When beavers go bad

beav1

Oh, my. Where to begin?

In  Bangkok, perhaps, or Taiwan. There, as in a mess of other Asian capitals, they’re trying hard to throw some crutches under the Yankee dollar. Spending fortunes Thursday buying US greenbacks, desperate to arrest the skid threatening to make that crap Americans love to find in their Wal-Marts so much more expensive.

Or in Sacramento, where an impoverished American state with an economy bigger than Canada’s gave a party and nobody came. Poor beggared California issued $4.5 billion worth of new bonds, and after all the hoopla a mere 31% of them had found buyers – even at a yield which would make Canadian investors drool (almost 5%). So, up go rates. With the country’s currency fading, investors in a failed state’s debt want flesh.

Or in Ottawa, where the central bank is flummoxing again about mess this is all causing. As the US currency swoons, ours is pushed higher, touching 95 cents this week and on its inevitable path to parity. (Predicted here some time ago.) The higher Canadian dollar is the last thing bankers need, since the housing bubble now has ’em in a sweat and all juiced to raise interest rates. But the moment they do, the loonie will be headed for $1.10 US and you can kiss the rest of our factories goodbye. And the hotels. And the exports south. And the economy.

LEND - SAVE CHART1

Americans save. Canadians blow the wad.

Or in Toronto, where Scotiabank economists staggered back in fiscal shock and awe when the graph above came together. Once considered reliable little beavers and squirrels, industrious saver-rodents, we have turned into lascivious credit-sucking vermin of consumption. As Americans have responded to recession by sensibly paying down debt and increasing their savings rate, we have fallen off the wagon on our furry little heads – plunging into collective debt as never before.

And what does all this have in common? Or matter?

Only this: The US dollar’s dive is one way for America to export its problems to other places. Like China, and like here. It makes beleaguered US exports competitive and gets millions of unemployed Americans back to work. It upsets trade patterns, revalues commodities (oil, gold) priced in greenbacks and threatens to shred export-addicted countries. It also greases the skids for higher interest rates, while it fuels an equities rally. It’s the ultimate trade weapon.

Of course in Canada, it’s all barely noticed. We’re at war, after all. The bidding war.

You might want to follow my lead this weekend. I’m filling the 4,000-gallon tanks buried in my side lawn.

106 comments ↓

#1 Kurt on 10.08.09 at 10:21 pm

You know what the housing bubble reminds me of? Nortel stock in 2000. Same run-up, then hesitation as tech in general started to burst, and then a final charge as folks somehow convinced themselves that it would somehow double again. It took 9 long years for that story to conlude and, yes, it did not end well. Residential real estate is not as inherently volatile as growth-oriented equities, but the similarities are spooky. Heck, I even remember a report from RBC securities describing Nortel as an interest rate play, just like our current RE market. Best to stand clear, lest you end up like the fury little guy in the graphic for this post.

#2 Brian on 10.08.09 at 10:26 pm

I agree that Canada is in a tough position. We are in a dangerous housing bubble. Raising rates will cool housing but levitate the Loonie which will kill our tourism and export industries.

Solution: Tighten housing credit via CMHC. Make borrowing amounts based on 5 yr rates not on variables and increase down payment to 10%. If you don’t have 10% down you shouldn’t even be looking! Also if vendor is offering a kickback in any form it CMHC should say No to insuring.

Unfortunately, with Karen Kinsley at the helm nothing of the sort will happen. Is Paul Martin available?

#3 Anon on 10.08.09 at 10:27 pm

What are you filling in the 4000 gallon tanks?

#4 Onemorething on 10.08.09 at 10:37 pm

Garth, reminds me of John Denver hold up with loads of fuel getting ready for the Mad Max revival.

Yes, you can smell the insanity and the excess in Canada that is going to equate to something the country has never seen before!

Begs to question whether NZ has more sheep (le) than CAN?

The ROW has no choice but to prop up the USD until it all plays out where another stock market retest of bottom occurs and flight to USD is found. There will only be one more real jump then get into any currency that can stand on it owns when protectionism kicks in.

Sound like another round of that popular carry trade game? NAME THAT CURRENCY?

Precious metals cannot play!

#5 taxpayer like you on 10.08.09 at 10:38 pm

“Americans save. Canadians blow the wad”

Graph says americans still borrowing – since ’91 – though now borrowing less.

Graph says Canadians now borrowing too – at same rate as U.S. – but only after 10 years of net lending. Not
surprising given a recession.

Garth – lets re-examine this in a year and see how the
trend is doing before we conclude that we blew it.

#6 wondering on 10.08.09 at 10:40 pm

You might want to follow my lead this weekend. I’m filling the 4,000-gallon tanks buried in my side lawn.

Easy for you to say. Our landlords disapprove of digging up the lawn.

#7 Gord In Vancouver on 10.08.09 at 10:58 pm

The US dollar’s dive is one way for America to export its problems to other places. Like China, and like here. It makes beleaguered US exports competitive and gets millions of unemployed Americans back to work.
____________________________________________

Inevitably, the Canadian government will stop extending EI benefits to counter the negative effects of our country’s rocketing dollar. This will, over time, introduce more homes onto the market once stubborn unemployed homeowners drain their savings.

#8 Chris S. on 10.08.09 at 11:05 pm

Cripes. The perfect storm is brewing…

#9 Watched Bubble Never Pops on 10.08.09 at 11:17 pm

“It is hard to make predictions, especially about the future.” – Yogi Berra

#10 double mike on 10.08.09 at 11:27 pm

Calibonds – not a big surprise here. Who in his right mind would support a socialistic republic with his money regardless of proposed rate? Be it even 50%, it’s not exactly appealing if you can collect the interest only once and face 5 cents for dollar afterwards. For drones that was a good party while it lasted. For working folks tax rates were as high as here without benefit of universal health care. The climate is nice though.

As far as parity concerned, come on. We don’t need no stinking industry here. We produce high demand financial product as 27 y.o. traders with 200K incomes can attest. Who cares if a worker or an engineer needs to pay 30% more just for shelter here. Those losers are just dying off dinosaurs and in our bright future we will prosper just selling houses and alphabetical soup to each other.

Fundamentals of our economy really are as solid as the Canadian Shield. Or maybe somebody’s head that solid.

#11 nonplused on 10.08.09 at 11:29 pm

The other big risk Canada faces in the not too distant future is the “US brain drain”. We heard about this in the past, but it has been forgotten.

Yes, US unemployment is high, but not markedly higher than here and we are catching up. Canadian layoffs are not being announced. I just had dinner with a good friend how works for a major Canadian O&G independent, and he said they laid off 600 people but did not announce it. Mostly engineers and support staff.

My former boss, on the other hand, just got a sweet deal on the US west seaboard, and wants me to come down for “meetings”. It’s all fine I work for this company as a consultant already, but what if he offered me a job? If I can get through the green card process, well, I can buy 2 or 3 times the house there for the same money as here and the only thing I would miss economically is health care, which Obama (bless his soul, the lone non-boomer in US politics) is working on.

Already much of the BC vacation property demand provided by Albertans is heading for Phoenix, Las Vegas, and Montana. I expect that trend to continue for a while. You can get so much more for your money. Border delays aside, and I think they will eventually subside, why in the heck wouldn’t you look at the US as an alternative?

