The predator

Oh crap. Markets wither on recovery jitters


Some called it predatory selling. Others said it victimized the victims. One visitor hissed that I’m despicable, and threatened to regurgitate my own words when they might be most damaging. And then, on BC real estate discussion board momentarily devoted to my last blog posting, this cogent comment:

He is on meth.
What a meth.tard.
If he was so f*ckn’ smart he would be doing it and he would be rich.
But no, he’s just whinin’ and cryin’ and poor….P.O.O.R. or should we say POO-R.
Quit wasting chip space with your drug incited posts.

And what was all the angst about? My ideas on being a bubble buster – taking advantage of an unsustainable housing market through savvy selling. In one case I suggested dumping your home into a bidding war environment, getting a fat, non-returnable deposit and a long closing date of six or nine months.

The logic was twofold: Sell now in a bubble and close in the Spring when the market may well be cheaper. Sell high, buy low (my family motto). Second, if the purchasers choke on rising rates and falling house prices, and bolt, you end up with a serious chunk of money and your house back.

I also mused on selling with a VTB on favourable terms to the buyers, and a 20% or better downpayment, favourable to you. After closing, you get a tax-free whack of cash, a tax-free 5% return on your mortgage money and your principal returned in five years. In other words, rent for free and await the housing correction.

But if the new owners end up under water, and walk out on their mortgage payments, you have every legal right a bank does. You can foreclose, force the sale of the house, regain possession or sue the defaulters for damages and any shortfall between the sale price and your mortgage amount – plus arrears and costs. And, you still keep the tax-free downpayment.

Is this stuff so scary?

What should I suggest? Sell your home in a bidding war environment – the tippy top of the market – and, if the buyers change their mind, just hand them their deposit back, share a Bud and try to resell in a declining environment? Or sell and take back financing, then let the buyers off the hook, after some hugs,  if they decide to stop making mortgage payments?

I mean, get a grip.

For real estate sellers, this is the Olympics, dude. It doesn’t get much better than this for dumping an asset at its greatest value. After all, we know interest rates and taxes will be higher in a year or two, that manufacturing jobs are not coming back, family incomes will be stuck in the mud and the real estate market burned out. Why wouldn’t you want to score?

It’s not like anyone’s forcing people to buy, holding Tasers to their temples and ordering them into the bidding war trenches. All around us in Toronto, Vancouver, Edmonton and Winnipeg, folks are stuffing themselves on cheap borrowed money and hitting the streets to compete for houses which went begging six months ago.  They insist on buying high, and higher, and highest.

Reasonable people know how this will play out.

Unreasonable, emotional, hormonal, peer-pressured, spouse-abused, right-brained, give-peace-a-chance, idealistic, kumbaya-humming deniers don’t. Fine. Sell your real estate to people without money and see how it goes.

I’ll be waiting.


#1 Smart on 08.16.09 at 9:27 pm


Garth, last Spring you have also expected cheaper market. You might be wrong again and the bubble show will still on the following Spring.

Actually I was right. Housing did correct. But I’m only a guy with an opinion. Individual results may vary and objects in the mirror are larger than they appear. — Garth

#2 POL-CAN on 08.16.09 at 9:32 pm

Even this perma bear is getting scared again after reading another great post from KD:

Sunday Lesson: Why “Normal” WILL NOT Return

Here’s the underlying problem: Bernanke and the Government are throwing literally $250 billion a quarter down the toilet simply trying to prevent an all-on deflationary collapse.

Unfortunately that “prevention” only works so long as the $250 billion a quarter can continue to be spent – more than $1 trillion a year in annual deficit that must be continually added by borrowing from the Chinese and Japanese EACH AND EVERY QUARTER or THE SYSTEM WILL GO RIGHT BACK INTO COLLAPSE.

How long can this continue?

Not all that much longer – and if the direction does not change before our rope runs out we face a future far worse than we did last fall had we done nothing.

#3 taxpayer like you on 08.16.09 at 9:32 pm

“After closing, you get a tax-free whack of cash, a tax-free 5% return on your mortgage money and your
principal returned in five years.”

Garth, I still dont see why the interest portion of the VTB is tax-free. I cant believe CRA would allow this loophole.
If you sold the property outright, then lent the amount as a mortage on another property, the interest charged would be declared as income, right?

It’s is part of the proceeds of your principal residence. I consider it non-taxable income since it’s basically installment payments on your sale proceeds. — Garth

#4 Onemorething on 08.16.09 at 9:37 pm

Love it Garth! This poster is a dick, plain and simple. More dicks to come, our gain!

Agree with MISH in posting a few days ago on housing bottom USA, it will be a 7 year duration to the bottom which put us end of 2012.

How long will Canada take to find the bottom 2015? and furthermore where will all the buyers be when it does!!!

I also believe is a triple down recession with second wave coming this fall.

I’m ready!!!!!

#5 anon09 on 08.16.09 at 9:47 pm

The Debt Crisis Cannot Be Solved with More Debt

#6 hal smith on 08.16.09 at 9:55 pm

If you want to bet on the real estate crash why not short the REITS ?

#7 conan on 08.16.09 at 10:04 pm

With the VTB strategy that you suggest, high down payment and all, doesnt that type of buyer get a far superior outcome by just buying the whole property?

Are you suggesting that a person with this type of down payment would not be able to get a normal mortgage with a lender?

How many people are there like that around in this current lending environment?

Read the original post. I suggested a five-year open, giving the buyers unparalled flexibility. The banks do not offer such financing. — Garth

#8 ottawa pete on 08.16.09 at 10:06 pm

Saw this new magazine at Chapters today: “First Time HomeBuyers Guide” $9.99 newstand price. Cover story “Why Buying Now is Better Than Renting”:

#9 $fromA$ia "Garths Nugget Boy" on 08.16.09 at 10:13 pm

Garth, what kind of advice can you give my friends’ father that has nothing but vintage money stored away and just turned 70 and lives in his car?

He doesn’t own property. I say of the vintage money to sell it in exchange for GOLD and the rest to keep as regular money because when times are tough people do not care for numismatics. Any thoughts?

#10 Calgary_rip_off on 08.16.09 at 10:19 pm

Hi Garth:

You are correct in that people are trying to unload their properties in Calgary. Its not so easy to get any place to live in Calgary, rental or own.

I like dd’s comments-yes myself and many others do want to get into Calgary’s market. I dont see people being maxed out here though. I believe many of the people in Calgary bought their homes when it was $250K if that for a place. Again, unless interest rates skyrocket, its extremely unlikely for prices to dip.

Garth, you have access to political info in Ottawa-will the feds we skyrocketing mortgage renewal rates? Whats the word?

#11 lgre on 08.16.09 at 10:22 pm

it’s funny how these people get their thongs in a knot when someting regarding housing is said that they dont approve….they have no problem with banks and government raping them on a daily basis,,or how about those stock shorters who made billions last fall..that’s ok, nobody benefited there I guess off some poor working stiff…the moral is, if you want to complain, then complain about ALL of it not just what fits your agenda…

#12 Blobby on 08.16.09 at 10:22 pm

I do LOVE the attitude that a lot of people seem to have (like the “meth” guy) – that if you dont own property, and dont have a lot of debt hanging around your neck.

That must somehow mean you’re poor?!?

I’ve heard it time and time again from Vancouverites who think their net worth is based on how much debt they have

#13 Coho on 08.16.09 at 10:23 pm

Garth, I wager that most of the ones bashing you are not sincere or ethical, but your last post gave them the opportunity to attack you.

I remember the story of the family that couldn’t get a mortgage and most of the posters’ hearts pumped nothing but piss about that family’s predicament. Yet now they pontificate about the virtues of honesty and ethics. Sounds as phony as balls on a teddy bear to me. They’re just using it as a tool to attack.

#14 dd on 08.16.09 at 10:24 pm

“He is on meth.”

Real estate is a funny thing. People get emotionally attached to it. They think it is going to go up in value all the time. Foolish. What asset goes up year after year? Maybe Canadians are slow? I mean look south of the boarder and the mess that they are in. You would think that maybe, just maybe, we could learn a couple of things from that.

But it is different here.

#15 dd on 08.16.09 at 10:34 pm

#1 Smart

“Garth, last Spring you have also expected cheaper market. You might be wrong again and the bubble show will still on the following Spring”

There are more houses on the market in Calgary under $300k compared to 2007. Prices are still off about 15%.

#16 FrankInVictoria on 08.16.09 at 10:40 pm


I love your blog and have read most of your books over the years (it’s only fair to say as this is my first post).

I sold my Victoria BC house in late 2007 (bough in 2001) and felt smug thinking I was selling near the peek. I still feel that way. If it wasn’t for this stupid government subsidy of cheap money I\you would have been proven right and the residential real estate bubble would have burst.

