Bubble buster


Always nice when we have a satisfied customer.

Weeks ago I gave you a couple of strategies on how to ‘short’ the bubblicious housing market now frothing in some of our more vacuous cities. The point was simple: If the people be dweebs, why not have your way with them?

Predictably, I was called callous, heartless, anti-social, borderline illegal and certainly repugnantly capitalistic for even suggesting such things. And what were these heinous, soul-crushing, testosterone-drenched bubble-pricking sales techniques?

Well, you can look up the Bubble Busters yourself, but one suggested selling in a bidding war, and insisting on a l-o-n-g closing in order to accept an offer. The logic’s simple: Sell high (now), and buy low (later). The odds of Canada being in a real estate bubble in, say, April of 2010 are remote, so why not get a fat deposit and a long close, and thereby have it both ways? You sell at an inflated top-of-the-cycle price, live in the house for most of a year, then buy into a declining market with the proceeds.

Additionally, you get a stinking big deposit which is non-refundable (you’ll have to fight your agent a little on that one), so if the buyers walk when the bubble pops, you get to keep their money. Like Divine Retribution without the thunder and bolts.

I noted with interest some real estate blogs run by actual experts (as opposed to me) said this was impossible.

Apparently not.

A few months ago I received this note:

We have a home purchased for $400,000.  It was up to about $900,000 but we are guessing it’s down to about $700,000. We have a $300,000 mortgage at 2.6% (open/variable)  My husband and I, although we love this home, are not ‘married’ to it.  We’d like to sell and either purchase something smaller (this home is 4200 sq ft  and we only have 1 child left at home) or rent while we ride out this storm.  Preferably we’d like to purchase debt free.  (We live in the lower mainland so that may not be possible).

We have been advised to keep the home because it has such a low interest rate.  Problem is, it costs a fortune to heat, in a winter like we’re having, and to replace carpets or lino will cost big bucks as well. From where you stand, how would you advise us if we were your children.  (We’re way too old for that, <smile> but for the sake of conversation).  We promise not to hold you to your ‘advice’.  :-)

As you might imagine, my advice was to sell, reap the profits and downsize with less debt and more financial security. And here’s the update:

Well, we finally put our home on the market. (Our interest rate is now down to 1.93%)  We had it evaluated 2 months earlier and one realtor said $699,000 was the highest we should ask and another realtor said $729,000.  The higher of the two was the realtor we chose to list our home but on the day of listing he said we should got for between $749 -759,000.  We chose the higher listing price, and just received an offer of $750,000!  After some negotiations we ended up with a big deposit and a completion date that is a full 8 months away.

About an hour after the realtor left I began to giggle.  My husband was confused so I explained, “Without realizing what we were doing, we just negotiated Garth Turner’s Bubble Buster #1.”

Well, Garth, I guess we’ll ride this out and see what the market does.  We may rent. We may buy. But we’re going to find out how this bubble busts over the next 8 months.

God, I love the smell of napalm in the morning.


#1 Denis on 08.31.09 at 9:55 pm

Awesome! Good work on them for making it work!

#2 Dean-oh on 08.31.09 at 10:05 pm

I’ve been looking for a 5 to 10 acre hobby farm in B.C. for the last couple of years and prices definitely have not been going up. In fact they have been coming down and the vast majority listed have not been sold, most have reduced their prices at least once. Maybe it’s the city folk who are more optimistic, or maybe it’s the fresh country air that wakes peoples senses. I don’t know, but keep your eye on the equity markets this fall.

#3 s33knges8 on 08.31.09 at 10:16 pm

I sat out in 2003, 2004, 2005, 2006, 2007, 2008, 2009 and said – “this cannot be, prices cannot keep climbing” – each and every year. I am still sitting out thinking the same. I am cash rich, but cannot convince myself to buy a house. All I can say is – raise those rates you bloody fools as I am sick and tired of hearing people tell me how much they have made in RE. Well, this should be an interesting week. If you look at the world markets today, it is clear Canada’s economy is dependent on others – they were all in the red from Oceania to North and South America. Now, raise those rates you bloody fools.

#4 john on 08.31.09 at 10:21 pm

About a year ago there was lots of talk regarding LIBOR and we witnessed it’s effects on interest rates.

Why has this subsided and is this likely to happen again?

#5 Real Estate Deal or No Deal on 08.31.09 at 10:23 pm

You are quite the Dude, Garth.

When the interest rates rise and the market tanks … you will need to publish something for us then.

#6 May on 08.31.09 at 10:24 pm

This is my second post at your blog.
First of all, I apologize that I have a very bad English. It is not my first language and I am still working on it!
Second, I am feeling down. I thought I could buy a house in this new country few month ago, however, this hope is fading away. We came to Canada from China with a little money ten years ago. We had our second child whom we couldn’t dream for in China! We had our jobs, cars! We’ve save a little money for down payment! All are amazing, BUT when could we afford a nice house in Toronto?!
Third, I’ve heard rumors about rich Chinese bringing money to here and paid cash for a million dollars house. They can make money in all different way in China, however, I am wondering how they bring it to here and how they put so much money in the bank!
Fourth, I am wondering if we should join the biding war and buy a crappy house?!

#7 Cendrine on 08.31.09 at 10:27 pm

Fabulous, just fabulous!

And they don’t have to rush to pack, either!

#8 barb .. a reader in Calgary on 08.31.09 at 10:37 pm

Successful vulturism and smiley faces go well together.

#9 where is link for story on shorting housing? on 08.31.09 at 10:44 pm

Garth, you said “Weeks ago I gave you a couple of strategies on how to ‘short’ the bubblicious housing market…”

Please provide the link; it doesn’t turn up on your search tool. Thanks.

#10 WillsDad on 08.31.09 at 10:47 pm

Hey Garth,

In the scenario laid out, if the buyers walk, the sellers get the deposit, say $50,000. . But, they are stuck with the house and it’s lower, falling value.

If they take a short close, they get to sell the house, make $350,000 profit.

It seems in this case, taking the deposit would net them much less cash in the end.

#11 PopThatBubble! on 08.31.09 at 11:05 pm

Have these people ever heard of “a bird in the hand is worth 2 in the bush “?

How big is the alleged big deposit ?

Best offer with short closing is better way to go .

The buyer may have made the better deal. If the price drops in 8 months more than the value of the deposit , the seller is the bigger loser. I assume the buyers’ deposit is cash which they are fully prepared to lose. Or if the price of the house drops, will the lender refuse a mortgage ?

How is the agreement drawn up…does the buyer simply forfeit the deposit or will the seller go after the buyer for the balance if the market drops ?

Greed is a double – edged sword

#12 Kurt on 08.31.09 at 11:07 pm

It’s funny how memes get disconnected from their origins. The “napalm in the morning” quote in Apocalypse Now was followed by the words “Smells like…victory” and underlined the ineffectiveness and futility of the American’s seek-and-destroy tactics in Vietnam. However, in today’s case study, the folks have achieved what looks like a real victory, albiet one in which a bunch of other folks are about to get the (figurative) jellied-gasoline treatment, courtesy their own wrecklessness. Oh well, it’s not the first time this has happened to our language.

#13 Jon B on 08.31.09 at 11:30 pm

Let’s just hope the x-factor doesn’t kick-in and real estate prices here in the Vancouver area go even higher. That would suck.

