Harry (not S) on 07.09.09 at 4:53 pm

#44 BigAl (Original) on 07.09.09 at 12:42 pm
Nice post about the economics priesthood and other dangerous sects.

You have an interesting name. It reminded me of a television appearance on the occasion of a youthful birthday back in the early 60s on Big Al’s Ranch Party (http://en.wikipedia.org/wiki/CKCO-TV0).

As a confirmed atheist, I undogmatically welcome free trade. I have lived on the other side of the world, and have seen how hard people there work to get ahead; many North Americans are soft and lazy by comparison. These turbulent times are a wake-up call for the West. We need to tighten our belts and readjust to a much more competitive global economic climate. If we hope to come out of these times in reasonably good shape, we must first demonstrate that we are deserving.

One thing that should be religiously pursued is the protection of Earth’s environment. Environmental stewardship trumps free trade. In our dealings with Asian countries we must demand that environmental considerations take precedence over any short-term economic matters.

#67 TakingResponsibility on 07.09.09 at 4:59 pm

RE: #44 Big Al (Original)

The “Market” as an omniscient and omnipotent God is a fascinating analogy – one that has been explored by both theological and economist scholars. From what I’ve read, historically speaking, markets are nothing new but the elevation of the market to “divine” status is. It does seem more than just a metaphor when it is documented.* Perhaps the religion of the market explains why we (the lambs) are desperately searching for the correct and true prophet (economists?) to explain to us what to do (when and what to buy and sell!), and might also explain how we think of our political power in terms of consumership rather than citizenship.

And perhaps not so incredibly then, economics professor Robert Nelson celebrates the religious aspect of his discipline in his 2001 book “Economics as Religion.” He states that while his colleagues think of themselves as scientists, they really are “more like theologians” which, in his view, makes their role in society very important. “Economic efficiency has been the greatest source of social legitimacy in the US for the past century,” he writes, “and economists have been the priesthood defending this core social value of our era” (2001:xv)

And, for all the goldbug(ers) out there, Mark Taylor of “Confidence Games: Money and Markets in a World without Redemption” argues that Nixon’s 1971 decision to take the USD off the gold standard “was the economic equivalent of the death of God” but that “God did not simply disappear but was reborn as the Market.” (2004:6)

Unfortunately, Garth Turner, as someone who fails to go along with and even questions ‘official prophecy,’ risks being labeled a “heretic” and “a false prophet” – and anyone who to listens to ‘the heretic’ are labeled ‘Followers’ – particularly from The Market’s missionaries (realtors? advertisers?).

In any case, I wonder if that is why we (the virtuous consumers, of course) feel comfortable judging the virtuosity of other consumers (as good or bad) and feel entirely UNcomfortable in questioning The Divine Market and it’s Institutions … nor should we mere consumers ever think of regulating The Market or it’s Financial Institutions.

Full stop. I’m getting too long winded (sorry) … thanks to the earlier #44 post!

*Besides several books (some polemical and some not) on the subject, here is an older short article that some people might enjoy!

http://www.theatlantic.com/issues/99mar/marketgod.htm

#68 MenWithHats on 07.09.09 at 5:38 pm

#51 diabolo on 07.09.09 at 1:23 pm

http://www.yourhome.ca/homes/article/663211

Who moves to a half a million dollar home (inflated)
directly from parents basement ??
This guy couldn’t even afford a rental shack before this…
This article is absolute crap…

Agreed .So are the other examples on that page .
Like the creep who alleges rhat hw paid off a 600K home in three years .
Only if he was growing weed .
These idiots are gonna have a rude awakening come the big jump in interest rates that any sane person knows is on the horizon .

#69 Jake on 07.09.09 at 5:40 pm

“If prices today make you gag, then how do you expect future buyers will be able to pay more?” Well said Garth. It is mind blowing how anyone can feel comfortable with these “corrected” prices. Only one way for prices to go and that is down.