The only downside to living in the US is that their government is all screwed up. But I would ask Garth to comment on whether ours is all that much better. It’s a beautiful country, mostly good people, and the cost of living is getting to be much better if you can get a job there. Which you can’t get here either.

Garth,

What are you filling the tanks with? Gas, desiel, heating oil, water? Got to admit what ever it is I like your style. Just can’t do that myself just yet.

#12 Daystar on 10.08.09 at 11:38 pm

Again, another excellent post, Garth. I’m glad you addressed the rising loonie as its been on my mind for awhile, especially the timeline of when the loonie would stop appreciating against the greenback and begin its own freefall due to record governmental deficit spending/losses.

I would like to add that at some point the U.S. greenback will stop its skid and hit bottom and it might not be as far away as we all think. Interest rate hikes in the U.S. could stop the greenbacks freefall but the big question is when. All eyes are on stabilizing asset valuations there, but rising rates will put an end to modest asset inflation in the mortgage industry until jobs come back. My reasoning is that the U.S. government is watching for a true asset bottom which I believe has just passed and once modest asset inflation has taken hold and will not fall further due to rising rates, interest rates will rise in the U.S. to keep their currency from a total freefall. I don’t except drama but I do expect a moderate rise in rates for a couple years beginning next year.

I might be so bold as to measure this in months instead of years with a true housing recovery (15 to 20% above current valuations) at least 2 or more years away and driven by real employment gains which I see beginning around the end of 2011, no later than 2012. Until then, I predict a continuing steep decline in the greenback while fed rates remain low, waiting for asset valuations to take hold and a moderate rise in interest rates beginning sometime in the spring, summer of next year, rising slowly through to 2011, 2012.

Several things could create a greenback recovery beginning some time next year, the most notably of which is a REAL U.S. recovery (which I think is still 2 full years away and a far cheaper currency than they have now will obviously help), some form of asset appreciation (which is just beginning to take hold and must happen to stablize their financials, a much more plausable event that would allow them to raise rates ever so slightly) and/or the intangible none of us are yet talking about… massive credit expansions from China and other superpowers that go bust (us included and this could also be measured also in months, not years with a rise in interest rates doing the damage… something that is nevertheless hard to predict in terms of timelines but what we especially so in Canada should largely fear and should have rightfully feared years ago).

Combine massive credit expansion failures of other nations with a U.S. nation on the rally for real driven more than anything by an already cheapened currency, and the immediate threat of loonie inflation this year and next will later change to the threat of rapid loonie freefall as the U.S. dollar begins to flatline and later strengthen beginnning at some point I think by mid 2010, no later than 2011, fuelling loonie deflation at a time when our own currency begins to fall relative to world markets from massive federal/trade deficits and popping housing bubbles of our own.

This outcome which further drives interest rates higher here is not good. What we will face at this point is rapid asset deflation combined with inflation of imported goods, or shrinking personal equity combined with the rising cost of imports/cost of living. This will measurably contract GDP and further shrink tax revenues forcing taxes to go up at a time when buying power drops signifigantly from a devalued loonie and far higher debt service, shrinking our economy into a prolonged recession, even in the face of rising commodity exports. Investors like or not, will hammered at every turn.

In short, under this scenario, a falling loonie combined with rapid asset deflation caused by rising rates and a higher cost of living will make everyone poorer to which there is no escape unless one cuts losses and exchange loonies for better fairing currencies before the loonie falls. This too, if enough smart money begins to exodus for safer havens internationally, could the pressure the loonie down farther should Canadians take their money elsehwere in anticipation of such an event.

In other words, at least from where I’m standing, it doesn’t look good for Canada sitting at the top of an unjustified asset bubble, profound severe structural federal deficits and looming trade deficits caused by stumbling manufacturing in the near term from a near term high dollar, all leading our nation into an eventual falling loonie from debt coupled with a highly plausible U.S. greenback recovery (again, hard to nail the timeline but I see the Greenback rising against the loonie less than a year from now). The timelines are hard to predict, but I would say… things begin to unravel next year in Canada with a rise in interest rates and 2011, 2012, 2013 will be rotten years for all Canadians. A simple asset bubble gone bust from rising rates will be enough to cause a prolonged recession all on its own without external forces factored in.

Sorry about the doom and gloom, but I don’t see an upside here except for those who exchange their loonies with currencies that fair much better than ours in the near future to come. A positive change in government would certainly help, but much of the damage is already done and must later be faced. Past and current failed/failing governmental policies will have their pains for all Canadians and they are surely unavoidable. The only question now is when. I predict… soon. Easily less than a year away and if I had to throw a number out there, 6 month to 8 months. Ouch!

#13 BCTRADER on 10.09.09 at 12:02 am

Too much doom and gloom on the USD these days, which incidentally is about to make a major bottom. This week has been a contrarian’s wet dream come true. The secret meeting story took the cake. US Dollar’s end is plastered everywhere you look now. Noone in their right mind would short it at this stage. Well maybe all who watch CNBC and listen to Cramer.
Apple trading at 190? It doesn’t even pay a dividend. The sheep have truly arrived.
All stock indexes pointing to slight new highs, after which the plunge will commence. Inflation is not in the cards intermediate term. You can’t have inflation without an expansion of credit. First the cleansing of the financial system has to take place, which Curly at the Fed is now out of bullets and powerless to stop. The USD is the sickest currency in the world, with more debt denominated in it than any other currency. This debt will default, destroying all excess supply of USD, driving up the value of it. After this has happened and Gold has taken a trip south, it will be time to worry about inflation.

#14 Future Expatriate on 10.09.09 at 12:11 am

When beavers bite off more than they can chew…

#15 Future Expatriate on 10.09.09 at 12:13 am

“I’m filling the 4,000-gallon tanks buried in my side lawn.” – Garth

With what, Garth…. gold or petrol? (DUCKING)

#16 Chaostrology on 10.09.09 at 12:31 am

Na, na, na, na

Na, na, na, na

Hey, hey, hey

GOOD BUY!

#17 Nostradamus Le Mad Vlad on 10.09.09 at 12:45 am

When beavers go bad they become rotten rodents, like “. . . lascivious credit-sucking vermin of consumption. . . . fallen off the wagon on our furry little heads – plunging into collective debt as never before.”

That’s the way society has gone, couldn’t care less about who picks the tab up. They will find out very quickly, that’s fer sure.

Here’s a convenient conspiracy theory for y’all, re: the greenback’s slide this week — http://smallsizeurl.com/513/ Excerpt:

“So who wanted dollars diving and gold rising? . . . No one knows. But one thing is for certain: With the price of gold jumping to $1,048.20 per ounce, traders who moved early enough stood to make millions.”

The hard part is in figuring out who made a mint (if they did).
——
Paul Krugman figures world trade is not in a depression, it’s worse (may be right, too). — http://smallsizeurl.com/krugman/

GS is American, and CanWest is Cdn., I understand. — http://smallsizeurl.com/509/
—–
China becomes stronger as US manufacturing disappears, and more economic stuff yet to happen. — http://smallsizeurl.com/511/ http://smallsizeurl.com/other/
——
Vlad’s Vomitoriums Inc. (a highly successful and lucrative chain of vomit-based restaurants) is pleased to present a 9:25 clip on Gold and Hyperinflation.