#14 Ted on 08.31.09 at 11:39 pm

Having a Realtor with balls pay’s off.

#15 Peter on 08.31.09 at 11:42 pm

So the people who is bought that house for 750K they think it will be a 1M !!!!

#16 Michael on 08.31.09 at 11:47 pm

That is a beautiful situation to be in.

#17 Ronaldo on 08.31.09 at 11:47 pm

What a great strategy. It’s a no loser for the seller since they are already sitting on a huge gain even though they claim the house has dropped 150m from its high. So much for those who bought at that level since they are underwater by that amount right now. I guess back then it seemed like a heck of a deal same as $650m will seem like a heck of a deal 8 months from now. I suspect that the down payment is such that the buyer will still go ahead with the deal even if the price drops by $100m should he still plan to buy a place. I can foresee this sort of thing repeating on a regular basis in the future particularly by boomers who are now nearing retirement age and are sitting on huge gains. For them, what’s the big deal dropping a hundred thousand or two since its all tax free cash anyway and likely more money than they have made on any other investments. For most boomers, most of their cash is sitting in their home and getting out now and capturing these huge gains makes a heck of a lot of sense. It does for me and is exactly what I will be doing. Whether or not interest rates rise, once the stampede to the gate by the boomers wanting to dump their McMansions begins, it will be like a floodgate opening up. And there are a lot of them about to do just that. Garth has already made that prediction I believe. There will be a glut of large homes and a demand for smaller homes or condos. Don’t know about the rest of the boomers my age and I’m at the leading edge, but I am getting tired of being a slave to my home and its time for a change. The other thing is that a large percentage of boomers contrary to popular belief will not be retiring with huge company pensions and will need to sell and downsize as they are counting on the profits from the sale of their home to fund their retirement, myself included. Don’t rush to buy kids, there will be plenty of nice big homes at bargain prices to be had in the next couple years.

#18 TaxHaven on 09.01.09 at 12:20 am

Congratulations! Sensible people do exactly the same thing shorting the TSX or buying long-dated Puts, don’t they?

But there DOES seem to be a feeling among the masses that profiteering is somehow unethical. Not only on this blog but also on many others. That taking advantage of the greater fool is sort of, well…underhanded. What happened to Rich Dad’s “the making of finer distinctions”(than other people can…)?

Have Canadians become so socialized that “exploitation” and the making of profit through risk is to be forbidden? Can there never be ‘losers’ in this new Sweden (er…Canada!)? Protecting absolutely everyone from loss: maybe it’s one of our “Canadian values”?

Sorry. Capitalism only works BECAUSE of social inequity and the differences inherent in each man. If you don’t like that system, well…YOU pretend to WORK and your beloved state will pretend to pay you…

#19 Nostradamus Le Mad Vlad on 09.01.09 at 12:36 am

“Always nice when we have a satisfied customer.”

Doesn’t it make you feel warm and fuzzy all over that someone actually took your advice — FREE, no less! — and made it work?!

Yes! Sensible people, although few and far between do exist! There is but a glimmer of hope for humanity!

“. . . some real estate blogs run by actual experts . . .” — Credit to Those Magnificent Men In Their Flying Machines, Goofy, Dumbo, Snow White and the Seven Trucks, Jim Flaherty and Stephen Harper — an absolutely outstanding job in decimating what little we have left!
#98 Samantha 8:45 pm — Thx. for the link. Whether people understand cycles or not, the Caucasian ends in a few decades, with the Yellow (Chinese) and Red (Mongolian) races waiting in the wings to carry over, just like a relay race. BTW, glad you liked the pizza post!
Quite interesting — http://ncane.com/992t & http://ncane.com/5xh — re: the WH.

Now that Obama, more or less has the power to shut the ‘net down in the US completely — http://ncane.com/7dzc — the point is: Who introduced this bill? The answer may (or may not) surprise you.

Recall The Bilderberg Group, Rothschilds, Rockefellers — the elite, NWO, behind-the-scenes silent ones or the ultra-wealthy (they are all one and the same) — one of the sponsors of that bill — Jay Rockefeller (D – WV), but there is a downside . . .
“Never has an administration who had more firepower at their disposal, been set to so totally fail in the next six to eight weeks. It is nearly a foregone conclusion. It is nearly unavoidable. . . . the next few weeks will take and effectively halt the radical transformation that the left appeared unstoppable with only months ago.”
Japan has a new govt., so — http://ncane.com/ii8
“. . . Japan’s elites are in trouble because of the STRONG yen and government overspending. We also look at the [European derivatives markets] again: the Beast is still growing out of control.”
3:04 song “The Government Can”, done to the tune of “The Candyman Can” — very funny!

#20 Not Garth on 09.01.09 at 12:50 am

Garth – sales in Vancouver have dropped off quite a bit in late August (second half of Aug much slower than first half). Could sales drop off this fall and leave Vancouver RE gasping for air by year-end?

#21 JoeCalgary on 09.01.09 at 1:45 am

Markets hit by China commodity default


“A report that Chinese state-owned companies will be allowed to walk away from loss-making commodity derivative trades provoked anger and dismay among investment bankers on Monday as they feared it may set a damaging precedent.”

But the state-owned companies will follow Ottawa’s guidelines, won’t they?

#22 blobby on 09.01.09 at 2:45 am

I might be missing something here. What happens if the prices DO keep going up over the next 8 months in this scenario?

#23 Future Expatriate on 09.01.09 at 6:37 am

#22 – Hell will freeze over and the universe will collapse in upon itself and no one will be here to care.

#24 changster on 09.01.09 at 6:43 am

Hi Garth,
Thanks for your good work, I have been following your work since when you were the “Money” editor of the Toronto Sun.
After reading “Greater Fool”, we took your advice and sold our macmansion in Richmond Hill and have been renting ever since.
What is your view on the present and future value of small towns/bungalows in the bayview/Finch area ?

#25 Munch on 09.01.09 at 6:52 am

Great STUFF, Garth!


Now we can not only be CORRECT about the bubble, but pocket some COIN out of it as well!

Your Munch has bought himself a TRUCK load of “Crash Puts” (fa out the money Put Options) and will make a KILLING when this whole pile of cards comes tumbling down

#26 Tarth Gurner on 09.01.09 at 7:16 am

How you gonna feel in 8 months when your house is worth 850,000?

#27 Slava on 09.01.09 at 7:22 am

@ #22 — my thought exactly. Let’s see who is the looser then. This particular couple have an option to rent, of course.

Garth has been predicting ‘correction’ for quite some time now. Takes a lot of faith counting it is going to happen during a relatively short period of time.

#28 Herb on 09.01.09 at 7:26 am

Yup, great plot. All it takes is the greatest fools who can and will fork over tens of thousands with no strings attached, and buy for future occupancy.

That “satisfied customer” may have swept the market clean.

#29 Seilfworcehtsa on 09.01.09 at 7:44 am

#6 May

If you want to accumulate you have to speculate as the saying goes. However, when speculation permeates the residential RE market as it has it is, perhaps, best for the unsophisticated newby to stay on the sideline. A fool and his money are too soon parted. It used to be that you bought a house so as to own your home. Now you buy a house and the house owns you. Patience is a virtue and as my German friend used to say,”patience baby,patience.”

