From here to maturity

boots1

In case you missed the news, Alberta launched a $6oo million bond issue on Monday, which sold out in a few minutes.

This is interesting on a couple of counts. First, Alberta is now a bigger debtor, mortgaging the financial future of its citizens. This should tell us something about the current ‘recovery.’ Second, despite its Triple-A rating, the province’s underwriter convinced it to offer a slight premium over rival Government of Canada bonds. So, investors snapped up the higher yield.

So what?

So the next series of GoC bonds will have to compete with the new Alberta bonds at the dealer auction. And so interest rates creep higher – a salient fact since current mortgage rates are set in the bond market.

This is what competition for capital does, and you’re just seeing the first ripples in what will be a sea of new debt issues washing over the market in the next few years. The federal government’s budget shortfall alone will be $55,900,000,000 this fiscal year, and added to that will be $29,000,000,000 more in financing for Ontario, BC, Quebec and Alberta. So the bond market will see about $85 billion in new bonds from these two levels of government alone. In one year.

This is why interest rates will be percolating, whatever the Bank of Canada does. Eighty-five billion dollars will leave investors’ hands to buy bonds only if the return on capital is both adequate and competitive.

Meanwhile there are steady indications banks will not be happy for long lending money at 2.25%, the current prime rate – the lowest it has been this century. Blog dogs have been peppering me in the last few days with copies of a letter TD Bank’s been sending out to LOC customers giving notice of a rate hike.

But these are not just any old lines of credit – instead, they are fully secured, real estate-backed LOCs which essentially pose zero risk to the bank. And it’s not just a wee rate increase, but rather a massive 44% surge in the cost of borrowing – from price plus zero, to prime plus 1%.

Why would the bank do this now?

As some wise folks have pointed out, banks can now enjoy a government guarantee for their HELOCs by funding them using CMHC’s mortgage-backed securities program. The bad news is the money is coming from the bond market, where mortgages are also funded. And when upward pressure on bond yields is felt, bond prices drop as investors demand more of a premium to own fixed-income securities.

There is little the Bank of Canada can do about this, since its usual bag of tricks (drawdowns, redeposits, Specials and SRAs) is aimed at keeping rates in a narrow when banks borrow from each other (which happens every night). What someone is willing to pay for a bond, Alberta, Canada, Nova Scotia or Lululemon, is another matter entirely.

The important point is that Alberta (like Canada) has the highest possible debt rating – which means it can get away with paying the lowest rate of interest, and still flog its bonds. The premium just unveiled means competing bonds with similar ratings and maturities will trade at a discount to face value. So new investors will pay less than par for existing debt, which means they buy $100 for (say) $98, effectively raising the yield to maturity.

Translation: Rates are rising. They will continue to rise. The sheer mass of new borrowings ensures it. This is whether or not the prime pops, or the central bank changes its cheap money policy. If you depend on borrowed money which comes from the bond market – like a secured line of credit or a mortgage – you should know this.

Three per cent mortgages are doomed.

Moral: Unless you own it, debt sucks. Even for a cowboy.


89 comments ↓

#1 Samantha on 09.21.09 at 11:44 pm

Here’s an article from The Globe and Mail regarding soaring commercial vacancies. Calgary is not faring well in this area.

http://www.theglobeandmail.com/report-on-business/crash-and-recovery/commercial-vacancies-soar-across-country/article1296226/

#2 Cabin_Boy on 09.21.09 at 11:46 pm

I am a long term resident of Alberta and I can’t believe what a mess the finances here are. No province has had an edge like Alberta has had in the last 30 years. The conservative government here has gotten away with so much BS yet rural AB (and enough of the Urban vote) reelects them NO MATTER WHAT. There isn’t even a decent official opposition to them. I seriously don’t know what is wrong with the voters in this Province. They all seem normal when you talk to them…I guess they ‘lose it’ when they’re starting at the ballot box.

Note: That scumbag Harper is a conservative from Alberta. Go figure. Him and that no good degenerate, Ralph Klein, are the poster boys for Alberta Cons.

I love this Province. Don’t share the same affinity with the..ahem…’leaders’.

#3 Eduardo on 09.21.09 at 11:47 pm

I knew you wouldn’t post my last post in the last topic. It had too many good points and pointed out too many flaws with your argument and how you’re grasping at straws.

#4 davers on 09.22.09 at 12:06 am

Ok given my knowledge of equity markets, which is minimal, I can’t help but wonder why the banks bother selling bonds when they can borrow from other banks for cheaper. It just seems crazy to me that there are essentially 2 prices for money, and the banks would use the more expensive one.

That being said it is pretty interesting that Alberta just pushed the price of money up that tiny little bit.

#5 alex on 09.22.09 at 12:35 am

Love your blog Garth. Inspired me to write to my parents trying to explain to them what was really happening.

Summary:

1) As of Q2 US Credit balance has gone negative. Debt monster now eating capital to stay alive. Immenient Collapse (Q3) ahead.

2) Government has duty to warn citizens collapse immenient. Solution – “Swine Flu Pandemic”

3) “Swine Flu” is metaphor for “Great Depression”

http://for-my-father.blogspot.com/

#6 Gord In Vancouver on 09.22.09 at 1:03 am

Thanks for the update, Garth.

I say this politely – things are sad when the REAL current economic picture comes from a blog, not the mainstream media.

Unlike media outlets such as Global, you back up what you say with objective facts and figures, not comments from someone who’s obviously in cahoots with the real estate/financial industry.

#7 Grumpydawgs on 09.22.09 at 2:42 am

The LSD economy of Canada could be in for a surprise if the value of our currency is challenged by alternatives. The Zimbabweization of the Canadian dollar will not continue to find buyers at these rates ad perpetuum.

I have another question though. We have seen over the years mysterious ‘corporations’ registered in the Bahahmas and the Cayman Islands buying national debt in amounts that can only be generated by a national government not a private entity. Is the government buying it’s own paper?

Hmmmmmm, another good read below.

http://www.24hgold.com/english/contributor.aspx?contributor=Ty%20Andros&article=2344128120G10020

#8 Mike (Authentic) on 09.22.09 at 2:56 am

1% doesn’t sound like a lot, but when it’s a 44% increase. That’s a lot.

But then I’m not surprised mortgage rates are going up, Garth prepared us for this long ago. Did the canary in the coal mine just pass out or was it dead many months ago?

I bet we had a few mortgage holders pass out when they read rates when up by 44%. And we know this is just the beginning of the rate increases.

Sadly, i’m sure the house salesman didn’t mention that when they bought their investment.

Mike

#9 Mike (Authentic) on 09.22.09 at 3:01 am

It is amazing about Alberta and does put into question this “recovery” and this bit of news came out too about Alberta: In Calgary, the oil and gas slowdown helped push the commercial vacancy rate from 4.7 per cent last year to 13.1 per cent.

Last year I bet that Alberta was the “safest” provience to be in, to invest in and was future proof.

Well, maybe it still is #1 in those aspects, but only because the bar was lowered then for everyone else.

Not a good sign of things to come.

Mike

#10 Onemorething on 09.22.09 at 4:32 am

Get ready for a triple dip recession and when its done will finally be called a depression.