As Garth repeatedly says, gold is not money (correct). Where does that leave hyperinflation? — http://eclipptv.com/viewVideo.php?video_id=7711

Best I know, gold is a hedge, but silver is better value. Hyperinflation is outta my league. Guess this is politics at its finest — upside down, inside out, back to front and off its rocker.

BTW, the US budget deficit is $1.4 trillion. Half that total is for the pointless wars they are sending kids to die for. Now the Cdn. govt. is thinking about “extending” the AfPak mission. Big surprise, but it keeps the troops employed.

#18 Philly on 10.09.09 at 1:22 am

Some scary graphs regarding debt levels held by Canadians

http://edmontonhousingbust.blogspot.com/2009/10/consumer-debt.html

Not only has mortgage debt tripled in the last 25 years (inflation adjusted), but so has consumer debt. Yet incomes have stayed the same.

This cannot end well

#19 Too Old Bob$ on 10.09.09 at 2:36 am

“Gold is not money. — Garth”

How many times have you said this, so I thought what the heck, lets try it. So down to the local Gas Station to fill up the mobile. I get $60.00 in gas and go in to pay. I know the guy quite well, being that I frequent there alot and it’s a Mom and Pop operation. It is not a PetroCanada, but gas is gas. I said to him, “I have no money, credit card or auto debit, but I have a 1 oz Canadian Maple Leaf gold coin, 99.99% gold, how about I pay you with this instead?” He looks at me wierd and says “Huh!” LOL his face was priceless. I explained it to him again and he said, “ah, ok, but what’s it worth?” I told him approximately the value in comparison to the US dollar. He said “whoa! that’s alot, but if I take it then I have to give you back what I owe you in dollars.” “Well of course you do, why would I pay more for the gas then I have to.” He thought about it a bit and we discussed the circumstances thoroughly. He finally said “you know it’s not a bad idea, but I can’t really do this. The till’s balance will be out at the end of the day, the boss (his wife) will kill me for doing this and what if I take it, then tomorrow the price goes down. I lose out.” I told him that the price might go up and the boss might give him a bonus for being so smart. We laughed a bit, then he finally said “nah I can’t do this, too risky and I want to go home to supper tonight and dessert.” We laughed some more, then I pulled out $60.00 bucks to pay him. I said “cya later and remember to keep an eye on those Gold prices.” He said “sure, I’ll do that while I’m having dessert tonight”. :o

#20 Munch on 10.09.09 at 2:41 am

Beautiful, Garth!

Beautiful!

#21 Mike (Authentic) on 10.09.09 at 4:41 am

“Oh Boy!” – Quantum Leap

Speaking of Quantum Leap wouldn’t it be nice to leap 5 years into the future from here?

All signs are showing we are heading towards raising interest rates sooner than expected in Canada. In fact, there were quite a lot of articles on Google News that are mentioning this fact as well.

With a strong loonie the American’s might not buy our exports as much, but it gives Canada and excellent incentive to diversify it’s trade to other areas of the world. We do have coastal sea ports to serve both Atlantic and Pacific markets. And I hear China is very interested in our oil. So a strong dollar and higher interest rates may not be a bad thing for Canada in the end.

As I heard on CNBC last night “The strength of a country is in it’s currency”

Mike

#22 Maurice on 10.09.09 at 6:04 am

Amigos: Mean while the US 30 year Bond interest rates keep on dropping. Four out of the last 5 days. Eight out of the last 10 days. Now down below 4%. Deflation and a falling currency value. This no one can explain.

#23 David Bakody on 10.09.09 at 6:11 am

Garth ….. first if you have large tanks buried please ensure you keep them full and recirculate due to marine growth.

I was out to Wall Mart yesterday (rainy day) and the place was almost empty and what was looking for was more expensive that expected. As I was leaving I ran into a friend and frequent shopper who commented on the lack of people ….. ROMA is now playing scratch and win …. look for other signs ladies and gentlemen…. Remember a Sale is not a sale unless you need the item!

#24 Mikey on 10.09.09 at 6:24 am

Garth, Is this the last inning?

MIkey

#25 Tony on 10.09.09 at 6:33 am

Garth,

How do you feel about farmland as an inflation hedge (as opposed to real estate)? Will farmland values plummet along with real estate?

#26 BDG YYC on 10.09.09 at 7:24 am

And Garth, you might have added:

This has ended badly, because it is over.

Oh sure, there are still a few straggling “hey wait for me’s” rolling the change they’ve accumulated in the margarine container in their dresser drawer and riffling through the upholstry in the bimmer (loaded with empties) looking for a quarter to finish off the last roll, before they hawk the Martin bum a grand or two from dad and borrow the couple of grand they’ve got stuffed in their RRSP to finish scraping together that $20K down on that ever so affordable $300K mortgage. Yup, there are still a few stragglers eager to seperate themselves from the nether-class of hapless, never to own renters. Hell yes, there are still a few household’s with qualifying capacity and $30K-$40K incomes to be shoe-horned into our more ‘merikan than apple pie Kanadyun dream. And …. sure there are still folks with tonnes and tons of home equity to be sucked out and stuffed into into that “on sale at prices never to be seen again” condo in boomertopia. And there are of course the D’onald-too’s scrampling to get ’em while their still hot planning to get rich flippin ‘m to the desperate folks who’ll be willing to pay anything when that home ownership chart crosses 75% on its way to 80% as it surely will a few years down the road.

Who’dathought we had such a bottomless wealth of willing junkies or such a proficient band of pushers ever able to find yet one more fool able to scrape together the price of a high. Yup its over … the debt are on that last and best of all highs … no clue or concern whatever – they are already debt, but for the time being the music is great … encore!!! “Yea … Heart’s Explodin’ !!!!!!!!!!

Woaaaa … too damn much mellow drama ! O.K. maybe it ain’t quite so bad … let’s be optomistic …
to our walking debt …

http://www.youtube.com/watch?v=E6m1qgnUw74

#27 larrysummers on 10.09.09 at 7:32 am

Bring on the rate increases…

Canada Adds 30,600 Jobs, Jobless Rate Falls to 8.4% (Update1)
Share | Email | Print | A A A

By Theophilos Argitis

Oct. 9 (Bloomberg) — Canadian employers added jobs for the second straight month in September, and the unemployment rate unexpectedly fell, adding to evidence the U.S.’s largest trading partner is emerging from its recession.

Employment rose by 30,600, Statistics Canada said today in Ottawa. The jobless rate fell to 8.4 percent from August’s 8.7 percent. The median forecast of economists surveyed by Bloomberg was for a 5,000 gain in jobs and unemployment at 8.8 percent.

The report may increase pressure on the Bank of Canada, with its benchmark rate at a record low, to follow Australia into raising borrowing costs. The central bank lowered its benchmark lending rate to 0.25 percent this year and pledged to keep it there until June 2010 unless the inflation outlook changes materially.

“Certainly on the back of what we saw from the central bank of Australia, the report has the potential to lift markets up. There may be a tendency to draw those linkages,” said Stewart Hall, an economist at HSBC Securities in Toronto. He added such an expectation would be “misplaced” given Canada’s economy is more closely linked to the lagging U.S. economy than Australia, and Canada’s recovery will be more “incremental.”

Bank of Canada Senior Deputy Governor Paul Jenkins said yesterday that this week’s surprise Australian rate increase isn’t necessarily a precedent for Canada.