#30 Bill-Muskoka (NAM) on 09.01.09 at 8:15 am

God, I love the smell of napalm in the morning.

Well, then my man you have not actually smelled napalm (or the burned flesh associated with it), but it is still a nice phrase people relate to.

Now, as the oligarchy of Ontario and Oddawahaha go through their well rehearsed machinations of political intrigue, and perhaps a Fall election (Pretty much now clear that it becomes a choice between Asshole ‘A’, or Asshole ‘B”s ideology), there are winds of change blowing. In fact those winds make a Force 5 hurricane look rather weak. They are the winds that mean REAL change. Here is how to recognize them.

Japan’s old boys bite the dust

Across Tokyo, thousands of posters for the victorious Democratic Party of Japan (DPJ) called for upheaval in terms usually associated with Iraq: sekken kotai – regime change.

That means toppling not only the oligarchy of second- and third-generation politicians who have ruled since 1955, but also the bureaucracy, the right-wing males who suppress the ambitions of women, young males and minorities, and the construction companies who have littered Japan’s mountains, rivers and beaches with concrete.

Many foreign analysts – mostly middle-aged white males in lofty academic or “research” positions in Japan – have not fully grasped the undercurrents of change below them.

Working class Japanese, especially younger women, have had it with oyaji – older men in government and business who resist change and duck responsibility, safe within their old boys networks in smoky backrooms and golf clubs.

The victory of young over old is shocking in Japan, where a third of the population is over 60. Eriko Fukuda, a 28-year-old woman, beat former defence and finance minister Fumio Kyuma, 68. Mitsunori Okamoto, 38, beat former prime minister Toshiki Kaifu, 78 – Kaifu’s first loss since 1960. Osamu Nakagawa, 58, beat former foreign minister Taro Nakayama, 85, credited with building Osaka’s international airport.

“At long last we are able to move politics, to create a new kind of politics that will fulfill the expectations of the people,” said incoming prime minister Yukio Hatayama.

The same winds just blew at Force 7 through the U.S. and are coming to an election here soon. Those who insist the past is the future had better be heading to their bunker. Those who want to maintain their elite status quo need to realize that worldwide the Sheeple are turning into Rams.

Now that is what a real Rambo will do…ACT!

#31 Ronaldo on 09.01.09 at 8:18 am

#22 blobby

These people obviously have an “Exit plan”. They are sitting on a cool “Tax Free” $350,000 gain. Take the money and run. RE is just another commodity, no different than playing the stock market or gambling in a game of cards. You are better to leave a little on the table for the next “Greater Fool”, take the money while the banks are still fooolish enough to lend on these fictitious gains and head west where you can pick up great deals right now and stash a nice wad of cash. As the “Gambler”said, “know when to holdem, know when to foldem”. Great strategy. A no brainer.

#32 Patrick on 09.01.09 at 8:23 am

Short the housing market this way? No way!

Better to take & bank the money now, rent in the interim, and buy low later.

As the wise poster above said, bird in the hand is better than two in the bush.

#33 Jonathan on 09.01.09 at 8:42 am

#22 blobby

shortly thereafter melting?

you can’t time the market – you can just take an educated guess at the probabilities of the timing.

Having said that you can with certainty, declare Canadian real estate a bubble of mega proportions. One needs to look at the rate of mortgage debt growth over the last 30 years to declare that. It has risen 10x the nominal amount in 1980 and 4.3X the real amount. Nominally it has more than doubled since 2002 and in real terms, has increased by about 80%.

You can’t walk around that fact. Real estate prices are not supported by income. They are supported by debt.

#34 Slice on 09.01.09 at 8:51 am

Anyone buying a house these days is a tool, shank,

or a bag full of hammers, your choice.

#35 Denis on 09.01.09 at 9:06 am

#22 blobby on 09.01.09 at 2:45 am
I might be missing something here. What happens if the prices DO keep going up over the next 8 months in this scenario?
They sell their house for what they agreed to sell it for. It’s called buy low, sell high. Not Buy low, sell Highest you greedy Blobby. Take your chips off the table when you’re up. There’s nothing wrong with protecting your position.

#36 eddy on 09.01.09 at 9:12 am

Garth said “Sell high (now), and buy low (later).”

i agree with buy low sell high, but there is no guarantee that prices in TO will drop. They were down last Spring about 15%, that was a buying opportunity. i predict that in TO prices will be flat . I was hoping for a bigger correction than 15%, but i figured ‘that’s it’

Off topic, Don’t forget to vote! http://dissolvethecrtc.ca/

#37 Calgary Rip off on 09.01.09 at 9:45 am

That post pertains directly to the greater Vancouver area.

Vancouver is worse than Calgary.

Yes, Calgary is different-in many many ways.

There will be no bust to this bubble:

1) Why would be Bank of Canada elect to raise interest rates and put people in serious financial straits? This is unlikely.

2) It is not a crisis situation mandating a raising of the rates. Where is the crisis?

3) Raising of interest rates would upset the delicate nature of buying and selling of properties. This is unlikely to happen.

Garth you still havent covered exactly which way the Bank of Canada is leaning. You probably dont know for certain. Who is the person in power that would know? You indicated it is not Harper. Who is it then?

#38 Calgary Crash on 09.01.09 at 9:47 am

There’s always two sides to a story. Could you contact the buyers and get their viewpoint? And just how much is that “big” deposit?

#39 Larry on 09.01.09 at 9:53 am

#22 blobby “I might be missing something here. What happens if the prices DO keep going up over the next 8 months in this scenario?”
LOL that’s a good joke bud :)

#40 Gregor Samsa on 09.01.09 at 10:12 am

Sorry if this was already posted, but apparently (and not entirely surprisingly) a bunch of smug Canadians emailed Mish about his comment on Canadian housing. Here is Mish’s response:

In response to “Mish Videos – On the Edge with Max Keiser” when I mentioned the Canadian housing bubble, I received numerous emails from people telling me that Canadian banks were in better shape than the US, that lending standards on houses were tighter, and how commodities would support home prices.

Perhaps banks are in better shape but that does not mean they are in good shape. But the real reason we can say Canadian housing is in a bubble is the same reason the US was in an identifiable bubble:

Home prices are standard deviations above rental prices and wages. That may not be true of every city Canada (it was not true in places like Danville, Illinois either), but judging from housing prices in Toronto, Vancouver, etc, it is crystal clear Canada is in trouble.

I cannot quantify exactly how many standard deviations above norm the major Canadian cities are, but a look at home prices and acceleration in appreciation is telling in and of itself. In the US, homes prices to wages and rent were a whopping 3.5 standard deviations from the norm at the peak.

Canadian home prices are a bubble waiting to pop. When the bubble does pop, it will take as long to fix as in the US, 6-8 years minimum, perhaps way longer, depending on how big the bubbles got in each location and the speed of the declines.


#41 Bill-Muskoka (NAM) on 09.01.09 at 10:17 am

Will everything be ‘oil’right?

Chinese firm to take 60% oilsands stake: PetroChina investing $2 billion in Dover, MacKay River projects

CALGARY–A Chinese energy giant is making a nearly $2-billion investment in the Canadian oilsands by buying a working interest in two northeastern Alberta developments.

