By the shorts


By every measure, it’s overdone, oversexed, speculative and scary.

The latest numbers show it with clarity: Resale home sales of 50,270 last month was a record for July. Activity surged by a third in Toronto and Edmonton and virtually doubled in Vancouver. Even more dramatic was price. In a year, in the midst of a recession – when inflation is negative and interest rates flatlined – the average Canadian home grew in value by a stunning 7.5%.

This, as you know, happened while US home values tumbled another 15%. It also happened as our jobless numbers exploded, manufacturing collapsed, car companies staggered and the country’s finances disintegrated faster than at any other time in history.

This is the tangible face of speculation, when social pressure and greed drive an asset higher because it’s in vogue. It also proves that when something’s drop-dead cheap, people will load up. In this case, borrowed money.

There are many reasons reasonable people should expect this is the top of the market.

Pent-up demand can’t last. It will be gone soon enough, along with record sales numbers.

Unemployment’s expected to rise through much of 2010.

House prices may have gone up almost 8%, but family incomes have not. In fact, they’ve stagnated.

And interest rates have only one direction in which to travel, as do federal and provincial taxes. We know where both sales taxes and mortgage rates will be two years from now.

For these simple reasons, and quite a few others, the housing bubble – bred by cheap financing and human folly – is at or near its inflated, bulging, taut and orgiastic zenith. The question for investors is also simple: How do you make money from something in bloat?

Several ways.

In the stock market, for example, you can short a company whose shares have climbed beyond reason by selling short. That means unloading equities you don’t actually own, by borrowing them from a broker, in the hope of buying them back in days, weeks or months at a cheaper price. The difference in what you got for selling it today and what you pay later is the profit.

But how do you short the housing market?

Bubble Buster # 1

Obviously selling real estate you own at the top of the market (that would be just about now) is a way to realize capital gains. Then short the market by buying back in later at a lower price. In fact, if you were to sell today in a bidding war you’d be able to get any closing date you wanted in an unconditional deal with a serious non-refundable deposit (make that a condition of the sale).

Demand a long closing of, say, next April or May.

One of two things will likely happen: (a) the market will have crested, giving you top-of-the froth sale proceeds with which to buy a new house. Or, (b) the buyers realize they made a horrible mistake and paid far too much in the middle of a bubble, and don’t close the deal. Sweet. Then you get to keep both the house and the serious deposit (and here I’m thinking fifty large on a 400K property).

Bubble Buster # 2

Alternatively, you could sell a property at the top of the curve, get a guaranteed tax-free high yield on your sale proceeds, and quite possibly reclaim the asset, along with pocketing opportunity money at the same time.

Let’s say you have a mortgage-free property that could fetch $400,000  – again, likely in a bidding war. Being a seller’s market, you’re in the driver’s seat and can insist on a large deposit which is non-refundable (BTW, the real estate agent will fight you on this, but tough).

Now, offer the buyer an attractive vendor take-back mortgage  – five-year term, completely open, at less than bank rates. In fact, banks don’t even offer long-term, open loans, and the one-year open is north of 6.5%. So, an open fiver at 5% is a great deal for the purchaser.

Insist on 20% down ($80,000), and a VTB of $320,000 – which will give you a monthly income of $1,860, or $22,332 a year. And it’s tax-free, since it’s flowing from the proceeds of your principle residence. In other words, you have taken your over-valued property, put eighty grand in your pocket, and created enough cash flow to rent a similar home – secure in the knowledge that you’ll still get your $320,000 back in (at the most) five years.

But what happens if the housing market collapses and your buyers find themselves underwater, with a house worth less than $320,000? What if they walk or default on payments?

No probs. Put the house under power of sale or foreclosure. You get the option of selling it again in the open market (and keeping the cash you’ve already collected), or putting it back into your own name. Plus, you have the right to sue the poor buggers for missed mortgage payments, legal costs and any shortfall that might occur between the mortgage amount and a sale amount – no matter how distressed the market might be.

Getting a judgment would be virtually automatic, or just regain title and move back in. And you’d be $80,000 wealthier than you were before, without having had to invest any money.

There’s more. Stay tuned.


#1 squidly77 on 08.14.09 at 10:50 pm

We are at month 31, and it takes 120 days for a mortgage or debt to go bad, so lets say that we have just enjoyed month 23-27, can anyone spot the bull rally in a bear market ? It ain’t rocket science. Bull run in a Bear market wipe out

#2 squidly77 on 08.14.09 at 10:52 pm

over sexed ? scary man scary thats a male rhino !!

#3 Chris no longer in England on 08.14.09 at 11:11 pm

Garthy, you ruthless beast.

#4 Real Estate Deal or No Deal on 08.14.09 at 11:13 pm

Hilarious, and Brilliant Garth. Love the pic.

#5 HJD on 08.14.09 at 11:15 pm

(b) the buyers realize they made a horrible mistake and paid far too much in the middle of a bubble, and don’t close the deal. Sweet. Then you get to keep both the house and the serious deposit (and here I’m thinking fifty large on a 400K property).

Question: In the case of such a default, does the real estate agent have a claim on some of the deposit? What percent?

No sale, no commission. — Garth

#6 zammer on 08.14.09 at 11:17 pm

WOW, check out the latest sales numbers in Edmonton….
I didn’t think the sales would drop off this quick…

#7 taxpayer like you on 08.14.09 at 11:18 pm

“Insist on 20% down ($80,000), and a VTB of
$320,000 – which will give you a monthly income of
$1,860, or $22,332 a year. And it’s tax-free, since it’s
flowing from the proceeds of your principle residence.”

Wouldnt you have to declare the interest portion of the
VTB payment as income?

Otherwise an interesting plan…..

#8 Barb .. a reader in Calgary on 08.14.09 at 11:37 pm

Bubbliscious, Garth! Your devious plot is so ve-ry Snidely Whiplash!

Hmm. If only I could grow a mustache so that I could wax it and roll it between my fingertips — and sneer — whilst following your dastardly yet brilliant plan!


#9 GG on 08.14.09 at 11:43 pm

Greed indeed is driving this economy. It’s silly, stupid and insane and we’re all a part of it. Let’s just look at good old communisn. Look at Cuba. Everyone is happy. Even the US is pissing jealous. They don’t have to deal with all this nonsense. They don’t have all the material things that suppose to make us happy. No one is homeless and hungry. They have little but they’re happy and we’re depressed and pisssed. Helloo Fidel!!

#10 dd on 08.14.09 at 11:46 pm

Great read.

#11 GG on 08.14.09 at 11:56 pm

“Plus, you have the right to sue the poor buggers for missed mortgage payments, legal costs and any shortfall that might occur between the mortgage amount and a sale amount – no matter how distressed the market might be.”

They’re poor buggers alright but they’re human beings with families, young kids and mouths to feed. I hate this short selling crap, profiting at the expense of regular people like you and me. This market is all fking insane.

Buying a house is not a right. — Garth

#12 Calgary_rip_off on 08.15.09 at 12:14 am


Your post may be a good reflection of Ontario, but it doesnt seem to be affecting Calgary.

Look at the mls prices in Calgary. Prices arent at pre boom levels. Houses are still overpriced here.

Calgary is now a big city. If a house is advertised below market value in the time period of 24 hours the realtor will likely have several competing offers for the property.

These are the facts. There is no Alberta advantage.

The solution for renters and hopeful home buyers is to mentally and emotionally disengage from the mess. It is hard to accept that many of the renters in this city are simply enabling those who were privileged to buy before the boom to own their house with someone else paying for it. This is the reality.

There are simply no crashing conditions in Alberta as I see it. To obtain pre boom prices in Calgary would require a massive implosion of industry on all levels here. This will simply not happen, there are too many variables.

The only factor that will cause house values to plummet are interest rates. As of now, rates are still within reach for most owners. If rates were to hit 10%, then some action might be seen.

As it stands your posts have no relevancy in Alberta, as Alberta moves very very slow in terms of change. Please post on future mortgage interest rates.

#13 BobbyV on 08.15.09 at 12:27 am

The downturn in the GTA market has already started ….. don’t ask me how i know, those who are working in the industry doing trends/forecast are already seeing the signs of a nasty autumn/winter of 2009 in the past 3 weeks. The pentup demand fromfirst time buyers have officially been purged from the market ….. now we’re left with people holding the bag (houses) that will be declining in value faster than many can imagine.

#14 Calgary 2009 on 08.15.09 at 12:28 am

Dude, you’ve been sayin same thing for over a year now. And ain’t happening … not as you’ve described it. You tell people to short overbought stock? That’s like you tell people to eat if they’re hungry. Harpo also told people there are good buying opportunities out there when the market took a dive last winter. What’s your audience? Clueless individuals? What’s your next book? “How to cope with inflation?”
When things are too good, that’s when you turn bear and when things are too bad that’s when you turn bull. That’s how you make it through the ups and downs and you do just that uself, however preach armaghedon for the masses …. what do they know anyways.
Ah … forgot you’re a politician, that explains it … tell/sell what people want to hear …. doom and gloom in this case …. rampant inflation next year ….when u going to have your properties up for sale ….
Do you still keep your 30000 TSX prediction for 2015? … How is that going to impact RE 3/4/5/6 years down the road …. Einstein?

How’s that Concrete Equities thingy going, cowboy? — Garth

#15 Nostradamus Le Mad Vlad on 08.15.09 at 12:33 am

“By every measure, it’s overdone, oversexed, speculative and scary. There’s more. Stay tuned.”

Scarily oversexed. Well, the rhino passes the bikini test (is it really a rhino, or a hippo with a plastic snout on?), but one can clearly see the greater fools now lining up at the trough to be fed the usual pig swill.

I guess being head over heels in debt gives an amazing high, then when reality sets in an unbelievable low, just like cocaine.
An explosively breaking news brief about how concentric circles stunningly repeat themselves. From The Onion. —
The Bilderberg Group, Rockefellers, Rothschilds (NWO) and the rest of the ‘elite’. —
“. . . that income inequality in the United States is at an all-time high, surpassing even levels seen during the Great Depression.”

Market manipulation at its finest! —
“Highly respected market analyst Louise Yamada agrees. As Randall Forsyth reported in the May 25 issue of Barron’s Up and Down Wall Street column:

“It is almost uncanny the degree to which 2002-08 has tracked 1932-38, ‘Yamada writes in her latest note to clients.’ ” Her “Alternate Hypothesis” compares this structural bear market to 1929-42.”

Global Depression = Regional Wars and eventually WW3. —

Timing is (almost) everything, so this somewhat goes with what squidly77 said in post #1 of the next few months. —
Similar to what Ted Turner says, saying earth should have no more than 250 – 350 mln. people (depopulation from the current levels), which could lead to this in the not-too-distant future. —
Explain what “Dimona” is to all who have ears! —,7340,L-3761806,00.html
For those who enjoy growing fruits and veggies, this is worth a look. Also covers water rights, etc. —

#16 Casanova on 08.15.09 at 1:05 am

Garth, I think you are underestimating a very important thing in your analasys, interest rates will go up, but not in the near or medium term. Look at Japan! I think interest rates will stay in this range for 5 to 10 years, although it might seem unbelievable to some. But interest rates is not the main argument, look in the US, they do have lower rates than here but prices keep going down. The bouble in Canada will burst out of its own weight and when nobody expects it. Patience is the key, so stop looking for a reason when we dont leave on a reasonable enviroment.

Rates will rise. The BoC is powerless to prevent it. — Garth

#17 hal smith on 08.15.09 at 2:12 am

I always knew you had a dark side……….

#18 Investx on 08.15.09 at 2:24 am

Garth, you are a real estate wizard.

Have you performed any of the straegies above?

#19 John m. on 08.15.09 at 5:33 am

OMG lmao …i just spilled my coffee when i seen that picture–hilarious :-)

#20 Darryl on 08.15.09 at 6:07 am


That’s cold man. Is the second point as no risk as it sounds? How can the house be a principle residence if you live in another home?

#21 Herb on 08.15.09 at 6:12 am

Garth, do you have any idea what that kind of pornographic image will do to Le Mad Vlad?

