Kind of a rep

facelift1

The new face of Canadian debt millionaires.

The loudest noise in my local HD on Saturday came from the birds singing in the rafters. Knots of staff in orange aprons covered with bling and tape measures hung around roofing materials, cellulose blinds and the unloved end-of-season BBQs. I was there for the bunker, of course. This was the weekend to install the backup emergency power supply to the standard standalone power supply for the standby generator. Tempus fugit, if you get my drift.

A friend to the south called to say she’d just driven down millionaire’s row in East Oakville. ‘A forest of signs,’ she said. ‘Never seen that in my life.’

Indeed, some lakefront estates in that area trade hands once every few decades. Some, never. And certainly not like today – with fat price reductions slipping through to local brokers weekly. Hell, you can even rent a $4 million place that used to belong to the president of Ford for eleven grand a month. That’s 3%.

In the resort town of Wasaga Beach, a local developer desperate to sell languishing new homes sent out an email blast trumpeting CREA’s latest release – “TORONTO (Reuters) – Canadian resale home prices are likely to rise, not fall, and sales will match or exceed those of last year, the Canadian Real Estate Association said in a revised forecast on Thursday, August 27.  A much stronger showing in the second quarter, and a solid start to the third quarter, prompted CREA to predict a dramatic rise in home sales for 2009, and for prices to edge up…”

Hey, kids. Everybody’s doing it! Jump in!

This weekend’s Globe ROB carried the usual coy photo of a couple willing to spill their financial guts all over a broadsheet page, but eschewing a full-frontal headshot (above). The thirtysomething BCers own $1.43 million in real estate, with $1.14 in financing. That’s 8.3 times income (and she’s on mat leave), with debt payments taking 77% of net income.

Said the financial advisor in a blaze of insight, “they should consider downsizing.”

Canada, it turns out, is getting kind of a rep these days. Family debt-to-income ratios are now among the highest in the developed world. Our housing market is one of the most expensive on the planet relative to national income. A survey of the least affordable places to live had four BC cities in its top list. No other country has gone from a record government surplus to a record deficit as fast as Canada. And our trade deficit has just reappeared for the first time in 30 years – not the kinda news you want to hear when you’ve hitched your wagon to free trade.

As mentioned here a few million times (I’m tedious), what our indebted fellow countrymen and women can look forward to are higher taxes, stiffer mortgage rates and a constipated economy. There is absolutely no validity to PMSH’s comments that we will be out of this historic deficit pit without public pain. That’s not a political statement. Mere fact. The next ten years will be defined by what has happened since October.

And as I mentioned two days ago, our major economic provinces – BC, Alberta and Ontario – are equally in the soup. Surpluses have turned into deficits, with tax increases, spending cuts or both a certainty.

So, let me summarize: Families more indebted than ever. Economy still sucks. Trade crumbles. Pols choke. Did I miss anything?

Oh yeah, record real estate sales.

Gotta run. Time for a genset check.

93 comments ↓

#1 anon09 on 08.29.09 at 9:33 pm

Krugman Wants US To Imitate Italy’s Finances

#2 WillsDad on 08.29.09 at 9:34 pm

My question for you Garth: if every “have” province is running a deficit, what will be the effect on transfer payments? Should the Quebecs, Maritimes, and Manitobas be battoning down the hatches?

#3 Tarth Gurner on 08.29.09 at 9:56 pm

Did I miss anything?
————————————————-
1) Canada is extremely resource-rich
2) best banks in the world
3) low crime, high morality/values/ethics
4) wealthy boomers (just look at you GT!)

#4 DrC on 08.29.09 at 10:02 pm

Weird ain’t it? ‘Straya is in the same sort of boat – resource rich and was recently in surplus but now charging into deficit to socialise the losses of the Boomers who indebted themselves up to eyeballs. So maybe we won’t crash like the UK, Ireland or Iceland, but slowly choke on our own poop for the next couple of decades like Japan did.

PS one advantage of deflation for cashed up individuals can be lower prices. Maybe this is something for the bunker roof Garth? http://www.nytimes.com/2009/08/27/business/energy-environment/27solar.html?_r=2&scp=3&sq=Solar&st=cse

#5 Dan in Victoria on 08.29.09 at 10:18 pm

I don’t think thats kool aid he’s pouring, more like nitro glyercin.I looked hard at the picture but I see the Sh.. hasn’t hit the fan yet.That whole house of cards is going to come crashing down.Its unbelivable out here. More and more of this type of thinking every day.Keep hammering them Garth, maybe you can save some of them.

#6 Jon B on 08.29.09 at 10:50 pm

I’m still waiting to witness this indebtedness house of cards fall. Every time it seems imminent, some government intervention kicks in. How many more tricks do they have up their sleeve?

#7 Alberta_Teacher on 08.29.09 at 10:52 pm

77% of net income. What is the point of financing such a load? What happened to enjoying life? No wonder this guy is covering his face. If his boss knew his situation, he could sizzor-kick the guy in the face at every meeting and plunge his head in the toilet at office parties and the guy still wouldn’t quit. Not when he’s that leveraged.

#8 Repatriated Expat on 08.29.09 at 11:13 pm

This couple’s risk tolerance is beyond insane.

The only thing driving individuals to make these kinds of decisions is speculation.

When sentiment changes either through rationalization or through circumstances from speculation to fear this house of cards will come falling down.

As for all the RE vultures on this site, my prediction is there will be more carrion than one can absorb. So when the changing fortunes do come about, be selective.

#9 s33knges8 on 08.29.09 at 11:17 pm

Oh, please put up the interest rate. God, please put up the interest rate.

#10 ottawa pete on 08.29.09 at 11:23 pm

“Wall Street Betrayal Seen in $4.8 Billion Company Debt Losses”

http://www.bloomberg.com/apps/news?pid=20601109&sid=a0kvXdQtvCWw

Another Ponzi scheme…no new “investors” and the pyramid collapses…

Here’s an example of how companies are hiding losses behind shady accounting rules and not marking to market. The article outlines how various companies are recognizing losses to varying degrees. The fact is this is junk debt with a high probability of default and yet it is not being recognized as such.

I was under the impression that the mark to market ruling came this year, while the article suggests that it was in place since 2007. Perhaps someone on this blog can explain…

‘For 25 years, auction-rate securities were popular with borrowers such as municipal governments, student-loan financing agencies and nonprofit organizations, which used them as a way to get short-term borrowing rates on long-term obligations. Some of the debt does not mature until 2047.

Banks oversaw periodic bond auctions, generally conducted every 7, 28 or 35 days and supported the sales by purchasing unsold debt. They stopped buying in February 2008 as credit tightened. Auctions have failed regularly since.

In July, only 408 of 3,035 auctions drew enough bids to allow bondholders to sell, meaning 87 percent failed, according to the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access Web site.

There is little prospect the traditional auction-rate market will ever return, according to Espen Robak, Pluris’s president.

‘Dead Asset Class’

“This is a dead asset class,” said Robak, whose firm estimated corporate writedowns on the debt reached $4.8 billion in the second quarter, against $2.1 billion a year earlier.

The 23 banks involved in the sale of the debt have negotiated settlements with state and federal regulators, paying $575 million in penalties and agreeing to buy back more than $61 billion of securities. ‘

‘Companies owning auction-rate debt often follow a 2007 Financial Accounting Standards Board ruling requiring holders of instruments for which there is no observable market to estimate a fair value. The price can be based on a formula the companies devise themselves and must be explained to investors.