Privately held Calgary firm Athabasca Oil Sands Corp. said yesterday PetroChina plans to take a 60 per cent stake in the MacKay River and Dover oilsands projects.

“Oilsands projects are very capital-intensive long-term investments and difficult to fully finance in the traditional equity market,” Athabasca chair Bill Gallacher said in a statement.

PetroChina is not the first Chinese firm to show interest in northern Alberta’s vast oil reserves, second only to Saudi Arabia’s in size.

Sinopec Corp. has a 50 per cent-stake in the Northern Lights project northeast of Fort McMurray, with French energy giant Total S.A. holding the rest.

It’s smart for Canada to sell oilsands bitumen to markets other than the United States, where the “dirty oil” moniker has gained traction and where emissions regulations are expected to become more stringent, Lauerman said.

Gee, should we plan on funding Chinese as a Second Language now too? Seems Canada is selling off its natural resources and to Hell with our own stability and future. More of the same short term thinking by the greed mongers. No wonder Harper hates environmental issues…they interfere with his friends profits at the world’s expense.

#42 Dave the Mortgage Agent on 09.01.09 at 10:23 am

There is one major flaw in Garth’s “Bubble Buster #1”.

By extending your closing date out 8 months, even with a firm offer, that transaction might not ever be completed. The fly in the ointment is, the clause inserted in every lender’s mortgage commitment that states; “if there is a major change to the application, the lender reserves the right to cancel the commitment to finance that mortgage”.

The Bank’s are not stupid, if the value of the property drops signifiacantly over the next 8 months prior to closing, they can ask for a new apprasial closer to the closing date. The lender will then only lend based on the lesser value of the later apprasial or the purchase price. Most lenders will only accept apprasials that are not older than 90 days. If the market is dropping fast, then they may want to shorten the 90 days to something less.

This was the #1 Killer of the financing of new homes in the US. Most new home deals have 8 months to 18 month closing dates. When the US market was dropping, the Builders had no choice but to drop their prices, but by dropping the prices it had a catastrophic effect the values of the the homes that were already sold but not yet closed. This is why there are close to $2 Million vacant new construction homes across the US.

The same thing can happen to resale homes with exceptionally long closing dates.

That material change clause is a “Catch all” that gives the Bank the right to back out of the deal.

Your safest option is to close your sale deal within 90 days or earier so your buyer can use the apprasial that was completed at the time of the agreement to buy.

This will keep negitive influences of declining market values from effecting your sale.

If you want to benefit from further reductions in housing prices, sell now……..rent……then buy later.

Cash will be king in the next couple of years.

Sellers and Buyers beware.!!!!

#43 Makeorbreak on 09.01.09 at 10:49 am


#44 Men With Hats on 09.01.09 at 12:04 pm


#9 where is link for story on shorting housing? on 08.31.09 at 10:44 pm

Suggest you learn how to research properly .

#45 lili on 09.01.09 at 12:16 pm

Well, August is over. A few more days and we will have another batch of freshly baked Canadian real estate numbers topping up the annals of home price history.

The recession is abating, the stock market is finding something new to fret about, and most Canadians are sitting pat in their little detached engines that could (note, that is not a veiled plug for home generators…).

Anyone feel like placing a a put option on the TREB numbers? Are we topping out this year? Is there a real estate volatility index that I can attach a swap option to? blah blah blah??

People, homes are not stocks.

#46 Men With Hats on 09.01.09 at 12:40 pm


Shorting strategies .
Learn how to do research properly .

#47 Men With Hats on 09.01.09 at 12:51 pm


Link for shorting strategies .

#48 Nostradamus jr. on 09.01.09 at 12:55 pm

4,200 sq ft for $750K??????????

$178.00 / sq ft!!!!

…Someone got a bargain!!!!!!

Garth, why dont you put more info on the property…otherwise you are just hyping an old couple who just got taken to the cleaners.

Nostradamus jr.

#49 Barb .. a reader in Calgary on 09.01.09 at 12:59 pm

#9 — Garth,

You said you gave you a couple of strategies on how to ‘short’ the bubblicious housing market.
Please provide the link for your story on shorting housing

Dear number 9,

Garth’s devious short plan can be found here.

#50 Barb.. where's 'here'? on 09.01.09 at 1:18 pm

there’s no link… did you mean the Aug. 14 article? thanks

#51 Bill-Muskoka (NAM) on 09.01.09 at 1:38 pm

Meanwhile, down South, things are moving along nicely.

Bank bailout has made Washington $4 billion

Do not expect to hear such news from Canada’s goobernment.

Madoff beach house modest with great view

Hey, all you RE Gurus…here is a REal Buy!

I love the way the U.S. deals with crooks.

The U.S. Marshals Service, which seized the property just east of the Hamptons on July 1, will put the property on the market this week as part of an ongoing effort to pay back burned investors.

Madoff’s punishment included a forfeiture order that stripped him and his wife, Ruth, of nearly all their wealth.

Deputy U.S. Marshal Roland Ubaldo said furniture and any other personal belongings found inside will be sold at auction – “from pieces of art to Ruth Madoff’s shoes.”

Maybe we can get our people in Oddawahaha to grasp how it is done. Let’s start with Earl Jones, eh? Then we have Ly’in Brian we might want to chat with, the OLG President and Board of Directors, Hydro One’s former CEO, Nortel’s CEO, etc. Oh, never mind, that would take a real spine and meaningful crime laws. Here we let that bastard file Bankruptcy and leave everyone high and dry.

The U.S. RICO Act have the way to deal with these White Collar criminals, and then there is always the I.R.S..

However, one must be judicious in the application of such a powerful law RICO Act Downside

BTW, anyone here who Michael Bryant’s mouthpiece will be to defend him?

Charges pending against Bryant after cyclist killed

#52 miketheengineer on 09.01.09 at 1:38 pm

Garth et al:

Important Swine Flu Article

Sorry once again. I am going off topic here:

I thought this posting by Dr. Mercola was pretty decent. He gives some options.


Hope all are having a great day, the sun is shining, looking forward to a nice bike ride. Wish I had the cash for a motorcycle on a day like today.


#53 Barb .. a reader in Calgary on 09.01.09 at 1:45 pm

#50 Barb.. where’s ‘here’?

#50 at least think up a moniker, like, how about “Princess”?

But yes, sorry about that, my H-ref link here failed to work above, so alternatively, yes, Garth’s stategy can be found August 14th under Garth’s bubble buster tactics:


#54 blobby on 09.01.09 at 1:46 pm

@35 “Not Buy low, sell Highest you greedy Blobby.”

I’m not greedy, i’ve been predicting a downfall for ages (predicted last octobers one, and a friend linked me here to tell me garth agreed with me – and we were both right).

I just wondered how it could be a “bubble buster” if we dont know for SURE that prices will come down.

Surely it can only be referred to as a “bubble buster” in 8 months time when they’ve proven to have timed it right.

Talking of timing – i must say.. if the libs are planning a no confidence vote .. doing it after the gov has declared the recession to be over is a bit silly. Maybe they should wait 8 months when everyone is pi$$ed at losing their property value?