Dollar Rising

The yield on Canada’s overnight index swap due in one year, a security based on investor expectations of where the Bank of Canada’s rate will be at that point, rose above 0.5 percent yesterday for the first time in eight weeks, and was trading at 0.597 percent at 7:22 a.m. today.

The Canadian dollar advanced 0.8 percent to C$1.0432 per U.S. dollar at 7:30 a.m. in Toronto, from C$1.0518 yesterday.

The public sector, along with manufacturing and construction, led the rise in September employment. Construction, benefiting from rising home prices and a government stimulus package that targets the industry, added 24,600 jobs during the month.

#28 Mike (Authentic) on 10.09.09 at 7:43 am

#19 Too Old Bob$ “I thought what the heck, lets try it. “I have no money, credit card or auto debit, but I have a 1 oz Canadian Maple Leaf gold coin, 99.99% gold, how about I pay you with this instead?” He looks at me wierd and says “nah I can’t do this, too risky””

I tried paying for items with old Canadian silver dollars. Even though the silver in them was worth much more than $1, all they would honour it for was $1. Even the collector value was over $10+ it didn’t matter.

In fact, an older Candian penny is worth more for it’s copper content than 1 cent, but stores will only give you 1 cent in value for it.

Precious metal coins are great, but if you are paying more than face value for them, you are paying too much unless you are a coin collector.

(I paid $14 for a near-mint 1869 Candian penny a few months ago)

Mike

#29 Kurt on 10.09.09 at 8:21 am

Garth’s tanks: it’s underground, which would impose special requirements on the tanks for petroleum distillates – very expensive. Further, he said “tanks”, implying a total capacity of 8000 gallons or more. That much fuel would imply the coming of the apocalypse and we know from his constant baiting of goldbugs that Garth doesn’t believe in that. Finally, what does a beaver save behind has dam? (Yes, I know, food too…) This is clean, potable water, folks, hidden below the frost line.

#30 double mike on 10.09.09 at 8:41 am

#11 nonplused – exactly!

That’s what I’ve been thinking about for last couple of years. I have friends in Silicon Valley and they do invite to join from time to time. Given RE prices near parity and wages 30% higher down there it’s approaching level of no-brainer despite the lack of medical and high taxes. Of course the looming state bankruptcy gives me a pause, but what the heck, they won’t let vagrants lose in Palo Alto, Atherton or Sunnyvale no mater what.

And the climate, ah the climate… ‘Tis Getting more and more appealing while the winter gets closer.

#31 613 Happy where I am on 10.09.09 at 8:53 am

Truth be told, the reason why Americans are saving is because they have been through an economic correction which everyone and their mother saw and now probably feel alot poorer now as a result, so they are saving rather than trying to keep up with the Joneses, like they normally do.

We Canadians on the other hand have continued to think : Well, if it doesn’t impact me personally, then it aint a recession… We havent had the real estate correction that went on in the US which triggered this recession. We continue to act recklessly, setting off bidding wars and borrowing ourselves up to our eyeballs because our banks haven’t failed.

Be forewarned though… it aint over until it’s over and, as Garth says, we need to prepare ourselves for the inevitable downturn. A rise in interest rates alone will cool things off… personally, I can’t wait…

#32 My_View on 10.09.09 at 9:04 am

4 Thousand gallons of fuel, holy cow!

Are you planning to invade P.E.I.?

#33 DaleFromCalgary on 10.09.09 at 9:05 am

“It makes beleaguered US exports competitive and gets millions of unemployed Americans back to work.”

No it doesn’t. The factories are in Mexico or overseas and they’re never coming back. Even if Americans took minimum wage, the labourers couldn’t compete with 25-cents an hour overseas workers.

Gold and silver are still the best long-term investments. No maintenance costs, no counterparty risk, high liquidity, capital gains tax only if you sell in large amounts that are required to be recorded by the dealer, otherwise tax-free if you just cash in a Maple Leaf at a time over the counter as you need fiat currency. The price of gold will stay up because of what gold bugs refer to as the Beijing Put; not only is the Chinese government buying it, but they are encouraging the populace to do so as well.

Conventional oil as mineral rights or private equity are good cash flow earners. Rental property is a headache because of maintenance costs and tenant troubles.

The US$ is slowly being liquidated by the Chinese and Russians as they tiptoe to the exit before it inflates. Best currencies are Canadian and Australian dollars because we have all the commodities that will be in demand in the future: oil, grain, precious metals, industrial metals.

Incidently, I hope you have monitoring wells around your underground tanks. When they start leaking (not if; all underground tanks leak sooner or later), you will be on the hook for tens of thousands of dollars, more if they contaminate the water table. I’m familar with one service station that was abandoned in 1996 and is facing $200,000 remediation costs. Last person to hold the land title is responsible for costs and it is recourse.

#34 Ottawa_Tradesguy on 10.09.09 at 9:05 am

Wow Garth,

I’m still waiting for those factors that will ultimately lead to the collapse of the housing market?

Rising Unemployment – Apparently not

http://www.theglobeandmail.com/report-on-business/yes-we-have-recovery/article1318179/

Ironically, for a business despite all of our worries about taking on debt this is the best time to leverage up, credit is cheap and if a business can attain long-term financing to fund growth now it gives them a competitive advantage (see national post article in Yesterday’s post)

Could it be the same thing for consumers? I suspect Canadians are far less stupid than we give them credit for when it comes to dealing with their credit.

#35 Bill-Muskoka (NAM) on 10.09.09 at 9:16 am

The higher Canadian dollar is the last thing bankers need, since the housing bubble now has ‘em in a sweat and all juiced to raise interest rates. But the moment they do, the loonie will be headed for $1.10 US and you can kiss the rest of our factories goodbye. And the hotels. And the exports south. And the economy.

So how, Master of The Financial Stuff, if you can explain it, does Europe and the Euro do so well being HIGHER than the USD?

You are always saying the same thing Garth that a high Loonie is bad for Canada. I completly disagree. I think you have forgotten the old value of quality of product deserves a higher price. Canada is a a far better country than the U.S. according to the latest UN results (We are fourth and the U.S. is 13th). I think too many Canadian business people are lazy and cheap asses who just want to suck the hind teat of the U.S. We need to Grow UP!

The USD is way overvalued and their debt is in the tens of trillions. By my math and financial assessment their dollar is a POS and worthless except in the make believe world they and the morons in the markets created. Rome fell and is falling AGAIN. Wake up!

As to our housing oprices they are INSANE and just another example of Canadians refusingto look at things realistically. We are a Ship of Fools being helmed by Cap’in Trade!

#36 Daystar on 10.09.09 at 9:28 am

Canada’s trade deficit widens to $2 billion in August. Don’t you Canadians worry, Flarehty will just sell some more bonds, a little quantative easing, its all taken care of:

http://money.ca.msn.com/investing/news/business-news/article.aspx?cp-documentid=22166475

#37 JM on 10.09.09 at 9:30 am

what bubble? (sarcasm)

http://www.theglobeandmail.com/real-estate/royal-york-and-the-queensway/article1316975/

The house sold for $6,600 in 1978 and resold 31 yrs later for 53x (yes times) more at $350,000.

I wonder if my bungalow will be worth over $10,000,000 in another 20 yrs? Not likely.