‘Richfield, Minnesota-based Best Buy Co. reported a $14 million loss on its $312 million in auction-rate holdings during the three months ended May 30, according to filings. ‘

During the first quarter of 2008 Texas Instruments reclassified its $533 million portfolio as a long-term asset and reported losses of $41 million as of June 30, according to regulatory filings. ‘

#11 chicken on 08.29.09 at 11:26 pm

I was in Perth Australia on business and I asked a few people who worked in our Australia branch about housing. They told me its different in Perth and it will not be affected by a down turn in prices. They have the same sort of deal over there. High prices, low interest rates and a govt incentive to buy. I almost choked when they said “different”. Since I thought that was reserved for Victoria BC. I mean Perth is a commodity based city such as Calgary.

#12 ottawa pete on 08.29.09 at 11:26 pm

It struck me today why the real estate market floodgates opened in mid May: The banks demanded the government allow them to not apply mark to market on their junk debt in return for loosening credit…

#13 ottawa pete on 08.29.09 at 11:42 pm

Interesting to note that the new “FASB Accounting Standards Codification” comes into effect on Sept. 15 2009 the anniversary of the Lehman Bros. collapse….

#14 robert on 08.30.09 at 12:13 am

“The next ten years wll be defined by what has happened since October.” Funny but this doesn’t sound like the same guy that says we dodged the big one.

#15 Einsam Solo on 08.30.09 at 12:27 am

“Tempus fugit, if you get my drift.”

As in… time’s up?

#16 HappyJack on 08.30.09 at 12:29 am

WillsDad on 08.29.09 at 9:34 pm

An excellent answer to your question RE: Equalization Payments at this link

http://en.wikipedia.org/wiki/Equalization_payments

Quite amazing how things have changed in the past couple of years !

Keep Smiling

#17 Bilbo Bloggins on 08.30.09 at 12:33 am

So much for the myth of Canadian banks having more strict lending standards.
What do they care. CMHC and the tax payer are on the hook.

In the middle ages, common people were slaves (serfs) to the landowners.
Now they think they are the landowners by buying.
Ironically they are now slaves again, but this time to the bankers.

#18 Keith in Calgary on 08.30.09 at 12:36 am

I am debt free…..I am debt free…..I am debt free……!!!

Damn, the truth feels good.

#19 Daystar on 08.30.09 at 12:36 am

It seems to fall on deaf ears, Garth. It seems as though readers in general… or a good chunk of them at the very least, think causal effects will either happen overnight, or you aren’t right about what you say. In other words, when things are fundamentallly unsound with the state of the economy and government management, the consequences must be quick and instant! Just like we are programmed to become ajusted to!

And as unemployment builds and divorce rates edge higher, some things… some things don’t change after all. ;-)

http://www.youtube.com/watch?v=LLlothFZzYg&feature=related

#20 Jmack on 08.30.09 at 12:49 am

When your at a party having a good time, sometimes it’s hard to leave.

#21 Vancouver_bear on 08.30.09 at 2:24 am

World’s safest banks, only RBC is #10 worldwide, the rest of our banks did not make to the top 20 list….but made it to the top 50.

http://www.cnbc.com/id/32537102/?slide=1

#22 $fromA$ia "Garths Nugget Boy" on 08.30.09 at 3:02 am

What the pols dont reveal is that when RE collapses/corrects there will be a new election.

Conservatives will cling to power as long as they can do what it takes to keep Canadians buying mortgages.

I am discusted at the Liberal hate mail I have recieved from the Conservatives against Michale Ignatiav….

This country is on the ropes and Canadians are oblivious!

#23 Daystar on 08.30.09 at 5:08 am

http://ctv2.theglobeandmail.com/servlet/story/RTGAM.20090828.wtrade0828/business/Business/businessBN/ctv-business

“Non-residents purchased $38.3-billion (Canadian) in bonds and other securities between April and June, an impressive vote of confidence that stands in stark contrast to 2007, when international investors sold $31.6-billion of securities over the entire year, according to Statscan.”

These numbers are terrible. Ugly, ugly numbers… and the numbers we borrowed from May to June… staggering. We went from investors to borrowers in an ugly hurry. We went from trade surplus to trade deficit… record fed surplus’s to record fed deficits… and morons keep bleating that interest rates won’t go up for years to come in this environment.

I guess this is what Canadians want. After all, they voted (or abstained from voting) to get these results.

#24 kt on 08.30.09 at 7:34 am

Every time you mention your ‘bunker’, this place in Horning’s Mills always comes to mind. I do hope your’s isn’t constructed out of buses …
http://www.webpal.org/webpal/d_resources/arktwo/index.htm

#25 ally ally oxycontin free on 08.30.09 at 8:31 am

“But despite what you might expect, I am not bullish merely because the Obama administration seems to be committed to lighting the fuse on massive inflation in 2010 and beyond.

True; even in more normal times you’d expect Washington’s mind-blowing $1.8 trillion annual deficits and its plans to sink us even deeper in debt with health care reform and countless other “borrow and spend” initiatives to be massively inflationary.

Record-shattering borrowing by the U.S. Treasury combined with manic money-printing by Bernanke and the Fed — would be a dead give-away that massive inflation and soaring resource prices was a virtual certainty.”

***Why SHUCKS, Canada is only expected to add $200 Billion to its own deficit during the next 10 years. an’ an’ an’ Carney says international trade will pull us outa this mess. Someone should ask accounts payable clerk Flaherty!

http://www.moneyandmarkets.com/rare-double-play-opportunity-in-oil-gold-and-more-2-35270

#26 ally ally oxycontin free on 08.30.09 at 9:08 am

And, the term of your appointment will require that you pledge to vacate your appointment at the end of an 8-year period [ 2017 ] … most especially you, Duffy, because you’re occupying two seats.

In 2017, all 27 appointees will state unequivocally they had no knowledge of ‘such term limits’ at time of their appointment. The condition is recognized as the Oliphant / Doucet memory syndrome … “Mr. Justice Oliphant I have no recollection of those events.”

“I’ve got it! I’ll appoint all of them! Yes, I know, the Liberals did just the same for years – the same Grits who are now assailing the appointments, just as the Tories used to attack theirs. This is the cycle we have become caught in, each party justifying its own excesses by the others, each hypocritically accusing the other of hypocrisy. And the public, educated by long usage to expect no better, cannot even be roused to outrage any more. Time was when this sort of flagrant cronyism would have caused a scandal. Certainly in any other country it would. But not here, not any more. (Andrew Coyne, macleans.ca)”

”Harper has made noises for a long time that the Senate is a dumping ground for political cronies, a “taskless thanks.” It pays $130,000 per year with a generous pension, and senators don’t sit on Mondays or Fridays, not to mention numerous other holidays, and finally are allowed 20 absences per year, political events not counting as an absence. Senators have been known to sleep in the chamber, and they don’t normally have offices outside of Ottawa, or even get into contact with the public…”

http://www.thestar.com/article/688373

#27 David on 08.30.09 at 9:20 am

I read the article and then read two more times to make sure I did not miss anything. Something about 77% of after tax income made me feel slightly uncomfortable. That does not leave very much disposable income for food, clothes, recreation, driving a car or the occasional emergency. It is wrong to wish ill upon others, but a market so obviously over valued requires a serious cleansing of the stables. A negative net worth is almost a certainty for this couple if they do not sell and sell soon.

#28 Gord In Vancouver on 08.30.09 at 9:43 am

#3 Tarth Gurner

3 out of 4 isn’t bad – the one you didn’t get is pretty easy to figure out.

#29 Justin on 08.30.09 at 9:45 am

# 16 HappyJack

Good Link! I am somewhat shocked to see these numbers. No payments to Saskatchewan or Newfoundland in 09/10 but over 8 billion to Quebec.

I was in Montreal last weekend to see my Honey and Gas prices were above $1.09 a liter so perhaps the Feds are getting a little extra back through various taxes. Also spoke to a cabbie down in Old Montreal and he said it has been a very quiet summer there.