What was not so good is all that nice equity went in index funds in North America and Europe. That’s didn’t go so good… Oh well.

I have been renting and plan on continuing to doing so for 1-3 years.

How can one short this residential real estate bubble without actually owning a house?

#17 dd on 08.16.09 at 10:46 pm


“Why “Normal” WILL NOT Return”

But people are buying RE like it was 2006. It seems the general public is unfazed by want is coming down the pipe. Wow … $300-400K in the whole for some young family and the world has changed and they don’t even know it.

#18 dd on 08.16.09 at 10:48 pm

“The predator:”

Now that picture scares me.

#19 squidly77 on 08.16.09 at 10:49 pm

i have been called a drunk a drug abuser and a basement dwelling in my under wear flat out loser
all that accomplished was that it pissed me off more
well realtors deny this graph
fingers crossed hoping you miss the pool

#20 dd on 08.16.09 at 10:50 pm

.#4 Onemorething

..Agree with MISH in posting a few days ago on housing bottom USA, it will be a 7 year duration to the bottom which put us end of 2012…

Even if the bottom is today or in 2012, prices are not going to move up for years. There is too much debt to pay off.

#21 conan on 08.16.09 at 10:50 pm

I have witnessed restaurant tycoons doing your vtb strat a lot. They sell a semi-successful restaurant to buyers who do not have the money to do a restaurant start up.

The original owner opens a competing restaurant across the street from the hapless new owners.

One year later the original owner owns two restaurants.


The sad part is … tenants are chosen because of their likely hood to fail.

It is a sharky strategy Sir Garthalot

It’s not about restaurants which, in this environment, is culinary suicide. — Garth

#22 Barb .. a reader in Calgary on 08.16.09 at 10:51 pm


Here’s an example that perhaps some of those commenters will “get”. Here ya go:

Presumably, those same ‘commenters’ would buy & sell in the stock market. When they make money there is someone else who loses money. So do they feel bad? No. They take their profits. It’s just that the stock market losers on the other side of their transaction are faceless. Do your ‘commenters’ feel the same remorse for people from whom they make money in the stock market and refuse to invest, or refuse to take those profits off of others?

#23 dd on 08.16.09 at 10:59 pm

#10 Calgary_rip_off

“I dont see people being maxed out here though. Again, unless interest rates skyrocket, its extremely unlikely for prices to dip.”

Ripp-off, you are going to have to sit tight. These things take a while to implode. I bet when people in the state were buying all the way up the bubble they never expected to be underwater today. However it is predicted that by 2012 or so that about 50% of all mortgaged home owners in the states will be underwater (if the economy keeps shedding jobs).

So consider yourself lucky, keep saving, and one day you will get what you wish for.

#24 Joe Realtor on 08.16.09 at 11:04 pm

These people whining and complaining that you’re encouraging unethical practices are probably the same people who as landlords, don’t have a problem taking good money from Tenants and can’t even be bothered cleaning the apartment before they move in, or refuse to replace broken closet doors because “it doesn’t bother them”. You know, they’re taking in 25,000 a year in rent but can’t be bothered spending 300 so the tenants have a closet with properly operating doors.

#25 gold bugger on 08.16.09 at 11:06 pm

If it’s a seller’s market, why wouldn’t you just sell it clean, instead of creating for yourself a VTB mess that’ll quite possibly (likely?) take a lawyer and lots of heartache to sort out down the road?

And offering accounting advice you’re not qualified to give.


Doesn’t your rock collection need polishing? BTW, I ran Canada’s tax system for a while. — Garth

#26 Best place on meth (aka NJ's Analyst) on 08.16.09 at 11:16 pm

Har dee har!

That was me that posted your thoughts on the real estate board.

And the fellow who responded like a 3 year old in a sugar tantrum is the resident board troll.

Pssst….he’s from up in Cariboo country!
Prince George would be my bet. You know, where they drink and do little else.

Steers & queers, I believe the saying goes.

#27 Einsam Solo on 08.16.09 at 11:23 pm

“taking advantage of an unsustainable housing market through savvy selling”

Garth details some perfectly legal ways to make money on the bubble and suddenly everyone is an altruist?

#28 Peter Wiener on 08.16.09 at 11:28 pm

#6 Hal Smith

the serious risk-adjusted downside (the low hanging fruit) was already traded at the time of minimum exposure (remember, you have to pay the monthly distribution to whomever you shorted {sold} the units).
Going in, the trade works against you at high annual percentages and the longer timespan you are short, the greater the pain IF YOU ARE WRONG as you pay out that monthly. Optimal time would have been when the REIT’s had much further to fall at a faster rate (eg last year meltdown).
Kind of an old idea, too late IMHO.

#29 Jake on 08.16.09 at 11:34 pm

If things get bad enough do you think the Keg restaurant will have Spam Summer next year instead of Lobster Summer? Hopefully they’ll still bring out the drawn butter, or I’m not going.

#30 Peter Wiener on 08.16.09 at 11:50 pm

#1 Smart

Garth was right, he continues to be right and will be proven right in the end to an extent that you will change your posting handle (moniker) from “Smart” to something a little less self-congratulatory if you have the guts to come back at all once the results are in.

What are you, four years old? Think things happen on an exact timetable that is knowable or that they evolve at their own rate?

Did you forget that interest rates were dropped to all time lows along with lending criteria in the period in question or is Smart an aspiration of yours as opposed to a description of your current intellect?

Remember, he’s correct because he can do math and think critically, not because his name is Garth and he has a blog.

#31 Peter Wiener on 08.17.09 at 12:14 am

general comment posting

The tenor of some of the posts and/or their emphatic parroting of RE industry myths should be welcomed by the patient renters on this blog intending to purchase at lower prices in the future as a sign that allis not well. They portend the same demise of a bubble environment, but do not herald its’ arrival definitively.

The shrillness with which these ill conceived ‘snippets of stupid’ are delivered is waxing loud. Replaying televsion interviews from 2006 to 2008 (Fox News, CNBC, etc.) where the cheerleading RE shills resorted to outright disparagement of reasoned analysis in their on-air debates seem to be being repeated on this blog. The Canadian experience will be different, that’s for sure, but market prices generally break soon after that kind of sustained noise as you the fundamentals slowly, but assurredly ,assert themselves.

Why is no one patient anymorewhen there is a need to be? After all, you don’t expect it to be easy to make (or save) some serious money, do you? What are you, a RE agent or something?

#32 Punnoval on 08.17.09 at 12:30 am

POL-CAN (#2)

This one was shown on about a week ago. Mostly a repeat of the Moyers interview several months ago. If you want aomething really depressing see:

anon09 (#5) for a better rehash of this stuff look it the following site:

and (of course) this fine but long winded paper:

#33 Dosouth on 08.17.09 at 12:42 am


After attending your session in Kelowna I got to thinkin’… Why is it that the Okanagan Mainline Real Estate Board ( is ALWAYS the last board in the Province to post their stats publicly? I call, email and they blather on about time it takes to prepare, up to 10 days. Me thinks that B###SH#T takes a little more time to prepare and make more palitable. Honesty is no ones policy in B.C. when it comes to Real Estate and no, I haven’t lost in this market but am waiting to pounce on a good deal…..eventually!

#34 My_view on 08.17.09 at 12:47 am

It’s is part of the proceeds of your principal residence. I consider it non-taxable income since it’s basically installment payments on your sale proceeds. — Garth

What do you mean by I consider? Has this been done (by you) anyone? What does Revenue Canada consider it?

#35 Happy Renter in North Van on 08.17.09 at 12:48 am

Talk about emotional reactions – A couple of days ago I wrote on a Vancouver Sun blog it was bizarre Real Estate was listed under the “Business” Section… Only paper I know which does that… and, if Vancouverites loved their piles of “sticks and bricks” any more, the Real Estate section would migrate to the “Faith/Religion” section… That twisted somebody’s knickers in a knot…

#36 Bob on 08.17.09 at 12:59 am

anyone who doesn’t sell now are gonna have a hell to pay this fall………….

#37 My_view on 08.17.09 at 1:02 am

Also to all the T.O> haters or all of Canada for that matter. Born/raised in the big smoke and have traveled to most of the so called World Class Cities. I love Canada, actually get a bit little homesick when I travel. Whenever I travel abroad and say Torona, I feel proud and yes they know of Toronto, imagine that. Canada is a great nation from coast to coast and will be a sought off country to live in and prosper for all of its glorious resources. Envied across the world. How old are all the so called world class cities in comparison to any of Canadas great cities?

#38 Nostradamus Le Mad Vlad on 08.17.09 at 1:06 am

“. . . meth . . . much better than this for dumping . . . Sell now . . . Sell high” — SELL BABY, SELL!

On a more sombre note: Us old geezers / farts / estrogen laced floppy-doodle wannabees generally use a product called Meth-amucil, to keep the sanitary system positioned between our ears flowing freely, no interruptions ever. So Meth- is good!