#55 Grumpydawgs on 09.01.09 at 1:48 pm

#6 May. A foriegner can import as much money as they like into Canada, there are no restrictions. There are no checks on where this money came from and no concern regarding the legality of the funds. The Canadian government will refuse to deport or repatriate any crimals or their funds. The Canadian government encourages international criminals, thieves, fraudsters and dirty politicians to come to Canada and as you see many do. They are all perfectly safe here in Canada. The government also encourages foreign nationals to bring currency into the country by keeping the Canadian dollar artificially low. This has been a national policy since the Trudeau years when it was decided that the Canadian economy should develop to assist third world governments and not the to the benefit of Canadians. If you’re wondering why you are seeing criminal immigrants who have robbed banks, enslaved persons in their own countries and stolen aid money from charities come to Canada in such large numbers it is becuase the government of Canada encourages it. This is a country designed to accomadate immigrants so that guilty white politicians in Ontario can feel better about themselves after having inherited large amounts of money from their grandparents. This is not a country for Canadian citizens to flourish. If you want to benefit from living in a western democracy then you must move to the USA.

#56 Sherri on 09.01.09 at 1:51 pm

Just took another look at the deposit and it’s for $50,000.

#57 Jake on 09.01.09 at 2:09 pm

#30 Bill,
Those Force 7 ‘winds of change’ in the US did nothing to change the elite status quo. Obama serves his masters just as well as Bush did. Great to see you posting regularly again though. I totally agree with most everything you post and I appreciate the perspective your experience brings.

#58 Men With Hats on 09.01.09 at 2:16 pm

Barb :
Due to a glitch I rovided the link three times .
Man this guy is stupid !

#59 Downsized and Delighted on 09.01.09 at 2:18 pm

I’ve always wondered what actually happens to the “big deposit” when a deal falls through. It’s sitting in trust at the real estate brokers. And I suspect he wants first dibs on it – so lets hope it’s more than the commission (frequently it isn’t).

The only benefit to the vendor of getting a big deposit is that it tends to commit the purchaser. But this wouldn’t be the case in Garth’s scenario, would it?

#60 rory on 09.01.09 at 2:51 pm

Hey all …

Here is a ‘bubble buster’ from Mish’s site “Deflation is a bitch”.

“Spain, and the rest of the European periphery, can solve their problems either through massive productivity gains, which is highly unlikely, or through a reduction in wages and prices in the order of 20-30%, which is what will happen slowly and painfully. You could call such a reduction of wages and prices an “internal devaluation”.”

Canadians/Consumers will always pay the lowest perceived costs …for example if a car made in Korea is cheaper that a car made here and the perceived quality is the same then low price wins …so the statement above is what I see coming … there is no other way …as usual union & govt employees will be the last to suffer…IMHO…hello below.

#61 BDG YYC on 09.01.09 at 2:57 pm

A builder in Calgary was advertising on the radio yesterday … “Condos Priced Below Cost” … looks like 20% plus discounts on Calgary Condo and area resort properties. Offer to beat competitors pricing by 5%.

Smells like a firesale … always a sign of good things happening in a market.

Calgary certainly is “different” especially for the folks who bought in past months who just got their equity priced out from under them by their own builder.

Condos are in tough … not just with the supply issue but at these low mortgage rates condo fees represent enough additional debt service capacity to allow first time buyers to step up to a single family home or duplex for the same monthly outlay.

Check it out …
Deals scrolling at bottom right of page.

#62 Denis on 09.01.09 at 2:58 pm

#27 Slava on 09.01.09 at 7:22 am
@ #22 — my thought exactly. Let’s see who is the looser then. This particular couple have an option to rent, of course.

Garth has been predicting ‘correction’ for quite some time now. Takes a lot of faith counting it is going to happen during a relatively short period of time.
If you’re going to call someone a loser, please learn how to spell loser!

(my apologies for being so blunt, but it’s a pet peeve of mine when someone calls someone a looser … it just makes you look like an idiot when you can’t correctly spell the insult you’re intending to deliver!)

#63 BD on 09.01.09 at 3:26 pm

#41 BILL-{NAM}

Actually China moved into Canada two years ago when they bought controlling interest in a tungston mine from a junior company in the eastern Yukon. They also have an interest in a molybedum mine in northern B.C that didn’t start up yet. I am sure you are aware of nost of the uses for those metals and can connect that to them cutting off the sale of many strategic rare elements mostly only found in China used in military and electronics.

They have had small delegations of business men running around Canada for months now and it looks like they are findng a use for all those U.S. dollars. Our polititions of course are lapping up any idea of investment and jobs at any cost to retain power.

The important thing is to look at the internal riots in Chinas provences where companies have moved in but brought their own labour thus not benefiting the local population. There is nearly open conflict in Africa betwen locals and Chinese labourers brought in to work at the Chinese companies operating there. Basically it is like the natives giving away manhatten for a handful of beads when you look at the givaway of land and resources in that continent. Russian companies dealing with Europe are another good example of conflicts between two different ways of doing business and running companies. Unlike Japan which set up plants in other countries but integrated their way of doing business with the local economy and hired local people it doesn’t look hopeful that closed societies like China an Russia will ever integrate successfuly into the world economy which is why this whole free trade bullshit has to end if we ever want to move forward as a species. What most people forget is that free trade was written by corporations along with all the local laws involving international business which favour profits at any cost over the needs of ordinary people.

#64 barb .. a reader in Calgary on 09.01.09 at 3:46 pm

Bill Muskoka,
re link: Japan’s old boys bite the dust

In 1987 my boss, an advanced species of male, said to me ‘the old boys club will die off’ and things will be better.”

Bill, hopefully many winds of change blow at the same time.

And your comment, “coming to an election here soon. Those who insist the past is the future had better be heading to their bunker. Those who want to maintain their elite status quo need to realize that worldwide the Sheeple are turning into Rams. Now that is what a real Rambo will do…ACT!”

Great comment Bill.

#65 Rhino on 09.01.09 at 4:05 pm

#41 Bill-Muskoka (NAM) on 09.01.09 at 10:17 am

“Seems Canada is selling off its natural resources and to Hell with our own stability and future. More of the same short term thinking by the greed mongers. No wonder Harper hates environmental issues…they interfere with his friends profits at the world’s expense”

Hey there Bill,

Maybe there is hope yet…

The DIEHARD QUEBEC SEPARATIST my partner married, has started pushing an “ABC” wagon, and is actually considering voting for something other than Bloc as “we gotta get rid of Harper”.

Seems many Quebec Separatists will hold their noses to vote out the Harperites. Even THEY are recognising the damage to Canada – and by extension Quebec – under the present administration…

Hope reigns supreme!

#66 Live Within Your Means on 09.01.09 at 4:15 pm

Gee, I wonder how many will be putting in an offer on this house.

The listing for Alan Jacksons’ home.

Keep clicking on the arrows on the right side & it will take you all over the house & land. Check out the Virtual tour and Video


Alan Jackson’s 19-thousand square foot home is joining the real estate market. After talking to the Nashville Scene a few months ago about he and wife Denise wanting to downsize, the Jacksons are making it a reality. The asking price of the six bedroom home in Franklin, Tennessee is currently 38-million dollars and comes complete with a 20 car garage, gymnasium, an airplane landing pad, three ponds, multiple guest cabins, media room, marble hallways, and a boat dock.