It took from 1928 to around 1945 for things to get moving again kiddies. Japan is still in the longest long two decades and its now the US of A’s turn.

I see a 7-10 year “L” as always. This is the only way the US can survive plain and simple. During this time Canada and anyone else (lets say the whole world) will feel the pain especially those heavily reliant on them for consumer spending, lending or commodities as demand will cease to exist.

Look for in the short term a repeat of last year and test new lows. This will be the last time the USD will be allowed to climb before it busts and then by that time protectionism and new reserve currency will be introduced.

RE globally will fall like a stone as the only way banks will lend is through proper regulation, old school lending tactics and like Garth Vader says, interest rate hikes!

RE will be affordable again, but it will take its toll on those who purchased it in the last 6-7 years on cheap money.

Boomers or any generation for that matter has be screwing the balance so you cannot blame one or the other just GREED!!!!

Stay out of debt, keep your powder dry, dont be a fool.

#11 NOBODY on 09.22.09 at 5:54 am

Garth:

When will mortgage rates begin to creep higher?
Any credible timeline?
Next spring?
Now?

Anyone?

#12 The Vulture on 09.22.09 at 6:58 am

POP GOES THE WEASELS

For first time buyers that bought more house than they could reasonably afford and on ‘free’ money (supported by Canadian taxpayer CHMC)…the pressure is building and you will be squeezed until you pop like a weasel and lose your steel appliances, granite counter tops and the saltwater pool.

Next time, don’t be so quick to pull the trigger…educate yourselves first then act upon your knowledge…

#13 Mikey on 09.22.09 at 7:14 am

Onemorething!!! where is your back-up saying where going into a triple dip recession?

Mikey

#14 HalifaxFamily on 09.22.09 at 7:21 am

I called the rate increase last summer and ended up locking in the interest rate. Unfortunately, the BOC and other banks pushed down interest rates and did something that nobody has seen in their lifetime. I feel like a fool for locking in at 5.1%…. but had I known that the BOC and other banks were going to cheapen the price of money, I would have stayed at prime-0.95 on a totally OPEN mortgage and locked in now.

sheesh. i hate it when ‘they’ can just change the rules. We are now going to see some rate increases and it’ll be a reversion to the mean.

#15 Robert1 on 09.22.09 at 7:22 am

hmmmmmmmmmmmmmmm ……

The best things in life are free
So give them to the birds and the bees

I need money (that’s what I want)
That’s what I want
That’s what I want
That’s what I want

Your lovin gives me such a thrill
But your lovin can’t pay my bills

I need money (that’s what I want)
That’s what I want
That’s what I want
That’s what I want

Oh money (that’s what I want)
Oh lots of money (that’s what I want)
Oh money (that’s what I want)
That’s what I want
That’s what I want
A whole lot of money

Money can’t buy everything, it’s true
But what it can but I can use

I need money (that’s what I want)
That’s what I want
That’s what I want
That’s what I want

#16 Kash is King on 09.22.09 at 7:29 am

Keep your pineal gland healthy and de-calcified. You need this to receive the Light .

This St. Valentine’s day 2009, for 18 minutes, the moon was in the seventh house. At the same time Jupiter was aligned with Mars.
Confused by all the big changes in the world? Higher dimensions? Maybe not so confusing as per The Fifth Dimension:
http://www.youtube.com/watch?v=LANwIgpha7k

Anyone noticed the big huge “star” in the southeastern sky since about March? That’s Jupiter.

Wrong blog, dude. Go here. — Garth

#17 Mike (Authentic) on 09.22.09 at 8:11 am

#10 NOBODY “When will mortgage rates begin to creep higher?”

From how I understand it (and I could be wrong) Mortgage rates are based on long (10-25yr I think) US Gov’t T-Bills, when you see them raise, so do Canadian mortgage rates.

Also if the CDN gov’t raises the prime rate (which will be next year, maybe as soon end of Q1) variable rate mortgages will go up.

And. Let’s not forget banks can set wherever rate they want, anytime they want regardless of what the US T-Bill or prime rates are. But they usually try to charge as much as they can in any market. (upward price pressure)

Mike

#18 robert on 09.22.09 at 8:28 am

Won’t rising interest rates actually benefit savers? I thought savers were supposed to be losers. Also interesting that a provincial (albeit Alberta) bond issue sells out within minutes with equities in an echo bubble. What flavour of Kool-Aid are these people drinking? (Sarcasm off).

I’m sure the banks are not happy lending at 2.25% but will the borrowers still be queuing up when rates go higher? Sure, those that have no choice, but the rest of us? I say be careful what you wish for. Higher rates = higher debt service costs = less $ for discretionary spending in an economy overburdened with debt. Ultimately very deflationary unless incomes rise significantly (which for now seems a rather unlikely prospect).

#19 Soylent Green is People on 09.22.09 at 8:30 am

GT, I knew you wouldn’t post my last post in the last topic. It had too many good free porn website urls and pointed out too many GAP store coupons worth hundreds of dollars and how how easy it is to make thousands of dollars assembling cd cases at home.

Actually that would have added immensely to this site. But I did not see it. Will check the spam queue. — Garth

#20 $fromA$ia "Garths Nugget Boy" on 09.22.09 at 8:34 am

Moral: Unless you own it, debt sucks. Even for a cowboy.- Garth

Yeah debt sucks but so does interest on a GIC. Thats why people are throwing their savings at purchasing homes and the stock market.

Don’t know how many times I have to say the same thing on this blog: there are many secure investments available today with returns of 5-7%, which is ten times the current inflation rate. Many people apparently get the finances they deserve. — Garth

#21 $fromA$ia "Garths Nugget Boy" on 09.22.09 at 8:53 am

Don’t know how many times I have to say the same thing on this blog: there are many secure investments available today with returns of 5-7%, which is ten times the current inflation rate. Many people apparently get the finances they deserve. — Garth

Garth, its all blah, blah, blah unless you spell it out for people. Give us some examples. Thanks for your critisism.

Again? — Garth

#22 Art on 09.22.09 at 9:00 am

Ok, Garth, I believe you, there are secure investments available with returns of 5 – 7% …

I just dont seem to find any. I do not mean to be sarcastic, but the key word here is “secure”. Can you point out those investments, pls?

Strip bonds, Bank preferreds. Real return bonds. Bond funds (the right ones). Integrated oils. Dividend funds. Principal protected notes. Equity-linked certificates. And many, many more. — Garth

#23 Denis on 09.22.09 at 9:00 am

Blog.ByTheOwner’s take on your $1.142M shack in Kits beach from your latest Weekend Update post (http://www.greaterfool.ca/2009/09/18/worth-every-cent/)

“How much would this home be worth in your neighbourhood?

The answer to that question could be anywhere from $60,000 to $1,142,000 depending on location. In this particular case, the home was located in Kitsilano, a suburb of Vancouver.

The home sold for $1,142,000!

Location, location, location!”
Source: http://bit.ly/7n62A

#24 dondiego on 09.22.09 at 9:05 am

But if you think of gold as a currency rather than as a metal (which, by the way, most central banks do – why else would they be buying it now?) the medium-term trend has to be up.