#22 David Bakody on 08.15.09 at 6:30 am

The other side of the coin are the poor families who now finds themselves in those sad state of affairs. How many could there be ….. 100’s , 1,000’s or will government bail them out? “Speculation Real Estate Royal” indeedy do…..

#23 Wealthy Renter on 08.15.09 at 6:34 am

The New American Dream: Renting

Interesting article in the WSJ explaining how the home ownership society evolved in the USA.

#24 Cannibal on 08.15.09 at 7:20 am

Yum, nothing better then eating the young ones.

#25 Devil's Advocate on 08.15.09 at 8:25 am

#9 GG

Have you ever been to Cuba? When there we didn’t find everyone happy. In fact there seemed to be a surreal flatness that permeated throughout the country. There was no enthusiasm. People went about their jobs and days like they had a frontal lobotomy. There is no incentive and thus no enthusiasm. I could not live in such a state.


Do you know what a lengthy process foreclosure actually is, the costs involved, and the halted cash flow during the process, the susceptibility of a property to the manic behavior of the party being foreclosed upon?

The horror stories of renting tenants gone bad pales in comparison to those of a homeowner being foreclosed upon. That $400,000 house may well be worth less than $80,000 under market, even in a rising market, after the vengeful acts of the person you foreclose upon are through. Say nothing of the 6 to 12 month process during which they make no mortgage payment to you.

This is one of the reasons interest rates have to increase as that reward for risk today is disproportionate in light of the failing economic fundamentals and realization that it is only myth that R/E prices will perpetually rise negating any potential loss to a mortgage lender.

Yes, I have gone through the entire process, from missed mortgage payment to retitling the property. As with every real estate transaction, it varies. But go into it with knowledge and a good lawyer, and the outcome is assured. — Garth

#26 miketheengineer on 08.15.09 at 8:26 am


What happens if they have an uncle “Guido”? Someone who doesn’t like the idea of their relatives loosing a lot of money on a bad deal?

Otherwise, brillant plan. I like the idea of sell at the top, long closing. Take 20k deposit. That way if they walk on 20k it won’t bankrupt them , and uncle Guido won’t come around to make things right.

I like 50K better. — Garth

#27 lgre on 08.15.09 at 8:41 am

The home ownership craze is ridiculous in the Canada/U.S…In many parts of Europe it’s the norm to buy a house and generations will live in it, my family in Europe is still living in the same houses my grandparents owned and uncles bought decades’s here that the constant buy and sell is promoted..while it benefits the agents, banks, government and brokers, but not the people doing the buying and selling.

#28 Dom-GTA on 08.15.09 at 8:56 am

Greed is not so good.

I am a little dismayed at the article. All it shows is how to take advantage of some poor fool.

You can sue, etc…what bad karmic energy. I am as much as a capitalist as the next but really basing my financial success on the fact that I can sell now and then foreclose on the poor bastard that bought my property at the peak.

I love the idea of being prepared and maybe buying a distressed property but to actually make a plan and bet on that happening seems just a little too….

I have had too much good and bad luck to actually wish the market goes down so my plan can come to fruition. Better to simply prepare yourself the best you can without it having to be a zero sum game.

Thanks, Gandhi. In the real world acquisitive people buy houses they cannot afford from sellers consumed by greed. My suggestions are in tune with the times, if not divinity. — Garth

#29 Chris no longer in England on 08.15.09 at 9:07 am

“In other words, you have taken your over-valued property, put eighty grand in your pocket, and created enough cash flow to rent a similar home – secure in the knowledge that you’ll still get your $320,000 back in (at the most) five years.”

And while you are waiting, you can stay at top hotels for 1c per night (while mistakes last).

#30 JO on 08.15.09 at 9:09 am

GG – No one is taking advantage of people who did not pay their obligations. If the loans are not repaid and action taken to recoup money, the depositors/savers, already treated like garbage with extremely low rates and having the deposits used to issue multiple amounts of loans to weak borrowers, are going to be taken out. So the prudent savers will be left with nothing if there is no debt collection. Ironically, the structure of our banking system (assures eventual bankruptcy of many banks due to the fractional reserve fiat money structure) ends up meaning the taxpayers (and future taxpayers) bear the brunt of the banks and governments/BofC stupidity in interfering with the markets.

If people buy a home they cannot afford, which most in the last 3-5 yrs have, and then want to walk away, what message does that send ? Your gov’t and the BofC, with their monopoly on money and through the use of programs such as CMHC/NHA and CDIC, have created a massive ponzi scheme where taxpayers, current and future, underwrite the risk on the weakest home loans – creating artificial demand and raising home prices beyond the reach of those savers who are avoiding the trap of paying 6-7 times income for a home.

In the end, I fully support POS and foreclosure. The joke has been played on the savers, especially those stupid enough to have money on deposit through a savings account, or gic.

This will end as usual when gov’t interfers with markets – systemic collapse. This ends up destroying those who bought the homes they could not afford, but even worse, also wipes out/really hurts those who put down 20 % or more and/or have paid down the home. A savers revolt is coming to match up the the inevitable taxpayer revolt. Do you want your tax money, and your kids tax money, used to pay loans for people who put less than 20 down and bought something they could not affprd ?


Anyone laughing at Garth for “being wrong”…may i suggest you hold off on that conclusion until at least 2012. We are only in the top of the 2nd inning in Canadian RE. Think the first correction that happened to the Nasdaq after the March 2000 peak. The worst is yet to come.

#31 Dom-GTA on 08.15.09 at 9:29 am

LOL, I have never been accused of being Ghandi before. Quite the opposite.

I have to say I prefer the Gandhi Moniker over some of the others. I think that is what is missing. More Ghandi’s and less Ayatollahs.

Obviously, not in line with pure financial gain and maybe that attitude is what is keeping my bank account balance from being as high as I would like.

All I can say is that I like some of the proactive tips if one has an even slightly pessimistic view of the future they are certainly appropriate and what the careful person should do. Shorting has been a time ownered hedge against excess and causes the peak of the bubble in many ways as it fuels the market with inventory or stocks when natural demand may otherwise not have gotten the supply.

We certainly live in interesting times.

#32 Dom-GTA on 08.15.09 at 9:30 am

Greed is not so good.

I am a little dismayed at the article. All it shows is how to take advantage of some poor fool.

You can sue, etc…what bad karmic energy. I am as much as a capitalist as the next but really basing my financial success on the fact that I can sell now and then foreclose on the poor bastard that bought my property at the peak.

I love the idea of being prepared and maybe buying a distressed property but to actually make a plan and bet on that happening seems just a little too….

I have had too much good and bad luck to actually wish the market goes down so my plan can come to fruition. Better to simply prepare yourself the best you can without it having to be a zero sum game.

#33 Nostradamus jr. on 08.15.09 at 9:34 am

How will the following scenario affect Canadian Real Estate values?

…China has been accumulating and hoarding all commodities…why?

To protect its industrial base?
Is China preparing armaments readying itself to go to war?

And to war with whom?…Japan?, Russia?, South Korea?, U.S.A.? or is it…..North Korea?

…Which would explain the diluge of foreign investors invading the safety and stability of Vancouver, the next financial, trade, cultural and leisure capital of North America.

#34 Dom-GTA on 08.15.09 at 9:41 am

wow..honoured, obviously now ownered!! Thinking too much of RE as I am about to buy instead of rent. Sorry for the double post. (if the second one is automatically deleted by Garth)

My reason for buying is simple, I can’t build my bunker in a rental unit. With 2 dogs and 2 kids cheaper to buy than rent what I need.

So even though I believe we are headed for a downturn I am buying. Hopefully I am buying a property that won’t be decimated in a down turn but who knows..

I am trying to mitigate that risk by buying smart but it is tough when you want a bunker but not commute 2 hours each way to work. Might have to spend more than I want but in a mass social downturn no can repossess if the infrastructure has truly collapsed. Sheriff will be busy trying to keep rioting down vs repossessing.

#35 rubberduckie on 08.15.09 at 10:20 am

Really? All the FTBs have bought? Because I keep hearing about idiot acquaintances with low-paying jobs buying dream homes. Just when I think everyone of means has bought, ding, there goes another one.

I know some folks being evicted from their rental. They have a dog. They’re looking for another rental now, but since typical Vancouver landlords are such d**ks, I bet they end up purchasing a place just so they can have a non-scuzzy roof over their head.

#36 dontcallmeshirley on 08.15.09 at 10:25 am

Garth, you’ve presented a couple of productive ideas if you happen to own.

How about something plain vanilla like buying a downtown condo for no down, say next Tuesday, and then selling it in September.

That’s home run too right?

That’s called speculation based on leverage, with huge commission costs. Good luck, sucker. — Garth

#37 Terry C. on 08.15.09 at 10:51 am

Back in 1990 a Real Estate Broker friend of mine told me how Real Estate sales collapsed literally overnight. I asked him to explain and he told me this, “During the first week in March 1990 sales were brisk, phones were ringing constantly, multiple offers were the norm, sales and prices were in a parabolic blow-off mode. After the weekend, starting on Monday of the second week, the phones stopped ringing, offers and appointments were cancelled, activity just stopped!!!” He told me he had never seen anything like it, “thousands of people just all of a sudden stopped their buying behavior”, and thus began the collapse in prices as listings went through the roof. The early 90’s recession had begun. The place was Oakville Ontario, and soon Toronto and the golden horseshoe area followed close behind. Buyer sentiment changed in as little as a few days, and with that sentiment change the whole Real Estate world changed for years to come at that time. Beware this time we are in as it looks certain we are going to be repeating history very soon once agaim.


#38 Investx on 08.15.09 at 11:08 am

“Rates will rise. The BoC is powerless to prevent it. — Garth”

How so? How did Japan have the power to keep rates low?

It’s all about the currency and balance of trade. We are not Japan. — Garth

#39 Men With Hats on 08.15.09 at 11:14 am

Diabolically clever . Makes me wish I had some skin in the game .
No capital gains tax . Leaves me breathless .

#40 Peter Wiener on 08.15.09 at 11:15 am

# 12

How long have you lived in Calgary?
Check out the history of house prices in your city through several cycles in the past decades and then re-read your posting. Then STFU before you make yourself look even more foolish.
Those who fail to heed history are doomed to repeat the mistakes of the past. They had people like you in mind when they coined this phrase.

#41 Paul on 08.15.09 at 11:31 am

#5 That happened to my neigbour. Went to court, the agent got his commision.

Then he did not properly word the P&S agreement. — Garth

#42 $fromA$ia "Garths Nugget Boy" on 08.15.09 at 12:16 pm

Just about everybody I talk to in Vancouver expect property to go down after the Olympics.

How low can it go???

#43 Gord In Vancouver on 08.15.09 at 12:26 pm

Another interesting article from Garth.

I expected real estate pumpers to interpret today’s post as an act of desperation to get people on the fence to sell.

#44 Nostradamus Jr's Analyst on 08.15.09 at 12:35 pm

God, how I’d love to teach these bidding war clowns a lesson and make a killing off them at the same time.

Now, if I only had a house to sell……

#45 Bottoms_Up on 08.15.09 at 12:52 pm

There you go Garth, the price of rentals are starting to come down (single family home in nice neighbourhood in Kanata for $1350/mo). This would have been unheard of 1 year ago:

#46 coolmate on 08.15.09 at 1:01 pm

Garth, what if you have a $320,000 home and only $150,000 left on morgage? Do you still recommend Buuble buster options?

#47 Bottoms_Up on 08.15.09 at 1:03 pm

Some more anecdotal evidence…went to a beautiful spot on the Rideau canal last night (Friday night) in Ottawa for dinner (~6:30pm)…thought it would be extremely busy due to the beautiful weather and shitty summer weather we’ve been having…there were no customers inside, and the patio was about 1/2 filled……

….this is not going to end well.

#48 X on 08.15.09 at 1:12 pm

DOM- you miss the point.

Better to take advantage of the fool, than be the fool.