#38 Hiteclowtec on 10.09.09 at 9:43 am

Thank`s Garth for some real news ! The bankrupt news papers are printing any sort of propaganda imaginable.
There are small businesses closing at an alarming rate all over Southern Ontario you can see them, as you travel around, with your own eyes! If you follow MLS there are lake front condos that have been listed cheap for 5 years with zero offers !!!!
I`ll be doing an inventory check at my northern bunker and some more hard asset investing ( ammo, fire wood, generator fuel, etc……..).

The don`t worry be happy MSM is really starting to annoy me with their prepaid BS. This blog has some great links to what`s really going on.

#39 smw on 10.09.09 at 9:48 am

#27 Mike (Authentic)

I will gladly give anyone here face value for their one ounce Canadian Maples, gold ($50) and/or silver ($5).

:)

Substantial rate rises should push the stock market and gold/silver down…

Most stocks are now over valued, despite estimates coming in “better” than expected.

#30 613

You said it!

Unfortunately all those Canadian consumers utilizing records amount of credit today have been taken out of the economy for tomorrow. Garth’s chart above tells the story of the Canadian economic winter.

Right grasshoppers?

Eventually instead of following the Bush regime and Greenspan’s economic theory of consumer driven economy we as Canadians will have to produce affordable goods the world needs, but with the albatross of a dollar equal to or above the world’s current reserve currency.

#40 lizzard on 10.09.09 at 9:50 am

garth if i was you i would wait to fill that tank. since march 5 the US dollar has declined by 15% while crude has climbed 64% with bearish fundamentals…we are due for a large correction in crude.

#41 David Bakody on 10.09.09 at 9:53 am

#24 Mikey on 10.09.09 at 6:24 am

Last inning Mikey ….. not a chance this is the start of the new world order plan that was hatched around a hundred years ago …. the rich & powerful have and will become more powerful. There was chatter Mikey that Obama is willing to let the US National Debt rise to $20 Trillion! couple that with other nations and think Mikey who is going to get their hands on it? Who will be cast aside to fend for themselves? and who is useful and who is not? The US of A has the military force and the soldiers who have been programed to fight on command fully backed by a government and generals who are accountable to only one person who is accountable to who? It really is quite simple Mikey …. there are those who have ( multi billions) and those who have not and to-day the have nots are growing so those who have can have more. So smart people will listen to Garth and pay down debt and save wisely living within their means so they can survive and live well. ….others will go into the game and loose all and be caste aside … be a Greater Fool or smart ass investor and loose everything overnight. Paul Martin was on the radio this morning and said it all …. in part he said we can only hope governments ( WTO) have learned and act soon to insulate people and then all we can do is hope the next fall is not worst than the last one. Those words are 100% correct ….. and to think 36% of the voting public fell for meager 2% GST cut and now it will soon be pay back time with interest, billions and counting on top of loss of good paying jobs, wage cuts and less benefits. Do not give me that crap about it would have happened to Paul Martin also …. for he said sure it would have happened but we would have started with good insulation ….. Mr. Harper was already in negative territory when it hit. nuff said …….

#42 Onemorething on 10.09.09 at 9:56 am

You know, other than the asinine letters Garth receives in which we bite on btw for shits and giggles, and the odd duck who flies in who is either a IB or REA (always looking over their shoulder) and the odd troll, there is about 24 key contributors in the consortia who really have something well oiled to spread around.

I would trust this consensus greater than any of the Ponzi’s flickering around (slightly visible in our peripheral).

Garth, lead the party into some level of summation so we can track the progress, even though the masses are being insanely manipulated, we should be able to nail this down to around 85%+ probability.

Could be a Letterman top 10 for the next quarter or any other way to present but let’s put the yardsticks out there brother from another mother!

#43 d&g on 10.09.09 at 10:05 am

Looks like Garth is taking it on the chin again.

That’s the problem with making too many predictions.

Don’t fight the tape Garth. Canada is in a generational bull market.

You can’t talk it down with blogs or books.

I had 7 properties in downtown Toronto I sold just under 3 years ago. I left a lot of money on the table but, I’m not gonna try to talk down the Canadian market just because I sold early. (Put the ego aside).

A collapse will come when it comes NOT before or when
one says it will now.

#44 MrC on 10.09.09 at 10:08 am

Wont be installing any tanks in my yard this weekend. I am off to the States tonight for the weekend.

Dollar is around .95. The difference in our tax rate compared to the US pretty much eliminates the difference in currency rates now.

#45 charles on 10.09.09 at 10:13 am

Dear Garth,
This being GST rebate day I was wondering if I should invest the $118 on canned food, spare tubes and tires for the family bicycle or go the the Casino.
Thanks in advance for your advice.

#46 John Warnock on 10.09.09 at 10:14 am

Different housing concerns in Regina
I get asked to speak to groups on housing concerns, but by different groups from those who invite Garth. Yesterday I led a two hour discussion at a downtown United Church, and none of the people there were wondering whether this was a good time to buy. They were concerned about the 50% increase in rents over the past year or so. They wanted to know why the NDP government lifted rent controls in 1992. Why are there fewer rental places available in Regina today than there were 15 years ago? Why doesn’t the City of Regina engage in city planning? They just rubber stamp proposals by developers and builders, and they always support the building of condominiums instead of apartments. Why does the local government always approve the conversion of apartments to condominiums?
Many seniors on fixed incomes own their own small bungalows. But they are still afraid of losing them, as property taxes keep on rising. The NDP government seriously cut the provincial grants to local communities and school boards, offloading their tax cuts to local governments. Property taxes are now among the highest in Canada.
There is now a two year wait to get into social housing. There is less social housing available now in Regina than in 1991 when the NDP took office. Why is the government of Saskatchewan selling off social housing? It is far too cold in Regina to live in the street.
The average price of a house in Regina is now $246,000, and the median household income is around $60,000. For the people who attended the church seminar, buying a house now is simply out of the question. Under CMHC guidelines, buying a house is now “unaffordable” for the majority who live here. Those who own houses are pleased that the apparent value of their house has doubled in the past two years. Those who don’t are hoping that Garth is right and the Canadian housing bubble will burst. In the USA the average rental vacancy rate is now 7.8%; in Regina, 0.5%. Rents are dropping quickly in the USA.
What can be done about the housing crisis that affects ordinary Canadians? There was despair at the housing meeting. Our peoples’ government, the NDP, which ran the province for 16 years, almost always came down on the side of the rich and against workers and the poor. That was certainly the case when it came to taxes and housing. If Jack Layton’s friends and allies won’t help, who will? The communists are long gone. The mainstream churches have no influence. The Liberals and Conservatives here couldn’t care less.

#47 let the battle begin on 10.09.09 at 10:15 am

Trillion US Dollar Man vs Gold Dust
and their partners
G7 for dollar man
rest of the world for gold man
wait I see Canadian banks starting to offer buy gold online…do I see a tap out? No wait a reversed lock from Benanke he propped up the US dollar to shield against gold man. It’s going be a tough battle here folks.
tune in next time for more…

#48 ralph on 10.09.09 at 10:17 am

Don’t let MOE find out what you will storing in those 4000 gal underground tanks!

#49 Dean on 10.09.09 at 10:21 am

I don’t know Garth. I don’t think the dollar matters that much when the American economy sits mired in the toilet. They’re not buying anything right now so the price of it is irrelevant.