#25 My_View on 09.22.09 at 9:08 am

“Translation: Rates are rising. They will continue to rise. The sheer mass of new borrowings ensures it. This is whether or not the prime pops, or the central bank changes its cheap money policy. If you depend on borrowed money which comes from the bond market – like a secured line of credit or a mortgage – you should know this.”

LOL,You are constantly blogging about rates going up (fear mongering). TD bank was the last one to increase their HELOC and all customers can call up the bank and negotiate or switch products. Then the BOC rate/bank prime rate. The day you blog about rate roulette, the banks announced reductions. Just look what happened this last Friday Sept 18, rates went down. Yes of course rates will head higher, but for now NO they are not. The prime rate is now 2.25 plus .10, its pretty much prime. My prediction is when rates to go up, prime-minus will return. Someone change the tune, this record is broken……

Based on what? Your bunions? — Garth

#26 Robert1 on 09.22.09 at 9:13 am

Not to get too political on this blog, but it is with interest one reads the headline on CBC ” N.L. Spending Scandal Leads To Another Guilty Plea ”

http://www.cbc.ca/canada/newfoundland-labrador/story/2009/09/22/nl-andersen-guilty-220909.html?Authorized=1&AuthenticationKey=1_26_bf54dc22-8095-4454-9418-532a261996b4.pakpbnhaemekki

*******************************************

Wally Andersen – Liberal

Ed Byrne – Conservative

Randy Collins – NDP

******************************************************************************************

Now who can say that the statement ” All Politicians Are Thieves ” is inaccurate ? Fraud, Forgery, Breach of Trust ……. dammit, these are supposed to be the elite that we elect to govern us and instead it they read like the supporting cast for Madoff and the rest of Ponzimaniacs out there…… but that being said …. I TRUST GARTH !

#27 Dave on 09.22.09 at 9:22 am

Strip bonds, Bank preferreds. Real return bonds. Bond funds (the right ones). Integrated oils. Dividend funds. Principal protected notes. Equity-linked certificates. And many, many more. — Garth

————

anyone know where to go for these? I have investments in riskier areas but am totally in the dark when it comes to the more secure investments. Any insight would be great.

We should all be thankful for this blog. I’m sure we’ve all learned stuff because of it.

#28 David Bakody on 09.22.09 at 9:29 am

Interest Rates …….

Not having a crystal ball I would say that there are already moves afoot to raise rates …. most people are more than cautious and truly believe the story of the Tortoise and a the Hare. Garth is 100% correct in stating there is competitive rates and most start at the 3 year mark. I would suggest that banks have to increase rates prior to 3 years to profit. Now? what next, these same people will want to invest and will have even more money tucked away in TFSA’s and the competition knows it …. Bank loyalty is not what it use to be …. we all lost due their greed … and do not give me that crapola it will never happen again and trust us! Harper/Flaherty spent more money that bunch of drunken cowboys home from range and our MSM stuck their heads in the sand with no respect for their oath of professional journalism and fired those who dare speak the truth wrt to buying a home with no money down and financed to the hilt. Canadians will get exactly what they voted for and will once again turn to Liberals to solve it, it may be to little too late and let no one say they were not for warned as I remember Paul Martin words : ” Make no mistake Stephen Harper’s Canada is far different than mine” Like him/them or not the “TRUTH” was we had $15,000,000,000 in the bank, $3,000,000,000 in an emergency fund, we had good world standing, we were not at the pointy end in Afghanistan, people had jobs, and our young people had to prove to the bank they could afford a home before they were approved for a mortgage and the list goes on….. Now if y’all are slamming that because you just do not like Liberals fine ….. then please post Steve Harper’s accomplishments and his vision for returning the kind of financial accountability prior to 2006 when he said give me a chance and I will give you “Accountability and Transparency”

#29 Repatriated Expat on 09.22.09 at 9:44 am

I’m on an email list with TD waterhouse which notifies clients of new issues, and yesterday the Alberta bond issue popped up in my inbox. 4% guaranteed return is not a bad deal these days. Minimum investment is like 5K. Unfortunately, I work for a living so missed the opportunity to get my share, but there will be more issues out there.

#30 dave99 on 09.22.09 at 9:51 am

Toronto midmonth TREB prices and sales are up yoy 8% and 23% respectively.

The 2nd half of Sept and Oct last year saw 10-15% yoy drops (after the market crash).

So unless something drastic happens, we’ll be seeing 20% YOY price increases coming out of TREB for the next couple of months. Can’t wait to see the marketing spin they put on that!

I must say, even with all of the extunuating factors, I am absolutely dumbfounded at the 8% and 23% YOY increases.

#31 Tony on 09.22.09 at 10:05 am

So now that interest rates will be creeping up, where is a good place to put my cash to take advantage of this increase??? Thanks!

#32 Calgary_Rip_off on 09.22.09 at 10:13 am

Garth, how is it a bad thing if interest rates skyrocket? It will keep crazy spending in check. House values will return to normal.

“cabin boy” commented that people in Alberta seem normal and then vote conservative at the polls. That’s the way people are here. They act friendly. They arent friendly. Its very very mean here. Every man for himself. B.C. is mean, but its not covert like it is here. For this reason when I put my car up for sale I put a sign on it “serious inquiries only”. Im amazed at what people will do here. They will phone at 10:30 at night wanting to see it, several times, or they will offer you $500 for it when it is listed for $2500. Bottom line: Most people in Alberta are like cattle. They dont think for themselves. So its no wonder there are so many problems here.

There is a solution: Get a good job where your contact with these conservatives are minimized and go home and stay there between shifts. And dont go out cause its a war zone.

This housy market if it implodes will be fun to watch as people in calgary get steamrolled. Its about time that $400k median delusion flatlined.

#33 Tony on 09.22.09 at 10:16 am

To continue from above, I’m interested in more aggressive investments besides preferred shares, bond funds, etc. that will take advantage of the rising interest rates over the next decade. Any advice?? Thanks!

Short interest-sensitive securities. — Garth

#34 David on 09.22.09 at 10:37 am

What’s the problem with borrowing money Garth? Some other generation will have to live with the consequences.

Boomers have gotten that one figured out, which is why its their default option for their governments.

For Their family – Cut costs and live within their means.
For Government – Spend like drunken sailors.

Because someone else has to pay back the debt from the Government spending…so its no big deal.

#35 Jmack on 09.22.09 at 10:45 am

Recover could take a while according to Larry Ellison

http://brainstormtech.blogs.fortune.cnn.com/2009/09/22/oracle-ceo-sees-long-slog-for-u-s-economy/

#36 Chaostrology on 09.22.09 at 11:02 am

Robert 1, you made me laugh,

I see your “Money” song and raise you a “Taxman”

Let me tell you how it will be
There’s one for you, nineteen for me
’cause I’m the taxman, yeah, I’m the taxman

Should 5 per cent appear to small
Be thankful I don’t it all
’cause I’m the taxman, yeah, I’m the taxman

If your drive a car, I’ll tax the street
If you try to sit, I’ll tax your seat
If you get to cold I’ll tax the heat
If you take a walk, I’ll tax your feet

Don’t ask me what I want it for
If you don’t want to pay some more
’cause I’m the taxman, yeah, I’m the taxman

Now my advice for those who die
Declare the pennies on your eyes
’cause I’m the taxman, yeah, I’m the taxman
And your workin’ for no one but me

Beatles(1966?)