#49 Elle on 08.15.09 at 1:21 pm

Garth ……….WWwwwwait a minute here. Why now?

Why such a turn of attitude from gardens, root cellars, generators and wood stoves. “Stockpile those things which you will not be able to buy” -” Get out of your mortgage.”.. “park (big old RV) on a cheap acreage two hours out of town” (ATCrash) I can hardly wait! I liked this side of Garth, much better.

It’s not that I think these ideas are not prudent. In this world they are. But why now? Why not last year? It gives me a sense that we’re filling in a big gap here… And it worries me. Are you seeing that the Crash is not as close as we thought? Do we now, really have to resort to these measures to perhaps recoup a little money that has leaked away?

The motives behind all this skullduggery bother me. What goes around — comes around! Care to comment?

How is selling an asset at the top of the market ‘skulldugerry’? This is my prudent side. Take the cash and buy solar panels, babe. — Garth

#50 Boombust on 08.15.09 at 2:02 pm

“Just about everybody I talk to in Vancouver expect property to go down after the Olympics.

How low can it go???”

Hmm…interesting. I’m sure the Olympic hype helped to propel the market UP, so why won’t a post-Olympic hangover drive it down?

#51 lili on 08.15.09 at 2:42 pm

Garth, this is a despicable post. You sound like all these bankers that see capitalism as a year-round casino built to relieve suckers of their money.

When you and your attendant minions cry foul of the bankers that have looted the public purse to prop up an irrational and overbought market, and feign that the people’s future has been sacrificed, I am certain that you are only sorry you weren’t in heavily enough on the deal yourself. In fact, it is simply sour grapes.

Now, in the face of rising home prices that you did not predict, you are scrambling to hatch a plan that would deliberately destroy yet more people’s lives.

You can reply with any obtuse and insulting quip that you like, but I promise to save this post for the next person that naively suggests that you are advocating for the people, or have worked for the people’s interests ever.

You can feel bigger and more important than me, or any anonymous sucker, but a dubious plan like this comes only from someone desperate to be a big shot. I am sure no real well-paid big shot needs a micro-scheme like this to live well.

Ultimately, you’ll eat cake like the rest of us.

There is nothing despicable about selling a house at its high point (or a stock, or a bond, or a mutual fund). My strategies are completely reasonable and hurt nobody so long as a purchaser lives up to their end of the bargain. You need a serious hug. — Garth

#52 Nostradamus jr. on 08.15.09 at 2:50 pm

>>How so? How did Japan have the power to keep rates low?

It’s all about the currency and balance of trade. We are not Japan. — Garth<<

…Uhmmmmm, care to elaborate beyond a one sentence explanation Garth?

We are better than Japan, w/ a teenie tiny smaller pop and w/ huge natural resources.


#53 dd on 08.15.09 at 3:13 pm

#49 Elle

“Are you seeing that the Crash is not as close as we thought?”

Ya … and the people that saw the market crash coming were in cash for a year or two before hand. You trying to time the market?

#54 dd on 08.15.09 at 3:15 pm

.#47 Bottoms_Up

“Rideau canal last night”

Could everyone be out at the cabin?

#55 Shifty on 08.15.09 at 3:21 pm

This is my prudent side. Take the cash and buy solar panels, babe. — Garth

I’m one of those who have too much of my money tied up in house and struggling to find a way free up some capital. Never thought of being the banker, why not the banks do it all the time.

Waiting for the non prudent side.

#56 dd on 08.15.09 at 3:25 pm

#12 Calgary_rip_off

…Look at the mls prices in Calgary. Prices arent at pre boom levels. Houses are still overpriced here…There are simply no crashing conditions in Alberta as I see it… If rates were to hit 10%, then some action might be seen.

Ripp-off, you are too caught up in the market. I know you want in but why buy at todays highs? The market is off at least 15% from the 2007 highs. No crash but still off. The market is still overvalued at today’s prices. Rates don’t have to reach 10% to put people into default around here. Homeowners are maxed out.

With short term Natural Gas expected to decrease even more watch new round of layoffs. People are fearfull on the job front. Conditions will get worse before they get better in this province.

#57 dd on 08.15.09 at 3:30 pm

#36 dontcallmeshirley

“How about something plain vanilla like buying a downtown condo for no down, say next Tuesday, and then selling it in September”

If the employment fundamentals were favorable it would be less risky (like Calgary during 2005-2007) however it is only based on cheap money.

#58 conan on 08.15.09 at 3:32 pm

I have not yet read your book ” After the Crash ‘ Garth.

I will assume you predicted some crashy things in it.

I do not think anyone can predict much these days because of the unknown extent to which stimulus money is going to be used.


My book is a click away. Be a man. Buy it. — Garth

#59 dd on 08.15.09 at 3:34 pm

#33 Nostradamus jr. o

…China has been accumulating and hoarding all commodities…why?

Because commodities are cheaper and their holding ($US) are decreasing in value. Don’t overthink it.

#60 dd on 08.15.09 at 3:38 pm

.#28 Dom-GTA

…I love the idea of being prepared and maybe buying a distressed property but to actually make a plan and bet on that happening seems just a little too….

That what happens everytime you buy low and sell high, no matter what the asset. Someone is left holding the bag.

#61 Dubble on 08.15.09 at 4:32 pm

When does this bidding war stop?
My gf and I considered buying a home about a year ago and were preapproved for 400k. I am the type of person who will not buy a home unless we can put 25% down and take a 15-20 year term.
I also doubt our ability to pay back 400k with a combined income of 75k if we stick to the values mentioned above. How did we qualify for this loan? It boggles my mind that people will buy 400k homes with borrowed downpayments, then create a bidding war on the property driving the prices higher. The houses selling were 180k 6 years ago. LOL.

We cant buy overpriced assets and take on HUGE amounts of debt and expect good things to happen. The value of the asset will drop when reality sets it. And reality is soon a knockin’.

On another note, Garth, this was the first time I read one of your posts and was genuinely upset.

We cant take advantage of one another to better society.
Thanks for reading…

#62 Offshore Time on 08.15.09 at 5:23 pm

Well, I just tranfered a significant amount of my RE funds offshore. I am tired of having my hard earned “war chest” earn a measley 4.4% while Canadian banks use my money to fuel this bubble. And when the inevitable tax hikes come to remedy this reinflated credit bubble, I will be partly prepared.

#63 Nostradamus jr. on 08.15.09 at 5:43 pm

Speaking of Vancouver….

>>The Canada Line carries another distinction: It makes Vancouver the first city in Canada to have a rapid transit line to the airport.

That will put Vancouver on the map and on par with Hong Kong and London.

“It’ll change the face of the city,” said Jane Bird, CEO of Canada Line Rapid Transit Inc.”It’s a real opportunity for people to see Vancouver in a different way when they arrive at the airport.”

…Better hurry up friends and buy a home here before prices double…

#64 Schroedinger's Bull on 08.15.09 at 6:03 pm

is it just me or is that rhino wearing a thong?

What’s a thong? — Garth

#65 Patel on 08.15.09 at 6:16 pm

“Thanks, Gandhi. In the real world acquisitive people buy houses they cannot afford from sellers consumed by greed. My suggestions are in tune with the times, if not divinity.”

No need to bring Gandhi in this debate over housing market….

#66 Men With Hats on 08.15.09 at 6:25 pm

You clowns are too funny . Garth writes a column on how to launch a broadside barrage against realtors and banks and you react as if he is giving away state secrets and inviting you to break the law .
This is a war of attrition and only those who are fully armed will survive .
This info is worth tens of thousands of dollars and Garth gave it to you for free .
Lighten up .

#67 Nostradamus Le Mad Vlad on 08.15.09 at 6:32 pm

#21 Herb on 08.15.09 at 6:12 am — “Garth, do you have any idea what that kind of pornographic image will do to Le Mad Vlad?”

Herbalicious, I resembleful your Question Of The Day, and accordingly, it is only fair to give a brief look at the overall view.

I have been in millions of incarnations, the most recent ones being an incomplete exhaust system for a Ford Pinto (which has gone — the Pinto or Ford?), granite countertop, Shepherd’s Pie (I cannibalized myself as I was so tasty) and an object floating somewhere in space.

All these have led to my current lifecycle of being a complete nincompoop.

The thought of transposing into a pornographic image never crossed my mind until now, but as all possibilities in life are unlimited and time is irrelevant, I would not bet against me re-appearing somewhere soon in a centrefold near you, wearing a latex-riddled swimsuit!
I was unable to find Monty Python’s soccer game (one side consisting of pirates with one real and one wooden leg, opposition normal), so here is something a little more pertinent to the present occasion (the banter between the two is also curious). —
Sitting on a cornflake waiting for the crash to come and go, as the worms kept eating into their brains (apologies to The Beatles and Pink Floyd for messing around with their lyrics), I was struck Like A Hurricane (ditto Neil Young and Crazy Horse) by the continuing Ziegfeld Follies happening.

Supposedly, Cdn. banks are in fair to good shape (see old link following), but from Mish’s site news that the FDIC has essentially gone under may tie in with what squiddly77 (#1) and I (#15) said previously — the whole schmoodle is sinking faster than most of us realized.

Bill Bonner of The Daily Reckoning writes: “. . . Private sector employment is back to levels of 1999. There are more jobs in restaurants and health care…but many fewer in manufacturing. Net gain: zero. . . . The only job gains have been in the parasite sector – government.”

Leading to an obvious question: If all the well-paid jobs are disappearing, western govts. getting deeper into the hole [thereby raising taxes] while printing and creating unlimited supplies of money electronically, how do present boomers / retirees cope with ever-increasing bills and paying off others’ debts?

Hint: Population reduction (control of the white, Aryan race). The Red / Yellow (Oriental) Race is replacing the white Aryan Race. To quote:

#33 Nostradamus jr. on 08.15.09 at 9:34 am — “Is China preparing armaments readying itself to go to war? . . . with whom?…Japan?, Russia?, South Korea?, U.S.A.? or is it…..North Korea?”

Chances are the US will push someone, somewhere too fast and hard, and getting one mighty slap in the face for going that route.

It will not happen during our lifecycles, but it is already taking shape, so Nostradamus Jr. is correct, but only from a long-term perspective.

The unknown in this case is the Ring Of Fire and San Andreas Fault — when will it happen, how big will the ‘quake and supervolcanoes be, etc.

#68 FY on 08.15.09 at 6:34 pm

#32 Dom-GTA

“I am a little dismayed at the article. All it shows is how to take advantage of some poor fool.”

I am sorry. What about the poor souls of the savers, would-be-retired, seniors, and taxpayers, who see their savings are being whittled away by artificially low interest rates, endless bail-outs ?

Where is the justice and your sense of righteousness in that ?

#69 dd on 08.15.09 at 6:47 pm

#63 Nostradamus jr.

“It makes Vancouver the first city in Canada to have a rapid transit line to the airport.…Better hurry up friends and buy a home here before prices double…”

Wow … just from building a rapid transit line from the Airport to Dtown will double housing prices. The way to riches has finally been cracked.

#70 Hagbard on 08.15.09 at 7:02 pm

I stupidly sold our house in 2004, thinking we’d reached the peak of the bubble. Fast loosing faith in ever seeing a decline in prices, and money earning 1% interest isn’t getting us anywhere either. I’m 52, maybe its time to cash in, buy the house and start enjoying life and stop waiting for events that may never happen. Don’t want to be still waiting for that bubble to burst when I’m 64.

#71 RM in Oakville on 08.15.09 at 7:09 pm

#63 Nostradamus jr. on 08.15.09 at 5:43 pm

Nostra, give it a rest. We’re not interested.