As for commodities, they’re ridiculously volitile anyway. Oil went from $120 to $35 and back to $70 in the last year. You think a 10% increase in the Canadian dollar is a huge factor next to that?

I would argue that the biggest factor in Canada’s economic recovery is America’s economic recovery. The dollar is an interesting side effect. I think that the gap between the US and Canada has to close, and either they’ll grow to close it, or the bubble will pop and we’ll end up right beside them. The dollar is merely an indicator of where we’re at right now.

#50 Comfortable in a coma on 10.09.09 at 10:25 am

This from todays NY Times:

The FHA may be the next entity needing a bailout.

Many of the loans the F.H.A. insured in 2007 and last year are now turning delinquent, agency officials acknowledge. The loans made in those two years are performing “far worse” than newer loans, dragging down the whole portfolio, Mr. Stevens of the F.H.A. said in an interview.

The number of F.H.A. mortgage holders in default is 410,916, up 76 percent from a year ago, when 232,864 were in default, according to agency data.

“I don’t think it’s a bad thing that the bad loans occurred,” he said. “It was an effort to keep prices from falling too fast. That’s a policy.”

You think the worst is over? The bad news just keeps coming. These are loans that started after housing prices had “bottomed”. Defaults are up 76% from a year ago! If people can’t afford to keep paying their mortgage after buying at low prices, the economy is a lot weaker than it looks.

I can’t understand why Canadians keep buying “stuff” while the employment numbers keep tumbling. Surely on some level they understand that their safe job doesn’t exist in isolation from the world economy? The euphoria around rising house prices and the need to get in while you can almost has me convinced that I am missing something. But how is it possible to continue growing the economy of Canada when the good news is that layoffs are slowing down? At some point there is no one left to lay off and then the numbers are zero. I guess that would mean the economy has turned around?

How can Canada continue to prosper when: our main trading partner is still collapsing, oil is being stored offshore in tankers, tax revenues are decreasing and our dollar is climbing toward par? I have been in business long enough to become cautious when all signs are negative. Where is our growth coming from to sustain our economy, never mind grow it? I would love to borrow a bunch of cheap money right now to expand, but I don’t see my customers growing, so I would just go broke owing cheap money. I understand that those who are daring in bad times sometimes come out in front, but I bet that you only hear of the ones that win, not the thousands who gambled and lost.

Short term,I sit with money in the bank knowing that long term I will still be in business to take advantage of a true recovery.

As for storage tanks, I hope those are septic tanks. 4000 gallons of diesel will grow algae if it is not used, gasoline cannot be stored long term without going stale and wine needs to be kept in small drinkable bottles.

#51 Timothy Nessus on 10.09.09 at 10:30 am

To: Bill-Muskoka (NAM)
“So how, Master of The Financial Stuff, if you can explain it, does Europe and the Euro do so well being HIGHER than the USD?”

Simple, oh Master of Missing the Obvious, have you recently looked at the share size of the EU market? No?

OK, they are about 500 million people generating about 30% of the WORLD GDP.

Basically, they have an internal market SO large and rich that they do NOT need to export (albeit they do). If they don’t need to export, the price of the EURO does not matter. DUH!

#52 Comfortable in a coma on 10.09.09 at 10:36 am

This is a great article on the continuing American real estate condition.
http://www.nytimes.com/2009/10/09/business/09fha.html?_r=1&th&emc=th

#53 Watched Bubble Never Pops on 10.09.09 at 10:53 am

With regards to booms and busts, if the ‘when’ cannot be answered any explanation of the ‘why’ that is given is no more valid than the next.

Individuals who say, “the boom will continue” or “the bust will come” are equally valid because since the timeline is unknown, both are correct.

A (insert financial genius name here) predicts that these will change? That’s awesome. I’m sure predictions are difficult to sell to the media.

Why do smart people focus so much on talking about what MAY happen instead of what IS happening. And what IS happening exactly? Well…

Canada government bond yields are a joke…
http://www.financialpost.com/personal-finance/story.html?id=2067841

http://www.bank-banque-canada.ca/en/rates/bonds.html

The BoC’s overnight rate is really low…
http://www.bank-banque-canada.ca/en/monetary/target.html

The inflation rate is negative…
http://www.cbc.ca/money/story/2009/09/17/canada-inflation017.html

September added over 30K jobs…
http://www.financialpost.com/news-sectors/story.html?id=2085743

The BoC says it won’t raise rates…
http://www.theglobeandmail.com/report-on-business/crash-and-recovery/bank-of-canada-repeats-dollar-warning/article1317611/

Australia’s rate hike is going to kill us? Yeah right. Sure.

California’s bond issue will spur everybody to raise rates? Um Ok.

“Thousands of experts study overbought indicators, oversold indicators, head-and-shoulder patterns, put-call ratios, the Fed’s policy on money supply, foreign investment, the movement of the constellations through the heavens, and the moss on oak trees, and they can’t predict markets with any useful consistency, any more than the gizzard squeezers could tell the Roman emperors when the Huns would attack.” – Peter Lynch

How about we focus what IS happening instead of extrapolating out to what posters think MAY happen.

Nobody cares about what MAY happen when every scenario has an equal probability of occuring.

#54 TJ on 10.09.09 at 10:55 am

“Already much of the BC vacation property demand provided by Albertans is heading for Phoenix, Las Vegas, and Montana. I expect that trend to continue for a while. You can get so much more for your money. Border delays aside, and I think they will eventually subside, why in the heck wouldn’t you look at the US as an alternative……?”

>>This is an example of folks living in a delusional world. As an Alien in the US, you will face a laundry list of hings you CANNOT do to improve your property…without HIRING an American to do it.

You can cut your lawn, and maintain the pool, and that’s about it.
Then there is the rapacious IRS.
Canadians re used to the gentle hand of the CRA, in the US, the IRS is more feared than the Taliban.

No tax breaks, foreclosed, armed and desperate neighbors, gasoline and service dependent – ie. economic suicide.

But heh, we still have idiots paying $1000.00 a square foot for a Condo, where you have to step over vagrants, to get out of the front door, so what do I know?

Any sucker that thinks having a property in stinking hot places like Phoenix are NOT paying attention.

Don’t believe my gimlet eyed view of reality – watch this.

Dimitri Orlov – Societal Collapse – Best Practices

#55 Bill-Muskoka (NAM) on 10.09.09 at 11:08 am

#50 Timothy Nessus

Oh really? You obviously know little about the EU’s trade. Canada should, and is, reaching out to the rest of the world to increase our exports. The EU, South America, etc.

The EU has a few brand names you might recognize such as Airbus, Saab. Mercedes-Benz, Bentley, Rolls-Royce (they also have U.S. Plants and, in fact, bought GM’s Allison Division years ago), not to mention the heavy equipment industry and military weapons and aircraft. Russia has greatly increased their exports, but like most countries they export FINISHED PRODUCTS, not just raw materials. Are you one of the NAU/SPP advocates or just ignorant?

The USD is dying and soon to be reduced to something akin to the Ruble’s former status.