Anyone recall a store called “The Brick Shirt House”, either Wellesley or College and Yonge in Toronto during the ’70s? :-D ‘Coz we’re all a few bricks short of a full load now!

Further to #5 anon09 on 08.16.09 at 9:47 pm excellent link, one para. — this is what the US Fed, BoC and BoE (etc.) are doing:
“A debt crisis can only be solved by paying down and reducing debt; [ it cannot be solved by compounding ever-more debt on top of an extremely overleveraged economy. ] ”

See whut I mean ’bout being short a few bricks? Sheeple will be b-b-q’d until they are burnt to a cinder.
Clip 1 of 4 concerning the possibility of a false flag in Montreal. —
The m$m is beginning to sit up and take notice of this fake pandemic — AT LAST! —

Consider this for a night-cap (no link, as nothing has been proven; the liquid in the injections MAY be a bioweapon): “. . . an announcement by Prime Minister Netanyahu soon that he is ordering Israelis NOT to take the swine flu vaccine, it may not be just a coincidence…”
One of the super-volcano’s tummies is growling! —
“As a side note, the large lake visible on Sumatra just south of Medan on this map is Toba, the collapsed caldera from the largest volcanic eruption of the last 20 million years.”
Ever heard of biological warfare? Instead of nuking Iran’s power plants, a different approach happens. Comments toward the end are interesting. —

#39 Munch on 08.17.09 at 1:19 am



#40 kitchener1 on 08.17.09 at 1:21 am

The world is full of whiners and complainers, Garth being an MP you must be aware of this fact. Let them complain, when things turn bad everyone is going to be a “victims”

Everybody on this blog has to READ this

that manufacturing jobs are not coming back
that manufacturing jobs are not coming back
that manufacturing jobs are not coming back

Now look at the UI numbers for Canada, Southern Ontario has 5 out of the 10 highest UI rates in the country. In that list are:
Niagra falls

thats a huge stretch of the 401 corridor to the west and a huge stretch of the QEW

Now, all of these communites (except Toronto) are manufacturin based communities, what type of job is going to replace the general labour union job that paid $25/hour?

We already did the “service sector” job thing back in 2000, now that most of those jobs are filled were are these people going to find work? Economic recovery without jobs, thats one for the future economic textbooks.

#41 Mike (Authentic) on 08.17.09 at 1:40 am

#9 $fromA$ia “what kind of advice can you give my friends’ father that has nothing but vintage money stored away and just turned 70 and lives in his car?

Vintage money! Forget trading in for gold, take it to a coin collector shop. Collectors like us pay WAY MORE for it than it’s worth in gold. “Vintage money” is worth a lot more than you think!

I just purchased a 1859 Canadian 1 Cent for $14 in (EF condition)! That’s 1,400% ROI I gladly paid the guy. Try that with gold.


#42 Lance on 08.17.09 at 2:05 am

Garth was right, real estate prices *did* drop in the spring. A further drop was cut off by super cheap money which returned the debt gluttons to the trough for one final feast. One of two things now happen:
1) The bottom feeders finally run out of food and there are not enough buyers left and no more interest rate cuts to drag in new ones… real estate begins to slowly slide.
2) Rates go up and the market gets a shock of reality and the buyers almost completely dry up. Real estate quickly slides.

It’ll probably be a combination of the two… interest rates will likely stay low for another year or two. Central banks know the havoc it will cause when they start to raise them. I suspect currency devaluations will come before interest rate hikes.

#43 kc on 08.17.09 at 2:19 am

Predator??? Go onto craigslist and type in vancouver apt/suites rentals. You want to see who predators are?? start reading some of the ads… here is a killer….

2010 Olympics Rent:

Jan & March, 2009 – $12K/month

Feb. 2009 – $17K/month

This suite is rented short term – 1 month minimum and a maximum of 4 months stay

Many say on them…. only renting for 5 months… or rent ASAP till january 2010….

incase you were wondering what that top one is listed as….

$3200 EXECUTIVE PRESTIGE WATERFRONT- Furnished 1+Den – Sept 1


ps, I feel many owners are in for a shock when they can’t rent their “condos” for the next 4-5 months then think they are going to be getting 20K for febuary…. good luck and have fun in foreclosure court.

#44 Daystar on 08.17.09 at 3:17 am

Ouch! I’m a lefty, or better put, right brained. (come to think of it, unreasonable, emotional, hormonal, peer-pressured, spouse-abused, right-brained, give-peace-a-chance, idealistic, kumbaya-humming sums me up…. multiple owee’s!)

Can someone spot me a bud? I’m feeling quite fragile right now.

#45 Jody on 08.17.09 at 3:29 am

“After closing, you get a tax-free whack of cash, a tax-free 5% return on your mortgage money and your
principal returned in five years.”

You may consider it tax free Garth but does Revenue Canada think the same way?

#46 Future Expatriate on 08.17.09 at 4:04 am

Garth, I’d hardly call people selling homes now to people with no long term prospects “give-peace-a-chance, idealistic, kumbaya-humming deniers”… I’d call them greedy avaricious a-holes soon to get what’s coming to them. And buyers who buy now are just idiots, period.

All financial problems are based on greed, not magnaniminity, equanimity, and completely unrelated pacifism.

Call it “Kum Bah Ya Karma” (Come By Here, Karma).

Unless of course, you were making a pun (Come BUY Here)?

#47 Daystar on 08.17.09 at 5:45 am

#2 POL-CAN on 08.16.09 at 9:32 pm

An excellent link. (its an hour an a half long, but the regulator being interviewed explains a great deal, its well worth it)

The jist of it, it seems from myself, is that the U.S. has been led by corrupt governments and financial leaders (CEO’s) with various bonus’s as the prize leading to ponzi schemes, fraud and federal deregulation (from more fraud and bribery) to the point of taking the economic system to a near collapse.

The reason why it seems as though nothing has changed are two fold: Obama’s government either doesn’t know what to do about it, or they too, are corrupt or both. The second is… we are dealing with incredibly powerful CEO’s and former CEO’s and major shareholders that are looking to keep the entire political/economic system weak and fractured, exploiting the weakness of human nature to the point where they can no longer be prosecuted, where their statute of limitations saves them for they are in a real run against time.

And the one big thing that is against these highly successful crooks who have successfully ripped off the system at all levels and (with probable ease) persuaded a major number of others to follow them for ponzi schemes (bonus’s realized) have a good number of players at all levels…. the one big and glaring obstacle in their way… is the collapse of the U.S. economy itself.

And sadly, I’m not sure if they ever really stopped to consider it but it is happening but then… what crook ever does? Their economy really is falling apart and whats jarring about all this, is that we in Canada have a federal government that isn’t really any different than the deregulating Bush administration both in competency and ideology. Considering record current real estate valuations with nowhere to go really but down, created by record low fed rates that have nowhere to go but up… coupled with an ugly jump in permanent job losses and record high fed deficit policies, it can’t end well up here in Canada either.

It is scary… and real scary if the Obama administration does nothing for their system will not correct itself until its fixed because the U.S. economy effects us all.

#48 Live Within Your Means on 08.17.09 at 6:12 am

I see you are in the news again Garth, tho I don’t often put store in much of what The Hill Times has to say.

#49 Mike B on 08.17.09 at 7:12 am

Garth’s suggestions are sound. Go with the flow indeed. If the trend is to sell and people are living high off the hog on the banks dime then sell to these butt heads. Honestly in Toronto I can see a pop in prices perhaps next year once rates go up and the whole HST thing gets established. Good time to become an agent. Hey here’s the washroom and garage.. give me my money now…thanks. Wheeww .. twenty minutes work… where’s my 12 grand commission and make it snappy.

#50 miketheengineer on 08.17.09 at 7:14 am

#40- GTA unemployment

The answer is simple. Obama will save us.

Now back to reality. My grandpa would tell us stories about the 1930’s. People would rent out rooms in their homes. More than 2 people would live in a home. In the case of my Grand pa, 2 adults, 8 kids, and 2 borders. Almost everyone, had someone living as a border back then. Grandpa, didn’t have a car. Stores didn’t have everything and they were not open 24 hours. He grew his own food, what he could, and had chickens for eggs. He made his own wine.

I don’t know what is going to happen. My guess is that lots of people are going to go belly up, sell their home, default, like they did in the 1980’s. Then they will live with their parents, sisters, brothers. Family will move back in together and pool their resources.

In Toronto, they have a huge huge multicultural society. Those guys know how to live “without”. They have several family members living in the home. They rent out basements. They save their money. They pay “cash” for everything.

Lots of suffering coming soon. Anyone who thinks otherwise, must work for the provincial or federal government.