#72 John m. on 08.15.09 at 7:17 pm

#63 Nostradamus jr. on 08.15.09 at 5:43 pm….i lived in BC for 22 years,when i first went there it was awesome,good people magnificent country.but wow did it change……you could not leave anything in your yard without a chain on it and a damn good one or it was gone!,you couldn’t go to a self fill gas station without locking your car when you went to pay or it was gone.When you drove you kept your car doors locked…..i didn’t i had a guy jump in the car at a stop light (he went out as fast as he came in).People live in cages crime is rampant,organized crime is everywhere and often at war with each other.It often difficult to find anyone who speaks english or really gives a rats ass if you need help.Industry is practically non existant,logging is just about done as well as the fishing industry,tourism is drying up faster than the economy. The big money people make their livings off of drugs (a huge percentage).Ah yes anyone who is thinking of moving there should look north…..(a hell of a long way from the fraser valley) .A beautiful province destroyed by greed and corruption.

#73 conan on 08.15.09 at 7:51 pm

Have a scotch down at the pub on me tonight. I did the right thing and bought your book “after the crash”.

You have to also do the right thing and tell everyone whether it is your lips photo shopped on that rhino.

Is that part of your beard?

P.S. I would have bought more stuff but there is a recession going on and I have to do my part to keep it going.

#74 Elle - AKA BABE on 08.15.09 at 8:07 pm

Garth the Prudent …….

…….. the “skulldugerry” part is the unsportsmanship of all the scheming……it’s just like shooting fish in barrel!!

-and if you will, an answer please…….”why now?” “why not last year?”

I was asked for shorting strategies. Do you have a request? — Garth

#75 Dan in Victoria on 08.15.09 at 8:07 pm

I’m scratching my head here with some peoples reasoning.Try this.You go to work and do your job and get your pay,everything is running like clockwork.Regular raises,bonuses,etc.(Think Paying your mortgage on time)Now they hire someone that doesn’t pull their weight in your department,steals the donuts,take extra time at coffee and lunch,leaves ten minutes early every day,no money in the coffee jar,but drinks it anyhow,thanks suckers(think ,don’t pay their mortgage) but now everyone has to work harder to cover for them,no raises ,no bonuses now because things aern’t getting done.So are you going to say oh… thats ok …they can continue to work here(live in the house for free)…. not do their job drag all of us down…I’ll work twice as hard to make up for them.Pay extra for coffee and donuts.Not me. If they can’t pull their weight(pay for their house)its time for them to go work some where else.(foreclose)I hope you can see the parrallels. Its one thing to offer a helping hand its another to give handouts.Do You go to the food store and say to the cashier I know that milk is $4.49 but I’m only paying $3.49?

#76 Nostradamus jr. on 08.15.09 at 8:11 pm

After Vancouver Olympics RE will drop?

…Yes…only in outlining “whanabe” areas like Toronto and Hamilton.

#77 saanichtonian on 08.15.09 at 8:12 pm

“What’s a thong? — Garth”

It’s thomething you thing…thilly.

On a lighter note…
I have seen now 4 references (from different, and as far as I know separate sources, one of which is Bob Chapman of the International Forecaster) to either an impending U.S. bank holiday, or a series of rotating bank closures starting (according to at least 2 of the said sources) on August 24.

I do realize that it is only rumour until it is reality.

Just wondering if anyone had a heard any similar references?

#78 Jeannie on 08.15.09 at 8:14 pm

#62.’Offshore Time’….care to share some advice on how to go about ‘transferring’ funds into an Offshore account?
If I could make 4.4% in Canada, without risk, I’d be quite pleased, I’m really getting stiffed for being a saver.
I’m assuming you’ve done your research
on your Offshore bank. Thanks in advance.

#79 Barb .. a reader in Calgary on 08.15.09 at 8:48 pm

A little gift….to those who need a smile, a scene-stealing squirrel is in the news again:

#80 Dan in Victoria on 08.15.09 at 8:48 pm

Post#8 Barb,I kinda had Garth pegged as Dr.Benton Quest Like they say nice to take the family jet out for a spin.

#81 Keith in Calgary on 08.15.09 at 8:49 pm

I am sitting in my hotel room at0 Bally’s in Las Vegas right now.

Just finished an afternoon of shopping, gambling and drinking. Deflation is great. Especially as it pertains to the RE market. The wife and I ran across one of those realtor booths in the Fashion Show mall…….and it had a huge sign emblazoned with ‘We love Canadians’ and our flag prominently displayed. Gotta tell you guys……between 80-120K gets you a 1,600 sq ft house that costs 4 times as much in Calgary. And Vegas is, IMHO, ten times better than Cowtown. Gotta go now……..the wife wants to go shopping, gambling and drinking again. GAWD…….it’s good to be a renter.

#82 Nostradamus Jr's Analyst on 08.15.09 at 9:05 pm

It’s interesting you mention that because there seem to be a lot of speculators/investors hanging on to their condos trying to get a big score renting out during the olympics.

I’m seeing insane asking prices up to $28,000 for the month of February.
Happily though, 85% of these greedy turds are not finding any takers so the only question is will they wait until March to dump their condos on the market or will they pull the trigger before then.
That of course doesn’t include all the condos left over from the athletes village that need to be disposed of – another loss for us the taxpayers.

2010 may well be the biggest failure in Olympic history on many levels.

#83 RM in Oakville on 08.15.09 at 9:12 pm

#76 Nostradamus jr. on 08.15.09 at 8:11 pm

No one outside of the left-coasters gives a rats’ ass what happens to Vancouver RE now, 2 months from now or after the Olympics. Keep trying to sell your spin and propaganda, no one’s listening.

John M (post #72 John m. on 08.15.09 at 7:17 pm) summed up my feelings very well. I lived and worked in Vancouver several years ago for almost a year and I went from being awestruck by the beauty (my English Bay view near Stanley Park in west downtown), to not feeling very much at home, to wanting to get the hell out as fast as I could.

Nice place to visit but I’d never want to live there.

#84 Grantmi on 08.15.09 at 9:29 pm


“Riddle me this Batman??”

I took a drive out to Abbotsford today to due to business, and I couldn’t help notice the amount of FOR SALE signs stabbing lawns and front condo vistas all over the place.

I went into my RE office where I rent a home from to drop off my next couple of months checks for renting a home they manage!

WHERE ARE ALL THE PEOPLE in the office! You could have shot a cannon down the hallway!

I asked the recep. “Eh! Where’s all the agents with clients buying homes” She laughed! Honey! There are none! Most don’t even come in any more on the weekends!

They were busy a couple month ago when all those low rates were out there… but most pulled the trigger because of the 60 day expire on the pre approved rates.

In fact she said! Are you happy with your rental place… i have some that are about 30% less in price you’re currently paying right now for the one you’re in! WOW! Thanks makes me feel good! I have to move to get a 30% savings in a rental place.

I said – “No thanks!” Tell your client to call me! I want to talk about reducing my current rent with him! I ain’t moving!!!

peace! (Long live the Garden… in Woodstock!)

“Move Along! Nothing to see here!!!”

#85 GG on 08.15.09 at 9:39 pm

“We cant take advantage of one another to better society”.

The problem is that we live in this Ponzi scheme economic system. You and I can’t escape it being taken advantaged of. Every one here is a shark out to bite someone else’s tail. This whole market world is a fraud. It’s a dog it dog world. Even Garth who can be your friend giving you some good advice will capitalize on you if you act like a stupid real estate sucker.

#86 Nostradamus Le Mad Vlad on 08.15.09 at 10:00 pm

#77 saanichtonian on 08.15.09 at 8:12 pm — “. . . one of which is Bob Chapman of the International Forecaster) to either an impending U.S. bank holiday, or a series of rotating bank closures starting (according to at least 2 of the said sources) on August 24. . . . Just wondering if anyone had a heard any similar references?

BINGO! Marc Faber has said something similar (I posted the link a day or two ago), and there is something coming to fruition shortly.

The Cdn. banks could start feeling the pressure early next year (they’re not talking, and neither is the BoC), but today’s Okanagan Saturday has a few business stories which plainly show the m$m is loaded with BS.

“Is economic gloom nearing an end? Housing, manufacturing data points to end of recession: economists” (CP) — and —

“Asian markets mixed amid signs world economy emerging from deep recession” (AP)

The manufacturing sector in NA has taken a nasty hit, and it probably won’t recover for decades.

As to the word ‘economy’ in the second heading, there are a multitude of economies in the world; economy is singular, namely a one-world currency led by a one-world govt.

Another report in today’s paper says “Canuck banks rumoured to be looking at Ireland Banks”. If — and when — there is a bank holiday in the US, there will be some ramifications here as well, whether people want to believe it or not.

Another link, but the comment from sums the bank holiday up nicely (square parens mine):
“The US doesn’t want a real democracy in Iran; with that, there would be no bogeyman to demonize, and Ahmadinejad — he won both elections by at least 62%, clear majorities — does make the perfect scapegoat.

“What they want is for there to be yet another American-friendly puppet (like the Shah) installed in Iran for access to the oil.

“As reported at this site yesterday,

[ “the US has assured Israel that they will have a response to Iran ‘within the next 8 weeks’ ]

“That means that the UN will have resumed its session in September, and the US deadline for Iran to respond to the US’s demands will be over.

“We may very well be looking at an “October Surprise” this fall, and if it happens, it may well be the start of WWIII.

“Russia has warned Tel Aviv and Washington that this will be the case, so the question of whose side Russia will be on in such a conflict has been made crystal-clear.”

Somehow, everything is falling into place now, but also look for something major next spring. We’re in the middle of another Crusades.
Anyone who believes (or thinks) the US (and almost certainly the Mossad) is the good guy may like to do a little research. —

Meanwhile, US vets sleep on the streets and tent cities are spreading while homes are foreclosed. —$12Billion_Israel.html

“All This, So Israel Can Control The World’s Oil

“Everyone thinks that all we give to Israel is $3 billion a year, but the real cost is in the hundreds of billions.”
Angry Bear writes about high-tech and unemployment —

In a Reversal of Fortune, however, this —

#87 POL-CAN on 08.15.09 at 10:02 pm

#81 Keith in Calgary

Thanks for that post… made my day…

I finally managed to convince my better half that now is not the right time to buy and that we did not miss out by not buying last fall/winter.

Just signed a 1 year lease on a 4 bedroom, 4 level, 2 car garage, brand new townhome 5 minutes from downtown T.O. and will be moving in 2 weeks.

We got the SS and granite for $ 2550 a month plus utilities. Less then 30 % of monthly take home and at the same time still have all of our cash and investments. We will sit back and wait for this fall’s crash in comfort and with piece of mind.

It is good to be a renta. Long live deflation :)

Planning that Vagas trip for October.

#88 POL-CAN on 08.15.09 at 10:07 pm

#73 conan said:

“P.S. I would have bought more stuff but there is a recession going on and I have to do my part to keep it going.”

Nice one…. If only more people got the message and did their part here in T.O. things might actually become affortable again.

#89 POL-CAN on 08.15.09 at 10:09 pm


Went to an open house today.

Nice place listed at $ 659000.00 in Leslieville (I was driving through and stopped). Talked to the agent and was surprised that I was the first one through at almost 4 PM. He blamed it on the nice weather and time of year….

Might this insanity finally be ending? How many first time buyers and greater fools are out there?

#90 Barb .. a reader in Calgary on 08.15.09 at 10:25 pm

#80 Dan in Victoria “I kinda had Garth pegged as Dr. Benton Quest”
Ah ha, you’ve hit the nail Dan, now that you mention it, that IS who he looks like!

I heard that. — Garth

#91 Verdad on 08.15.09 at 10:41 pm

It will be interesting to see what the fall and winter holds for Canadians. Typically, houses sell for more in the summer, as it is just a better time to buy/sell because of the winter weather, kids are not in school, etc.

However, if the fall hits RE hard, that could carry through into next summer. We’ll see.

#92 BobbyV on 08.15.09 at 10:48 pm

It could just be the summer slowdown but it has slowed to a crawl in the GTA market. Keep in mind the ultra low 3.69-3.79% rates are expiring within the next two weeks so that along with many first timer buyers who have already jumped into the ocean of debt may be the reason why demand has dropped off a cliff in August and will continue to decrease as we enter 2010.

#93 Santa on 08.15.09 at 10:52 pm

Looks like the greed is alive and pulsating both sides of the fence. We will see who is Santa going to bring presents to this year.