#7 Joseph, excellent post man! I enjoyed the follow up by #44 Big Al as well. I used to think that free trade would only exploit people in the developing world. It is pretty obvious now that globalization will hurt a lot of people everywhere. This should come as no surprise, because the people scraping the cream from the top have no allegience to their countries or the people in them. Their only allegience is to money and power. Of course they will economically destroy the US and Canada if it helps achieve this end. If our leaders and the associated profiteers are willing to sacrifice our best citizens’ lives in illegal wars do you honestly think they give a sh!t about the average person’s job. The next few years are going to be challenging to say the least. I’m just glad that average citizens in this country will still care about one another when everything hits the fan.

#70 Shawn on 07.09.09 at 5:44 pm

Lidia,

Here’s an Edmonton story,

Couple we know with a young child living in an Edmonton high end neighborhood started building in an even higher end neighborhood last year. The home is almost ready for possession, but they will have to put it up for sale since the home they are living in is not even close to selling. Needless to say it is not in the $300,000 range, since those are the ones that have sold recently They now have two places for sale, and the chance of losing both homes.

We also know other people out of work, or with very slow businesses, worried about their jobs, and about keeping their homes in the Edmonton area.

Be very careful about getting into the market now. Prices will fall further.

#71 MenWithHats on 07.09.09 at 5:53 pm

I feel for Sam and her family .
It has to be daunting to face the loss of your home .
I will never purchase another Hallmark product .
I have had China on full boycott for five years .
If I can not find an equivalent product, made or grown, elsewhere I go without .
Chin up Sam .
Good luck

#72 Bonnie N BC on 07.09.09 at 5:58 pm

#69 TJ

I so agree TJ – Garth gave them the best advice. I was quite surprised with the visceral comments aimed at the couple – darn blogdogs – they will never admit making a mistake in their past.

Lidia, you need to measure your next step very carefully. What is reasonable and affordable? Not according to the banker that you do not need but is it worth it? Property taxes, insurance and maintenance – make a choice that is logical and well within your means.

I’d say wait until January and see if this is a dead cat bounce. Lucky you are not in BC ’cause our pricing is insane and I agree with Garth – things will not turn out well here in the summer of love (real estate wise).

#73 meggie on 07.09.09 at 6:23 pm

Rory, sorry you had to wait so long for your wanted rebuttal but some of us had to work today. It smells alot like sour grapes your way. I do not know what kind of private sector plan you hold, but SALARY wise, dollar for dollar, you’re ahead in your occopation.

VgnBkr,”perhaps he would have actually had to do some work. Sit on his ass all day, work 10-4, take 2 hour lunches, and retire at 50 with a 60K/yr pension”
The bitter stereotyping is probably beyond my reaching.
He is a welder so “sitting on his ass all day” isn’t an option. He works from 7:30 to 4:00 when he’s on day shift. He has a clocked off 1/2 hour for lunch. He plans to work til 65. (retire at 50? He’s already 51) 60K/year pension? Surely you jest
I used to come to this blog to encourage people and seek information. Increasingly so, this has become a
stomping ground to vent, namecall, spue, hurl insults, and demean one another. Evident in the vemenous way Bill and Sam were mercilessly attacked yesterday. There were exceptions, however, and a few kind hearted souls showed some compassion.

#74 TrueGritCalgary on 07.09.09 at 7:05 pm

#68 MenWithHats, the guy you are talking about who said he paid off the 600k mortgage in 3 years, also thinks that a household income of 250k to 350k is a “moderate” income. Some folks out there are just out to lunch.

#75 Nostradamus Le Mad Vlad on 07.09.09 at 7:18 pm

Today is International Spontaneous Conspiracy Combustion Theoryless McHappy Day, so — http://tinyurl.com/ne9uz3

“The Secret Plan for Citigroup: Leave the Bank in a Coma

“Q: Why won’t the government put Citi out of its misery and let it fail? A: The feds have a new strategy to leave the bank in a coma.”

Comment by wrh.com. — http://tinyurl.com/lb2ckv

“The Fed is already doomed. They just don’t know it yet. The American people are realizing that this licensed counterfeiting system is the reason their lifetime of hard work yields only more poverty and debt.”