#51 David Bakody on 08.17.09 at 7:32 am

Many years ago I was watching a TV comedy show and a older Jewish person was telling a person who wondered why he was so rich, he said: “It’s Simple” buy something for 10 cents sell it for 20 cents, that’s 100% profit then you will learn to buy something for $1 and sell it for $3 and that’s real good profit! And that is why I am rich and you are a smuck for spending money you do not have.

#52 wayupnorth on 08.17.09 at 7:47 am

#2- pol-can

Had a chance to listen to most of it but Kd, mish, Nathens economic edge and AE have been saying the same thing for months. Like I wrote yesterday the house of cards is coming down bcause no criminal organization survives unless those it controls fear it. Now that nearly half the U.S. is bankrupt that fear is disappearing.

OK Garth explain what I just read on National Newswatch. Please say you are not that insane?

#53 Ernie on 08.17.09 at 8:48 am

Good for you Garth, when I read your previous post I wished I had that 400K clear title to do just as you suggested.

#54 dontcallmeshirley on 08.17.09 at 9:11 am

Hi folks,

Anyone care to quantify the house price declines they’re expecting and the corresponding (ballpark) interest rates and unemployment rates that will validate these shorting strategies?

I’ll start, catastrophic decrease (eg. 100k+) to the average home price will require an unemployment rate of 20% and interest rate of 15%.

#55 Herb on 08.17.09 at 9:20 am

Further to wayupnorth’s #51,

For your and Dorothy’s sakes, I hope it’s wrong. For the rest of us, I hope it’s right.

#56 Dandy on 08.17.09 at 9:20 am

I’ve a suggestion, how about all housing bears start posting only positive comments along the lines of ‘house prices will never go down’. Stop informing the fools of any potential downside. By being negative about house prices we are just creating uncertainty which leads to indecision, deliberation all slowing down the inevitable. If everyone was of the same bullish mindset then prices can fly beyond all reasonable levels making the market truly impossible for nearly everyone. In the face of insane prices only then can we be certain prices will come down.

Lets really ramp this market.

p.s. I’m a Brit house prices can go a lot higher!!!

I should also mention I have a vested interest in an all out collapse my future ex wife wants a place near high park and is giving me earache.

#57 tim sople on 08.17.09 at 9:24 am

On Optimistic Bunch

#58 vicguy on 08.17.09 at 9:47 am


Good for you, Mr. Turner. If you promise to continue with your ‘digital democracy’ blog, I’ll promise to contribute to your campaign again.

#59 Lost in the Okanagan on 08.17.09 at 9:53 am

I wish a bidding war would happen in the Okanagan! Things are selling but at severe discounts. Can’t believe what is happening in Ontario.

#60 Q on 08.17.09 at 9:58 am

#61 D from London, ON on 08.17.09 at 9:58 am

#22 – Barb the reader

#24 – Joe Realtor

Excellent comments, my feelings exactly. Why does it seem “ethical” to some people to make money some ways (e.g. stock market and property rental) and not other ways (e.g. Garth’s Bubble Busters)?

I think it has something to do with how we see ourselves. Most of us think we’re smart wheeler-dealers in the stock market, and attribute our losses to “ah, that’s the market”, without stopping to think that behind the nameless face of “the market” someone else is gaining the money we are losing.

As for income properties – we see landlords as evil oppressors of the working class (“Landlords, like all other men, love to reap where they never sowed” – Adam Smith)- but since we don’t see ourselves as members of an oppressed class we don’t care. In fact, we are eager to buy some income-generating properties ourselves and rent them out to “thankless, abusive tenants” who are out to victimize poor property owners like us!

We either cannot conceive that we are being ripped off, or we aspire to be the “ripper-offer”.

In Garth’s scenarios we can all too clearly see ourselves in the role of the buyer (in fact we may secretly fear that we are already in that position) and therefore take a dim view of what are completely legal stratagems for making money.

Comments about the morality of Garth’s proposals say much more about the self-image of the poster than they do about Garth.

#62 Got A Watch on 08.17.09 at 10:01 am

#5 anon9 – linked to an article at theVon Mises Institute that explains in 1 short page the simple truth, evident right in the title. For those not familiar, Von Mises was one of the leading lights of the Austrian School of Economics. The one that is never mentioned in business and economic schools today, where they dispense Keynesian and Friedmanite nonsense and call it ‘economics’.

Which might be OK, if these nonsensical theories that are treated as ‘facts’ by studious Professors, had any valid application in the real world outside of ivory towers. We are witnessing the abject failure of this dubious ‘conventional wisdom’ all around us in the real economy, where stupid theories conforming to group-think mental strait-jackets have led us over the economic cliff of easy credit into yet another predictable crack-up boom/bust.

Note the book cover on the right, Murray Rothbard’s “Economic Depressions: Their Cause and Cure”. None of what we discuss here is new, or unprecedented. In fact, the same things have happened many times before. Usually far enough apart in years that the older generations who lived through such episodes have died off by the time the next one comes along – so the fresh new eyes of the younger citizens have no historical frame of reference or actual experience of the bad times. How much attention did you pay as a child to the stories told by Grandma or Grandpa about the “The Great Depression”? How much did they pay to their parents who talked about the “Great Depression” of the 1870’s?

The lessons of history have not been learned, and we are doomed to repeat the same. Von Mises quotes reads like he spoke them today, examples:

“The final outcome of the credit expansion is general impoverishment.”

“Government cannot make man richer, but it can make him poorer”

“The worst evils which mankind has ever had to endure were inflicted by bad governments”

#63 Mike (Authentic) on 08.17.09 at 10:08 am

I see Garth has already posted it, but I just read on: that the market are down pretty big this morning!


DOW JONES INDUS. AVG 9,143.12 -178.28 -1.91% 10:21
S&P 500 INDEX 982.21 -21.88 -2.18% 10:21
NASDAQ COMPOSITE INDEX 1,937.87 -47.65 -2.40% 10:21
S&P/TSX COMPOSITE INDEX 10,530.17 -317.84 -2.93% 10:21


#64 POL-CAN on 08.17.09 at 10:18 am

#47 Daystar

Two words to think about:

fascism lite

The US has been accelerating on that path since 9/11. Canada is following behind like a good little red headed step child. Sooner or later we are going to get beaten.

Tin-foil hat time.

First collapse via depression.
Second NAU as the solution.
Third NWO as the future.

#65 dave99 on 08.17.09 at 10:19 am

#53, Don’tCallMeShirly,

I’m not sure what to make of your post. Were you being serious?

You think it would take 20% unemployement and 15% interest rates to cause a 30% drop in housing prices?

Perhaps you can explain how it is that the US/Ireland/UK have managed 30% drops despite the lowest mortgage rates in history and unemployment significantly below 20%?

Perhaps you can explain the fundamental economic basis which prevents a similar drop here in Canada?

Thanks in advance.

#66 charles on 08.17.09 at 11:25 am

#47 Ole Sol?

“… the one big and glaring obstacle in their way… is the collapse of the U.S. economy itself.”

Spontaneous collaplse is a terrible thing, we know that.

#67 seanmhair on 08.17.09 at 11:42 am

Congrats Garth on seeking Lib. Nomination! You truly are a bugger for punishment ;-) Hope you win!

#68 Dean-oh on 08.17.09 at 11:57 am

Frankinvictoria #16, ticker srs. To short commercial real estate. It is a 2x inverse etf. watch out for slippage. Not a long time hold.

#69 Wealthy Renter on 08.17.09 at 11:58 am

Follow the “Oh Crap” picture link Garth posted above, or link here , and click the video link.

The video is an informercial with the Globe and Scotia Bank pumping the “affordable” Canadian housing market.

#70 JM on 08.17.09 at 12:04 pm

#56 Dandy – just for you

#71 Dandy on 08.17.09 at 12:36 pm

Thanks JM

It looks nice and maybe good value but I’ve just committed to renting for another year plus the future ex seems fairly content for the moment.

#72 Jeff Smith on 08.17.09 at 12:48 pm

Look at dis, Canadians are upbeat about recovery. No wonder they are out there splurging on realty goodies. I am a little suspicious this writer is a realturd secret agent.

#73 dontcallmeshirley on 08.17.09 at 12:58 pm

#65 dave99

I’m trying to advance the discussion by quantifying the problem.

Only Garth gets to repeat the same thing over and over because it’s his blog, everyone else should try to add something.

Prices won’t just drop, there has to be a reason. Most people on this blog insist the cause will be distress selling. Fine, but what is going to cause that? You tell me.

Britain is very different than Canada isn’t it? Don’t they have 50 year amorts and lifetime, interest only mortgages or something? Their credit system allowed much more inflation than here in good ol’ Canada.

Learn to read, UnShirley. The reasons have been detailed here in depth. — Garth

#74 Men With Hats on 08.17.09 at 12:59 pm

Sheesh ! This group of name calling imbeciles are nothing compared to the group that appeared regularly on the ‘politics’ blog .
Pikers .