#67 rory on 09.01.09 at 4:20 pm

Small business wish list for MP’s. (and Canada – rory)


“A reality check for EI …..now is not the time to make the system more generous.

Preparing for skills shortages …..Rather than expanding EI benefits, MPs should consider using EI training dollars to introduce a hiring and training credit for on-the-job training in small firms.

Moving Canada out of deficit ….. (my fave and biggest +++ impact – rory) Political parties of all stripes must look at reducing spending, including eliminating low-priority programs, finding new ways of delivering needed services and reducing the size and cost of the civil service. In particular, they need to look at the growing gap between the insulated, tax-supported world of civil servants pensions and the decimated retirement tools available to average taxpayers.

Addressing credit card processing costs ….. (bad, bad banks. All take and no give – rory) Adding insult to injury in a tough economy, is the rapidly rising cost of processing credit card transactions.

….. concentrate on providing entrepreneurs, employees and all Canadians with a degree of assurance they are focused on what is important to the nation.”

You listening GT …this sounds like it is right down your alley as prudent and correct and in line with your “teachings”.

#68 Barb .. a reader in Calgary on 09.01.09 at 4:22 pm


Some people here don’t get Garth’s dry, self-mocking humour. If while growing up you didn’t hear and enjoy the wonderful use of great wit and dry humour by your parents, or, you don’t have the natural mind for it, it’s possible that you may tend to not recognize ‘irony’, or you may unwittingly be a Stephen Harper Conservative, which has the same effect. Fortunately these are deficits one can overcome with awareness and effort.

#69 Nathan in Edmonton on 09.01.09 at 4:24 pm

I tend to agree with the comments that this couple should take the money and run. 8 months is a long time and the buyer could easily change his/her mind if the market does correct. Unless they got a deposit as big as their outstanding mortgage amount, (which is a lot considering their age) they should get out fast.

#70 jess on 09.01.09 at 4:33 pm

reverse bank robbery
banks can now borrow money short-term at near zero cost from the US Federal Reserve. The Fed has pushed rates to near zero in order to boost the economy. On the other side, banks can buy up US government bonds that are currently paying around 3.5% interest.

This means that we lend the banks the money that they lend back to us, albeit at a considerably higher interest rate. To take round numbers, let’s say that the banks have borrowed $1 trillion from the Fed’s various lending facilities. (The Fed’s total loans are now over $2trn.) Suppose they pay an average interest rate of 0.2% on this money. If the banks then buy up government bonds that pay a 3.5% interest rate, they can pocket the difference of 3.3 percentage points. On a trillion dollars of lending, this will give the banks $33bn a year in net interest or profit. This is the extra money that the government is paying the banks to borrow back the money that it lent them through the Fed.
dean baker guardian uk.

#71 rory on 09.01.09 at 4:34 pm

Sorry all for harping about this pension thing but this reality is the biggest impairment to our continued success as a country. In a nutshell you cannot create 2 different groups (of employee’s-rory) in this country w/o a backlash at some point.

We cannot come out of this recession / depression without addressing this issue. There is just not enough eligible private sectors bodies to keep this scheme alive. Fix it and all will have something. Do not fix it and the great divide will widen and then will collapse.
Watch California.

http://fairpensionsforall.blogspot.com/2009/08/bc-throne-speech-signals-public-sector.html …you may need to scroll down to read the article.

#72 Larry on 09.01.09 at 4:48 pm

Nothing new to report here from Calgary, house sales and prices are higher then last year. The recession is over folks. The average price is about 450K here now and will probably be 600K 2 years from now. http://www.calgaryherald.com/business/Calgary+home+sales+increase+fourth+month/1951731/story.html

#73 David Bakody on 09.01.09 at 4:58 pm

Could we possibly get someone elected in Ottawa that knows a little about Real Estate and will put all the cards on the table letting those who wish to fall on their sword do so fully knowing all the facts? Like this fall.

#74 steven rowlandson on 09.01.09 at 5:28 pm

Hello Garth and Canadians.
Don’t worry about the bubble bursting, thats either happened or will happen anyway. What counts now is losing the least and getting ready for the next economic cycle.

Take money off the table and have a cash or super cash (gold or silver ) reserve? absolutely!
It is absolutely critical that enough people survive with their finances and savings intact and ready to invest wisely after the economy really bottoms out.
Otherwise recovery will be very difficult.
For those of limited means slashing debt to manageable levels is a good strategy if thats all they can do.
I think caution is the name of the game untill all the positive and negative excesses in todays markets have been purged.

Those excesses are that precious metals are extremely undervalued relative to the global supply of cash and credit.

Real estate is extremely overvalued relative to single incomes.

As for the stock market I think its much too chancy for small investors. I think we need to see price to earnings ratios of 10 to 1 or less before there is good value in stocks.
That means 10% income per annum or better as a return on investment. Garth I think if banks want people to save then interest on savings would have to be north of 10%. Right now it really doesn’t pay to save cash except for the convenience of having some in reserve. Perhaps its time to raise the reserve requirements to higher levels so that banks need savers as a supply of capital for lending.
Right now banks don’t need savers , therefore interest on savings is almost non existant.

Government debt: Its okay to pay it down and its okay to pay it off. Any government that borrows money should be fired immediately before it can borrow a cent. Deficits should trigger compulsory general elections at the very least…

Another reform that might be worth considering is to raise the minimum legal down payment on real estate to 25%.
This would ensure that buyers had some skin in the game and would discourage unqualified buyers and might put a limit on speculators…. One way or another Canada and America have got to turn the clock back 50 to 60 years and get back to basics in order to go foreward because the way things are now are not working. Then again things have not been quite right for the last 30 to 40 years anyway.


#75 PVC on 09.01.09 at 5:53 pm

Ahhhhhhhh………….I love the scent of BC in-the-hole
in the morning. Smells like failure.

British Columbia Deficit to Widen to C$2.8 Billion, Hansen Says
Share | Email | Print | A A A

By Christopher Donville

Sept. 1 (Bloomberg) — British Columbia Finance Minister Colin Hansen said the province’s 2009 budget deficit will widen to a record C$2.8 billion ($2.54 billion), five times more than he forecast before a May election.

Hansen said the province will remain in deficit for four years, instead of the two years forecast in February when he predicted this year’s deficit would be C$495 million.

Premier Gordon Campbell’s Liberal Party won election in May to a third-consecutive term, and provincial law requires a budget update within 90 days of a cabinet being formed. The party’s popularity has dropped since the election amid plans to merge British Columbia’s 7 percent sales tax with the federal government’s 5 percent goods and services tax.

#76 PVC on 09.01.09 at 5:56 pm

British Columbia Finance Minister Colin Hansen said the province’s 2009 budget deficit will widen to a record C$2.8 billion ($2.54 billion), five times more than he forecast before a May election.

Read that more than once to let it sink ALL the way in.

#77 Gordon on 09.01.09 at 6:38 pm

#42 Dave the Mortgage Guy

Who’s kidding who, in most cases the banks don’t order appraisals anymore. They let the mortgage broker input the data into CMHC’s emily program. With a tweak here and there by the broker, the mortgage is approved. A case of the fox guarding the hen house.

Brokers SHOULD NEVER have been given access to this program. This is how those 30’s something kids in Vancouver get over a million dollars in financing. It’s all about commissions and passing the risk onto CMHC (the taxpayer). Just like in the states, there is no accountability or responsibility in this marketplace.