But, before celebrating prematurely, you have to remember *any* speculative activity comes with risks. Especially when it involves what for most is a life’s gathering. Speaking of shorting the market, ever heard of a short squeeze? Shorting comes with its own traps. And the wolves are there watching for the limping of the herd… or for the ones wandering too far.

Enjoy your Trump musings.

#94 VanHousingBull on 08.15.09 at 10:52 pm

Actually, renting IS “shorting”, so to speak:

#95 gold bugger on 08.15.09 at 11:07 pm

The seller doesn’t automatically get to keep the deposit. Not in BC, anyway.

As usual, giving advice you’re not qualified to give.

Actually the deposit is refundable to the purchasr in an aborted transaction unless stated otherwise. However, it’s a moot point when it goes into the hands of the broker without instructions, as is usually the case. Stick to gold. — Garth

#96 jd on 08.15.09 at 11:16 pm

What if your premise, the premise upon which everything you state is built, is wrong? Then what? Garth, what if you are wrong? Then perhaps, you have counselled thousands of people to do the absolute wrong thing at the wrong time. My premise is, Let the market tell me what is happening. The stock market, real estate market etc. They tell me what is happening. You seem to want to tell the market what is happening. Who will be right? The Markets or Garth? I think we will have a correction at some point; just like all bull markets. But you seem to forget that bull markets can go on much longer than the critics can cry wolf.

So, buy a house, just like most of society is counselling you. I’m only a guy with an opinion. — Garth

#97 Gregor Samsa on 08.15.09 at 11:49 pm

I just read that the national median existing single-family home price in the U.S. is currently $174,000. I’d love to see this number for Canada, but I’m almost positive that it is much higher. I’d also love to know when else in history Canada has had higher house prices then the US, because I would be tempted to guess: never before.

#98 Coho on 08.16.09 at 12:18 am

#25 Devil’s Advocate wrote,

Have you ever been to Cuba? When there we didn’t find everyone happy. In fact there seemed to be a surreal flatness that permeated throughout the country. There was no enthusiasm. People went about their jobs and days like they had a frontal lobotomy. There is no incentive and thus no enthusiasm. I could not live in such a state.

My good friend has been to Cuba several times and has described Cuba exactly as poster #9 did.

If your idea of a good place to live is where you can “get ahead” and what….become somebody?… then you are in the right place, kinda. Yep lots of incentive, or more like false hope, in our westernized lifetstyle to become financially independent. The reality however, is that many people are a job layoff, an illness, or a divorce away from being financially destitute.

People are afraid to get sick, lose their jobs, and grow old in modern society. Ones that do become a burden to their friends and family who are still in the hunt for that elusive worry free financial freedom that very few will ever see.

#99 Ted47 on 08.16.09 at 12:23 am

Garth, why is it when CREA uses averages you slam them for misleading folks, you are doing the same thing saying averages in Canada are up 7% this is not true in many markets in Canada. Several around the GTA are braking even with 2008 prices. Averages do not tell the the local storey and as any wise investor knows real estate is intensly local.

#100 Nostradamus Le Mad Vlad on 08.16.09 at 12:33 am

Sorry about the link earlier — here it is again.$12Billion_Israel.htm

One date — August 22 — is now set. Keep in mind it is only a nuclear power plant; no one makes WMD there. —
“If Israel (or their slaves in the US) bomb that plant now, it will be a radiation disaster equal to Chernobyl. Nobody will see this as a justified or justifiable act.”

This 3:30 interview speaks for itself! —
“Israel’s Mark Regev STONEWALLS on the killing of 11 unarmed Civilians ‘Waving white flags’ ”

In case anyone forgot —
“. . . an earlier article (Martial Law and the Avian Flu Pandemic). As Infowars reported on August 6 and investigative journalist Wayne Madsen confirmed on the Alex Jones Show earlier this week, an international conference on the coming flu pandemic will be held in Washington next week.”

Interesting how Iran’s power plant starts operating on Aug. 22, and the Swine Flu conference takes place the same weekend in DC. False flag, anyone?

Also —
How close is Columbia to Venezuela? The US is causing some discomfort, not only in South America but across the planet. Where will additional soldiers be found? Try a draft. —
I haven’t used Yahoo! for a couple of years now, and Google for some time. There are plenty of other search engines available. First para. is good. —

#101 Farnsworth, Hubert J. on 08.16.09 at 12:39 am


“We got the SS and granite for $ 2550 a month plus utilities. Less then 30 % of monthly take home and at the same time still have all of our cash and investments. We will sit back and wait for this fall’s crash in comfort and with piece of mind.”

POL-CAN, I’ve been looking for something like this for months and finding nothing even remotely close. Rental pricing in downtown/ish TO seems to be consistently stratospheric. Can you provide some definite connection to this deal or similar deals, or a description of the process that led you to such a happy result?

I would jump to that deal in a heartbeat if it presented itself – please share!

#102 Jack the Lad on 08.16.09 at 12:56 am

A “Green Shoot” in Canada… literally…

#103 Absman on 08.16.09 at 1:15 am

#90 Barb a reader of calgary, now that you mention he looks like someone, I always that you looks like John Ritter with a beard in his older years.

Check it out.

#104 dd on 08.16.09 at 2:16 am

#70 Hagbard

…Don’t want to be still waiting for that bubble to burst when I’m 64….

Do what you must but housing is overvalued compared to income. I know in Calgary in 2004 it was not. In 2009 it is. How about your home town? Base it on something besides your emotions and “I think it is about time…” Base it on fundamental analysis.

#105 Happy Renter in North Van on 08.16.09 at 2:36 am

#37 Terry C…

Good Post… Great reminder how RE Specuvestor behaviour can turn on a dime… Downward, for many, many years… This (rampant speculation) too shall pass…

#106 Peter on 08.16.09 at 3:12 am

Well, this insane on houses and so called “HOME HOARDING” wont end until the BOC really has these PAIN in the B$TT…and that is the cooperation of cheap money, da#n banks and suck1e bankers who is telling clients to buy big (why ?) because they are going to lend you unlimited capital…(wow, do i have to worry about interest rates ?)..nono, because BOC always does raise interest rates 25bps only all the the time they raise to 100bps, it will take them over 2 years…sounds great…here are 400,000, VARIABLE for 5 years and remember, its an OPEN mortgage and we know buying a home may get you into TIGHT BUDGET,so, since you are a VALUABLE client, we will hook you up with home equity line and nice high limit annual fee waived platinum visa card where you can get some miles too !!!( SOUNDS GREAT ??? Forget to tell you, they are owing over $ 500,000 of debt now…!!!) If we have tons and tons of people doing the same thing and the BIG 6 are sending these good stuff to everyone…who will be suffering ??? Are we that stupid that we have to get brainwashed by these darn agents and bankers ??? WAKE UP !!!

#107 dd on 08.16.09 at 3:43 am

.#86 Nostradamus Le Mad Vlad

The news if so bull of bs one doesn’t know what to think. The G&M business section is one large BS story. They don’t delve into long term fundamentals and what is really happening in the economy.

#108 David Bakody on 08.16.09 at 6:40 am

I see here in the Halifax area more high valued homes are on the resale market all couched in with the many retired and soon to be retired people moving into new rental units and low cost Condos. Although they may not be planning to re-buy they are taking advantage of a buyer’s market. Hello could these the same people who understood the value of money years ago and had a set of long term plans in place in their own minds.

#109 PC on 08.16.09 at 7:00 am

C’mon Garthy

You know what a thong is. You metrosexual you.

Here’s a clue…think Borat.

#110 wayupnorth on 08.16.09 at 7:59 am

#77 AND#86

I’ve read the same thing and the only reason I can make out of it is that the FDIC just took over its last bank Thursday as it is out of cash. With 150 banks needing to be shut down now the only money available has to come from the fed which can no longer borrow except from itself. Any run on the banks now would prove that other than bail out money there is none!

In other words the whole deck of cards is collapsing and it will require a “bank holiday” or more to have time to restructure and force much of the debt out of the system. This could get ugly since all but about 50 smallish ones of the 8500 banks in the U.S. are already bankrupt along with GE and dozens of other major corporations.

What will be interesting is how they treat the derivitives and credit default swaps. If they treat them like any other bad loan the whole system collapses. If they write them down to zero there might be a chance all be it slim to write down mortgages and other bad debts enough to keep a few more banks afloat.

Any way you look at it, things will not turn out well.

#111 robert on 08.16.09 at 9:09 am

I have owned four houses in my life and am perfectly happy to be renting now. What a lot of folks seem to ignore (unless your house is brand new and even then you could have workmanship issues) is that maintenance can be a real pain, especially for a lazy man on the opposite side of the spectrum from Mike Holmes. Anyway some of these new fangled mortgages are like renting with all the headaches of owning. Where’s the fun in that? I cringe when I think of the financially lost generation assuming this enormous boat anchor of debt in their prime of life.

#112 Got A Watch on 08.16.09 at 9:46 am

Garth, congratulations on this post. Giving people actual strategies is going above and beyond, and I raise a toast to you.

Some people just don’t know when they have been given solid gold advice, judging from some of the comments above.

And there seem to be some who will never be happy, like lili, with anything you write. Which begs the question, if the content here is so objectionable, why are they reading? Maybe it has something to do with the simple common sense truths being dispensed. Nah, couldn’t be.

It seems the discussion here for many runs in the same ruts, day after day. There are the many clueless who seem to think real estate in Canada will never decline like in the USA – “It Can’t happen Here!”, “It’s Different This Time In Canada! or Vancouver!”. Sure, keep repeating that mantra, you are only proving the depths of your Marianas Trench of stupidity.

I could write a book-length dissertation about how it can and will happen here, this time is not different, and Canada is not that exceptional – but the words will not reach the brains of most of the public. I think it is just that most people have an inner Bullish bias, and they can cannot cope with concepts like deflation. Mostly because they have not seen it before in their lifetimes.

My opinion is still that we are in a deflationary spiral, and this will become more apparent by next Spring. There are no green shoots, except in the bongs of those who see them. Right now we are seeing a recovery-less recovery based on bloated Government spending, and that will melt away soon – ridiculous spending can’t be maintained, and there is no room for further “bailouts”, those shots in the dark have been fired. All “stimulus” money has disappeared down black holes of wealth destruction, and won’t be seen again, except as reflected on your rising tax bills. We may get inflation soon in CPI prices, but that would be from a fall in the value of the US $ driving up commodity prices.

#113 Chris no longer in England on 08.16.09 at 10:08 am

A report on the inadequacy of new builds in the UK, which are so small you cannot swing a cat (and so dark, the lights have to be on in the daytime).

I had an old (ex) farmhouse in the UK, and the barn next to the house had been converted into four two-bed homes before we bought our house. These units were tiny, but there was a constant stream of buyers and sellers in the 12 years we lived next door – mainly divorced fathers who needed a spare room for their one child visiting at the weekends. None of them stayed any longer than it took to get straight financially and move somewhere larger.

These places are flimsy with plasterboard walls and all storage/sinks/baths are scaled down so they don’t look out of place. Occupants must think they have been beamed into an episode of Land of the Giants.

The sad thing now is, with so many of this type of home built, when people are able to afford something better they cannot sell the box they are trapped in, because all the identikit boxes are for sale and competing for buyers.

There is also some kind of cachet about buying a “new, detached, 4 bed home with garage”, even if it is a box sited 6 inches away from the walls of the box next door. The couple that bought our old house had a tussle over it, because he wanted our house (large, high ceilings, lots of space) and she wanted a new “show home” (compact, would have been the polite way to describe it) in the newest part of town.

Eventually he persuaded her that it made more sense to buy a big solidly built Edwardian house instead of a cardboard box, and thankfully (for all of us) he won the argument.

#114 conan on 08.16.09 at 10:09 am


I have read a lot of misinformation about derivatives lately.

Yes there is a Kabillion billion of derivatives out there but there is only about 5 trillion of absolutely worthless ABC paper.

Most financial firms, Manulife excepted, hedge their investments by buying derivatives.

If a mutual fund manager is way up they will buy a derivative so that a certain return for their clients is more assured.