#30 Ed on 08.30.09 at 9:45 am

Why is it that people always worry about their debt after they jumped in?

It’s such stupid behaviour, but everyone around my age (33) acts first and thinks later.

#31 timbo on 08.30.09 at 9:51 am

video that makes you wonder who is holding the bag.

http://www.youtube.com/watch?v=gAtSmR7Z-Kg

I does make one wonder what the real value of the assets that Canadian and American banks are holding. How can this get better when governments are forced to back banks that are insolvent?

Nothing has changed since last year but a socialization of debt and a mass effort to keep the bubble inflated with programs that only push up buying times. When the stimulus stops so will the illusion. We have run out of cash at the casino and pulling the 2nd credit card is not the answer.

All governments should have let the market fall naturally instead of this slow, chasing the tail to the bottom nightmare we are facing now. It is a shame that fixing the problem is political suicide due to the fact that homeowners are also voters and have tunnel vision.

#32 Peter wiener on 08.30.09 at 10:02 am

# 17 Bilbo Bloggins

You sure are sharp this morning!
Great comment, very insightful.

#33 DaleFromCalgary on 08.30.09 at 10:03 am

“our major economic provinces – BC, Alberta and Ontario – are equally in the soup. ”

Not entirely so. Alberta is running a deficit but it is being made up from the Sustainability Fund, and the deficit is due to a spending problem. The petroleum industry still has a future once natural gas recovers, but I doubt Ontario’s manufacturing industry will ever be what it was.

Tons of “For Rent” signs in Calgary nowadays. One of my co-workers is a secretary. She and her truck driver husband were flipping real estate until the music stopped. They could only afford to buy duplexes in the cheap side of town which were difficult enough to sell even during the boom and impossible to rent after the Panic of 2008. They are on the hook for three duplexes plus their house (in a distant suburb with no amenities), can’t sell any of them, and only have half of their duplexes rented (to people you would cross the street to avoid). Credit card debt, of course, from their large screen TV and the annual two weeks in Mexico. No kids fortunately, and their jobs are relatively stable, but my god!, how can they live like that!

Put as much lipstick as you’d like on it. Still a hog. — Garth

#34 Nathan in Edmonton on 08.30.09 at 10:10 am

Madness they could get that much financing. If they want to keep that home they should play these numbers every Wednesday and Saturday: 16-25-34-37-45-48; keep living in la-la land.

#35 Peter wiener on 08.30.09 at 10:14 am

re #3 Tarth Gurner

Why does everyone keep just accept as fact and parroting the concept that we have the ‘best banks in the world’ when it is categorically untrue and worse, I believe was the contstruct of a delusional garden gnome who goes by the name of Flaherty.

Just review the ‘no deficit’, ‘no recession’ and other claims made by this cretinous creature and put this ridiculous assertation in the correct context.

#36 timbo on 08.30.09 at 10:17 am

Again , we are seriously putting our tax-dollars at risk by bailing out and extending credit to ventures that are becoming more and more speculative, in an effort to keep the party going.

http://globaleconomicanalysis.blogspot.com/2009/08/global-debt-bubble-causes-and-solutions.html

#37 ca on 08.30.09 at 10:17 am

Could you elaborate on the following:

“install the backup emergency power supply to the standard standalone power supply for the standby generator”

#38 popeye the sailor man on 08.30.09 at 10:28 am

In Alberta, every one says it will be different here oil will save us all. Yet the province is 7 Billion in the hole, gas is at a 7 year low.
We have been looking to buy a house for months waiting for the other shoe to drop. But when!
We also wanted a truck for the last couple of years, I say want because we could really do with out if we tried. Anyway we recognize that. The good news for us is we have seen good prices on trucks. A few days ago I saw a truck I liked as I drove pass the dealer. A 2004 F150 FX4 4X4, 137K Bright yellow and black, step side SB. Leather, power peddles needed for my kids and the height diff between my wife and I. Before I bore you more, it’s the numbers that are of interest. For sale on the web for $19,999, sales man on lot told me it’s on sale because it’s been on the lot for 60+ days, for $16,900. After my spiel on what I think its worth the sales man hinted of lower prices, since my wife had no idea I was looking at a truck, I offered a price I thought they would turn down ($12,500) they came back at ($12,680), directly from the sales manager, after wife viewing, and a mechanical inspection, which I did find a few problems. The inspection was not as good as I had hoped and the wife and I agreed on asking for a good discount. I pointed out the defects, with a 4X4 with 137K I would expect some anyway. I got them to reduce the price to $10,500 + GST + 399 Doc fee, they erased all the other top up fees like etching, nitro ($89 for nitrogen in your tires LOL), tire fees…. Any way bottom line is $11,433! Just over half of the original list price a very good deflationary price.

BTW; the lot is a major dealer, and the used lot is near empty and the used inventory is on the main lot to fill in the fact that they don’t have lots of inventory.

#39 Makeorbreak on 08.30.09 at 10:34 am

Déjà vu all over again?

http://www.guardian.co.uk/world/2009/aug/27/grapes-of-wrath-1-tulsa

#40 Bill-Muskoka (NAM) on 08.30.09 at 10:38 am

Hmmmmmmm? Isn’t there something about ‘gluttony’ in the Bible? Seems that, along with most the other great principles, has been cast aside by the Church of The Money Changers?

Then there was that little bit of wisdom by Luke, the physician, that warned ‘No man builds a tower without first counting the cost!’

And what was that Commandment about not ‘coveting your neighbor’s things?

Oh, I guess that was too Old Testament for all those waiting to be Raptured out of their self-made dilemma?

Darn, isn’t it funny how wisdom stays WISE?

I guess the adherents of the Roman Empire still are staunch believers that they are ‘invincible’ to the reality they create? Have to ‘own’ the land too because they plan on taking it with them.

I wonder if they will be able to afford the granite for their tombstone after buying those counter tops? Hey, there is a great scheme to make lots of money…Convertible Counter Tops! Yes indeed, if you buy my counter tops made from the finest Canadian Shield Granite we will inscribe you name, date of birth and death free of charge.

Then when you die, or commit suicide, you can simply move that precious rock to the cemetary…If the bank will allow it to be removed from the house THEY OWN!

Oh well, Hillel, that little old Jewish Baker said ‘Do not do to others want you would not want them to do to you.’ What a marvelous idea, eh? Keep upping the price so that the next generation cannot afford to live anywhere. (Tip of the day: Invest in CANVAS! There is going to be a HUGE market for tents very soon! Just look what canvas did for Levi Strauss?)

#41 Nostradamus jr. on 08.30.09 at 10:40 am

One of the most interesting posts in a long long time.

Garth…

1/
So BOC prints $3.3 Billion Cdn Dollars and invests it in US Treasury Notes?
2/
Spread Canada’s wealth? (a la Trudeau, your new mentor?)
3/
Why not instead Dividend out the $3.3 Billion newly printed Cdn $$$ amongst Cdn Citizens?

(Notice my ?’s….I cant be pinned down…makes me like you…a fellow prime Political Candidate)

>>># 86 Grumpydawgs on 08.29.09 at 7:24 pm

I am sad that I haven’t heard much outrage at the BOC ( CDN government) shorting the CDN dollare yesterday by flooding the markets with 3 billion CDN dollars to buy USD in a ten year bond deal. There were a plethora of apologists quoted in articles afixed to the business sections of the two ( isn’t it sad) Canadian papers. They all made quite a point of saying that the move wasn’t intended to dent the loonies progress. Look guys, if it wasn’t such an issue then why the ‘circle the wagons’ technique and the well rehearsed scripts?

The red herring that a low dollar is good for Canada is just nonsense. What a low dollar does is insure that Canadian businesses can never evolve into world competitive entities because the low dollar thwarts any possibility of being competitive with capital improvements, equipment and technologies. Our guys can’t improve productivity and thusly improve wages because they can’t afford to buy the newest machinery.