#37 Got A Watch on 09.22.09 at 11:11 am

“When will mortgage rates rise?”

Depends on who issued your mortgage. If it’s one of the Big 6 Banks, they are usually indexed to either their own ‘Bank Prime Rate’ or ‘Prime +1’ (HELOCs) (‘Bank Prime’ is whatever they want it to be), or the Bank of Canada ‘Official’ interest rate. Read the fine print if you have any type of ‘adjustable’ or ‘variable’ rate mortgage, there are many different products out there. While similar in most respects, the details in the mortgage agreement language will state exactly how they calculate your interest rate, not all Banks use the exact same methodology.

My own ARM is Indexed to the Bank of Canada rate, and is not affected by what the other Banks may do with their own interest rates. Other types can work the opposite way. So my mortgage rate will only rise when the BoC raises it’s official rate, which will likely be after (possibly long after) the Big Banks have already raised their ‘Prime’ interest rates.

At 1.6% now, I am going to ride that sucker as long as I can. Absolutely no incentive to pay it off early or make accelerated payments or whatever, at that absurdly low rate. Better to deploy the capital elsewhere. I’ll look at “locking-in” one day, not soon.

I was just reading one macro-economic study where they suggested the US Fed will not be raising rates at all until well into 2011, if then – and I think the BoC will be lagging behind them. If Canada raises rates before the USA, the CDN $ would then rise some more vs the US $, causing more job losses in Canada in many export related industries – politically bad for those seeking re-election, and would lead to calls for the BoC’s “independence” to be curbed. We are slaves to the US Fed’s decisions, and they look to be in no hurry to raise rates before the rest of the globe unless forced into it, so far all talk, no action.

So I see it as highly likely that the Big 6 Banks will be raising their ‘Prime’ interest rates long before the BoC raises the ‘Official’ rate. Thus many mortgage rates will go up without the BoC moving their rates. Just my opinion. YMMV.

Who is your mortgage holder? — Garth

#38 alberta guy on 09.22.09 at 11:44 am

Hi All,

I see the proof all the time that we in alberta are in trouble. I work on a small oil project and the guys we hirer always say I havnt worked in months, so that tells the story right there. No income but high living expences, they also always try to get there buddies on. As lots are sitting waiting for phone calls,

On housing there’s 5 houses out of 9 for sale in my subdivision. So that tells you somethings really really wrong.

#39 BDG YYC - Hmmm ... ? on 09.22.09 at 12:15 pm

By rough numbers …

Median household income in canada is about $60K-ish this means half of all households make less than this. Of the households making less than $60K-ish half of those make less than $30K-ish.

Better than 2/3 of households (69%) NOW “own” the homes they live in. So this leaves a bit less than a third of households potentially available to enter the housing market.

Now … rumor has it that at least as many “able” buyers as sellers are required to maintain real estate price levels. And; it takes a surplus of new market entrants to boost the price of the existing housing stock.

Supposedly the majority of new market entrants originate at the bottom (entry level) end of the income scale. Remember that’s new arrivals that we just need to keep passing through the affordability barrier … just like we’ve been doing … as demonstrated by the first chart on this page ….
http://www.scotiacapital.com/English/bns_econ/spretrends.pdf

Now going back to our little household income values we’re probably talking about something that looks like about $40K-ish – an income barely $10K-ish above the poverty line or what you’d have to consider the practical poverty line that is presently the threshhold income level for homeownership.

O.K. so let’s figure out how we can go about sustaining a continuous and expanding stream of these new market entrants by bringing affordability down into the depths of the available stock of the willing yet impoverished population of prospective homeowners.

First though it might be a good idea to figure out if there might be some sort of a limit as far as how deep we can go might be. So at the risk of being called “negative” let me go way out on a limb and make a wild and arbetrary prediction that says … SORRY – but its just not likely that somebody living below the poverty line is likely to become or remain a homeowner.

O.K. … O.K. … I know … first we need to debate the poverty line … because I know some folks are going to get all caught up in the fine points and shoot me down here by proving that the real poverty line threshhold (when it comes to who can aford a home) should be set at $12,500 because thier niece’s husband’s x-brother inlaw who has 3 kids and works part time at Walmart just bought a Condo with a $200K mortgage proving that there are still lots of buyers available and that there is no reason that our rate of home ownership isn’t destined to hit at least 85% over the next 5 or 10 years. But anyway … surely there is a limit somewhere between our current 69% home ownership level … with a $40K-ish supporting household income level (while maintaining some sort of entry level dwelling standard north of a shipping container) that takes us to maxed out territory.

Maybe if we knew of an example somewhere that actually found some point above 69% where things topped out …. hmmmmm

Oh WAIT !!! HERE’S ONE !!!!

http://optionarmageddon.ml-implode.com/wp-content/uploads/2008/06/home-ownership-rate.jpg

O.K. so that’s unrealistic because … well … we/Canada can keep rates low and stuff far more families into the home ownership dream world better than anyone … and anyway … we’ve got more and more families to tap into in that untapped pool of <$40K prospects being helped every day by our unemployment boom which bodes extremely well for prospects of rising house prices.

So … there we have it by the numbers.

I guess interest rate issues are a moot point. Nothing can stop this ride. BUY !!!!!!!!!!!!!

#40 Makeorbreak on 09.22.09 at 12:17 pm

The Appalachian Trail: New refuge for the homeless?

http://online.wsj.com/article/SB125348373308426061.html

#41 TheComingDepression on 09.22.09 at 12:20 pm

HUGE INSANE NEWS! The US Government has asked the banks to BAIL THEM OUT! CAN YOU IMAGINE how bizarre this is getting?
http://thecomingdepression.blogspot.com/2009/09/ron-paul-administration-guarantees.html

#42 Toronto C9 Renter on 09.22.09 at 12:29 pm

re: posts #20, #21, #22….”what investments pay 5% to 7%?”

Here are some some real life examples for you:

Telecom stocks are quite stable – BCE currently paying 6.1% (increased twice this year), Telus paying 5.6%, Verizon paying 6.4% (increased this year), Manitoba Tel (risky) paying 8%

Banks (Should have bought them in March but who had the guts??!) CM currently paying 5.2%, BMO paying 5.2, plus lots of preferreds out there paying 5.5 to 6 easy

Insurance cos: Sun Life pays 4.5%, Great West paying 4.7%

Finally, what about income trusts? (won’t be around forever but likely safe for a few more months). Pembina pipeline paying 10%, likewise Bell Aliant. Many other similar plays

All of these investments have some risk, but over the long haul the income streams can generate some serious wealth.

#43 Keith in Calgary on 09.22.09 at 12:33 pm

Currently, 10 year fixed rate mortgage terms are in the 7.5% range…….so, think about that for a minute…….

If the banks didn’t think the actual yields would be in that range in the near future, they’d actually be much lower today.

Even the banks are silently telegraphing the fact that they think rates are due to go up big time.

#44 Men With Hats on 09.22.09 at 12:37 pm

Nice article on the CBC website with a slew of GT quotes .
Most put G in a diametrically opposite stance from the run of the mill economists . Big deal .
G is a prophet .
His predictions will come to pass .Sooner or later .
There is going to be a bunch of hurtin’ units once the mortgage rates rise .
Oh,yea the recession ain’t over by a long mile .
No idea where this false bravado comes from in the market place .
Must be based on stupidity .
Just like all the dummies who,spent ten grand, think they are gettind a $1350.00 cheque from the government (?) by way of the HRTC .
When pigs fly !