When does it end? When some investor finally questions what they are lending on and calls BS. Or when Grandma Branisky from northern BC questions her banks lending practices and pulls out her life savings.

In the end, we the taxpayers are going to pay for excesses of CMHC. Because when brokers and bankers are lending money to drug dealers (aka tree planters) to buy some 50 houses in the Fraser Valley, and CMHC does not care, then something has gotta break.

#78 screef on 09.01.09 at 7:27 pm

Gord drug dealers are not the same as tree planters. Tree planting is hard honest work I’m not sure that I follow what you are thinking here with the aka statement.

#79 JoeCalgary on 09.01.09 at 7:43 pm

“China’s state-owned companies breaking contracts”


I posted a link to a different article saying this on yesterday’s thread. Several state-owned Chinese companies are presently signing contracts in Canada.


“For banks that are hoping to sell more derivatives hedges in China, the world’s fastest-expanding major economy and top commodities consumer, the danger goes beyond the immediate risk to existing contracts to the longer-term precedent that suggests Chinese companies can simply renege on deals when they like.”

Is this the great unraveling of the derivatives bubble?

There are reportedly over a quadrillion in derivative contracts out there.

“…implication for thousands of legally binding contracts struck worldwide with Chinese companies.”

#80 rory on 09.01.09 at 8:32 pm

“The B.C. Federation of Labour has long been calling for the province’s minimum wage to be hiked to $10 an hour” (from $8).

So 3 things …first thing – I can’t find the link again (oops) …second, bet the BC gov’t has no $8 jobs, go figure how they can afford it, er how taxpayers including the $8 guys can afford to pay it … hypocrits. …third, how can anyone afford any kind of housing in BC given what $8 works out to per month. I imagine even finding any kind of rental accommodation is nigh impossible. The article also says 60,000 BC’ers work at this wage …doesn’t say how many still live at home.

Article concludes by saying “The B.C. government has steadfastly refused to increase the wage, saying it would hurt business and result in fewer jobs for young people.”

And I thought high gov’t wages, too much taxation, huge gov’t spending, gold plated pensions, & over regulation hurt business and jobs for younger people …hmmm …what do I know.

#81 TheFirstRick on 09.01.09 at 8:39 pm

#71 rory on 09.01.09 at 4:34 pm Sorry all for harping about this pension thing but this reality is the biggest impairment to our continued success as a country. In a nutshell you cannot create 2 different groups (of employee’s-rory) in this country w/o a backlash at some point……..
Should society follow your suggestions and eliminate the working middle class until all that is left is the working poor?
What else do you bitch about Rory? Your neighbours new lawn mower? Your co-workers new shoes?

#82 X on 09.01.09 at 8:44 pm


Warren Buffett:

#83 bcgirl on 09.01.09 at 8:44 pm

Garth, another post that makes me smile, I just enjoy your writing while I wait for the bubble to burst. Mind you, here in the interior of BC prices did take abit of a tumble, and in spite of low rates, houses still just sit on the market for the most part.
Best of luck to you as you go back into politics, it would be so nice to have a real person who talks to people in a real way be in public office.
Your instincts were right about blogging and politics, but you can actually write, so it wouldn’t work for most of the politicians.

#84 Nostradamus Le Mad Vlad on 09.01.09 at 8:44 pm

Frank Zappa wrote some interesting songs. One in particular — http://ncane.com/37u — covers the m$m, govts. and especially sheeple. Spoken, not sung in a deep, slow voice with a light musical background. Check the title and lyrics out.

Of course, another song has a chorus of “. . . this ain’t no party, this ain’t no disco, this ain’t no foolin’ around . . .”

which is apt to describe the mess the world is in today, but the line only applies to regular folk, as we know things are hot (and gettng hotter) under the collar, so by all means, let sheeple continue to ignore the obvious with gay abandon.

BTW, Farmer’s Almanac predicts a “frigid winter” in the central part of North America; weather service says it will be slightly milder. As of yesterday, there had been 51 consecutive days without any sunspot activity at all, so I’ll stick with the former prediction!
A few months ago, a Russian prof. said the US was heading toward a major breakup. Since then, a few others have said the same thing, so — http://ncane.com/ibgs

“. . . the collapse of the dollar and the US is inevitable. Japan’s Democratic Party won the election, and I’d like to remind you that its leader [Yukio Hatoyama] has the snubbing of the dollar among his economic plans. . . . the US population has nothing to do with the part of its political elite that implements an absurd and aggressive policy that aims to create conflicts around the planet”

Taking the prior link, then adding two from my earlier post — http://ncane.com/992t & http://ncane.com/5xh — a good guess by anyone is that next year, all RE won’t count for diddly.
From our CFP (not advertising him) these are changes happening to CPP — http://ncane.com/mdh
“While the penalties for taking CPP before your 65th birthday will rise slightly, the rewards for delaying it will increase proportionately more.”

#85 Bill-Muskoka (NAM) on 09.01.09 at 8:48 pm

Could we possibly get someone elected in Ottawa that knows a little about Real Estate and will put all the cards on the table letting those who wish to fall on their sword do so fully knowing all the facts? Like this fall.

#73 David Bakody

David, OH! Please stop, I can’t take such laughter! Politicians in Oddawahaha taking ACTUAL RESPONSIBILITY? I would sooner believe in UFO’s coming from Outer Space.

Now, the other night there was a program on the HD channels that proved all the UFO’s were actually made by Russia and the U.S. after having gotten the German Nazi designs. In fact, AVRO helped a lot in developing such amazing vehicles. Remember the Foo Fighters of WWII? They were very real and WORKED. No real mystery.


#86 Bill-Muskoka (NAM) on 09.01.09 at 8:50 pm

All this Bubble Bursting anxiety seems to indicate a serious need for a national Gas-Ex program? LOL

The Smoking Lamp is out! (BTW)

#87 Bill-Muskoka (NAM) on 09.01.09 at 8:59 pm

It’s possible that you may tend to not recognize ‘irony’, or you may unwittingly be a Stephen Harper Conservative, which has the same effect.

#68 Barb .. a reader in Calgary

Steve is auditioning for the role of of ‘K’ in the next sequel to MiB, wherein he will re-state the line ‘We at the CPC have no sense (of humour) we are aware of!’

Don’t you just love how we have been subjected to years of Kindergarten Level behaviour by the CRAP and Libs? This we pay them for?

Even more interestingly, Iron occupies amost unique position in the Periodic Table of elements. Perhaps many are rtather ‘rusty’ from having been Sheeple for so long?

#88 rory on 09.01.09 at 9:10 pm

#81 TheFirstRick you said:

“Should society follow your suggestions and eliminate the working middle class until all that is left is the working poor?
What else do you bitch about Rory? Your neighbours new lawn mower? Your co-workers new shoes?”

Dude, your anger clouds your judgment …the middle class should be mostly private sector workers with a certain % of public service workers not the other way around …also see my post #80 …working poor is being kept poor by your benevolent gov’ts you appear to worship…again, IMO.

#89 conan on 09.01.09 at 9:23 pm

RE: 79

“There are reportedly over a quadrillion in derivative contracts out there.”

There is not that much. Derivatives cancel each other out.