The low dollar insures that we will be perpetually drawers of water and hewers of wood. The idea that we will sell intelligence services to the world has been proven wrong by the fact the every other developed country has a higher wage scale and higher standard of living than we do. Is Germany suffering because of a high Euro?

The reality is that the low dollar idea started with Trudeau and his half baked one world villlage BS. He wanted the CDN dollar low as an example to the developed world that we ( in the west) should sacrifice while the third world caught up. he was intent on bringing up the standards of living in Mexico and did everything he could to keep Canada from from outpacing the economies of Latin America. This was all part of the crazy headed ideas that he and that PM from Norway Bruntland cooked up when they dreamed up ‘ sustainability” ( thats western powers shifting economies and cash to the third world ) in programs like the KYOTO Accord and the main documents that contained this international socialism bunk that Trudeau was so fixated on.

I was sad when so many people missed another opportunity to lambast the government for perpetuating this stupid policy of beggering canadians for the short term gain of a few jobs in a few ridings in the voter rich ( Liberal Created ) constiuencies of southern Ontario. If the policy was overturned was overturned we would create jobs and a future that Trudeau thought was evil but would in fact be very good for Canadians.

You were smokin’ up until that last para. There is no political logo on stupidity. — Garth<<<

#42 mattvic on 08.30.09 at 10:45 am

Just sold in Kelowna and moved to Victoria to a family rental. We’ll buy at some point, but when? Can anyone tell me what the Victoria real estate market is going to do over the next year?

#43 Peter wiener on 08.30.09 at 10:48 am

# 30 Ed

I suspect it is because they have never been broke or gone hungry.

#44 Got A Watch on 08.30.09 at 10:49 am

One last time on Prechter and Elliot Wave. Before you blindly follow any stock market guru, it is wise to check their accuracy. At CXO Advisory Guru Ratings they rank “gurus” according to how well their calls on the US stock market worked out.

Like I told you before, Elliot Wave is not that great of a stock market forecasting tool. Robert McHugh, one of the leading EW traders, had a CXO accuracy rating of 36%, and Robert Prechter, the biggest EW name, used to have a rating around 32% IIRC when they last covered him. Both of these would be “unsatisfactory” if you were trading based on their calls.

They do give great macro economic analysis, and have been correct about almost all things in this credit crisis. Most of their market calls were close to correct, usually they got the timing wrong (way too early in many cases).

So they are quite readable and pretty reliable on the macro economic landscape, but tend to make timing errors on the trading. This is where the rubber meets the road if you want to make a profit in trading, if your timing is wrong so will your trade be, in general. The source of most of the ridicule directed at Prechter comes from this, his original book “Conquer the Crash” was published in 2002, about 5 years too early, which is almost a lifetime in trading terms.

I’d say Prechter under-estimated the power of the flood of easy credit unleashed by ‘Easy Al’ Greenspan and his Central Bankster co-conspirators post the dot.bomb crash, which has had the effect of distorting the Kondratieff Wave Cycle a bit, by pushing the inevitable downturn after the peak of 2001 off for a few years. But this distortion has come at a great cost, it makes the unavoidable corrective period (now) much longer and deeper than it should have been without Government interventionism run amok.

Keynesian and/or Friedmanite monetary policies have proven they are nothing but academic ivory-tower claptrap and voodoo economics – by their abject failure in the real world economy. Interventionism is the road to economic failure and eventual collapse. I remain in the Austrian School camp, the one they don’t teach in Business and Economics classes, which, IMHO, is one of the primary root causes of this crisis: our “leaders” and “elites” are “educated” in ‘Advanced Economic Stupidity’ with a secondary degree in ‘Idiotic Theories’.

Canada has it’s very own Elliot Wave ‘star’, Ian Gordon, whose work can be found at The LongWave Group, where he provides some great charts and presentations on the Kondratieff Wave Cycle and how to interpret it. Note to anti-goldbugs, you will probably find his theories offensive. You can’t please everybody.

Another Albertan – Thx. I always though Jesse was an ex-pat American, he writes like one, and most of his Blogs reference the USA economy etc, and his charts focus mainly on the US markets. I have not seen him mention Canada much, except in passing. Either way, a great perspective. I like VoxEu and associated websites as well. Problem is, too many good sites to read every day, not enough time.

Peter Wiener – My quote, thx. I’m glad you stuck around, your posts have had some insightful comments.

Garth and all the ‘Blog Dogs’ (trolls aside) – thanks for being a light in the wilderness. Common sense is so un-common these days, and that is really what we are all expressing, each in our own ways. Which is why it is so poisonous to “traditional” medias, we are helping push them along the track to richly deserved total irrelevance and new careers in some other unrelated industry.

#45 Dean on 08.30.09 at 11:02 am

Does anybody else feel like this obsession with retirement and age 65 that seems to add to the problem? I’m not saying that one shouldn’t plan for the future, but sometimes I think people are throwing themselves under the debt bus as a way to create that retirement nest egg.

The key problem as I see it with this kind of debt vs income isn’t where they’re going to end up in retirement. The problem is where they are right now. After all, if you do the math, you’ll quickly realize that a good percentage of your life actually occurs before the magical age of 65 and you might want to invest a little money sitting on a beach relaxing during that time period too. With the kind of debt income ratio these people have, you’ll spend a lot of time sitting on your futon in your living room watching TV, eating noodles.

We often ridicule those people who don’t have any retirement savings. Just as deserving, I think, are those that don’t spend a little time and money in the moment to enjoy the fruits of their hard work. These people are in danger of falling into both categories because of the risk they’ve taken on.

#46 rob on 08.30.09 at 11:43 am

my portfolio
no debt, 50% in cash 50% in gold & silver and a bit of platinum – might put some of that cash to either short the market. no plans to ever buy a house at least not at these prices, avg home price in T.O would need to come down to at least $250k to avoid going through a mortgage otherwise they can keep it, the renter is still winning far and large.

i personally think all these people are drinking kool aid with added sugar because it beats the kool aid we were drinking in late 2007. Interest rates will rise as other CB’s start raising rates ie Israel just did and China will eventually do so to or unpeg the currency. The greenback is dead based on the lousy auctions we have had of late where they are buying up most of the indirect bonds and supplying way to much paper. Every country will protect there own currency before going back to the USD as you are seeing right now already. TIC flows are negative to the US. And CB’s are hoarding and buying Gold for the first time since 87.

i highly recommend reading this blog.

http://harveyorgan.blogspot.com/

#47 R on 08.30.09 at 11:50 am

#42…Victoria as the rest of B.C. will drop like lead. Wait until the Prov. budget comes down on Sept.1..Then wait a bit longer for the Olympic games to end and the hst to kick in. Lets not forget an increase in mortgage rates. If you have a secure career or a good pension then Imo you will find some great deals. There is not much left on the Island to keep it afloat. Have you bought an earthquake kit and an umbrella? And don’t forget to budget for antidepressant medication.

#48 popeye the sailor man on 08.30.09 at 12:06 pm

Even “Rich dad poor dad” Robert Kiyosaki turns bearish!

http://finance.yahoo.com/expert/article/richricher/184720

#49 Seilfworcehtsa on 08.30.09 at 12:07 pm

The sun is still devoid of spots which generally means a cold winter…..bullish for natural gas and gas stocks. RE prices are holding up but have nowhere to go but somewhere…only God and Garth know where. The US dollar is hanging tuff and there is still plenty of room, though clouded in dooom, for govt. borrowing and spending. In an expanding economy debt generally expands even faster until the elasticity disapppears. Debt has been stretched to the limit and needs to cool down but govts. won’t let it so we keep kicking the can and the problems that go with it down the road. Horray for us.
You steal a $1.00 chocolate bar from the grocery store and you are a thief and could be jailed. Harper steals $30 billion from a bunch of poor seniors to enrich his friends and he is hailed as a hero and the $30 billion is a statistic. Harper lies and is considered wise. If I lie I am a dishonest lying old fool. Go figure.
Give us this day our daily bread…..who are we to expect anything more?