If a mutual fund manager is down they will buy a derivative so that a certain return for their clients is more assured.

In addition,

There are a ton of investments that really are just bonds earning a return. By using derivatives a fund manager can replicate any index /sub index around the world. The money is safe it is just the derivative that is at risk.

To recap:

Derivatives cancel each other out, as they are just market bets on which way an index/sub index will move over a given period of time.

There is only 5 Trillion of rhino-poo.

#115 Chris no longer in England on 08.16.09 at 10:21 am

Re my previous post –

Land of the Giants? Obviously I meant Land of the Lilliputians, but the fresh air here has gone to my brain….

Apropos of that, I have to mention the hoots of incredulity in our house when we watch “Love it or List it”, a TV show we didn’t get in England. The vast, VAST acres of space that some couples (with maybe one tiny child) insist despairingly is too small for them, triggers enormous amusement. You could fit half a dozen reasonable sized English houses into one of these places, and the resounding chorus of “Too small? You should try and live in an English house!” is bellowed from our sofa at regular intervals.

We always support Hilary as she demonstrates how to to make proper use of the enormous area they are living in, and laugh when David (boo, hiss!) is unable to persuade them to move to a McMansion with ceilings so high you can’t seem them (finally – Land of the Giants……).

I knew I’d get it right in the end.

#116 dd on 08.16.09 at 11:00 am

I do miss the picture of that Canadian Gal on the ice sporting her all Canadian swim suit.

#117 Jeff Smith on 08.16.09 at 11:10 am

Good god! Home price does continue to go up indefinitely after all. I knew I never should have listened to Garth. Now I will never be able to buy a house, too late to get into real estate.


#118 Kelly McMae on 08.16.09 at 11:58 am

Nice and callous. Capitalism relies on such. Survival of the most fortunate.

#119 Keith in Calgary on 08.16.09 at 12:36 pm

Another Las Vegas RE tidbit from yesterday…….walking thru the stores and hotels here (which are all interconnected) you run across some people who want to give you tickets to the shows for free. What the catch is that you need to sit thru a 2 hour presentation for a time share in the new Jockey Club resort hotel they are building on the strip down from the Bellagio. I told the guy that commercial real estate was the next thing to crash and that if things were really feasible, their project would have been fully funded by a commercial bank already, and they wouldn’t have to use hucksterism to try and con the general public into buying in.

#120 My_view on 08.16.09 at 1:17 pm


“We got the SS and granite for $ 2550 a month plus utilities. Less then 30 % of monthly take home and at the same time still have all of our cash and investments. We will sit back and wait for this fall’s crash in comfort and with piece of mind.”

How is $30k a year for rent plus utilities a great deal? O.k. you make great money, have a large family, and need/must have SS & granite plus location or hell the big home status. My opinion anything north of 2k a month for rent is nuts. Obvisiouly you are renting a home that is worth around a million bucks. But still, that rent is crazy, waiting for first time buyers (greater fools to run dry) they are not the ones buying those properties. Wait for this falls crash? More disappointment in your future.

#121 Jmack on 08.16.09 at 1:51 pm

In Blaine washington, you get 10 acres and an estate home for $599,000….15 mins away in Canada for $599,000, you get a townhouse in “South” Surrey…..tough comparison…but it kinda show’s how rediculous it is.

Went to Oregon in July…nice homes for $150,000 to $200,000….No sales tax

#122 jess on 08.16.09 at 1:58 pm

“Kahre had claimed he tried to legally avoid taxes by creating a cash payroll system that disbursed gold and silver coins, on the theory that recipients could go by the coins’ face value for tax purposes…

…”Your honor,” Kahre said when he stood to answer, “This last seventeen years of my life has been to get my issues” aired about taxation and the importance of a gold standard to back U.S. currency.

“My life is basically over,” Kahre said,, indicating that before sentencing he wants to “spend time with family and tie up some loose ends.”

He faces up to 296 years in prison and fines of up to $14 million, according to the U.S. Attorney’s office.

#123 Don of the Basement on 08.16.09 at 2:34 pm

The reaction to this post seems to be split between

A) “Yeah, stick it to the fools and umm rip out their eyeballs too…just because”


B) “Aww come on Garthy, we are better than that aren’t we? Let’s break the cycle of violence and not resort to these evil eeevil tactics…oh and I love puppies”

Both of theses responses are fraught with emotion.

A’s: Why the vindictiveness? Why can you not just act as an agent within this economic system in your own economic circumstances and complete that hypothetical transaction without feeling the need to rip out eyeballs too…or get glee from what YOU perceive to be as screwing someone?

B’s: Why the heavy handed self-righteousness? Why can you not just act as an agent within this economic system in your own economic circumstances and go threw with that transaction without refraining just because YOU think you are taking advantage of someone? Everyone has their circumstances when entering into a deal. It is not up to you or your high horse to ascertain what is ‘right’ or ‘not right’ for the other party.

#124 adap2k on 08.16.09 at 2:58 pm

up to date bio news and info

12160 Bio Watch :

#125 POL-CAN on 08.16.09 at 3:41 pm

#120 My_view

Look… It is quite simple really…

I refuse to buy a house in Toronto until prices get back to normal. That normal being the ave house for no more then 3.5 times ave family income.

The house that I am going to rent is probably going for somewhere in the 650 K range based on other units in the development. I refuse to pay 650 K for a townhome anywhere. Especially in this shit-hole of a city full of deluded, over-extended, un-read, un-cultured, and ignorant sheep.

Ok… Maybe in a real world class city such as NY, London, Miami, Moscow, Paris, or Tokyo I would pay that 650 k for a townhouse. And guess what… Prices have fallen in all of them.

Canada is different? Based on what? The fact that we have so far managed to avoid a depression due to QE means nothing. GAW explained it quite well again in post # 112. I suggest you read it.

If you want to belive that somehow we will escape a GLOBAL downturn with no real industry of our own is just plain silly. The world goes where the US consumer goes since they account for 20 % of global consumption. Be aware.

Prepare for the worst and hope for the best.

End of rant.

#126 NKVD Black Raven on 08.16.09 at 3:46 pm

After that concrete fell off the office building in Don Mills I read that concrete reaches it’s peak strength at about 30 years. Could someone more qualified than me on here speculate on how well newer glass-faced RE/CRE are going to weather the years?

#127 Erasmus on 08.16.09 at 3:57 pm

This may be old hat and already posted here, but my interest perked up when I came across the title of this article: “FINANCIAL ARMAGEDDON”. The US has done it again and who will bail them out? This is the US version of CMHC and their rush to subprime loans.

#128 Barb .. a reader in Calgary on 08.16.09 at 4:00 pm

Oh great, Calgary’s Annual Cash & Cars Lotto adds new twist.. a new grand prize of

……… wait for it ………

“A $435,000 Condo in Scottsdale, Arizona!”

I wonder what it’s value really is?

#129 rubberduckie on 08.16.09 at 4:07 pm

I think folks don’t want to follow Garth’s advice (VTB Mortgage) for the same reason we don’t want to go to the slaughter house and murder our own chickens for dinner.

#130 Swag on 08.16.09 at 4:20 pm

Garth just wow – predatory selling is quite a creative idea and I hope you forthrightly endorse this when you continue on your media/book selling circuit so that people can find out just where you stood in this time of difficulty for so many.

Your predictions have been wrong all year. Who’s to say you are correct now? I guess you are.

I take it you are selling your house and all your property as you are advising others to do.

I guess for those renters you advised to stay out of this housing crash of 2009, they have no choice but to borrow money, buy a house and sell it to someone else to take advantage of the bubble of 2009.

People have asked for strategies to make money in a bubble market (when buying ahome is obviously not one of them). Nothing predatory about selling a home in the manner I have described. But there is something quite unethical about the purchasers. Which are you? — Garth

#131 Peter Wiener on 08.16.09 at 4:29 pm

re #120

what planet do you live on?
you obviously don’t live in a large city and know nothing about math. $2,000 in rent in a city like Toronto is DRY CHEAP for WELL LOCATED rentals, especially with the alternative being $ 425 to $725 per sq ft for a concrete box with NO charm and highly questionable build quality.
Are you living in the last century?

#132 Peter Wiener on 08.16.09 at 4:42 pm

re # 117 Jeff Smith

You are joking, right.

Just think about what you posted for a moment.

If you are convinced that RE goes up indefinitely and you think those links suggest or even prove your reasoning, why would you hestitate – get out there and buy right now, don’t delay!

Don’t stop at one home either, if you buy multiple houses, then you’ll catch up on all the gains you missed out on that much quicker.

See, getting rich in real estate is easy, just like the whole world is telling you.



#133 dave99 on 08.16.09 at 4:49 pm

#120, My View, you wrote

“My opinion anything north of 2k a month for rent is nuts.”


Really? For Toronto? I live here and it sounds like #87 is paying a standard rental rate for a downtown townhouse.

#134 Peter Wiener on 08.16.09 at 5:02 pm

#112 Got A Watch

boy are you ever right!
have enjoyed some of your postings on Mish as well (if you are the same person with this handle (Got A Watch)

#135 jess on 08.16.09 at 5:03 pm

angered by job losses through mergers.

The Information Centre for Human Rights and Democracy said 30,000 steel workers clashed with riot police on Friday in the north-east province of Jilin.

#136 Peter Wiener on 08.16.09 at 5:08 pm

re # 111 robert

Another well reasoned viewpoint.

How a visitor to this blog can ignore this kind of well intentioned, common sense reasoning is beyond me; that they can actually bring themselves to buy a house in this environment is unfathomable!

#137 Peter Wiener on 08.16.09 at 5:20 pm

re #126 NKVD Black Raven

Although concrete achieves its maximum ‘strength’ after 30 years, there are many different mixtures of concrete for different applications that have varying life spans. There is an aquaduct (open pipeline structure to transport water in Spain that is 1,800 years old I believe and still in use today! In addition, environmental factors and exposure to corrosive elements can severly curtail the effective life of concrete (think the elevated Gardiner expressway in Toronto).

If you are concerned re today’s concrete structures, you should be. Floor thicknesses and general structural pours of concrete I have seen lately are all TOO THIN unless they are special high density mixes.
But, I’m the kinda guy who likes to build things to last centuries, not decades.

#138 dd on 08.16.09 at 5:21 pm

#120 My_view

…My opinion anything north of 2k a month for rent is nuts…

Really. Downtown Calgary at $1500 for 2b and 2b. Walk most places (health), only need one car (wealth), and time saver (quality of life).

#139 The Yellow Dart on 08.16.09 at 5:28 pm

Hello Garth, Hello All,

I’ve been reading this blog for a while now, but have never felt the need the need to post before. I guess I do now though, eh.

In general, I tend to agree with those who have an aversion for taking advantage of their fellow citizens in shady business dealings. In this case, however, there is nothing shady about Garth’s suggestions. They don’t attempt to lead any potential “victim” on at all. He is not suggesting you trick anyone into buying anything they don’t want, or doing anything to misrepresent the current value of the property. Right now what you would be selling them is worth exactly what they would be paying. Sure, most of us here don’t feel that those properties SHOULD be worth that much, but the fact is they are worth what people are willing to pay.

That’s the whole problem anyway, isn’t it? The reason why house prices are over inflated is because there are people out there willing to pay that much. Sure, cheap money and questionable lending practices don’t help… but they are not forcing anyone to take on huge debt, they are doing that of their own free will.

So rather than think of those people as victims, consider instead that it was the actions of those “innocent” people which ultimately served to inflate the price of houses in the first place. Sellers don’t determine the value of property, willing buyers do.

Besides, most of us bears are running around telling anyone who will listen not to buy. Many don’t seem to want to listen. So be it. It’s not about being vindictive, or about taking advantage of anyone. It’s about taking advantage of our (presumed) knowledge of future trends in the market.

#140 Swag on 08.16.09 at 5:28 pm

130: Garth I hope you are not suggesting that people buying a house now are unethical. (instead of mistaken or even prescient if the crash has passed).