#75 Munch on 08.17.09 at 1:00 pm


“Fture ex”


Eye have had a couple of “future ex wives myself

#76 Denis on 08.17.09 at 1:01 pm

Bah … Who cares what that dink on the RE Discussion Board says! Keep the strategies coming …

Here’s one if you don’t want to move and like your place:

– Offer a 100% Guaranteed No Vacancy Investment!
– Sell the House and Rent from the Buyer at Market Rent (they’ll negative cash flow or barely break even in Toronto for example), but real estate ALWAYS goes up and you have rent coming in to cover the debt servicing.
– Make sure you have first right of refusal so that you can buy the place back from the Greater Fool should he choose to stop bleeding cash flow and the market goes down by 10-15%.

We unfortunately had to move up to a bigger place so we couldn’t put this one into action. We cashed out and we’re renting now though after getting a much bigger place for a lot less than the current cost of buying.

#77 HappyJack on 08.17.09 at 1:02 pm

Excellent column & comments.

Not only is Garth showing us a legal way of turning a nice profit, but also, a heads-up to first time buyers to avoid the pitfalls of their purchase.

All in all a well rounded piece of journalism !

Speaking of ethics: Why do supposedly ethical companies put the unappetizing parts of a transaction in small print, which requires a magnifying glass to read & a lawyer to decipher ? This includes Insurance, Credit Card and Automotive Companies. You would almost think they were trying to hide something. :))

Keep Smiling

#78 jess on 08.17.09 at 1:12 pm

THE corporate watchdog has effectively banned three KPMG audit partners from practising as auditors for up to two years after their involvement in the 2006 Westpoint collapse.

What was discovered:
Signing unqualified audit opinions for several corporate linked companies ,conducted inadequate audits which did not comply with Australian standards. What took the corporate watch dog so long? How does this instill confidence when the auditors themselves are not following REQUIRED standards? Is banning enough or should they be stripped of their licenses?

#79 Barb .. a reader in Calgary on 08.17.09 at 1:18 pm

#61 D from London

D, further to what you mentioned, I had another analogy. Generally speaking, we don’t mind killing certain animals for human use. But more often we have trouble with the killing of cute animals.

If we even just perceive there is a face to the victim, that is to say, we ‘see’ them as a real person (i.e.: the house buyer), it is the same trick of perception as when we see a cute face on our prey, it’s just that much harder for us to do.

#80 Elle on 08.17.09 at 1:21 pm

Back into the Lions Den again! Yikes!

Sincere congratulations Garth –
“A wounded deer leaps the highest” – Emily Dickinson

The very advertised “Live Smart Program” “free” money for home renovations …….has been cancelled! Hot discussion on CKNW today. Thanks to Garth’s very astute bloggers …. well, we knew this wasn’t a sure thing to start with!

#81 Men With Hats on 08.17.09 at 1:23 pm

#82 Barb .. a reader in Calgary on 08.17.09 at 1:24 pm


Great decision!

I wish you all the best — I know you will do very well.

#83 POL-CAN on 08.17.09 at 1:29 pm

I love ZeroHedge.

And TAE, and Mish, and KD, and CR….

And the Greater Fool of course :)

Readers’ Digest To File For Bankruptcy

In a jarring reminder that hope does not pay scheduled interest payments, Readers’ Digest announced it is about to file for bankruptcy. And since bondholders don’t accept hope in lieu of cash, the company announced that not only would it not make its $27 million coupon payment but that it would undergo a prearranged Chapter 11 process in which its secured lenders would end up owning the company concurrent with a 75% haircut in their holdings.

But but but…. They keep saying that the recession is over on TV….

Look! Gravity DOES Exist!

Oh Beaker! Kudlow! Cramer! Lee Hardman? Do you actually do market analysis or do you just parrot whatever your corporate parents (which is always biased to “buy buy buy”) want you to say?

Where is the analysis on the global markets? Where is a look at the fact that since 2007 Asia has reliably led the US Markets, and there is no evidence that “it’s different this time”?

Buying parabolic blowoffs is STUPID.

#84 Pat on 08.17.09 at 1:33 pm

hey Garth, here’s an interesting article that mentions you. You’ve probably seen it but for the sheeple out there…

#85 Downsized and Delighted on 08.17.09 at 1:44 pm

I see you’ve been celebrating the “Woodstock” anniversary Garth. But you should wait for the smoke to clear before sharing any more tax advice. Can you get ONE tax expert to agree with you?

It’s all about structuring income. — Garth

#86 Emma on 08.17.09 at 2:14 pm

Mike (Authentic)… how would you suggest selling small duffel bag of Canadian silver coins? They are almost all dimes and quarters.

#87 dontcallmeshirley on 08.17.09 at 2:56 pm

Learn to read, UnShirley. The reasons have been detailed here in depth. — Garth

Yes, I know, interest rates can only go up and house prices don’t rise forever…got it.

Advance the discussion with some unemployment and interest rate numbers that trigger the scenario in which, en masse, sellers take less money.

Your argument, thus far, is that there’s precedent historically and currently in other countries.

We’re already at 10% official unemployment and 15-20% “real” unemployment. What will it take?

#88 Gonzo on 08.17.09 at 2:58 pm

Here is a reason for downward RE prices in Canada in addition to all of those already mentioned:
If stocks have another bear run, more “wealth” will be destroyed and buyers will dry up, as they did last fall. The only difference, is that interest rates can no longer be lowered to help re-stimulate home buying.
The chances of another bear run in stocks: almost certain, by most credible economists.

#89 miketheengineer on 08.17.09 at 3:06 pm


I hear you are going to run…..l currently have lots of time on my hands….if you need help or extra set of hands, just let me know.


Thank you, Mike. Let’s see what happens, and I will not forget the very kind and generous offer. If I do run for Parliament, you can be sure there’ll be an army standing in my way. — Garth

#90 POL-CAN on 08.17.09 at 3:35 pm

Today’s TAE is a must read….

Rea-days are back again and I wonder how soon they will extend beyond the boarder?

City Government Closed For Business Today

CHICAGO (CBS) ― If you planned to check out a library book, visit a city clinic or have your garbage picked up on Monday, you’re out of luck.

The City of Chicago is basically closed for business on Aug. 17, a reduced-service day in which most city employees are off without pay. City Hall, public libraries, health clinics and most city offices will be closed.

Emergency service providers including police, firefighters and paramedics are working at full strength, but most services not directly related to public safety, including street sweeping, will not be provided.

That also includes garbage pickup. Residents who receive regular collection on Mondays should expect trash to be picked up on Tuesday. Some other customers may experience a one-day delay as collectors catch up.

Move along… Nothing to see here…. The recession is over….


#91 Mike (Authentic) on 08.17.09 at 3:50 pm

#86 Emma “Mike (Authentic)… how would you suggest selling small duffel bag of Canadian silver coins? They are almost all dimes and quarters.”

Hi Emma,

Well, are the 1968 or older? If so, just take them to a coin shop and they will give you silver (oz) value + collector value. It’s a win-win situation for you if you want to sell them now.

As a side note, you could put them on eBay or Amazon or and get more for them from collectors, but it all depends on how much personal effort you want to put in. If you have any really old coins, definately put them up for auction (like 1949 and older), you could get $5 a dime for them!

Same goes for gold coins as well. Even a coin that is 2 years old (must be perfect though) will go for more than it’s value to a collector.


#92 Mike (Authentic) on 08.17.09 at 3:51 pm

Congratulations Garth on running for MP again, I’m very happy for you. You will again be a voice of reason in our Government.

Best of luck!


#93 Peter wiener on 08.17.09 at 4:45 pm

re # 78

Today’s economic numbers are sufficient to collapse this parody of a market given enough time. Whether you realize it not, it is happening all around you as we speak. Many problems gestate below the average person’s radar. Everything is fine until its not, then its too late. That’s how it has happened throughout history.

Current Proof: check out the housing markets (or what is left of them) in the USA, Ireland, U.K., Spain, Italy, Greece, Portugual – you get the idea (or maybe you don’t).

And don’t argue its different here, cause the USA has without question, the deepest, most innovative capital markets in the history of the world paired with a gov’t hell bent on re-inflating the bubble (or at least trying to lessen its impact as it deflates). If these guys can’t do it, chances are no one can – and its pretty obvious Uncle Sam is powerless in this instance.