#45 kevin on 09.22.09 at 1:01 pm

Garth, as a long term reader, thanks for what you are doing. Its a tremendous publc service.

I just wanted to ask for some clarity on your last post. I too received the TD letter in the mail. They are including a 1.25 % reduction in current rates if you lock in for 1-5 yrs. Considering a 4 yr rate is only .5 higher than the prime +1 is going to be, are you suggesting its time to make that call and lock in?

First, if the proceeds of your LOC are used for investment purposes, the interest is 100% tax-deductible, so the rate is more or less irrelevant. If not, and if this bothers you (sounds like it), then lock. Rates have only one direction in which to travel. — Garth

#46 Rob in NVan on 09.22.09 at 1:10 pm

For your consideration, on the news wire today:

“Canadian Retailers Post Unexpected Sales Drop in July”
http://www.bloomberg.com/apps/news?pid=20601082&sid=anK1bT7MA1e0

“The data suggest consumer spending is recovering slowly as the jobless rate rises and households retrench, after sales surged in May and June amid signs the country was emerging from its recession. The Bank of Canada has pledged to keep its overnight rate unchanged at a record low of 0.25 percent through June 2010 because of weak growth, unless the inflation outlook shifts” . . . “this is a “horrible across-the-board report,” said Derek Holt, an economist at Scotia Capital in Toronto. “It may signal the release of pent-up demand from last fall is over with.”

In contrast:

“Canadians Feel Confident About Economic Future”
http://www.vancouversun.com/business/Canadians+feel+confident+about+economic+future+survey/2016340/story.html

“A rebounding housing market is behind some of that confidence, according to Nanos, with 50 per cent of respondents saying they believe real estate values in their communities will stay the same, while 35 per cent think they will increase in six months, up nine points from May” . . . “34 per cent said they were worse off financially than a year ago. Only 15 per cent said they were in a better financial position”

Summary:

Bullish confidence in the housing ATM continues even as joblessness and spending constraints rise . . . i.e., no big surprises to most readers of this blog . . .

#47 Barb .. a reader in Calgary on 09.22.09 at 1:26 pm

#44 Men With Hats article on the CBC website

Men, do you have a link to that? Couldn’t find it.

(BTW hub has to warn all his clients about HRTC.
To say the least not one is pleased with the whole gig of this government always pulling the wool over the eyes of taxpayers with meaningless tricks.)

It’s here. — Garth

#48 DaleFromCalgary on 09.22.09 at 1:38 pm

“Yeah debt sucks but so does interest on a GIC. Thats why people are throwing their savings at purchasing homes and the stock market.”

You have to do the research, which most people don’t want to. They’d rather watch reality shows or the hockey game.

Buy physical gold and silver.

If you live in a petroleum area like I do, spend the time researching and making cold calls, and you will find partnership units in producing wells or private-equity junior petes paying 8% on preferred shares. These deals are never advertised or trade on the TSX; you have to do work finding them instead of hoping they’ll run an ad during the reality show you’re watching.

Throughout this year I’ve been buying bank bonds at 4.75% to 5%. They don’t advertise these; you have go looking for them instead of watching the hockey game.

There are all kinds of good investments paying 5% to 10%, but if you haven’t gotten my point by now, you have to do the research. No one is going to let a lazy investor in on a good deal.

NB: any investment paying over 10% is high risk, and anything over 15% is a Ponzi scheme.

#49 CurrentRate on 09.22.09 at 1:40 pm

Curious to hear thoughts on this from the group. Currently have pre-approval for (a) locked in 10 yr 5.35%, OR (b) 5 yr VRM (set at prime minus 0.15) w/ability to lock in at any time for the posted (aka The Kicker) 5, 7 or 10 yr rate.

IF one were to purchase a home today (I know, I know, I KNOW Garth…hence the if in caps) what route would the majority take?

#50 Barb .. a reader in Calgary on 09.22.09 at 1:44 pm

2 Cabin_Boy I love this Province. Don’t share the same affinity with the..ahem…’leaders’ ….poster boys for Alberta Cons

Cabin_Boy, my spouse and I share your frustration. As a matter of fact we partied with that fella on occasion when he was city leadr and later wonder’d how a man who could imbibe so would be The One Anointed.. then it became clear, the rubber chicken is flaccid and easy to bend.
As for the other, he was a T.O. boy who never fit in until he arrived in brainwashing country. He saw the light and knew he could take their manipulation thing to a whole new level (with the big help of a wealthy backing of hucksters).

Hucksters hook hicks handily and it shows.

#51 X on 09.22.09 at 2:00 pm

Is Le Mad Vlad on holidays?

#52 Kash is King on 09.22.09 at 2:05 pm

“Wrong blog, dude. Go here. — Garth”

Thanks, but I’ve drawn some inspiration from former Liberal Defense Minister, and Deputy PM Paul Hellyer.
Bear in mind he graduated as an Aeronautical Engineer in 1941.

http://www.youtube.com/watch?v=mYjzilMNiTE&NR=1

It’s important to keep/make our pineal glands healthy.

#53 Grantmi on 09.22.09 at 2:17 pm

#50 X on 09.22.09 at 2:00 pm
Is Le Mad Vlad on holidays?

I hope so…. it’s been nice to save some band-width!

#54 jess on 09.22.09 at 2:30 pm

UBS marketed and sold Lehman “structured notes” to ordinary retail investors. It instructed its brokers that the products were suitable for conservative investors who did not want to put their principal at risk. Investors who purchased these structured notes made a loan to Lehman Brothers and received a promissory note that promised that the value of notes would increase according to some formula if an underlying basket of securities increased, but the investor’s principal would never go down, even if the underlying securities tanked, because the notes came with a guaranty of “100% principal protection.” “If you lent me $100 and I drew up a legal documents that said in big, fat letters that you loan to me came with “100% principal protection,” as long as you stuck with our deal for 15 years, would you feel pretty good about getting your money back in 2024?” asks Susan Antilla of Bloomberg, in her June 10, 2009 article entitled “UBS Redefines Meaning of 100% Loss Protected…”

http://www.investmentfraudlawyerblog.com/2009/06/100_principal_protected_notes.html

#55 Men With Hats on 09.22.09 at 2:47 pm

#47 Barb .. a reader in Calgary on 09.22.09 at 1:26 pm

Yes,Barb absolutely . I mailed off a complaint to the Advertising Standards Council yesterday .
These ads are fraudulent and misleading in the extreme .
I almost feel sorry for anyone who was sucked in by the hype .