I am not buying or selling (real estate or advice for that matter).

Pay attention to the text. My examples were of people who welched on an offer or defaulted on a mortgage. Sheesh. — Garth

#141 dd on 08.16.09 at 5:30 pm

#130 Swag

…Your predictions have been wrong all year…

However, based on fundamentals such as median salary vs house prices there are no screaming deals to be had (In Calgary anyway). Why buy an asset when everyone else is? More likely to pay top dollar therefore more downside risk.

Over the last six month it is not housing that was the real winnner but the general stock market.

#142 Peter Wiener on 08.16.09 at 5:39 pm

re # 125 POL-CAN

Only one argument with your great post – shouldn’t call it a rant at the end, its not, its sound reasoning that in the context of an irrational market might make it appear that way. You can’t detract from the truth.

#143 Farnsworth, Hubert J. on 08.16.09 at 6:10 pm

Pol-Can #87 & #120, Peter Weiner #131

I’ve been following this blog for over a year, and when rental rates are normally mentioned by posters, they have struck me as almost absurdly low to what I commonly see, even when they have been specifically oriented to the Toronto market. My ongoing environmental scan of Toronto has found that it simply costs a lot more than most posters here realize to rent a decent and clean (no bugs, no vermin, no motorcycle gang neighbours – no offense Garth) apartment or flat, condo or house. Try finding an air-conditioned 1-bedroom comfortable for 2 adults (that isn’t a basement) for under $1100 between Lake Ontario and the 401, and from the beaches to, say, Royal York Rd. They might be out there if you are ready to follow the listings and pounce the moment an ad appears, but normally you will be challenged, because most available without a scrum will range between $1300-$1400+. A realistic price range for a 2/3-bedroom will see you looking at $1500-$2000+. And we’re not talking about some manner of serious premium luxury here (except in the marketing materials when it comes to condo rentals), we’re talking about appliances that work and a parking spot, and in all cases under 1000 sq.ft. in size. So, POL-CAN’s find of a relatively huge townhouse for $2250+ is, by normal urban Toronto standards, a score. POL-CAN, I applaud you, and I wish that you’d just mention the nearest intersection to those digs…

#144 Ottawa on 08.16.09 at 6:20 pm

It’s not as if Garth is “selling” anyone who is looking to buy real estate – in fact quite the opposite.

If people believe msm and have set their mind to buying in now, before the last good deal is taken – what effect does it have who they are buying from?

Regardless they would still own a home and it is not the fault of the seller.

The flip side is that, if incorrect, the current owner is selling an appreciating asset too early with the buyers collecting the paper profit.

#145 X on 08.16.09 at 6:22 pm

#125 POLCAN – ‘I refuse to buy a house in Toronto until prices get back to normal. That normal being the ave house for no more then 3.5 times ave family income.’

I am with you on that. My rule is even simpler. I refuse to pay what sellers are asking. I work hard for my money, and these prices simply aren’t worth it.

#146 taxpayer like you on 08.16.09 at 6:25 pm

Pol Can et al

I dont think “my view” was telling anybody to buy. They were just shocked at a $2500/mo rent. Seems high to a small-towner like me as well. I mean maybe its a good deal – like a new porsche at 25% off – but it sounds like you’re trying to live porsche when chevy (oops make it a
ford) will do.

The $2500/mo very roughly corresponds to paying a
$450k mortage. Given the $600+K prices, that may not be too far out of line. Gotta go….

#147 Nostradamus Le Mad Vlad on 08.16.09 at 6:53 pm

For #110 wayupnorth on 08.16.09 at 7:59 am — “What will be interesting is how they treat the derivitives and credit default swaps. If they treat them like any other bad loan the whole system collapses.”

— and —

#114 conan on 08.16.09 at 10:09 am — “To recap: Derivatives cancel each other out, as they are just market bets on which way an index/sub index will move over a given period of time.”

There was a very good documentary on CBC “Our World” this afternoon, called The Mystery Of Capital. Maybe new or repeat, not sure and I only caught the last 15 mins. or so.

Links showing the differences between Credit Default Swaps, Derivatives, how they work, etc. I don’t profess to understand them, as math is not one of my strong subjects. Third link is from Oz.

Quotes from links: “History — In 1995, J.P. Morgan’s Blythe Masters (a 26-year old Cambridge University graduate hired by the bank), developed the first Credit Default Swaps and Collateralized Debt Obligations (CDO). On April 2nd, 2007, Masters (who by then was the head of J.P. Morgan’s Global Credit Derivatives group), helped introduce CreditWatchTM to help evaluate credit swaps among other financial instruments.

“By the end of 2007 there were an estimated USD 45 trillion worth of Credit Default Swap contracts.[2]”
“Credit default swaps give a speculator a way to make a large profit from changes in a company’s credit quality.” [ Note the word “speculator”, as it signifies greed. ]

“Warren Buffett famously described derivatives bought speculatively as “financial weapons of mass destruction.” [ They don’t sound too healthy. ]

“The Investor’s Utopia: More Control for Less Money

“There are numerous derivatives strategies, but the common thread is that they all allow you to either buy or sell an investment without actually taking possession of it, with the ultimate goal of allowing you to profit from a move in the underlying asset in a specified amount of time.”

“What are derivatives? In short, derivatives can be defined as financial instruments or financial arrangements, which essentially derive their value from, or whose prices are based upon, some underlying stock, bond, commodity or other various other assets. Futures, swaps, options and warrants, as well as certain mortgage-backed securities are the most common derivative forms.”

Now, if people are losing homes based on mortgages that cannot be repaid, where do these derivatives come into play? If mortgages go down and homes become worthless (could be that is why entire towns are being razed now — no one is living there anymore), how are the mortgage-backed securities paid back and with what?

It shouldn’t be too hard to find out, but from what I understand, worldwide the CDS are in the quadrillions, and as conan said, derivatives amount to five trillion.

Even the basics on understanding this are beyond me. The man being interviewed in the documentary said the west has created a shadow banking system; everyone realizes that shadows are full of emptiness, there is no substance to them.

My guess is that one way or the other, foreclosed homes / bankruptcies / states and federal govts. going underwater are only the tip of a massive iceberg.

#148 Peter Wiener on 08.16.09 at 7:03 pm

attn Mike Hunt

hope you saw my belated reply to your posting on the “Subprimal” thread of a few days ago, comment #144 I believe

#149 Nuvolari on 08.16.09 at 7:09 pm

Hiya Garth,

Long time reader, first time poster :). More than anything, I just wanted to say a sincere thanks to you (and also to many of the board regulars) for your invaluable contributions to my education in the field of RE and the economy in general. Much appreciated!

Gotta confess, up until about a year ago, I was one of the great Canadian unwashed “financially illiterate”, totally clueless and oblivious as to what was going on in the confusing world of finance. But, hey, nothing like a messy divorce and a coincident collapse of the world’s economy to get one’s attention in a hurry, eh??

Anyway, my position in a nutshell. The past 12 months have been a personal and financial slog, but I’m just about out of the woods now. Totally debt free, apart from about 16 months left to have my mortgage totally paid off, so not doing too badly, all things considered – and a hot new Danish girlfriend, but that’s another story ;)… Absolutely no intention of moving at the moment – I love my house and my neighbourhood, and it’s convenient to work and all amenities, so don’t see any real point in relocating; it’s not just a house, it’s my home…

Just wanted to make a suggestion for an upcoming column, and I guess it’s related more to the mentality/psychology/sociology (or whatever you want to call it), of the economic situation that Canada and the world is in right now. I come here to read this blog, and to other sites that people here have recommended (Daily Reckoning, Mish, etc), and most of the posters make logical, factually well-supported and compelling arguments about the current state of affairs. Yet, in reading, listening and watching the mainstream media, it’s like we’re living on two entirely different planets. And I’m not just talking about the bubble-headed bleached blonde (thanks, Don Henley) who intersperses stories about the economy with breathless updates on the latest Jon & Kate Plus Eight or American Idol news flashes, I’m talking about the well-educated, well-credentialed economists and other so-called financial experts who you would think would know better, but who would lead us to believe that the worst is over, happy days are here again and everything will be back to normal soon. Now, I can understand this point-of-view from the RE shills who have an obvious agenda to make folks believe that this is so, but there are so many people who have no (apparent) agenda who are singing the same tune. And so my big question is: Why is this happening?? I mean, these obviously are not fundamentally stupid people, so how the hell can there be such a dichotomy of beliefs between people who are observing the same set of facts?

Like I say, I’m new to all this stuff, and it’s confusing as all hell, so I’m just trying to understand and figure out who to believe.

Anyway, thanks again Garth, and keep up the good work!

#150 Peter Wiener on 08.16.09 at 7:13 pm

#143 Farnsworth

absolutely been my experience as well in Toronto and if anything, your analysis errs on being conservative slightly. For mid-lux rentals, I have friends renting places (condo and houses) for between 4,500 and 8,000 per month PLUS utilities, insce, etc.

a mid-lux 2 bdrm / 2bath with some amenities run s2,500 to 3,800 PLUS utilites, etc. all day long – pick up a newspaper , go online or call a realtor in dwtn Toronto -you’ll see!

These high rents give a lot of credence to the claim “renting is throwing your money away” to people in Toronto that are told that by others and has been one of the fuels to this RE conflagration.

#151 Peter Wiener on 08.16.09 at 7:30 pm

Mike Hunt
see posting under Subprimal #144 I believe and call in the reserves!

#152 Peter Wiener on 08.16.09 at 7:30 pm


#153 john m on 08.16.09 at 7:55 pm

#128 Barb .. a reader in Calgary on 08.16.09 at 4:00 pm……that is a good one! :-)

#154 john m on 08.16.09 at 8:05 pm

“Getting a judgment would be virtually automatic, or just regain title and move back in. And you’d be $80,000 wealthier than you were before, without having had to invest any money.”….sounds great Garth with one exception–people losing their home are not nice people..i know a guy that held a mortgage on a home in Kingsville Ontario..the people defaulted and moved out and destroyed the house ,they even took the furnace,wiring,plumbing fixtures,patio stones,even interior doors etc ..that was two years ago he had to spend a ton of money to fix it up and has not received any satisfaction from the courts.

That’s why (a) you get a big downpayment and (b) a good lawyer. You always have the option of selling the property for the best market price and suing the defaulters for the shortfall. They cannot escape a judgement. — Garth

#155 PC on 08.16.09 at 8:27 pm

Garth Gekko Turner

#156 Typhoon on 08.16.09 at 8:32 pm

I’m worried that I’m not properly protecting my family and friends by being too quiet about my thoughts. Garth, I’m 100% with you on this housing thing. I have friends (in their early 30’s) who own a home and an investment property and I’m seriously worried that they are going to get plowed down by the incomming train wreck. Do you have any suggestions on how I can help get through to them that they are overleveraged and that a housing correction will be life devastating to them? I have trouble dealing with myself for not smacking them in the head and telling them they’re idiots. They all think I’m an idiot because I’m one of the only renters left in my group. I think my wife thinks I’m the idiot too, which doesn’t really help either. Am I the idiot?

#157 taxpayer like you on 08.16.09 at 8:58 pm

Re: Peter @150

I recall from some old posts that you are not buying any real estate anywhere in the world right now. Is that because you believe it is all overpriced?

You give us some example rents in Toronto. Holy crap! Do they approach the15X rule for rent/purchase? They
do seem to get to the magic number where a tenant with
a down payment could purchase for similar montly

So my question to you is this contradicting (or approaching contradicting) the “prices are too high”
assumption? People who are free to move at any time
(renters) are actually paying near purchase equivalents.
If we are not there yet, how much of a price change is in store?

Your thoughts? tia.

#158 Peter on 08.16.09 at 9:07 pm

Rent has been going up because of the outreagous management fees levied by the condo corp. plus you all have to understand with asset prices going up, those landlord would also jack up the prices (part of the co-ordinated efforts) to help push the real estate market higher and more unrealistic..Maybe you all should go to Asia and study why Canada has become the same market buying and selling behavior as those Asians did in the 1990’s and beyond !!! I am sure those are being carry over from Asians coming over (immigrating) here and use the same methodology as those populated cities like Hong Kong, Japan, Beijing, Shanghai and Singapore where you have to flip houses and rent homes to make money !!!