Btw, try to sell a high end property (1.5 million or greater) anyplace in Ontario other than Toronto (GTA) or maybe Ottawa area. A business associate just closed on an 8,000 square foot home on 4 landscaped acres, just 5 years old, custom built that COST (the vendor provided every invoice) a total of 4 million , for 1.7 million. The agent for the vendor later told my acquaintance that he had not one showing EVER in many months of listing except the actual buyer. Oh yeah, saw the place- incredible construction quality and very expensive landscape water features and I doubt that it could be replicated now for 4 million.
That kind of discount is what the US is experiencing en masse right now, but it’s in Ontario! This is not an isolated case in that my acquaintence had several other homes to choose from and all were being sold at 25 to 55% discounts to the ACTUAL BUILD COST which the vendors substantiated (documented)on the walk through appointments. Best deal was 5 million build selling at 2.1 million, but acquaintence’s wife preferred the cheaper one. BTW, no mortgages on these places so someone took a big haircut. He was told that there was simply little to no real interest in these places until the asking prices were at least 35 to 40% discount to PROVABLE build cost. Saw the same thing happen in places like King City, Markham, etc. back in 1991 to 1995 after the very late 1980’s debacle.
Funny how everyone disregards history when it suits them and then historical precedent bites them in the butt.

#94 Peter wiener on 08.17.09 at 4:46 pm

sorry, should have been for posting #87, not #78

#95 Makeorbreak on 08.17.09 at 4:47 pm

…and the recovery is well on its way, mesdames et messieurs! Wonder what it would look like if they admitted we’re in a recession…

#96 Albertaboy on 08.17.09 at 5:00 pm

I’ve been a long-time lurker on here and I’m piqued by the posts as well as responses. I’ve read A LOT of what the RE market is doing in both the US and Canada – and the similarities, while less obvious – are certainly there.

While the discussion has mainly focused on CA RE prices, they are in fact tied directly to our neighours to the south (and largest trading partners) and are therefore dependent on whats happening in the US.

If anyone has read the Edmonton Housing Bust website, the author has done extensive research into correlations in price to similar sized cities (Denver, Phoenix, etc) and charted them and the similarities are chilling. Kevin’s website is both informative and entertaining.

Anyone who thinks that RE prices continue upwards forever, or that interest rates are where they should be is both blind and dumb. Prices outpace inflation on average of 1% over the past 40 years and interest rates average 8% over the last 20 years. So how then is this market any different? Plain and simple – the endless supply of money (aka: Quantitative Easing) more commonly known as printing your own cash and the endless power of the BoC or Fed to play with interest rates how they feel.

There is only one way this can all end folks – very, very badly. You’re witnessing the end of the US as a global superpower both financially and militarily and seeing the dawn of China & India as emerging wealth producing nations. Not only will our standard of living in the West be destroyed over generations – not years, but our children & grandchildren will most likely speak Cantonese as a second language in the workplace.

Empires have fallen time and again, housing bubbles have burst as far back as the 1600’s, yet this time will be different. The only thing that will be different this time is whether you decide to move in with your parents or your spouse’s parents.

Sling all the mud you want, hurl the insults, pout, stomp your feet & hold your breath all you want. The train is still coming regardless and you haven’t moved off the tracks.

#97 Makeorbreak on 08.17.09 at 5:22 pm

#98 Soylent Green is People on 08.17.09 at 5:33 pm

Here here, I 100% agree with this post and the last one.

Anybody who calls GT a bad person for posting these tips should look into your city councillors expense sheets and then get back to me re people who take advantage.

#99 Bill-Muskoka (NAM) on 08.17.09 at 6:11 pm


I see there is some good political news to savour today!

Turner wants Liberal nod in Dufferin-Caledon, Ont.

and also

Raitt Punished?

Gee, some things never change in the Harper PMO, eh?

Best wishes and may you get the nomination and WIN!

#100 Nostradamus Le Mad Vlad on 08.17.09 at 6:13 pm

Sex In The Pan. Soon to be revealed to the hordes waiting for a saviour as another tepid, dull, drab Unproven Conspiracy Theory, it consists of three elements vital to the evolutionary progress of humanity:

(1) a hole in my sock; (2) levitation gone tragically wrong (Crash And Burn); (3) Krispy Kreme-laden Viagara-filled donuts (a weird link — )

Rising to prominence in the 80s — the Reagan – Greed – Gorbachev – Greed – Funny-Nomonics – Greed era, my better half made it out of curiosity — — and I have never been the same since.

Gloriously tasty, once will suffice as any more would be a major overdose, leading to a sense of contentment and normalcy.
What lurks in the supermarkets? —
Further to the Funny-Nomonics, this from Weiss Research Inc.: “. . . on the most critical economic sea change in a hundred years:

“The decline of the U.S. and Western Europe as the world’s dominant economic forces …

“The emergence of China and most of Asia as the world’s most powerful engine of investment profits, plus …

“The massive flow of capital from West to East, and how sophisticated investors are profiting from it directly.”

The times sure are rapidly changing. Several posts prior, I have mentioned the White (Aryan) race is giving way to the Red / Yellow (Asian) race, simply because it is their turn to be Captain of the Good Ship Earth.

In line with #95 Albertaboy on 08.17.09 at 5:00 pm fine post — “. . . the end of the US as a global superpower both financially and militarily and seeing the dawn of China & India as emerging wealth producing nations.” I concur.

It won’t happen in our current lifecycles, but the fiscal downturn here is almost directly related to what else is happening. In a time of intense volatility (such as now), there will always be major ups and downs all across the world.

However, there are plenty of good ways to invest, i.e.:

A quote from the last one: “. . . Krugman is on record has having advised the Bank of Japan to purposely cause inflation, as, “The way to make monetary policy effective is for the central bank to credibly promise to be irresponsible – to make a persuasive case that it will permit inflation to occur, thereby producing the negative real interest rates the economy needs”, . . .”

Pretty easy to understand why folk are so confused — Krugman blabbering on about nothing and then expecting us to believe him. Hell, most haven’t got the foggiest what he’s talking about to begin with!

BTW, watch for the “Bank Holiday” in the US first then possibly here come spring, flu shots having the wrong effect, an “October Surprise” event somewhere, etc.

#101 Nostradamus jr. on 08.17.09 at 6:18 pm

Agreed, better sell in the Bubble markets of Toronto and Winnipeg.

…Vancouver however may double in price.
Eastern Canadians will always pooh pooh the Left Coast.

Vancouver has only 900K population, excellent infrastructure and will likely become the Financial, Trade, Culture and Leisure Capital of North America.

#102 ottawa pete on 08.17.09 at 6:59 pm

I still hear people claim that “No one saw it coming”. Peter Warburton foresaw it all over 10 years ago:

The book is officially out of print but you might find a used copy or find it at your library (doubtful). It seems you can buy a copy here:

Comments from the author on the 2005 revision:

‘It’s been almost seven years since I wrote Debt & Delusion. So naturally, readers have a right to ask, “Why produce an updated version at this time?” There are at least three reasons, the cheapest of which is that the author is surprised and flattered to find that it is in demand and there has long ceased to be any supply.

More than that, like an abandoned mine, the book stands as a monument to what was already known about the global credit expansion and the strains in the financial system before the halving of equity market prices from the early 2000 peaks. Most importantly, and sad to say, this equity market trauma foreshadows even more disastrous results of the financial folly that has reached proportions unimaginable in the summer of 1998.

And so, the primary function of the book—“as a timely warning of the perils that lie ahead”—remains valid. Debt & Delusion exposes serious flaws in the development of the global financial system starting in the early 1990s, singling out the world’s largest central banks for special criticism. Their negligent oversight has permitted an explosion of corporate and household credit that has fueled a succession of false markets in stocks, bonds, and property.

Alarmed by the monster so created, the U.S. Federal Reserve has spent much of the past five years staving off the evil day when foolish lending turns into bad debt. Far from being the architects of economic stability and low inflation, the world’s central bankers have ushered in a new era of financial fragility and latent instability.

Innovations in the use of derivatives, structured products, and other complex financial instruments have been applauded by the central banks on narrow technical criteria. But these supposed bastions of conservatism have failed to comprehend the wider implications for financial stability. From poorly documented home loans to sub-prime auto loans to subordinated corporate debt and junk bonds, permanently easy access to credit has compromised economic management in the U.S., U.K., and other English-speaking nations and has fostered an illusion of prosperity and well being.

Lamentably, this staggering collective flight from reason has been endorsed by the economics establishment. The failure of many of the finest economic minds to engage with the rapid evolution of our financial structures and institutions has led to a superficial assessment of this unprecedented credit experiment.

Only now, as various credit markets face the inevitable tests of higher interest rates and the realistic pricing of credit risks, is the threat of a pandemic of debt-related distress beginning to be taken seriously. Government budgets, already strained by the weight of social support, have limited scope to respond.

In short, tougher economic times lie ahead, when personal debts will hang more onerously than for 75 years. Debt & Delusion recommends a hasty reappraisal of the debt requirements of corporations and households alike.