#56 Men With Hats on 09.22.09 at 3:02 pm

Address for Advertising Standards Council :

Complain about the governments (?) HRTC false advertising.

http://www.adstandards.com/en/Standards/consumerSubmission.asp

#57 jess on 09.22.09 at 3:18 pm

F.D.I.C. need cash which is another reason rates will climb. The cash balance is at $10 billion…
….Borrowing from the industry is allowed under an obscure provision of a 1991 law adopted during the savings and loan crisis. The lending banks would receive bonds from the government at an interest rate that would be set by the Treasury secretary and ultimately would be paid by the rest of the industry. The bonds would be listed as an asset on the books of the banks.

http://www.nytimes.com/2009/09/22/business/22bailout.html?_r=1

refresh the eighties and look how long it took…
For decades, savings and loan associations, also known as S&L’s or thrifts, had been staples of the American economic landscape — solid if unexciting institutions whose major business was making mortgage loans within their community. But in what became known as the S&L crisis of the late 1980’s, hundreds of thrifts made a torrent of bad loans, ending in a government takeover and bailout that ultimately cost taxpayers over $120 billion.

In the 1960’s, the government capped the interest rates that thrifts could offer on their federally guaranteed accounts. When interest rates soared in the early 1980’s, the thrifts faced such difficulty in attracting money that the caps were removed. At the same time, some states relaxed the limits on the kinds of investments thrifts could make.

A new breed of aggressive S&L’s emerged, that attracted large pools of deposits by offering higher returns, and then used this cash to move into new lines of business, including junk bonds and real estate development.

By 1984, federal bank board examiners detected signs of strain among S&L’s, but budget cuts hampered their ability to detect or restrain problems. As the real estate boom came to an end, first in Texas and later elsewhere, losses started to pile up and by 1988 were estimated at $60 billion, overwhelming the funds available to the agency responsible for the federal deposit guarantee.

In 1989, Congress created the Resolution Trust Corporation to take over the assets of shaky thrifts and dispose of them at fire-sale prices.

Resolution Trust closed or reorganized 747 institutions holding assets of nearly $400 billion. It did so by seizing the assets of troubled savings and loans and then reselling them to bargain-seeking investors. At the peak in early 1990 there were 350 failed savings and loan institutions under the agency’s control.

By 1995, the S.& L. crisis abated and the agency was folded into the Federal Deposit Insurance Corporation, which Congress created during the Great Depression to regulate banks and protect the accounts of customers when they fail. The total cost to taxpayers was later estimated at $124 billion.

#58 jess on 09.22.09 at 3:24 pm

climate controls rates

Trisha Palmer, a meteorologist from the National Weather Service in Peachtree City, Ga., said that the flooding is far worse than the hurricane-level damage from 2005. “

#59 GregW.,Oakville on 09.22.09 at 3:28 pm

Hi Garth, FYI artical
Weakened demand for energy could persist for a surprisingly long time. By Steven Cherry
http://spectrum.ieee.org/energy/fossil-fuels/when-will-energy-prices-recover

#60 L Pearson on 09.22.09 at 3:35 pm

Hi Garth – My husband and I also got the TDCanTrust letter yesterday. Our HELOC is for investment and we realize that the interest is 100% deductible.

However, we are currently looking to sell our house in a small town in favour of one in Guelph where we hope to find one with rentable space for students. We do this to augment our retirement since we were badly burned last fall on the market. This move means we will have to renegotiate the terms of our HELOC. It also means that if we sell quickly after listing but can’t find a suitable place to move to we will likely have to pay off the loan which will substantially decrease the funds to pay cash for the target house.

I’m not thinking clearly about our situation and would appreciate any guidance you or other posters may have for us. And, a big thanks, in advance for any good ideas you may offer.

#61 JFoo on 09.22.09 at 3:57 pm

And the economists were wrong…

Retail sales plunge in July: Statscan

Rather than go up .7% they wen’t down .6%. I wonder what the fall is going to hold when our summer cools off.

http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20090922/canada_retail_090922/20090922?hub=Canada

#62 Grantmi on 09.22.09 at 4:06 pm

Speaking of Supply and Demand for RE…

Here’s a somewhat comparison about irrationally thinking about supply and demand.

The price of POTASH has crashed in the last couple of year. Companies like POTACH OF SASK. thought they could wait out the farmers since THEY THOUGHT they needed their fertilizer hook or by crook. regardless of the economy. Everyone has to eat right!!! Not so fast!

http://tinyurl.com/mufz46

They didn’t! Farmers passed on putting fertilizer on their crops the last couple of years.. and now POTASH prices has dropped $500/Tonne from $900/tonne to $400/tonne.

Now the EXPERTS said that would never happen. POTASH was a sure bet because the world needed food and more and more of scarce land required fertilizer to grow their crops!!!

http://www.nationalpost.com/story.html?id=2017859

So what’s coming! Food hunger all over the world because of depleted high quality food… or more and more of the world poor dieing or eating dirt for sustenance?

Time will tell!

#63 Confused in Victoria on 09.22.09 at 4:43 pm

This is a bit off topic but I just don’t get it. Homes are selling like crazy in Victoria. Buildings are starting to go up again – the trades are booked.

I know it is cheap money but I don’t get it. This city has no industry what-so-ever except retirement.

#64 Chris L. on 09.22.09 at 4:54 pm

Garth, why doesn’t the bank just jack up their prime lending rate to 3.25% instead of messing around by adding prime plus B.S.? They just jacked mine up as well. It’s only 1% or 44% like you say. What a joke. I guess I need to dig out my contract and read the print since I figured I signed at prime even. They can put their prime up, but I don’t see how it’s legal to move it to prime plus since I never agreed to that.

#65 Too Old Bob$ on 09.22.09 at 4:57 pm

Alberta Bonds:

Ya they are borrowing money. Here’s what happens when you win the lottery a few times, but just can’t figure out how to save, invest or use it wisely. Spend, spend, spend that’s the way it is. Who cares about the future, just ride it out and enjoy. This seems to be the common disposition among all Governments these days. Oh well lets borrow some money instead of cutting back or prioritise the needs. Who knows, maybe we will win the lottery again. Some families consider this as future investing when related to inheritance.

Stelmach and Evans may get the brunt of this in the future and pay dearly for this. Then again being Alberta, the Cowboys will ride into the sunset looking for that lost calf, hemorrhoids begone.

BTW! you secure investers, looking for that easy return on your money. It’s out there, but you have to earn it. If you want someone to find it for you, then pay up.
As said before, I’ve had investments paying anywhere from 6.8 to 8.3 % return for over a year now.
Garth is right, but of course he has his wife working for him. he he!

#66 DaBull on 09.22.09 at 5:19 pm

#43 Keith in Calgary

Currently, 10 year fixed rate mortgage terms are in the 7.5% range…….so, think about that for a minute…….

Average posted rate on a 10 yr closed mortgage is 6.7%…. it can be had right now for the low low rate of 5.4%. So me thinks mortgage rates won`t be going as high as you hope anytime in the near future. Maybe 5 to 7 years down the road but only for a short period of time.

That opinion is based on what? — Garth

#67 Dan in Victoria on 09.22.09 at 5:30 pm

Post#62 Confused in Victoria,Yes you are 100%right.Resistance is futile.I have been happily banking as much money as I can from the newest batch of greater fools.There’s a good strong supply of them right now.I think the money will come in handy down the road.P.S.there is a large, left hand cigarette industry here.

#68 mattvic on 09.22.09 at 5:59 pm

#62 Confused in Victoria:

We’ve just moved back to Victoria and are renting while looking. I’m just as frustrated as you as to why things are still selling at such a rate. My theory is Victoria has such a huge backlog of FTB’s who have been unable to get in the market, that as soon as a small dip in prices and a huge drop in mtge rates allows them to get in, they do it with nary another thought. No thinking about how they’ll deal with it at renewal time, no real analysis of the cost of owning, etc.