#50 JoeK on 08.30.09 at 12:24 pm

#37 ca:

Makes cents to me. If the primary power supply runs down and doesn’t have enough juice to turn over the genset (generator), the small power supply will have enough power to start the genset to charge the primary power supply.

Ya – been reading too much of Home Power magazine (www.homepower.com) – $15 yearly PDF subscription.

#51 JoeK on 08.30.09 at 12:31 pm

#19: Daystar:

I’ll cop to that statement. While I’m a grizzled veteran of my own industry and I run a financialy responsible household, I’m a relative neophite in the world of political finance. My expectations were that we’d go into a major financial hole last fall, and then work ourselves as a country out.

I did not expect that the gov’t would drop rates and re-bubble the market. However, lurking on this site has opened my eyes quite a bit, and I thank all the posters for that.

#52 squidly77 on 08.30.09 at 12:35 pm

Angel Carter was high on ecstasy and still half-cut from a party the night before when a credit-card salesman at West Edmonton Mall asked her if she wanted a free plane ticket.

Sure, she said, strolling over to his booth. She was 18, partying day and night, addicted, homeless and couch surfing. A free trip would be great.

She told him she had worked at Boston Pizza for two months, that she earned $800 a month and lived at home with her mother. He gave her a credit card with$5,000 limit. “I just partied when I had that credit card, because I could,” she says. “I was caught up in partying and so I just stopped going to work. … I just didn’t care.”

She rented a limo, toured down Whyte Avenue and bought rounds of drinks for everyone. She bought clothes for her friends, seven pairs of shoes and cute handbags.

In three weeks, she maxed out the card. She never got her free trip. Now, at 19, she owes well over $6,000 with interest, along with more than $2,600 in unpaid cellphone bills. She is homeless, unemployed, facing a long list of criminal charges and trying to recover from a drug addiction. She can’t begin to pay it all back, and she is not alone.

#53 Peter on 08.30.09 at 12:56 pm

http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20090830/GDP_report_090830/20090830?hub=Canada

#54 squidly77 on 08.30.09 at 1:07 pm

http://www.edmontonjournal.com/news/Street+kids+fall+prey+perils+easy+credit/1941667/story.html

link for my above post

btw..i get the message..thanks for letting me get it out there..it was great help

#55 Shawn Allen on 08.30.09 at 1:11 pm

Kids buy a $500k or even $1 million house and they figure it will rise in price.

In effect, the plan is, the house will pay them to live in it!

Not gonna happen.

Those kids have insanely low interest rates. Who would lend a mortage at 1.45% (apartment building).

Rates will rise and these kids are toast.

ROB magazine projects out the pension at age 60 when these kids are now only 32. The chance that this guy will have the same job through to age is 60 is slim to none.

These people need give zero thought to retirement. Every waking thought should be on how to improve their present finances. Like sell the million dollar money pit and move into the apartment building.

#56 kc on 08.30.09 at 1:51 pm

38 popeye the sailor man

You should have went to a Ritchie Brothers aution. I am sure you could have gotten a better deal. As more and more “big companies” are forced to liquidate or have gone tits up.

#57 Investx on 08.30.09 at 2:07 pm

Waiting for the 2-year-behind-the-US-real estate-market to happen in Canada.

#58 Happy Renter in North Van on 08.30.09 at 2:23 pm

Like someone else said on the blog a couple of weeks ago.. to paraphrase…

“In a credit crunch, there are no victims, just volunteers.”

#59 kc on 08.30.09 at 2:24 pm

I have no idea of who in here read “John Mauldin’s” views. Personally I feel he writes a straight to the point paper every week as he tells it as he sees it. As Garth does the same thing, “why sugar coat the truth”. This week’s letter:

“Uncomfortable Choices in a Deflationary High Deficits Economic Environment”

Sums up many of the ideas and topics that Garth speaks and believes highly in. These choices for the future will not come to Canada with out pain. The population in the US are living through what we can expect shortly.

http://www.marketoracle.net/Article13088.html

cheers

#60 ottawa on 08.30.09 at 3:23 pm

Thanks above for the interesting CTV article.

In addition to the more than $200 billion (and rapidly increasing over the last few years) dollars that the government was already spending they are now borrowing an additional 3% of GDP each year to spend over the foreseeable future.

Even with this approx. 3% of GDP we have hadcontraction over the last three Q’s of over 3% and the good news story is an expected .2% increase in June economic activity. This is with semi re-inflated RE and consuming incentives.

I wonder what the logical limit is for government borrowing, spending and then pointing to an increase in economic activity as a sign of health? At this stage the “recovery” seems very fragile to be claiming victory.

#61 But Vancouver is Different! on 08.30.09 at 3:25 pm

Moved from Ontario to Vancouver 13 years ago; even then, thought real estate was too high. Endured 10 years of this “Vancouver’s different” refrain from smug locals (admittedly backed up by 10 years of sky high price increases, until recently). Key themes:
-Running out of land; can’t “sprawl” like Toronto (mountains and agricultural land reserve);
-best climate in cold G7 country; wealthy retirees will snap up land;
-Pacific Rim connection; Asian investors will lock in savings in rental homes in stable, beautiful city when prices in Hong Kong and elsewhere are insane;
-Compared to San Fran, LA and other pretty coast cities, prices aren’t that bad.
My gut tells me these prices are insane. Personally if I had millions in the bank, I wouldn’t buy a dumpy bungalow on the North Shore for $800K Plus, but all the evidence over the past 10 years has proven my gut wrong (again, except for recent modest declines). Now, bidding wars again. Is Vancouver really different? Have there been studies done on this?

#62 Bobby on 08.30.09 at 3:56 pm

I too read this article in the Globe and was taken back by the level of debt accorded this young couple. There was a time when our so called responsible banks limited your real estate debt to 32% of gross income and total debt obligations to 40% of gross. They would allow 1/2 of your spouses income to be included given the chance of maternity leave, etc.

Whoever lent these sums to this young couple certainly didn’t have their best interests in mind. If interest rates rise in the least, or if property prices fall, they will be in big, big trouble. I think they certainly realise this given they have allowed the Globe to publish their story.

The RE industry is pumping out spin to keep the markets alive. Remember if they said prices will fall no one would buy as it would be cheaper next month. This is the kiss of death for an industry dependent on commissioned sales.

The reality is that most of the sales are <$450 with no money down and 35 year amorts. The CREA quotes average prices rather than median as the medians are tending down.

Just look to the south to see what is happening. No Canada is not different. It seems we are just as gulible here as in the US. Just ask the couple above!!!

#63 bigpictureguy on 08.30.09 at 4:31 pm

#61 But Vancouver is Different! on 08.30.09 at 3:25 pm

I guess you weren’t old enough to remember the 1980 and 1987 crash.

#64 Nostradamus jr. on 08.30.09 at 4:34 pm

# 61 But Vancouver is Different

“”Is Vancouver really different?””

…glad you asked that Vancouver is Different.

I am able to read, in between all the lines in 95% of the posts on this blog, that the North Shore of Vancouver really is considered North America’s Cote d’Azure and Vancouver will become North America’s Financial, Trade, Cultural and Leisure capital.

…Everyone sees the above but are looking to buy here first before actually admiting to it.

Nostradamus jr.

#65 BD on 08.30.09 at 4:54 pm

If you didn’t check out Mish’s site today he does an interview where he states that Canada has a massive real estate bubble that will correct itself over time. Nathens economic edge has a longer version.