—Peter Warburton, September 2005’

Warburton described a day by day hour by hour train of events which turned out to be frighteningly accurate re: Bear Stearns. Lehman, Fannie Mae, etc. Again, he wrote this 10 years ago and yet there are no videos on YouTube, and no appearances on TV. You can find references to him on the Ludwig von Mises Institute web site:

I bought this book 9 years ago at the peak of the dot com BS knowing intuitively that the whole system was f-cked.

#103 Kash is King on 08.17.09 at 7:00 pm

Hi everyone. I haven’t posted for a long time, as I’ve been going through a spiritual re-adjustment of everything over the last couple of months.

Certain “disclosures” that are out there in the cyber world has made me realize virtually all my prejudgements and ideas may have been malformed, due to lack of proper background material upon which to form a proper opinion.

All of us, with our own differences, are truly precious, and above all we should endeavour to live in harmony throughout the world.


#104 Men With Hats on 08.17.09 at 7:12 pm

La Pouyade Grand Champagne on ice waiting the nom nod from the Liberals .

#105 David on 08.17.09 at 7:13 pm

JohnnyHorton has a disturbing post. Johhny might feel better if someone would tell him home prices will double in the next 3 months, credit will be limitless and cheap and best not be priced out of the endless expanse known as suburban housing forever. Johnny, may we all hope crack and crank can kill the pain of your stupidity about real estate.

#106 justjanice on 08.17.09 at 7:26 pm

All it takes for the markets to drop is the expectation that the price tomorrow will be less than the price today to be the prevailing sense of the situation. I don’t think it’ll be any one thing that tips the market, however, should we start to see bank failures and foreclosures in larger numbers, then the rate of decline might be accelerated.

Perhaps if people knew how ‘real’ the money is that they are spending on housing instead of just the fictional monthly payment. Imagine if your broker sat you down and said, are you willing to hand over every last one of your after tax dollars for then next 10 years and then some (ie. person clearing $4,000 per month) just to own this house ($480,000 house)?

A reasonable house price should be no more than 5 times one’s take-home pay….

#107 Future Expatriate on 08.17.09 at 7:30 pm

#50: “The answer is simple. Obama will save us.”

I just peed my pants.

#108 Wealthy Renter on 08.17.09 at 7:41 pm

Look at dis, Canadians are upbeat about recovery.

Hi Jeff,

Just like this blog, there were some highly intelligent comments from the Toronto Star readers regarding that piece. Tonight, most mainstream news outlets were reporting a study that 25% of people were refusing to book their regular dental appointments. That speaks volumes about the state of people’s finances.

I wrote here that my wife was hiring an entry level tech for her department. The window for the job opening was one week, and the grand total of resumes was over 7200. In normal circumstances, she would have around 500 applicants, but it has been a slaughterfest in phrarma research around North America lately. Jobs are being outsourced to India at an alarming rate. She is untouchable (by some grace) due to her skill set and tenure, but many working the industry are watching their heads. She gets a call a week from somebody she knows looking for a job, and often weeping.

Any recovery is going to be painful.

#109 jess on 08.17.09 at 8:00 pm

…speaking of outsourced

remember the Satyam scandal ?
PwC And Satyam: It’s Bigger Than A Blown Audit

“The Central Bureau of Investigation (CBI) has established that the Raju brothers were funnelling around Rs12 crore every month from Satyam through hawala (money brokers, often used in money laundering operations.) Satyam sent the amount as salaries for over 10,000 fictitious employees abroad…

“They were showing on their books the transfer of Rs12 crore every month as salaries. The transfer for one year was Rs144 crore. This went on for seven years since 2002," the CBI official said. Investigators established that in the last seven years, around Rs1,008 crore may have been transferred abroad. The money may be parked in the US, England, Mauritius and southeast Asian countries.”
A crore (Hindi: करोड़) (often abbreviated cr) is a unit in the Indian numbering system equal to ten million (10,000,000; 107), or 100 lakh. It is widely used in Bangladesh, India, Maldives, Nepal, and Pakistan. It was 500,000 in the now-obsolete Persian number system.

Large money amounts in India are often written in the form “Rs 23 cr”, that is 230,000,000 rupees. Although lakhs are used in Sri Lanka, most Sri Lankans do not use the term crore when referring to money.

#110 Calgary Crash on 08.17.09 at 8:06 pm

Things are really tough here in cowtown. A home sold for $200,000 under list price yesterday.

#111 Peter wiener on 08.17.09 at 8:32 pm

# 102

Have another drink.

#112 Peter wiener on 08.17.09 at 8:46 pm

# 100

Take a look at your city – I think you guys have already already poo poo’d on it enough yourselves – you don’t need our Eastern help! Besides nobody could screw it up like you guys – you blow it every economic cycle – no wonder you have such an inferiority complex out there!

Something occurred to me the other day – you must be chronically high – that is the only way to not notice the wet hellhole you pay through two noses to live in (your nose and the nose of the renter in the basement you need to help pay the bloated mortgages).

I am going to have an absolute laugh watching you and your deluded brethren collectively (and financially) recoil in horror at the sight of the detritus of your local RE market ex-Olympics, post HST implementation. I guarantee you will not be posting here or anywher else, you’ll be too busy trying to get out of the fetal position and wiping tears.



#113 The Great Gazoo on 08.17.09 at 9:22 pm

Look at the picture of the guy above GT’s link to the Globe and Mail article on the market crash today…

then click on the link…

then look at the guy on the picture in the Globe and Mail article…

that is FREAKIN’ SCARY!!! What happened to him?!

#114 Downsized and Delighted on 08.17.09 at 9:24 pm

If you mean Garth that you will add your “interest” onto the price of your house and give the purchaser an interest free loan I could possibly agree with you. But that isn’t what you said.

And why would I reveal everything? Then I’d no longer be a mystery. — Garth

#115 lgre on 08.17.09 at 9:31 pm

#107 Wealthy Renter on 08.17.09 at 7:41 pm

“She is untouchable (by some grace) due to her skill set and tenure”

Nobody is untouchable, everybody is replaceable.

#116 dd on 08.17.09 at 9:39 pm

.#100 Nostradamus jr.

…Vancouver however may double in price… of course they are still trying to figure out were the suckers will come from to buy these overpriced boxes in the sky. More on this breaking news later ….

#117 Herb on 08.17.09 at 9:42 pm

MenWithHats @ #103,

just think, it will be back to the good old days of – and daily battle with the Troll Patrol.

#118 dd on 08.17.09 at 9:43 pm

#73 dontcallmeshirley

…Prices won’t just drop, there has to be a reason. Most people on this blog insist the cause will be distress selling….

U new to this blog?

#119 dave99 on 08.17.09 at 9:52 pm

#87 xShirley,

What will it take, you ask?

1.Canada mortgage rates are very responsive to the BoC rate and the bond market. This is because of our short amortization period. Thus we see rates from 2.5% to 4.5% (for 5 years) whereas the US has rates of 5-5.5% (but for 30 years). The downward movement of rates over the past 9 months has acted sort of like an opening throttle to support the market. But now the throttle cannot open further. And over the next 5 years we will see this effect in reverse as the throttle closes back up. I think you (and others) misunderstand how sensitive our housing market is to this short amortization period and the responsiveness to interest rate/bond markets.

2. The CMHC insurance of 20% of the house price has provided banks with risk free mortgage business, as long as prices don’t drop by 10%+. Once prices start to drop, and to show the possibility of a drop below 10%, then the banks will tighten up. The problem is that as supply increases and demand decreases the banks will find themselves unable to sell off inventory, especially once you factor in closing costs, clearing off unpaid property taxes, fixing a property that has fallen into disrepair. Note that because of these various costs a 10% drop in a foreclosed property actually becomes 20% and therefore a break even scenario for the bank.

3. I think the fall in the Canadian $ vs US last fall motivated many foreign investors to seek to sell their properties. Conversely I think the Canadian $ vs US appreciation since April has motivated many foreign investers to decide not to list and reduced supply. Now that the 5% a month appreciation of the Can$ is over, that is one more “throttle” that is closed.

4. In the US we in are in the lull between the subprime mortgages, and the coming swell of Alt-A and others. As the second, larger swell hits the market this will drop the markets and shake confidence. This will similarly shake up our domestic housing market as people realize we were in the eye of the storm, nice and quiet, but only a brief respite.

5. Time. It will simply take time. Time for the unemployed to burn through their severance, UI, savings, and credit cards. Time for the banks to stop restructuring debt to buy time for their customers in distress. Time for the BoC rate to rise. Time for 5 year mortgages presently at 1.5-5% to need to reset at higher rates. Because we don’t have jingle mail here in Canada, our housing market is always going to be less volatile than the US in the short term. But our turn is coming in the medium term.

I’m fully confident we’ll see a 30% national drop from present prices within 5 years in Canada.