That vast group of FTBs then spawn loads of move-up activity.

I am struggling to hold off buying – Garth’s theories are all sound for the rest of Canada, I just don’t know if they will ever come to fruition in Victoria to any degree. There is just such a draw to this town due to its climate that I fear there will never be a major correction.

Anybody with any local insight?

#69 Rhino on 09.22.09 at 6:05 pm

#10 Onemorething on 09.22.09 at 4:32 am
(snip)
“It took from 1928 to around 1945 for things to get moving again kiddies. Japan is still in the longest long two decades and its now the US of A’s turn.”
(snip)

And remember… 1939 – 1945 what was happening:
– hundreds of thousands KILLED, and removed from the unemployed roles. (if not millions…)
– a greater number removed from the unemployed listings due to severe injury
– the Gooberments worldwide gave millions more jobs; with guns
– millions more were spent by Gooberments “supporting our troops” with food, lodgings ,etc., creating more jobs
– millions of jobs created in the homelands to build materiel for the war effort; so many it restructured our economy and altered our society due to the integration of the female side into the workplace.

Then… there were another decade or two, with jobs created rebuilding the mess that was left from blowing everything all to hell. Billions poured into Europe and Japan to rebuild their economies.

Gee… I wonder what it will take to turn things around this time? I sure do not see much job creation in Canada or North America…………

#70 jess on 09.22.09 at 6:08 pm

2008 Census data: Housing is getting even less affordable! even with lower prices!

More Americans found housing unaffordable last year, even though home prices across the U.S. have taken a major fall. More than 40 million spent 30% or more of their household income on housing costs, 600,000 more than in 2007, according to 2008 Census data released Monday. That includes homeowners with and without mortgages, as well as renters….

…”From 2007 to 2008 the homeownership rate fell more than half a percentage point, to 66.6% — the lowest level since 2002, says Mark Mather, a vice president at the Population Reference Bureau in Washington, D.C.

Many of those former homeowners have become renters, a segment feeling the brunt of steep housing costs. About half of renters spend at least 30% of their before-tax pay for housing.

Overall, the number of renters swelled by nearly 900,000 in 2008 compared with 2007. In the same time, renters stretching financially to make their rent rose by 601,000.

“The fact that affordability for renters is getting worse shows the impact of the economic downturn,” McCue says.

Renters are also more likely to be severely financially burdened. One in four paid half or more of their incomes for housing last year.

“The average monthly rent for a Manhattan apartment is still very high for most people,” says Matthew Baron, who co-owns a $300 million portfolio of multifamily and other buildings in the New York area. “We are also seeing a lot of people double or triple up with roommates in order to split the high rental costs.”

The new Census data show affordability remains difficult in many states, even in those hard hit by foreclosures and falling home values. Median housing costs for owners with mortgages, after adjusting for inflation, increased in 2008 from 2007 for nine states and decreased for eight states.

That’s partly because existing homeowners aren’t receiving the benefits of cheaper housing. They are often stuck in their properties, owing more than their homes are worth but unable to find a buyer.

http://www.usatoday.com/money/economy/housing/2009-09-21-housing-affordability-census_N.htm?loc=interstitialskip

#71 Makeorbreak on 09.22.09 at 6:14 pm

http://www.msnbc.msn.com/id/29356160/

How long, until this happens in Canada?

#72 Grantmi on 09.22.09 at 6:18 pm

#67 mattvic on 09.22.09 at 5:59 pm

Matt: What is the main thrust of the economy in Victoria? (Other then being the BC Capital)

I never understood Victoria… been there… seen it… and it’s nice! But to live there. What business, what industry supports the city ?

If it’s only a retirement haven…. and service…. when all these boomers die… are all these boomer kids going to pack up their families from back East and move into their boomer parents homes. I don’t think so!!

Example.. what line of work brought you back to Vic?

Very Curious!

#73 Partisan Spectator on 09.22.09 at 6:21 pm

To L Pearson:

I believe if you are selling property that you have HELOC on, HELOC will be closed automatically. Once you buy a house and meet HELOC criteria, a new HELOC line will be opened.

#74 dd on 09.22.09 at 6:35 pm

#67 mattvic,

Ya … I hear you. Move up island … it is cheaper.

#75 dd on 09.22.09 at 6:37 pm

#62 Confused in Victoria

…This city has no industry what-so-ever except retirement…

It called the sunshine tax.

#76 Men With Hats on 09.22.09 at 7:08 pm

That opinion is based on what? — Garth

A dozen beers .

#77 kabloona on 09.22.09 at 7:41 pm

jess #53, thanks for the link regarding “principal protected notes”…..I didn’t even know what those were…

:-D

confused_in_victoria:

I agree, no way some crack-shack down on Glanford should cost upwards of $500k….. ;-)

But fear not, the long slow slide in Victoria R/E is on it’s way….along with Gordo’s HST, rising mortgage rates, civil-service layoffs and the post-olympics hangover.

Just look at Bear Mountain or some of the cancelled downtown projects like Radius and The Hudson. If Victoria R/E is booming then why is Len Barrie so deep in the soup?

#78 Onemorething on 09.22.09 at 7:43 pm

#13, Mikey – the triple dip is a almost imminent given the euphoric mood of the sheeple as the PONZI scheme continues.

If the markets could have just been left alone to work we may have had a double dip but NO, the world wasnt ready for that claimed the USA, but really it was the USA which architected their own fix, stating it was best for the globe.

If you wish to see a good reference for double or triple dip, please view this
http://globaleconomicanalysis.blogspot.com/2009/09/when-will-fed-start-hiking.html

MISH points out the following scenarios:

“A double or triple dip recession or a pathetically weak L-shaped “recovery” is a very strong possibility if not a given. Unfortunately, it’s very likely we will have Structurally High Unemployment For A Decade”.

I also suggest there is only 3 readings you need to navigate through this period, 1/GARTH for Canada 2/MISH for USA and 3/STEVE KEEN for the Global perspective.

#79 DaBull on 09.22.09 at 8:31 pm

That opinion is based on what? — Garth

Debt servicing. An economic recovery can`t happen if the price of debt servicing increases so much that it stifles growth.

With the amount of debt out there it`s in everyone`s best interest that interest rates stay low until either debt is paid down or a real economic recovery happens. Being that it takes a great deal of time to pay down debt we will have to wait for a real economic recovery and by the looks of things currently, real economic recovery won`t happen for about 5 to 7 years.

The government will also be removing the calories from beer. — Garth

#80 Dave on 09.22.09 at 9:30 pm

BTW! you secure investers, looking for that easy return on your money. It’s out there, but you have to earn it. If you want someone to find it for you, then pay up.
As said before, I’ve had investments paying anywhere from 6.8 to 8.3 % return for over a year now.
Garth is right, but of course he has his wife working for him. he he!