#66 Fritz on 08.30.09 at 5:07 pm

Hi Garth: Off the topic…sorry.The local TV station is up for sale. CHEK 6 is going under and Canwest appears fairly happy about it . The employees raised 2.5 million but Canwest turned it down. If you want to return to politics you better find an avenue far away from the MSM if you want to get your message out. The MSM has deliberately dumbed down the average citizen to maintain the poisonous status quo and will go after you in a heartbeat. This site is great but until you start pasting it with pictures of naked people doing rude things you will never get to the average citizen. While CHEK 6 is very local (typical news stories: Cat in tree, Flower count, Lawn bowling expose), I’m sure Canwest has a lot of high profile stations out Ontario way that you can use to get your message out. Going back into politics is a very risky business particularly in this day and age. In the MSM ‘s eyes anyone with your message is akin to the vilest of the vile. You simply have to get your message out. Even if the sheeple don’t act on it at least they had the option. Look at this blog. How many allegedly read it and then turn around and ask the same “logically challenged” questions? Bombard these people with the facts until it sinks in. Rant, rant, rant…I better go for a ride. Sincerely Fritz

#67 But Vancouver is Different! on 08.30.09 at 5:10 pm

#64 bigpictureguy; you are correct! Maybe that’s why many of my peers are lined up to buy. In fairness, most older vancouverites I talk to still say that their house was the best investment they ever made; “buy as much as you can borrow, as quick as you can” is the prevailing advice of homeowners out here, old and new, even now.

#68 Onemorething on 08.30.09 at 5:56 pm

Debt Free! Yes, it feels good but what will be worth purchasing. This is going to get very messy I still believe and we could retest lows this fall.

If we do not see this then look forward to 10 years of absolutely no growth as the economy is architected to not include any huge declines just ponzi manageable ones.

Where will you put your cash to work kids???

#69 Vancouver Old-timer on 08.30.09 at 6:06 pm

#63 bigpicture guy

I remember the ’80s – my husband and I owned a house on West 12th that was appraised at $335,000 by the city for tax purposes one year, the next year’s tax appraisal was $135,000. Taxes, by the way, did not change – just the mill rate.

#70 Industrial Guy on 08.30.09 at 6:09 pm

#3 Tarth Gurner on 08.29.09 at 9:56 pm

Lets look at this list and give it the old reality check.

1) Canada is extremely resource-rich
Yes, this is true, BUT! our costs to extract are some of the highest in the world. The President of Vale / INCO said last year the company was unsustainable at present costs. We are now competing with the third world in the resource area. Must I remind you how our manufacturing sector fared against those same countries? Mines and forestry operations are closing all over Canada. So, if you plan to hitch your cart to this horse .. think again….. it’s gone lame.

2) best banks in the world
Sure, if you ignore all the bad debt that’s about to swamp them. Rising credit card defaults and personal bankruptcies. Commercial RE has tanked. And the value of residential RE will be heading downwards soon enough. Only the direct efforts of Bank of Canada have delayed our correction in the housing markets.

3) low crime, high morality/values/ethics
Push people to the wall and we’ll see how this situation changes. Desperate people do desperate things. Our mortality rate is lower than the USA because we pump huge amounts of money into our National health care system. As the economy falters, where will this money come from? Talk to the finance Minister in Alberta. He needs a new revenue stream. Maybe a sales tax is coming. Billions in deficits spending this year ….. and it’s not really that bad in Alberta. Try Ontario.
Ethics? forgotten about Nortel’s book keeping fiasco? Didn’t a guy get arrested in Quebec for a major Ponzi scheme recently? Values? Spend some time on Bay Street. Greed has a very ugly side.

4) wealthy boomers (just look at you GT!)
HUH? Those wealthy boomer all had a collective bath when the stock market imploded last fall. A lot of pension plans are still at risk and the Government of Canada can’t bail them all out as they did at Air Canada. I guess you think all these companies saddled with underfunded pension plans will magically grow a money tree. Yes, the markets have come back ….but, it could happen again. The fundamentals have changed very little.

Taxes must go up to cover all this deficit spending. The 2 point drop in the GST will be back soon enough. As Governments suck money out of the economy to pay down these deficits expect to see:

1. Higher taxes and service charges.
2. Massive reductions in the Public Service
3. Significant reductions in all areas of health care and social services.
4. The gutting of Canadian foreign aid.
5. Slashing of military spending.
6. Interest rates not seen in a generation

Basically, were going to revisit the 1980’s.

#71 taxpayer like you on 08.30.09 at 6:12 pm

63 Big show

I think it was more like an ’82 crash, and a ’97 (not ’87) slow deflation blamed on Asian financial crisis and second reign of NDP terror. May have been a couple of minor blips along the way. No significant recession in ’91,
though I did go home early that day…….

I guess that does kinda make it different………

…….oops….fed Nosty again…….

#72 905er and spouse on 08.30.09 at 6:21 pm

Things will get ugly very soon, here’s one example…

A few days ago we went to a new restaurant that just opened in Brampton. Kinda fancy, backs onto a golf course, but not THAT fancy or expensive.

The manager told us they had SIX HUNDRED APPLICATIONS for 50 or so spots. This is a restaurant we’re talking about. He also said many of the applicants had 30 years of automotive industry experience.

How sad, many of those boomers will never work again just like Garth says. They hired staff with restaurant experience first and most of them were out of luck.
It’s not going to be pretty around here when most people can’t even get a low-wage restaurant job.

#73 Nostradamus Le Mad Vlad on 08.30.09 at 6:26 pm

Variables and Opposites Attract, so . . .

On The plan, Aug. 27 — #161 My Dad’s deficit is bigger than your Dad’s on 08.28.09 at 10:59 pm said — “BC’s deficit is 3 billion!”

Kind of a rep, Aug. 29 Garth said — “. . . A survey of the least affordable places to live had four BC cities in its top list. . . . record real estate sales. . . . Hey, kids. Everybody’s doing it! Jump in! ”

Okay! Y’all jump now, ya hear? See wot comes up! — http://www.youtube.com/watch?v=bPXVGQnJm0w

Wuzzunt dat fun, kiddies?!
——
#11 chicken at 11:26 pm; #15 Einsam Solo at 12:27 am; #47 R at 11:50 am —

“. . . High prices, low interest rates and a govt incentive TO BUY.” /\ “As in… TIME’S UP?”? /\ “. . . wait a bit longer for the Olympic games to end and the hst to kick in. . . . an increase in mortgage rates.”

Excellent posts. FWIW, I see an underlying trend. Germany said a couple of days ago that “the second economic downturn has started”. Japan, which has remained largely stagnant for nigh on two decades now, held an election today.

An election is no more than moving chess pieces on a board. Talk — doublespeak — changes, but the song remains the same so one of the aspects remaining constant is that govts. are digging themselves further and further into a large hole.

The US, UK, Canada, Europe, Oz, NZ and (from Munch) South Africa are all singing the blues, all saying “we’ll do this to fix it, we’ll try that”, an election is called and hardly anyone bothers to show up.

Does a “pre-planned meltdown”, fooling greedy sheeples with zero-down, low-interest rate HELOC (anything to further the elites’ cause of flushing folks down the toilet) come to mind?

The above countries, along with a few more are already in a recession / depression (depends upon one’s POV), there’s lotsa rhetoric but no solutions.

So, other than a revolution, any suggestions? “Coz we’re all being suckerpunched, and most don’t even realize it.
——
#55 Shawn Allen on 08.30.09 at 1:11 pm — “Rates will rise and these kids are toast.”