#159 Peter Wiener on 08.16.09 at 9:08 pm

# 156

Nah, you are not an idiot, to the contrary, you are likely the ‘smartest dude in the room’. Savour the experience quietly.

In reality, no one wants to hear the truth (they like their dreams) and later, when and if proven right, you will receive little thanks.

To paraphrase someone better with words than I (Bejamin Franklin, I believe);

“Experience runs an expensive school, but some fools will learn in no other.”


#160 POL-CAN on 08.16.09 at 9:08 pm

#149 Nuvolari

Well thought out question :)

I will take a stab at it and others can add to it…

The reason people who should know better are openly lying to the public is quite simple. The current anglo economies are giant corrupt ponzi schemes. In any such scheme CONfidence must be present or else the whole thing collapses. The sheep must feed the system.

The un-productive segments of the economy i.e. banksters, insurance, all levels of government, RE agents and boards, and the MSM are scared shitless right now because if the consumer figures out that the system is a scam, the whole thing is over.

So they all ignore the fundamentals and keep hyping the “change you can belive in” and “hope” and “green shoots”, in an attempt to keep you spending even if it is through more and more debt.

All gov statistics can not be trusted. We must use our heads and pay attention to what is happening around us at all times despite what the MSM is pimping.

We must go back to being a productive society. We have to get rid of corruption in all public/private industries.

We must reward knowlege and abilities again. We must support productive ventures. We must consume less by living within our means and demand that our govs do the same.

#161 Peter on 08.16.09 at 9:14 pm

If prices are going up like that, sooner or later, this gap of buyers and renters will spread further and further and it will eventually becomes those richer always get richer because they can collect rent, make money by selling their inflated assets and buy more homes or condos to rent it out and if you all could not afford to buy, you all will send your money every month to these people and they will get more richer and richer…If you all still keep supporting the market by thinking “cheap money, cheap rates, houses are still cheap, money does not worth anything but need to send those money in to buy homes (hoarding physical assets) or homes does not drop in prices story”, we all will be holding the bag..

#162 Peter Wiener on 08.16.09 at 9:37 pm

re # 160 POL CAN

some good points in your response

my take;

These Realturds, Cdn banks, insce companies, investors, mortgage finance companies, city tax departments, newspapers, local gov’ts, the buiding industry and everyone with a vested interest all believe that they will benefit by keeping a “positive spin” (includes extreme exaggeration, manipulation of facts and even outright lying) on RE. In the investment world this is referred to as “talking one’s book”.

Well, these people (and I use the term loosely here) are SHOUTING and SCREAMING their book. Everyone of the aforementioned occupations NEEDS RE prices to stay up and even go up more to ensure their survival, so they need to keep up the seduction. Think vampires that are getting thirsty with the sunrise due imminently. No difference IMHO.

What absolutely floors me intellectually is that current buyers actually trust the judgement(s) of these shills who should not only know better, but do know better. They are are no different in my opinion that any other crooked promoter in that the only payoff they are interested is one in the short term. They’ve had it pretty good and they don’t want the party to end.

#163 Peter Wiener on 08.16.09 at 9:42 pm

also POL CAN has it right on another level – none of these lazy POS’s (not talkingPower Of Sale here) really wants to work, or if they have to work a bit then, they will do so for only outsized remuneration.

Its gonna be fun watching them implode financially – karma is a bitch!

#164 Barb .. a reader in Calgary on 08.16.09 at 10:41 pm

#149 Nuvolari
“I can understand this point-of-view from the RE shills who have an obvious agenda ….but there are so many people who have no (apparent) agenda who are singing the same tune.. So my big question is: Why is this happening?? ….these obviously are not fundamentally stupid people, so how the hell can there be such a dichotomy of beliefs between people who are observing the same set of facts?”

Good question Nuvolari, but the answer is the same as anything humans do (such as politics):


1) Some actually believe this stuff and push it. 2) Some it suits their purposes so they turn a blind eye. 3) Some will fall for anything.
With well-orchestrated campaigns, they will each carry out their end of the bargain to achieve the goal.
In this case, real estate — they are all trying to make money. Most humans really don’t care who they make money off of..
Bill Moyers discussed this human behaviour a few decades ago with Joseph Campbell. Participating in bad behaviour because it’s your job to do so, and not backing out, is known as “The Vital Lie”. Odds are most people will go along with any important enough lie if it means keeping their job or helping their vested interest. As per the 3 reasons above, there are a variety of motives for participating.
To walk away or be a whistle blower is a much more difficult option than we give credit for.
Thank goodness for people like Mr. Garth, even if he does have a beard and a bike.

#165 Peter Wiener on 08.16.09 at 11:05 pm

re# 157

You are correct in that I believe everything is overpriced INCLUDING THE ENTIRE USA! If you include the risk factors of currency differences, often discriminatory and rising taxes on non-residents, illiquidity etc., foreign destinations are a particular trap right now. An exception would be Iceland for example, but their loss of independence and self-sovreignty make it a crap shoot before 2010 probably.

I use a different formula to assess values, but suffice it to say I believe that people are strictly in la-la land when they extrapolate no vacancies, low interest rates, high and rising rents, etc. into their return assumptions. They are too short-sighted generally.

People buying believe this fantasy doled out by borederline fraudulent Realturds and are generally lazy thinkers. They leave out considerations that are not immediately evident and quantifiable such as the value of personal mobility (not having to sell a residence in order to relocate for better opportunity{especially with a murky jobs outlook at best} for example or to rid oneself of untenable neighbours by moving). Such considerations are not discounted in rising bull markets, but they sure detract from value in a falling bear market.

A golden rule to remember in any investment is that you make your money when you buy. Buy too high and/or at the wrong time and you are unlikely to profit now – or ever! Warren Buffet has espoused this many times over the years and it has always proven that way for me whether it be shares, houses or any material goods. I think that was Garth’s motive in purchasing fairly recently.

Barring hyperinflation, IMHO anyone buying for less than a 9.5% cash on cash return simply can’t make the kind of money I need out of a deal to induce me to write a large check. Don’t believe it’s possible? Bought lots of stufff in 1995, 1996, 1997 at 10% cash returns at 50% of replacement of cost going in. All sold now at considerable profit (taxes hurt though). By the way, despite all that advantages going in, with all that margin of error and the risks one assumes, vacancies, repairs, taxes, etc. and in a rising market, its still a business with costs and a lot of work.

So, to answer your question perhaps in another way, I would argue that anyone buying today is BUYING BADLY. If rent and ownership are ostensibly the same (they are not but I’ll prove it thru maths if I get ambitious enough another time) then you are assuming that ambient economic conditions, int rates, etc. won’t change. Where is the upside? Bad bet in my books and yes, shortsighted. I argue that rent should be the same or higher than ownership IN SOME CASES owing to its may advantages and flexiblity. But today, for Torontonians (maybe not Hamiltonians or Kitchenerites, etc though) it is much cheaper for me to rent a place that I like than buy it.

Please bear in mind that I’m a pretty disciplined investor in RE and have only ever lost a grand total of 120.00 Cdn (one hundrd and twenty dollars only) on my first house purchase due to a lucrative relocation opportunity that I accepted. It was a POS (literally and figuratively) from TD and I was scared it wouldn’t sell (1989) before I left. You see, I had sold a commercial/industrial buiding for 2.5 times what I paid for it after 6 months in 1989 by putting in $9,000 into it. I correctly perceived the market to be insane and me very lucky so I blew out the POS house for a tiny loss and split to my new work rather than (expensively) renovte and rent it out. The guy who bought it was going to turn into 4 rental units.

I will never forget stopping by the property about 8 months later where I met the new owner’s brother, shovel in hand, sweating and digging out the basement for additional rental space in essentially what was a shell of the old gutted structure. All he said to me was “it’s a good thing my brother isn’t here right now” with a malevolent glare and turned his back on me and kept sweating, swearing and digging. I was pretty tough then having just got back from working oil rigs the year before, but this guy had a shovel and was profoundly pissed at their mistake. I never forgot how close I came to a major financial setback that millstone around my neck that would have turned into nor how this guy had a look of despair in his eyes. They really, really bought badly at the top of the market in 1989 despite the POS price and my move made me look smart, though I know I wasn’t.

To this day, I am pretty certain that they would not have seen a return on their investment all told.

There’s a lesson in that for others too, including being beware of unproven and extrapolated math in an extremely expensive market for rentals.

Hope it gives you some insight.

#166 Another Albertan on 08.16.09 at 11:11 pm


No apparent agenda? Hardly. How do you think these economists get paid? Unless they are getting buy on selling research alone (highly unlikely), they will be working for or affiliated with some party or group that is running money – and likely a LOT of money. Just because they may be macro economists and don’t make investment picks themselves doesn’t mean that their firm isn’t trying to make a market in various equities or other instruments.

#167 Jonathan on 08.17.09 at 9:06 am

#16 Casanova

It would be interesting to you to note that Japan cranked interest rates from 2% to 6.5% over the course of 15 months. They did this to kill the bubble.

Back in 2005 the real estate bears thought that the US would fare better since Greenspan would avoid this mistake or raising interest rates and that their landing would be much softer. Well he didn’t crank them 4.5% – but the landing was as hard if not harder than Japans crash.

If the US and Japan suffered this fate, why would you have so much confidence that Canada can avoid this?

#168 Jonathan on 08.17.09 at 9:18 am

#117 Jeff Smith

You analysis is like the majority of Canadians. This is why bubbles happen. You don’t look at the underlying fundamentals.

This is debt driven from risky credit. CMHC and the banks are approving it all. The federal government and BOC have mandated it.

If you don’t know how this will end, then you’re a sucker. The higher prices go right now, the worse the crash will be. I look forward profiting from your greed. ALL credit expansions end poorly, regardless of country or time period, unless the expansion increases economic output at an equal rate. Debt growth has quadrupled the underlying GDP growth rate for ten years.

You can only have 100% confidence that real estate, one day, will be much less than what it is today. Much less.

#169 C Regan on 08.17.09 at 1:00 pm

Bubble Buster #2

Actually there is an 5 yr open variable P+.80 = 3.05% from BNS so a 5% vendor take back really isn’t a great option

Corey Regan

My offer was of a fixed, not a VRM. Big difference. — Garth

#170 Davinci on 08.17.09 at 4:41 pm

#122 jess
That guy is going to jail not for his payroll scheme but his choice to have his cake and eat it too. He had home loans and car loans and was actively participating in the currency that he knew was a scam, effectively giving him the advantages of both worlds.

The rule of taxes are simple…

“Give to Caesar what is Caesar’s and give to god what is god’s.”

(I’m not religious but in my studies of gold, silver and taxes I came cross that quote.)

What that quote means is if you trade in items that do not belong to the government you are not avoiding taxes. Also if he was religious he could also use his religion for a defense.

His main failure is that if you trade your $50 gold into $1000 paper you increased your wealth and your tax bracket.

If you traded your $50 gold for goods you are not increasing your wealth. The law is clear on that as it defines a dollar as measurement of silver and gold and that has never changed. Also the government decreed the minted gold and silver coins as legal tender and has never repealed such decrees.

His dishonest and greed is what ended him, if he had never traded his gold and silver for currency he would not be in violation only the individuals trading the gold and silver into currency would be if they did not claim it on taxes.

So a simple rule of thumb if you receive or accept currency you owe taxes on that face value. If you receive or accept gold and silver you owe taxes on that face value.

Here in Canada the same rules apply, however there is a limit per day how much coin money you can receive, after that limit, the coins are no longer legal tender and the recipient of the coins must pay taxes on the intrinsic value.

#171 George on 08.18.09 at 7:57 pm

Uh, Garth, if that is in fact your name, who in their right mind would ever consider those conditions of sale that you outlined in your essay.
Sorry, if have to go now – I am due back on the planet Earth.


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