There is a Catch-22 in here somewhere, because if Ron Paul is able to have the US Fed audited, Bernanke, etc. will fight like hell to crash the whole system, and probably succeed too.

It will cause an awful lot of immediate grief for ordinary folk, but the short-term pain brings long-term gain for people. Meanwhile — http://tinyurl.com/cmcv89

“Due to Goldman Sachs secretive culture and revolving door relationship with the Federal government, Goldman has recently been referred to as Wall Street’s secret society, with former Goldman employees currently heading the New York Stock Exchange, the World Bank, the U.S. Treasury Department, the White House staff, and even rival firms such as Merrill Lynch. Its landmark profits during the 2007 Subprime mortgage financial crisis led the New York Times to proclaim that Goldman Sachs is without peer in the world of finance.”
——
Nothing like a good laugh to brighten one’s spirits! — http://tinyurl.com/nafagn
——
San Andreas Fault has a growling tummy deep in its bowels! — http://tinyurl.com/kkrsq8 — South-west China had a mag. 6 ‘quake today, and a swarm of micro-quakes at Kileau Crater in Hawaii.

Hmmmm. A triumvirate of head honchos, all with their knickers in a twist. Good conspiracy theory to run with!

#76 Future Expatriate on 07.09.09 at 7:44 pm

Hormones put Obama in the Presidency in the US.

ALWAYS go with logic. NEVER go with hormones. Beauty fades; dumb is forever.

#77 Peter Wiener on 07.09.09 at 7:49 pm

general comment

I think all that visit, read and contribute to this blog should remember the case of Sam and Bill inasmuch that it is impossible to make judgements / give advice on a situation without all the facts being known. The 7 pm update just posted by Garth reinforces the importance of knowing the backstory.

#78 Future Expatriate on 07.09.09 at 7:50 pm

C’mon. EVERYONE knows that the solution to any problem is to recreate the same triggers that led to the problem in the first place. Like low interest rates.

Oh wait. That only perpetuates the problem.

Never mind.

#79 Bottoms_Up on 07.09.09 at 8:07 pm

Moral: if you’re going to cry foul and want Garth’s help, disclose all the appropriate information (i.e. we were terrible payers over the years, missed multiple payments and have been to court 3 times). Kinda calls into question every other email eh?

#80 rory on 07.09.09 at 8:26 pm

#59 timbo

Your kinda missing the point …gov’t subsidies bad, tariffs bad ‘cuz just they lead to retaliation and forces consumers to pay more because of high local non-productivity which equals higher prices.

I am sure you yourself are guilty of buying apples from New Zeland in the winter time but you say we should discontinue that practice and only buy local …what I am trying to saying is because of peak oil and climate change, market forces will equalize some of the outsourcing and off shore manufacturing bringing jobs home…so when oil goes ballistic the cost to transport will exceed what it costs to produce back in the home country…no need for government intervention …cheap energy drives it all…and btw, globalization up until very recently has been very, very good for us all …now is the time to pay it back …so if we would have blocked all trade 30 years ago you may still be living in the 70’s .

Besides, how do you think Canada, for example, got to be so rich in comparison to lots of the world …we sold lots of stuff to the rest of the world.

Dude as to the other thing …jobs …don’t care if you have no debt or lots of debt ….the reality is there will not be enough new jobs to have everyone in the family working …therefore we need to back 20+ years when you had one member working for whatever they could earn…yes that will drive prices down, bankrupt others but what the heck do you think is going to happen …magic.

PS – what you are also suggesting is that developed countries get to have it all and let the other 2/3 go to hell …not anymore …one world now…IMO.

#81 rory on 07.09.09 at 8:36 pm

#65 jess …here is a good counterpoint to yours…always 3 sides to a story …theirs, yours and the truth.

http://market-ticker.denninger.net/archives/1188-Finger-For-Finger.html

#82 Nostradamus Jr's Analyst on 07.09.09 at 8:38 pm

Nice contraption in the photo.