If more and more kids fall into the same trap, along with house-rich cash-poor boomers unable to offload their places, the banks may end up being melted butter spread on top of the toast.
——
#49 Seilfworcehtsa at 12:07 pm — Fine post– every word spot on! The m$m, of course, conveniently ignores all relevant facts, continuing to live above Cloud Nine Somewhere Over The Rainbow, where reality doesn’t exist.
——
#18 Keith in Calgary at 12:36 am; #45 Dean at 11:02 am — “I am debt free…..I am debt free…..I am debt free……!!!”; “. . . to enjoy the fruits of their hard work.”

Know the feeling. I also enjoy the fruits of my labor. Took almost three decades of bloody hard work, but it’s well worth it.
——
Who’s bleating again over the UN? dubya once said the UN is ‘irrelevant’, and I guess the same applies here!
http://haaretz.com/hasen/spages/1110835.html
“Israel bombed Iraq’s power station at Osirik, claiming that it was a clandestine weapons laboratory. Inspections following the 2003 invasion of Iraq confirmed that there was no such weapons laboratory.

“So, why should anybody believe Israel now when they are batting zero in their accusations against other nations?”

#74 Peter on 08.30.09 at 6:36 pm

Jon Seaby writes from Toronto: With all the money that is being flooded into the US economy, and for that matter the world economy, do you think that interest rates are set to rise considerably (i.e. like they were in the late 70’s 20-25%) in the next 3-5 years globally, specifically in Canada do you see interest rates rising considerably (similar to the late 70’s as well) in the next 3-5 yrs?

Jeff Rubin: Interest rates are generally a mirror on inflation. I believe inflation is coming back, hence i believe interst rates will move up sharply over the next couple of years. While I dont do investment advice any more, I will say this – if I had a mortgage, I would lock in now.

#75 eddy on 08.30.09 at 6:51 pm

TO listings are way way down. 18 in leaside, 62 in the beach. i drove through leaside today between 2-3 pm and saw no open houses
people are not listing! =low supply,decent demand=prices are still stable. the blogger waiting for a 40% drop in TO prices might as well buy more gold. people are re financing and staying put. condos?maybe. SFD in good TO hoods? No.

in the burbs? In oakville there’s over 100 listings at 2million plus

#76 Peter Wiener on 08.30.09 at 7:00 pm

# 70 bigpictureguy

Hey, you’re putting me out of business here! LOL!
Just kidding – great post! Thanks for rebutting #3 Tarth Gurner with some realistic perspective and your well reasoned ideas.

Personally, I’ve given up talking about RE, the economy or anything related to financial security with any acquaintences, friends or family. They either don’t get it or don’t want to get it and never will, so I no longer feel obligated to inform them.

Self interest dictates that I quietly disengage and fade now as I don’t need the aforementioned persons looking for someone solvent to save them as the “walls come tumblin’ down”.

#77 Gregor Samsa on 08.30.09 at 7:46 pm

#65 BD – if Mish Shedlock says that “there is still a MAMMOTH housing bubble in Canada that I’m quite positive is going to implode” recent home buyers should very, very afraid.

The thing that saddens me the most about what is happening right now in Canada is that it seems like we are turning into the U.S. A neutered media (seems like even the CBC is towing the line), an increasingly ignorant and apathetic population, politics that are shifting to the right, installation of (failed) U.S. drug policies, Canadians fighting an imperialistic war in Afghanistan… it goes on an on. Canadians need to wake up and if a housing collaspse is what will get their attention, then bring it on.

#78 PVC on 08.30.09 at 7:52 pm

Bye, Bye Canacaca

Canada Has Record Current Account Deficit on Exports (Update1)
Share | Email | Print | A A A

By Greg Quinn

Aug. 28 (Bloomberg) — Canada posted a record current account deficit in the second quarter on falling exports of goods such as machinery and metals and imports made cheaper by a stronger currency.

Payments sent abroad exceeded receipts from outside Canada by C$11.2 billion ($10.4 billion) from April to June, the most in records going back to 1946, Statistics Canada said today in Ottawa. The shortfall matched the expectations of a Bloomberg survey of 17 economists.

Canada recorded its first deficit in traded goods since 1976, at C$1.71 billion, Statistics Canada said. In the same quarter last year, there was a surplus of C$16.2 billion. Exports of goods fell by C$9.3 billion in the second quarter, compared with a C$6.8 billion decline for imports.

Stagnant trade, due to sluggish global demand and a stronger currency, is the biggest threat to the recovery from Canada’s first recession since 1992, Bank of Canada Deputy Governor Timothy Lanesaid Aug. 25. The Canadian dollar rose 12 percent this year through yesterday, making exports less competitive.

“Global economies experienced a severe recession in late 2008, and base metal mining companies have been struggling since,” Ronald Gagel, chief financial officer of FNX Mining Co. Inc., said on an Aug. 14 earnings call.

Limited Export Drop

Machinery and equipment exports dropped C$3.5 billion, and industrial goods such as metals fell C$2.2 billion. The drop in import volumes was limited by the Canadian dollar’s 8.5 percent gain against its U.S. counterpart in the second quarter, Statistics Canada said.

The current account is the broadest measure of international trade, covering goods, services and investments. The flow of money coming into or leaving Canada suggests changes in demand for the Canadian dollar.

The Canadian currency strengthened 0.4 percent to C$1.0839 per U.S. dollar at 11:05 a.m. in Toronto, from C$1.0877 yesterday.

In the investment ledger, foreigners bought a record C$30.7 billion of Canadian bonds, led by sales of new government and provincial securities.

#79 Calgary_rip_off on 08.30.09 at 7:56 pm

Just signed up today on one of Calgary realtors sites. He said if I listed my email and phone number I could look at the foreclosures. 20 seconds(literally) after I hit the enter button with my phone number he phoned me from Montreal. Said he was at a wedding and the pager went off. WTF? He said not to expect lots of foreclosures in Calgary and not at $20K. Said he wasnt pushy or anything. Right……I looked at his site. Not too many foreclosures.

So all the gloom and doom forecasted on this site….Sure I would like houses in Calgary to be reasonably priced. Not gonna happen. Look at the interest rates. This is NOT 1982. Would someone on here please outline WHY the Bank of Canada would raise interest rates on mortgages? To sell bonds? I dont think so. There isnt a reason. Therefore, the dropping of real estate in Calgary isnt gonna happen. Its in one word…..WHACKED…..

Again, just because its justice, because you want it to happen doesnt make it so for prices to implode. Lots of natural gas, lots of oil jobs. Big paying jobs. This keeps the local economy going. Is oil and gas demand going to go bye bye? Will sellers here want to sell their homes at half price? Dont think so.

Sure, the stats support somewhat a decline in prices. But the way its going, drag that out for about the next ten years. Or, it may recover by then.

I am waiting for some valid statistics to support either pro or con that Calgary will implode. I havent seen any here.

Thx.

Learn something about monetary policy. The BoC is powerless to follow an independent interest rate policy in a country with a floating currency, its economic survival dependent on trade and its government in record deficit. — Garth

#80 ESL on 08.30.09 at 8:08 pm

Last week I happened to tune into commentator on Canada’s BNN network who was commenting on about $120 Billion in cumulative mortgages purchased by the CMHC. If our banks are doing so well then why the need to take all this “refuse” off the hands of such well-run institutions? Ask yourself who will pick up the tab for loan losses when these mortgages go underwater? The widow who’s taxes $1000 on $11000 income – that’s who – all the while Bank execs are paid through the nose with bonuses for a job well done. Moral hazard is alive and well in Canada, headed up by the local Goldman Sachs rep who openly threatened to take our currency into the toilet swirl of the Greenback just to “keep our economy competitive.” I wonder how many of Zimbabwe’s neighbors agree this is a good strategic plan for the long-term health of our economy.

#81 kabloona on 08.30.09 at 8:21 pm

re. the ROB “financial facelift” article on the two vancouver yupsters with $1.43 million in real estate holdings …. is anybody else amazed at what they’re paying for mortgage rates?