Your statement is equal to saying the next SuperBowl will bankrupt the USA because in total One Quadrillion Super Bowl bets have been placed since they started the Super Bowl.

#90 nonplused on 09.01.09 at 9:45 pm

To be truly “short” real estate, you have to use your capital on margin to sell something you don’t own, hoping to buy it back later for less. Garth’s shorting strategies actually make a person “flat” real estate. Still better than being long.

So, to truly “short” the market, the best bet is to actually short REITs through your margin brokerage account. Risky business, as REITs have already suffered quite a bit from the highs and didn’t rebound with as much vengeance as the rest of the market.

Here is a chart of Brookfield Properties, for example.


Off 66% from its spring 2008 high, but up 100% from it’s recent lows. Ah, if it could be 2008 again.

I don’t think this recession is anywhere near over. The government is covering up the carnage with bailouts, hoping that if people go back to spending all will be fine. But the people have less income now than they used to based on tax receipts, and even at low low low interest rates there is only so much you can put on a visa. Phase 2 down should start shortly, like the 4th quarter.

I think much of the reason for the recent rally in the markets (and what a rally it’s been! Unprecedented!) is because everyone looked at a chart from the 30’s and said “see? There should be a big rally before it goes into decline again! Buy and sell later!” Other than the bailout money of course. Who knows where the banks are really spending that money. Buying their own stock perhaps? I would not put it past them. Nobody else in their right mind would bid up bank stocks right now.

#91 good luck on 09.01.09 at 10:23 pm

You won’t get the deposit……if the bubble bursts.
That’s my bet.

#92 Dave on 09.01.09 at 10:54 pm

to post #63 who said….

Actually China moved into Canada two years ago when they bought controlling interest in a tungston mine from a junior company in the eastern Yukon. They also have an interest in a molybedum mine in northern B.C that didn’t start up yet. I am sure you are aware of nost of the uses for those metals and can connect that to them cutting off the sale of many strategic rare elements mostly only found in China used in military and electronics.


i think we might be getting information from the same source. I wish we could discuss this further

#93 Guru on 09.01.09 at 11:04 pm


“Gee, should we plan on funding Chinese as a Second Language now too? Seems Canada is selling off its natural resources and to Hell with our own stability and future.”

There is no need to learn Chinese. The Chinese elite have been sending their children for schooling in English-speaking countries for years already. I know this because teaching these children is my livelihood. In spite of these recessionary times, the number of Chinese visa students in my classroom continues to rise. The business of teaching Chinese children is a growth industry in Canada. Our future masters will be able to speak to us in our own language. Convenient, eh?

#94 JoeCalgary on 09.01.09 at 11:22 pm

“Derivatives cancel each other out.” Sure they do, conan, each and every last one of them, especially when they’re repackaged and bought and sold many times.


#95 It sold! on 09.02.09 at 12:39 am

For those who think we ‘asked’ for a long closing date, we didn’t. The purchasers asked for this date as they have more than one home to sell to be able to purchase our home. This date is re-negotiable by either party. Because we had more than one offer come in they wanted to sweeten the deal by removing “subject to the sale of both homes” but wanted more time to sell.

#96 Mike (Authentic) on 09.02.09 at 3:45 am

Calgary house sales post 43% drop in 3 months. Condo prices post 3 months straight decline.

Sales: June July August
SFH: 1837 1585 1277
Condo: 738 702 632

Ignore the Calgary Herald’s spin.


#97 Bill-Muskoka (NAM) on 09.02.09 at 7:29 am

#93 Guru

Interesting point and well stated. I raised the issue to stimulate thought as to where Canada is ultimately heading. Not from any bias, but from a historical viewpoint which teaches how society changes from within. An excellent program was aired last week titled ‘Factory City’ which shows how the Chinese have created a very efficient manufacturing facility in which the people both live and work. They face the same human problems we do, but take a more realistic approach to resolving them.

Oddly, it is very similar to the Industrtial Revolution we experienced where the company provides both the work place and the housing, thereby eliminating the assinine commuting we have come to so dearly love as a ‘free’ people (Not!).

#98 DG on 09.02.09 at 9:37 am

I just don’t get why this is a good strategy. In my opinion there is no chance whatsoever of the value of their home increasing over the next eight months, and a moderate to high risk of it falling considerably. Keeping the deposit is a delusional “win” since they may have cash in the bank but they are stuck with a house that is falling in value. If it’s 4,200 sq ft and $750k, that tells me it’s a mcmansion or similar in a suburban location — absolutely the worst kind of property to own for the foreseeable future. I can’t see any scenario in which it isn’t better to take the cash now while it’s really on the table.

#99 conan on 09.02.09 at 11:20 am

RE #94

That article is just sensation driven journalist crap.

Are you familiar with the put and call market?

Deriviatives are like a put and call system but it is not one commodity /stock that is being speculated on but a BIG BASKET of commodities /stocks being speculated on.

They cancel each other out.

The scarey part of the derivaitive system that your article is referring to is only about 5 trillion dollars.

The other 995 trillion dollars is all based on assets worth somthing.

#100 Dave the Mortgage Agent on 09.02.09 at 11:38 am

#77 Gordon, I agree there are still loopholes in financing that many brokers are exploiting, CMHC is still using the Auto-valuation but with an 8 month closing date; keep in mind on resale purchases most lenders will only “CAP rates” for 90 days. If there has been even the slightest increase in rates after 90 days the lender will have to re-submit for new CMHC approval, which would then require CMHC to re-run the auto valuation software again, which could trigger the revision to value.

GENWORTH, actually removed their auto-valuation from their approval process and CMHC may not be far behind.

This auto-valuation on conventional deals most lenders have already stopped.

I don’t have a problem with apprasials being completed because, it stops fraud. It gives some level of accountability of an indication of current market value.

On purchases not so much of an issue, but on refinances, asking the vendor what they think their house is worth, submitting the deal to CMHC based on that value, and CMHC not wanting to spend the $262.50 to have a true oppinion of value before they agree to refiance that property to 95% of the overstated value is very dangerous.

But I guess CMHC would rather see the vendor lower their monthly payments, extend their amortization back out to 35 years in hopes that during this recession they can scrape by and not lose their homes. This keeps a GLUT of homes from hitting the market and forcing the Canadian real estate market into a tailspin.

Then CMHC would actually have to make good on paying out the Billions in losses from the mortgage insurance on the defaulting mortgages….

The Canadian real estate industry is hanging by a very thin line, and maybe allowing consumers with good credit, solid job’s the ability to lend beyond the real value of their homes to allow them to keep their homes until values re-adjust maybe the lesser of 2 evils.

#101 jess on 09.02.09 at 2:49 pm

derviatives cancel out? why is their so much corruption on these?


Thirty investment banks have been subpoenaed in what has become, according to the Times, a coordinated multi-agency probe of municipal finance over corrupt practices experts estimate cost state and local government agencies, pension funds and utilities — and by extension, taxpayers — more than $4 billion a year, or almost as much money as the Illinois pension fund lost between 2004 and 2007 — when Blago proposed another bond issuance — this time worth $16 billion.

#102 conan on 09.02.09 at 8:39 pm

Re 101

That Blago goof is corrupt.
It is not the derivative that is at question here but the illegal sharing of a commission.