One of those in front of 24 Sussex would come in handy.

#83 rory on 07.09.09 at 8:52 pm

#66 Harry (not S) you said:

“One thing that should be religiously pursued is the protection of Earth’s environment. Environmental stewardship trumps free trade. In our dealings with Asian countries we must demand that environmental considerations take precedence over any short-term economic matters.”

Haha …we should demand huh …like when we were poor we told them ‘screw you’ and exported our dirty industries to them…so clean up and send me clean plastic crap …lol.

More to the point, I am reading “how your world is about to get a whole lot smaller” by Jeff Rubin …it addresses this in actually what I consider a fair way for all market participants instead of using bad protectionism practices…carbon tax locally first, then expanding it on to imported goods which will get them to clean up or go out of business …is fair as we put it on our own also + we have the advantage as we are cleaner then them as of now.

#69 Jake you said: “It is pretty obvious now that globalization will hurt a lot of people everywhere”.

Can you answer why – was it because we got into a bubble in lots of locations or is it because the damn third world countries want their turn at the can and we in the OCED say no … you are hurting our overpriced industries …just asking for clarification.

#84 Toronto C9 Renter on 07.09.09 at 8:58 pm

to #82…

At one time, there was indeed one of those contraptions in front of 24 Sussex.

It’s no longer there as it has long since served its intended purpose. (Early in the year it was baited with the keys to the PM’s residence, and used to capture Stephane Dion — he was then humanely removed from Ottawa and safely reintegrated into academia, I believe)

#85 rory on 07.09.09 at 9:09 pm

#73 meggie you said:

‘Rory, sorry you had to wait so long for your wanted rebuttal but some of us had to work today. It smells alot like sour grapes your way. I do not know what kind of private sector plan you hold, but SALARY wise, dollar for dollar, you’re ahead in your occupation.”

Meggie thanks for the time to reply …this is nothiong personal to you or your husband or any othe public service employee …what the facts are the facts are.

The one link I send you showed that public servants for the equivalent job are paid 7 to 40% more than private. How id that fair since private pays for public.

As to your pensions – they are invested the same as the private side except you have a bottomless pit from which to top up the shortfalls …they are called taxpayers. All us privates are asking for is that the public and the private pensions, including defined contribution have the same level playing field…that’s it….no special privileges.

We all benefited in the good times, and now that the bad times are here we all need to share the pain …somehow being a gov’t employees seems to make them deaf and blind when they here they might have to share the pain …like it is something you signed in a contract – NOT.

As to sour grapes because you or your husband have a gov’t job …no …the sour grapes is the entitlement you feel you have….somehow.

As to what you call ‘venting’ I call informing and educating …there will be a battle on pensions and it will not be good …the good old days are gone …goggle some …just telling you why…it is the unfairness in the system and we the privates have little power.

Yes, one comment went a little far.

PS – I have no pension …all saved up by myself and no one else so yeah I get a little defensive when others take it away just because they think they are entitled to it.

#86 john m on 07.09.09 at 9:33 pm

Great post as always Garth….for the past few months every time i stated my opinion in the company of friends about the crash we are facing in the future everyone laughed and told me i was wrong….that as Harper and Flaherty had proclaimed over and over again “never in Canada”……….well curiously people are starting to think differently..i was fishing today with a “naysayer”..his son who has a CEO position with a big company has had his wages slashed..his free spending lifestyle has not changed…his father (my fishing partner) has lost over 50% of his retirement investments..he is now getting very concerned…….all i can say is people better face the facts and ignore the Government supported propaganda–because there is no quick fix and personally i think the challenges we are now facing are petty to what the future brings—the walls are closing in on a hell of a lot of people who are hanging on by threads who have been sucked in by the greed and BS of the people we look to for the facts. Thanks Garth for telling it like it is!

#87 lgre on 07.09.09 at 9:51 pm

green shoots

http://www.youtube.com/watch?v=Y7ZN2F_7K7U

#88 rory on 07.09.09 at 9:53 pm

sorry meggie …one more time

Say we each have a million $$$, using the 4% withdrawal rule we would both get 40K per year.