2.25% on the primary residence and only 1.45% on the rental property….wow. The lowest I ever got from BMO back in the late 90s was about 3.75% for two year term…at the time that was a generational low in mortgage interest rates. First mortgage I signed up for back in ’91 was around 9%…..

The only thing keeping those two clowns from insolvency is The Carney’s free money policies…..

#82 bigpictureguy on 08.30.09 at 8:28 pm

In fairness depending when those old folks bought ie like at the bottom of those aforementioned recessions then they did well.

TIMING IS KEY. BUY LOW AND SELL HIGH.

Go ahead. Join the buy crowd. Knock yourself out and buy today and borrow!

#83 bigpictureguy on 08.30.09 at 8:30 pm

#69 Vancouver Old-timer on 08.30.09 at 6:06 pm
#63 bigpicture guy

1980 was truly frightening times. I saw families and lives ruined when interest rates were 18%.

#84 bigpictureguy on 08.30.09 at 8:32 pm

#76 Peter Wiener on 08.30.09 at 7:00 pm
# 70 bigpictureguy

It’s all for sport Peter.

I’m really just lonely putz loser myself in real life! LOL

#85 bigpictureguy on 08.30.09 at 8:39 pm

“Learn something about monetary policy. The BoC is powerless to follow an independent interest rate policy in a country with a floating currency, its economic survival dependent on trade and its government in record deficit. — Garth”

Garth let’s say if the economy continues to deflate despite the initial stimulus injection what prevents the feds from just continue printing money? My major fear is if they continually manipulate and artificially prop up economy.

Something has to give at some point no? I’m hoping for a weakening dollar, inflation kicks in and interest rates rise to 6-8% to punish the love couple who are highly leveraged.

Then again I may not have a job if that happens :(

#86 Repatriated Expat on 08.30.09 at 8:43 pm

Re # 70 Industrial Guy

“The President of Vale / INCO said last year the company was unsustainable at present costs.”

I have to take issue with this specific comment. The same company went on record when competing to buy the company stating that Inco was a competitive low-cost nickel producer.

Inco Ontario profits from 1996 to 2006 were 2.2 billion, Vale-Inco Ontario profits 2006-2008 were 4.1 billion.

And Vale-Inco has been cutting jobs in Canada that would give Neutron Jack (Jack Welsh of GE) a run for his reputation.

Where is Vale-Inco today? The company has been set adrift with Sudbury shut-down and no-one making anything, no product/money.

This story is yet to be played out.

#87 Seilfworcehtsa on 08.30.09 at 8:45 pm

The fact that lofty levels of debt on the guilded nests of the daring do crowd is often times leaving them feeling less secure than a bug in a rug and causing the rest of us to scratch our heads in bewilderment is not necessarily a tragedy in the making but the odds against a tragedy are not good. The saying is that if you owe the bank $10000 and can’t pay it then you have a problem but if you owe the bank $10,000,000 and can’t pay they have a problem except now the problem is passed on to the taxpayer. In the early 90’s Donald Trump had personal debts of $900,000,000.00 and business debts of $3.5 billion….such a debt load that his creditors couldn’t allow him to fail and he didn’t.
The Canadian govt. has a fail safe plan to steady the real estate market with the many arrows in their quiver….just ask Jim or his sidekick over at the BOC. And, of course, my uncle has a plan to manufacture silk purses using sow’s ears.
The Americans have the room to borrow trillions more and why not ….they know that they will never be able to repay it and have no intention of doing so even if they could. After alll, the greenback is the only game in town….for now. Economics is easy!!!!Never a lender or a borrower be, a penny saved is a penny earned, a stitch in time saves nine, waste not, want not. Moms are smart…some moms anyway, now eat your broccoli. But Jimmy never listened.

#88 Basil Fawlty on 08.30.09 at 9:36 pm

I suppose Canada’s Banks must be good and safe, since everyone keeps saying this is the case. However, we have been told a lot of whoppers over the past two years by many of the same commentators. What is the derivative exposure of Canadian Banks?
One thing we know for sure is that savers are being severely punished through the lowest interest rates in history. In addition, we know that Mr Carney is now talking about Quantitative Easing in Canada to keep the dollar low, as part of the international race to the bottom through competing currency devaluations. The QE will also punish savers as dollars held become worth-less, while massive misallocations of capital occur as the inevitable result of inflating the money supply. One can call currencies money, however like Voltaire said ” All currencies eventually reach their intrinsic value – zero”.

#89 Industrial Guy on 08.30.09 at 9:36 pm

I stand by what I said about the resources sector and Inco. If we compete with mining operations in the developing Worlk, we a re doomed to the same fate as our manufacturing sector.

Where is Vale-Inco today? Laughing all the way to the bank. Vale INCO has huge reserves to tap into. All the strike did was reduce their operating cost for this summer. The srikers are fools. They handed Vale / INCO a gift. As one long tern analyst of INCO put it:

“A cynic could certainly say that because the company clearly was wiling to endure a shutdown of its own making in order to get the price of nickel up, it could hardly argue that a shutdown of the union’s making would be a bad thing”.

The snow will be falling before Vale / Inco has any interest in negotiating anything. The purchase of INCO created an larger international mega corporation to compete with their growing rivals in Russia.

INCO rival Xstrata did lay off 686 salaried and unionized employees in February. This story certainly has played out in places like Dryden, Marathon, Bathurst and Northern Quebec. One industry towns are dying all over Canada.

You may want to read this article.

http://money.canoe.ca/News/Other/2009/07/10/10090091-cp.html

#90 Just a Girl on 08.30.09 at 10:41 pm

LOL, I read this Globe & Mail piece while eating my breakfast … got to the end of the article, and realized, did I miss the advice? Read it a second time and found the lame, passive advice to ‘downsize’ … shook my head. When I found this picture on Garth’s blog, I had a good chuckle. I thought there’d be a shredding, somewhere …

#91 Halifaxfamily on 08.31.09 at 7:17 am

One word: wow. I hope they can sleep at night.

#92 mattbg on 08.31.09 at 8:19 am

#30 Ed,

I think debt is becoming somewhat of an extreme sport. The over-comfortable clowns in their 30s (I am of the same age) need something to motivate some excitement in their lives… especially the ones that don’t have kids and have no legitimate reason to strive because they have no-one to provide for or build a future for. It gives you a legitimate-sounding gripe about life. Since so many people are in the same conga line, you can even get sympathy and nobody will call you out because there’s an unspoken victimhood conspiracy going on (i.e. if you don’t call me out, I won’t call you out).

Taking on irresponsible levels of debt puts you on the edge of a cliff for a long time. It gives you street cred in this generation. If you want to fit in and share a common mindset with your peers, you have to do it. I am not joking.

Becoming an underwater homeowner is a right of passage into responsibility and adulthood that many 30-somethings are now just getting into.

#93 Peter on 09.01.09 at 2:19 am

Well, these are many typical couples in Canada right now where they thought if they do some painful things early (by taking in great amount of debts and bubble up their asset figures), they would be able to retire rich like those multi-billionaires and enjoy the sun in Florida or something..But, it seems like they are missing something called Asset Inflation at first and Asset Depreciation in the end…If you all think Canada is all safe from that, it would not or should not be…Do you think we would like to buy a 4 million dollar home 10 years later while we only made 70K in combined income of a couple ? Dont get brainwashed from those bank guys and real estate guys..as they all will vocal the market and echo to everyone about how sound and great are with the equity and real estate market..but bottom line is, if we have a line up of people that needs to find work and large amounts of students getting out to find jobs and great deal amount of people who cant find great paying jobs but only those $9.50/hour job plus HST on everything…we all get screwed easily !!!