—————————————-

take it easy with the arrogance. I was looking for an area to park short-term cash as I don’t pay much attention to things that don’t have exceptional growth potential. Therefore, my short term cash is in ING. However, looking at my account online today, one of my stock purchases from 3 months ago is up 572%. If you want me to direct you to the sector that has over a dozen companies doing returns like that, then you’ll have to pay up too!

cling on to your 5% but I learned about making killings in the market by sharing info with others, absorbing that info, and doing research myself.

Have fun going to work!

#81 taxpayer like you on 09.22.09 at 11:55 pm

Mattvic/dd – here’s some sales stats for up island

http://www.relocationbc.com/statistics-vanisland.asp

dd- the industries in Victoria are

1) Government
2) Tourism
3) retirement
4) UVic

aka

1) do little
2) do less
3) do nothing
4) learn how to do 1, 2, 3!

Life is good…..

#82 Dan in Victoria on 09.23.09 at 12:00 am

Post #78 The government will also be removing the calories from beer.Garth.Hell last year when we were fishing in Bamfield we were having a few beers and we had a german tourist convinced that missing husbands pictures were put on beer cans in Canada.We all had a big laugh when he figured out we were a bunch of unsober idiots.He just kept shaking his head “You Canadians”

#83 Tony on 09.23.09 at 12:02 am

I disagree, interest rates will stay where they are in Canada for years to come. All the news out of America is sheer lies and deceit. When the truth finally comes out bonds will rally both in America and Canada. I expect commodity prices to tank especially gold and silver. The world is still in a deflationary collapse and no sums of money thrown around in America will change that.

#84 Too Old Bob$ on 09.23.09 at 12:47 am

#79 Dave on 09.22.09 at 9:30 pm

Geez! Dave the comment wasn’t directed at you or anyone in particular, no arrogance intended. When I said pay up, I meant you would probably have to get advice from someone in the trade. The percentages are cash payments, not stock increases. Stock gains are a different ball game.

Doing your own research is the way to go, I commend you.

#85 Mike (Authentic) on 09.23.09 at 6:45 am

#60 JFoo: “What recovery? Retail sales in July show decrease”

Great news article post! I copy/pasted some more of the interesting stuff in there:

“…In dollar terms, consumers spent $430 million less than expected.

Carmine Cesario, a spokesperson for Tiles Plus, said Canadians don’t seem to be taking advantage of the government’s renovation tax credit.

Alberta showed the biggest drop in spending, with a decrease of 1.1 per cent. The province was also down 9.2 per cent compared to the previous year.

At Willow Park Wines and Spirits, a Calgary-based retailer, liquor bottles priced higher than $100 were flying off the shelves before the recession — but no longer.

“Our sales have dramatically almost stopped on the high-end, and now it’s happening more on the mid-range wines,” spokesperson Wayne Henuset said. “We’re getting a lot more sales on the low end.”

That fits in with one explanation for the decrease — that consumers are still buying the same amount of goods, but choosing less-expensive items.”

#86 steven rowlandson on 09.23.09 at 8:46 am

Hello Garth.
85 billion in new government debt is a national disgrace and indicates a shamefull lack of fiscal discipline in government. This also indicates a lack of moral discipline and whats even worse it’s supported by law and most people really are indifferent to the problem. The real reason for the indifference is 2 fold :

1. The politicos won’t accept the wise council and requests from constituants. So its like talking to a brick wall.

2. Re fiscal discipline.
Those who benefit from government spending will not support spending restraint at their expense and would and do try to suppress any and all discussion on moral and fiscal discipline in order protect their so called iron rice bowl.
Self interest trumps the long term good of the country.

That I think sums it up and like I say Canadians have to find out the hard way.

Steven

#87 april on 09.24.09 at 10:58 am

Garth, I just sold to rent [White Rock, BC] hoping prices will drop further. Most of the time I believe they will but when I hear media reports about rising prices the doubts creep in even though I’m aware of who’s behind the spin, saying the lowermainland bc is different and all that nonsense. I talk to people who say they wouldn’t get now what they paid 2 yrs ago and newer homes are selling for less than they paid for their older home 2 yrs ago. For the most part I think I should wait a yr or two but the anxiety gets to me sometimes……what do you think?
Thanks April

#88 collette on 09.24.09 at 11:31 am

Garth, I hear that there are a “few minefields” coming down the pipe re the economy. I wonder if you have any idea what this might be?….. commercial real estate collapse is one I think, but what else? I could buy a home now , just sold to rent, I’m in the Metro Vancouver area, but I think from what’s in the wind, I’ll wait awhile? The other question is what to invest in for income. I don’t know how to invest in stocks and anyway am afraid of risk [nearing retirement] so I guess it’s %1 at the bank or maybe bonds?
Thanks
Collette

#89 golden on 09.24.09 at 8:24 pm

A lesson on money from a real financial guru.

Doug Casey on Gold

Interviewed by Louis James, Editor, International Speculator)

L: Doug, we’ve talked about cars, cows, and cash, but the investment world thinks of you as a gold bug, so let’s give that a go; why gold?

Doug: Sure. First of all, it’s because gold is actually money. It’s an unfortunate historical anomaly that people think about the paper in their wallets as money. The dollar is, technically, a currency. A currency is a government substitute for money. Gold is money.

Now, why do I say that?

Historically, many things have been used as money. Cattle have been used as money in many societies, including Roman society. That’s where we get the word “pecuniary” from: the Latin word for a single head of cattle is pecus. Salt has been used as money, also including in ancient Rome, and that’s where the word “salary” comes from; the Latin for salt was sal (or salis). The North American Indians used seashells. Cigarettes were used during WWII. So, money is simply a medium of exchange and a store of value.

By that definition, almost anything could be used as money, but obviously, some things work better than others; it’s hard to exchange things people don’t want, and some things don’t store value well. Over thousands of years, the precious metals have emerged as the best form of money. Gold and silver both, though primarily gold.

There are very good reasons for this, and they are not new reasons. Aristotle defined five reasons why gold is money in the fourth century BC (which may only have been the first time it was put down on paper). Those five reasons are as valid today as they were then. A good form of money must be: durable, divisible, consistent, convenient, and have value in and of itself.

L: Can you elaborate on that?

Doug: Yes, and from them, we can draw inferences that will help us anticipate the fate of the dollar.

First, let’s take durable. That’s pretty obvious – you can’t have your money disintegrating in your pockets or bank vaults. That’s why we don’t use wheat for money; it can rot, be eaten by insects, and so on. It doesn’t last.

Divisible. Again, obvious. It’s why we don’t use diamonds for money, nor artwork. You can’t split them into pieces without destroying the value of the whole.

L: If I paid for a new Ford GT with the Mona Lisa, what would be my change – a small canvas by Picasso?

Doug: [Laughing.] That’s right. Maybe you’d get millions of those paintings of Elvis or Jesus on velvet.

Consistent. The lack of consistency is why we don’t use real estate as money. One piece is always different from another piece.

Convenient. That’s why we don’t use, for instance, other metals like lead, or even copper. The coins would have to be too huge to handle easily to be of sufficient value.

Value of itself. The lack here is why you shouldn’t use paper as money.

Actually, there’s a sixth reason Aristotle should have mentioned, but it wasn’t relevant in his age, because nobody would have thought of it…

L: It can’t be created out of thin air.

Gold is not money. Casey is a dinosaur clinging to an investment that has disappointed for 20 years. — Garth