We now have a market crash – for ease of calculations we both have $800K left (20% crash, it just happened). The same 4% rule means we get to only take out $32K….sorry I mean I only get $32K…you in public pensions still get $40K.

Our investments were the same. So now we both have a $200K shortfall …I need to make it back to $40K either by working longer, or riskier investing, you on the other hand tell me to pay you $200K from whatever I got – out of the my reduced $32K pension. If I do not I go to jail as it will be tax evasion or something like that …this is a little over simplified but I think addresses the issue …now you may get why we get a little excited.

#89 Get_Smart on 07.09.09 at 9:58 pm

If one is going to criticize (read: show jealousy) of government workers and their pensions, one needs to also examine the pros of private vs. the cons of public work.

Private pros (for the most part):

1) able to negotiate a raise at any time; percentage of raise is likely higher than what public counterpart is getting (for example, 10% vs. 5%).
2) rewarded for hard work by promotion.
3) substantial Christmas bonus.
4) ‘sky’s the limit’ upper management/executive level pay
5) able to work and earn overtime pay
6) earning more than 3 weeks vacation by their 7th year

Cons Public (for the most part):
1) cannot negotiate wage other than what the union gets for you; regulated and capped salaries/raises
2) hard/good work is fine but does not earn you promotion–you’ve got to compete with others (who may not even have experience in your area!) by writing exams/doing interviews in order to move up.
3) no Christmas bonus.
4) hours of work usually must be completed between 7am-5pm, M-F; no overtime.
5) can be slow and/or busy as F*%#.
6) cannot opt out of pension plan contributions that takes a significant chunk out of every pay cheque

“If you can’t beat ’em (Rory), join ’em”

FACT: getting a public job in the 1990’s was a cake walk. Today, not so much.

#90 Bottoms_Up on 07.09.09 at 10:25 pm

For all you bankers out there: could you please answer this question:

Why would a bank give me a hard time cashing a GoC cheque under $1500? (I have a zero balance in my bank account there because I no longer bank there–I previously tried to close the account but they wouldn’t let me, and they wanted to first deposit the cheque into my account and then withdraw the funds) I said NO. It took 10 minutes to get the damn cheque cashed.

Funny, I found this as my consumer right (so why was it such a hassle?):

http://www.fcac-acfc.gc.ca/eng/consumers/Rights/Cheques/RightsCheques_1-eng.asp

#91 Republic_of_Western_Canada on 07.09.09 at 11:01 pm

#53 Just a Girl –

No. ‘Fine Arts’ still has some respectability. Don’t sully it.

#92 rory on 07.09.09 at 11:37 pm

#89 Get_Smart

Stop it .. I am not jealous…work hard reap the rewards …lose money do not be rewarded …I just want the “hand in my pocket’ to stop and a big hand is the saving of public gold plated union pensions.

As to the pro and cons …I cannot figure whose side I am supposed to join.

Besides, what the heck does any of this have to do with pensions…and your saying “for the most part” …what planet do you work on …ahhh Goldman Sachs or AIG.

#93 taxpayer like you on 07.10.09 at 12:22 am

89 Get Smart – Pros vs Cons

So why arent people leaving the public service in droves because life is so much better in the private sector?

Could it be:

1) They dont understand “Negotiate” but understand “strike”?

2) They dont want to “work hard” to get promoted?

3) They dont want to work overtime?

OK maybe not fair, but this one is a joke:

“5) can be slow and/or busy as F*%#.”

Where have you worked?? That sounds like the private sector to me (and I’ve worked both). Oh and if its slow for more than a couple of days you go home!

And who cares how busy you are in the public sector if you dont work overtime?

Dont get smart, get real!

#94 Dave on 07.10.09 at 1:23 am

If Ottawa just prints that money, the loonie will lose value, homes will begin rising/inflating in value…and they become ATM’s again.
____________________________

wrong