#56 jess on 10.09.09 at 11:20 am

ok if you are an owner of gold at any point then YOU should be liable to clean up the problems after instead of being allowed to go bankrupt and leave ME who has no gold left to pay for YOUR irresponsible behaviour. T

Giant Mine
Yellowknife’s Giant Mine began operations in 1948 and quickly became one of Canada’s most prolific gold mines. Over its lifespan, Giant Mine produced more than 7 million ounces of gold. This is one of three mines that reverted back to the Crown in 1999 when the mines’ owner at the time, Royal Oak Mines Inc., went into receivership.

Why is it a contaminated site?
The main issue at Giant Mine is the 237,000 tonnes of arsenic trioxide dust stored underground at the site. The dust was created during the gold production process. When the mined ore was roasted to release the gold, the arsenic was also released as arsenic trioxide dust. This highly toxic dust continues to be safely stored in the 15 stopes and chambers underground at the site. The amount is equivalent to seven and a half 11-storey office buildings. On site, there are also tailings ponds, old mine structures and other surface features that require remediation.

#57 pezzazz on 10.09.09 at 11:32 am

“I made my fortune by selling too early” Bernard Baruch

#58 jess on 10.09.09 at 11:55 am

45 John Warnock

Have you ever asked yourself why REITS were treated differently than other trusts?

#59 RJD on 10.09.09 at 12:07 pm

#33 Ottawa_tradesguy:

Did you actually read the story or just the headline: “Private sector jobs fell by 17,100 and public sector employment rose by 36,400… ” Hmm. This stimulus money is supposed to be stimulating the private sector….

…and businesses do go t*&ts up when they borrow too much and don’t sell enough….

#60 Kenken on 10.09.09 at 12:08 pm

#2 Brian
You are right.. this option lies in the hand of the govt and will not worsen the already-too-strong loonie situation
BUT … this is politically unacceptable
If this move is made, the opposition will use this as leverage and stupid canadians will vote Iggy
This is too risky politically although CMHC cannot continue like this!!!

#61 Men With Hats on 10.09.09 at 12:36 pm

Smart money says if you get a mortgage your down payment should equal the amount of interest the bank is charging you over the life time of the contract .
This puts you in a positive equity position .
Of course this will never fly with the greedy little twerps in today’s market .
Their loss .

#62 Eduardo on 10.09.09 at 1:15 pm

Garth, stop impairing the rest of the country with your anti-CAD pro-Ontario speak.

We all know Ontario is screwed, the rest of us can enjoy cheaper imports and good opportunities to invest capital overseas.

Maybe instead of saying we need to export everything, Ontario should focus on adjusting their operations to be economical in their own market first (or markets other than the US because it’s not going to be cheaper for them to import cars from here).

THE CAD IS NOT COMING DOWN! It is positioned to do nothing but strengthen, especially against the USD so maybe Ontario should adjust the export model that was built on 0.65 cents to the USD.

Last time I checked there was a manufacturing sector, tourist operations and export industries everywhere in the country. Are you giving us that Alberta screw-you version of nationalism again? — Garth

#63 JFoo on 10.09.09 at 1:18 pm

Here we go, now even the national news is starting to repeat the fact that interest rates will go up as stated by BC and Ont. Credit Unions.

http://www.cbc.ca/money/story/2009/10/09/bank-rate-increase-prediction.html

#64 Eduardo on 10.09.09 at 1:32 pm

“Last time I checked there was a manufacturing sector, tourist operations and export industries everywhere in the country. Are you giving us that Alberta screw-you version of nationalism again? — Garth”

A strong dollar promotes capital investment (that could potentially improve efficiencies in manufacturing sector over time) because people aren’t worried about losing their capital. See China/Brazil right now as an example.

There are many reasons for a strong dollar. Tourism and a manufacturing sector that failed with a weak dollar are hardly good reasons for a weak one.

You have no idea what you are talking about. — Garth

#65 Eduardo on 10.09.09 at 1:34 pm

Garth, another example of the strong dollar for an exporter that ends up well: Cattle.

Right now Canada imports Beef from Australia and exports our own because it’s cheaper that way. A strong dollar is actually protective for the cattle industry.

#66 MrC on 10.09.09 at 1:40 pm

#36 The house at Royal York and Queensway is about 1km from where I live. We are in one of the brick houses to the north. When we bought in 2001 the area in the article was going for $225k-$240k at the time.

#67 Future Expatriate on 10.09.09 at 1:43 pm

#19- Next time do it right? Go to Scotia Bank or the gold dealer first, sell the coin in five minutes, THEN go to the cash station with the cash to get the gas like everyone else in the world who holds gold does?

Not rocket science.

Proof gold is not money. Money is a medium of exchange. — Garth

#68 David Bakody on 10.09.09 at 1:44 pm

Garth Turner Right Again ( Are you listening MSM) and to think he was once asked by CTV’s Mike Duffy way back when to come on the air and tell Canadians but now Senator Mike had a much different agenda …. Thanks Mike you could have saved many Canadian families much hardships.

CBC Breaking News……….

The Bank of Canada will push its benchmark interest rate to 2.5 per cent in the next year and a half, an economist with the Central 1 Credit Union predicted Friday.

Now BC & Ontario …… “ADD” Harper’s Sales Tax (HST) and rising energy prices because business will pass their costs on to who?

Garth I think this rate is a modest number because of Austria’s early move ….. 25/50 bases points on multi billions is mega bucks is it not? The banks just might move there cost a little early then when Harper moves they will blame Ottawa for everything.

#69 T on 10.09.09 at 2:15 pm

OPEN QUESTION FOR SERIOUS DISCUSSION.

This question is for all, icluding Garth.

If Canada is doing so “well” and our currency is being reflected as such, perhaps someone could shed some light on a few little details.

1) For the first time in decades, Canada is now running a deficit.
2) Canada has switched from a Trade surpless to a Trade Deficit. ($2Billion Dollars) Exports are now DOWN 34% from the high in 2008
3) 80+ % of everythig we make, dig out of the ground or dream up goes to the USA.
4)Which ties into this, if shipment are down, that means our resource shipments are down, making the “resource base” theory a joke. To add, Oil is priced in USD so when our dollar goes up, Calgary is getting less for the oil when converted back to Canadian Dollars.
5) Our debt levels for the average Canadian would make an American puke tying into the next point
6) Our average house price in Canada now Stands at $409,000. The US its now $190,000 with nearly identical income.

So I ask, exactly what specifically is Canada doing that is so great to warrant a stonger Canadian Dollar.

SPECIFICALLY.

The way I see it, there are only 2 differnces between Canada and the US.
1) we have more resources which are sold in USD ie we are loosing more and more every day
2) Our housing prices have not dropped YET which is aiding a huge wealth effect.

Or is there something else.

Comments?

Garth????

#70 Mikey on 10.09.09 at 3:02 pm

Garth, How low do you think the USA dollar will go?

Mikey

#71 jess on 10.09.09 at 4:10 pm

Florida banking agency helped Stanford set up unregulated office to sell his phony CDs

http://thekomisarscoop.com/2009/07/exclusive-florida-banking-agency-helped-stanford-set-up-unregulated-office-to-sell-his-phony-cds/

http://www.crocodyl.org/wiki/american_international_group_aig

#72 David Bakody on 10.09.09 at 4:30 pm

#68 T on 10.09.09 at 2:15 pm

First who said Canada is doing well?