The only thing that would change that is if the world’s central banks can keep up their fancy footwark from the past 9 months for the next 5 years. Although I think they have done a truly brilliant job, I’ve always felt that they were simply intending to buy time to allow the intelligent to restructure. I don’t think they’ve ever believed they could spend their way out of this.

One final note from the front lines…

I work for a large blue chip financial company in Canada. Recently one of our admin staff went on Mat leave. We have a hiring freeze on. And to hire a replacement (for only 5 hours a day, and for only the period of the existing staff member’s mat leave) we needed to get approval from a Senior Vice President. Think about it. This is how one of the largest financial companies in the country views the situation.

ps. xShirley, if we had 20% unemployment and 15% interest rates I think prices would drop by 50%+ (rather than the 25% you suggest)

#120 BigAl (Original on 08.17.09 at 10:00 pm

You have an army of supporters here as well for your nomination. I throw my hat in as well to help any way, even if from here in Peel.

Thank you. I am obviously a man in need of serious help. — Garth

#121 taxpayer like you on 08.17.09 at 10:38 pm

My view/downsized:

I see you share the same concern I do regarding the taxable aspect of the “installments”. I also considered downsized’s approach, but I do not think the numbers
are very workable for this example.

But what is proposed is a mortgage, registered on title,
which would certainly contain words like “principal” and “interest”.

Off the top of my head, a 320k mortgage will give about
$15k interest in the early years, at the proposed rate. On
an income of $60k/yr, I hazard a little more than 30% marginal rate meaning $5k of tax, or about $400/mo
dropping the $1800 available for rent to $1400, which may be the difference between a “Pol-Can palace” and a
“dd dive” (sorry dd, the alliteration worked).

Garth, please stop waving your hand and saying “credits will do” and give us some solid reference, you sith lord of real estate you….

#122 timbo on 08.17.09 at 10:43 pm

#88 gonzo,


it’s not a matter of if but when and the fed is out of bullets and down to its last couple of hand-grenades.

#123 Another Albertan on 08.17.09 at 11:19 pm


Don’t forget the backlog of paper for bankruptcies and court-order sales. Based on anecdotes from lawyers and accountants, there is a 6 to 8 month lag (at least here in Alberta) that needs to be factored in.

Additionally, there are also creditable (pardon the pun) rumors floating around that banks are giving more-than-normal grace periods for mortgage delinquencies (the “try harder next month” pep talk) in an attempt to allow mortgagees get their payments back on track. This is in response to the already-deep queue in court – the banks are trying not to exacerbate the situation and are certainly doing their best to keep things quiet.

The reality is that people using traditional media – television, magazines and newspapers – for their information are far from getting breaking news. Anything regurgitated from a published report occurred at least 4 to 12 weeks earlier.

Case in point, Deloitte has been appointed receiver for a number of commercial real estate projects here in Calgary. Has the Herald reported anything in this regard? If they did, it was minimal. That new office building at 8th and 8th in downtown Calgary (the one with the funky street art)? The developers are already toast and have been for a few months. If you look carefully, you’ll find that CDP (Caisse de Depots et Placement) is taking a number of serious hits for projects they’ve backed. Owners have been scrambling for a few months now to get failing developers out of the way and professional building managers in place to try to right these various ships.

There’s no way you’ll glean this kind of information from quarterly reports or from the major media outlets. If you hear about it at all, it’s WAAAY old.

The first thing readers should be thinking when they come across ANY report is “when did this REALLY take place?”. The sooner people begin to fully understand the leading and lagging time factors that can come into play, the better. There are many factors that are already heavily in motion. Absence of evidence is not evidence of absence.

#124 Peter on 08.18.09 at 3:10 am

Garth, I read your blog when you start putting housing affordability and pricing sustainability issues..I truly support your blog because it makes me distinct from those sheepies friends and clients who thought that 1) buying a house from low interest rate and merely no price correction is a correct way to do..2) BOC will only raise only 25 basis points in the future if required…I am sure lots and lots of these mortgagees would not be able to pay their mortgage because they are all persuaded by their bankers to go ARM – 5 years…I am seeing long term fixed rates keeps rising and I am sure those people doing ARM will not be able to tap back into fixed rates and would rather forego their home and take a loss or ask their mommy, daddy and granny to support some of the payments in hopes of breaking even..But, Garth, you are darn right, jobs are really diminishing every single day..lots of job postings has not real jobs waiting for you, they are just ads for hiring but there are no means for them to hire anyone…Secondly, my friend apply for a store manager job in a retail environment, the district sales manager told them that they posted on job site for 3 days and the received over 1000 resumes (includes my friend’s) we have 1000 unemployed people looking for 1 position..chances are ? (You Guess !!)..Anyways, Thanks once again !!

#125 dontcallmeshirley on 08.18.09 at 8:59 am

#118 dave99

Hey Dave, it’s nice to see someone is thinking about how price drops actually happen and giving the house price drop theory some badly needed context.

I agree with you that the massive liquidity provided by the G and banks is a major contributor to the housing bubble.

I disagree with you on how fast that liquidity goes away.

3-4 points more interest is not going to break anyone and force them to sell. Like you say there’s no jingle mail, so that means struggling homeowners will dismantle RRSPs, mutual funds and whatever to pay their mortgages.

This will takes years to unwind. I would extend the long end of your “within 5 years” horizon.

More like a decade.

Waiting 10 years to buy doesn’t sound appetizing to me.

#126 steven rowlandson on 08.18.09 at 12:48 pm

Garth I find it no surprise that you were critisized by those involved with real estate. Real Estate is to alot of people more than just a place to live. In many cases it is a financial version of a fanatical religion and as such is very intolerant of heretics and unbelievers.
The high priests are bankers, real estate agents and investment gurus. The congregation are the sheeple who follow the herd and get into deep debt based on the reward of tax free capital gains if they keep the faith and keep paying their mortgages. It might be a good idea if you consult your local fire department to find out where you can buy an asbestos suit just incase the real estate fanatics decide to burn you at the stake.

Just a bit of humor garth. Never the less since they have resorted to curses it does indicate that they are
setting themselves up for a fall due to over confidence, greed and arrogance. Think of it. What if they couldn’t find any more home buyers, I mean suckers?


#127 Dianne on 08.18.09 at 1:40 pm

“I see you are in the news again Garth, tho I don’t often put store in much of what The Hill Times has to say”.

#48 Live Within Your Means

Garth. We’d be thrilled here in Caledon (or, at least my husband and I would) if you ran against David Tilson.

Did you happen to see the article in the Caledon Enterprise wherein Tilson made the usual excuse as to why Caledon isn’t qualifying for any “stimulus” cash?

Naturally, Caledon admins neglected to complete the application forms correctly.

The Toronto story all over again.

#128 Dark Wettler on 08.18.09 at 2:35 pm

Hullo Garth. I am not a home owner. Sold my crappy Kits condo long ago in the before time – 2004 – when I thought that real estate values had already become retarded (for double it’s purchase price only three years earlier). It has since gained another 50%. Oh well, who knew?

Do you remember books like Boom, Bust and Echo that predicted an end to rising real estate prices back in the mid 90’s due to less demand from an aging and already housed population? Of course, that was before we saw the appearance of ‘Greenspan’s Gone Wild’ on the television. Clearly I underestimated the power of easy credit and low interest rates.

I have been critical of some of your bolgs in the past. I wanted to say that those are clever strategies that you have outlined above and I believe those are some of the most valuable lessons learned from this blog to date.

Now you just need to come around on the topic of precious metals and resources….

Thanks. As for the demographic argument I and David Foot have advanced, they will materialize. You are just 6 years too early. — Garth

#129 Dark Wettler on 08.18.09 at 4:02 pm

Guys like Foot and Cork thought that there would be a mini-surge in house prices toward the end of the 90’s and that prices would begin to decline from about 2000. They turned out wrong on both points. We also believe that they will be wrong on their prediction of low, stable interest rates for decades, but that is because of factors now that were not evident when the books were written.

I completed the real estate salesman’s course in BC in ’94. I didn’t take out my license as the late 80’s bull market had started to collapse and I hated selling anything. I was 21 at the time. From where I sat then, the 2001-2008 rally was an impossibility. A doubling in value of my lousy condo from 01-04 seemed like lunacy.

I don’t know what buyers are thinking now.

My prediction in 1995 was that the demographic impact on housing would be in full flower by 2015 (I wrote a book with that title, for that reason). I stick by it. Foot’s book was not even published until 1997, so nobody forecast ‘that prices would begin to decline from about 2000.’ The parts of your argument you did not make up are sound, however. — Garth

#130 Dark Wettler on 08.23.09 at 2:38 pm

….Foot’s book was not even published until 1997, so nobody forecast ‘that prices would begin to decline from about 2000.’ The parts of your argument you did not make up are sound, however. — Garth

Boom, Bust & Echo, Copyright 1996 by David K. Foot.

Page 33.