There is lots more Sir/Madame and it is all bad news and with this afternoon news of higher interest rates en route there will be many running to their banks to lock in mortgages. This can have devastating effects for many should they have to sell their overpriced homes by getting hit twice …. negative equity and early mortgage payout defaults … both of which Mr. Turner warned many of. Upper Canada and the West Coast will be hit the hardest ….. now the media knows why Harper & Co did not call Iggy’s hand on a election …. many people will not sleep good to-night knowing they will have to come up with more mortgage money with much less pocket cash that is required to pay that dirty little line on every sales slip called Harper’s Sales Tax (HST) even journalist will not be exempt.

Check this out ….. HST will apply to rental units and auto leasing. Even thought you may have bought it prior to the new Harper Sales Tax (HST) inside deal. It will not matter because you pay monthly, will BC & Ontario on Harper’s word forgive y’all …. of course they will, just like banks and credit card companies ….haha

#73 Jon B on 10.09.09 at 4:34 pm

Two questions:
1.) What are you putting in those 4000 gallon tanks?
2.) How long might the $USD stay below parity (assuming that’s where it’s going soon)?

#74 Cashman on 10.09.09 at 5:07 pm

The US$ is exactly where the global bankers want it for now. Then it will depreciate even further and presto, a new north american currency called the “amero” will be the new north american common currency. It’s already been printed up and ready to go. The global bankers are just waiting for the perfect time to implement it. Don’t believe me, that’s fine. Go back to sleep like good little sheep and let the big bad wolf (IMF, Fed Reserve and World Bank) do it’s job. The amero IS comming like it or not and it will float against the Euro. In the mean time, these bailouts will hold for a couple of years and new bottoms for stock markets will be reached.

http://www.prisonplanet.com

How are the drugs? — Garth

#75 shifty on 10.09.09 at 5:09 pm

“It’s the ultimate trade weapon”

So, deflation could be more of a possibility in this scenario making cash more valuable and debt more unmanageable.

I don’t understand how it(lower US dollar) would trigger an equity’s rally – unless somehow a lower US dollar could stimulate US manufacturing or am I missing something?

#76 Eduardo on 10.09.09 at 5:23 pm

“You have no idea what you are talking about. — Garth”

Capital flows from weakening currencies to strengthening ones for capital investment. That’s a fact.

Understand that Canada exporting cars to the US is not the solution. They already make more than enough cars for themselves, they are shutting plants. There is too many already.

Capital flows to where it gets the best return. Period. Stop making it up. — Garth

#77 Eduardo on 10.09.09 at 5:28 pm

RE 68:

The answer to your question is in 4.

“4)Which ties into this, if shipment are down, that means our resource shipments are down, making the “resource base” theory a joke. To add, Oil is priced in USD so when our dollar goes up, Calgary is getting less for the oil when converted back to Canadian Dollars.”

Your logic is flawed. The CAD is going up the price of oil is going up nominally in CAD but also because the USD is going down.

When those same companies want to INVEST CAPITAL TO IMPROVE EFFICIENCY OR EXPAND OR GROW THEY SPEND CADs which will buy them more in terms of USDs.

That’s why it’s good to have a strong currency. If you are an Foreign entity who believes their currency is going down you invest capital when your currency is relative strong (or in the process of weakening) and in an country whose dollars are strengthening so that you can return more of your weakened currency.

#78 Mike Oxlong on 10.09.09 at 5:38 pm

“Now BC & Ontario …… “ADD” Harper’s Sales Tax (HST) and rising energy prices because business will pass their costs on to who? ”

David Bakody you flipping moron, these taxes are provincial and why don’t you tell us all what political party are in power in both these provinces you liberal bootlicker.

#79 Eduardo on 10.09.09 at 5:47 pm

“Capital flows to where it gets the best return. Period. Stop making it up. — Garth”

And many of the best returns are in Canada’s resource sector and in STRONG Canadian dollars so stop pretending like we should pillage the dollar because it’s in the best interest of Canada. It’s not. It’s in the best interest of the manufacturing sector which is largely based on autos and largely based on Ontario.

#80 Nate on 10.09.09 at 5:53 pm

Ive got a lovely 19,000 sqft abode for sale..any one interested?…ill give ya a good deal..

P.S. I only accept gold bullion as payment..

#81 Swag on 10.09.09 at 6:07 pm

Eduardo and Garth:

I can’t recall vast numbers of businesses moving from the US to Canada when our dollar was 60ish so why should the opposite happen at parity?

The absolute value is irrelevant in the long run. It’s stability that matters.

#82 Dano on 10.09.09 at 6:07 pm

Mortgage Rates on the rise.

http://www.newswire.ca/en/releases/archive/October2009/09/c5663.html

#83 Jordan on 10.09.09 at 6:16 pm

#73 Cashman – You have not been watching enough TV!

The newspapers and network news have experts that tell me everything will be OK.

The government has our best interests at heart! Especially the American government, they care so much about their citizens teeth that they put fluoride in the water.

Oh and they’re helping save the planet from the poisonous CO2 by charging us tax, and no it doesn’t matter that plants use it for photosynthesis and then release oxygen as a waste product.

The FDA can be trusted, it doesn’t matter that they’re a documented revolving door for corporate heads and lobbyists.

Yes Big Brother, 2 + 2 = 5

BTW many Canadian cities and communities fluoridate their water too.

#84 Chris L. on 10.09.09 at 6:17 pm

No taxes on rentals to the person that said there would be:

http://www.cra-arc.gc.ca/E/pub/gi/notice244/notice244-e.pdf

#47

#85 glw on 10.09.09 at 6:37 pm

#77 Mike Oxlong
QUOTE:
David Bakody you flipping moron, these taxes are provincial and why don’t you tell us all what political party are in power in both these provinces you liberal bootlicker.
___

Mike Oxlong you flipping moron,the BC Liberals make GW Bush look like a pinko commie swine. They are the old Socred party in sheep’s clothing.

Find out about the transfer payment to BC that prompted the invoking of Harper Sales Tax by the BC Liberals after denying that they were bringing it in prior to the last election – they lied.

#86 Kent on 10.09.09 at 7:08 pm

All this and Obama gets the Nobel Prize. After eight years, I now know how Dorthy and Alice felt.

#87 kc on 10.09.09 at 7:11 pm

78 Eduardo on 10.09.09 at 5:47 pm

“It’s not. It’s in the best interest of the manufacturing sector which is largely based on autos and largely based on Ontario.”

DUDE…. are you aware that for every 1 auto job there are/were 4 forestry jobs in Canada? you logic is slightly leaning for one direction.

#88 The Great Gazoo on 10.09.09 at 7:13 pm

HA HA Eduardo

This is the way it works – I come from a global automotive parts manufacturer:

– capital investments are based on RETURNs, typically
payback on an investment is expected within a year (maybe two), detailed analysis is used to predict savings and payback .. meaning RETURNS!!

– capital investments are based on new programs/product. I.e. our company won business to make X part for Y automotive company

– never in my life have I heard management say: “Oh the dollar is in so and so condition, lets (not) invest” HA HA HA

You are non-sensically contrarian, I know you love Garth and just want his attention.

Go back to penalty box dives for Arsenal.

#89 Cory on 10.09.09 at 7:15 pm

Long Bond prices dropped today, all indicators point down. MACD and 200 DMA on the way down. The quick response to yield increase by RBC shows what is coming imo.

http://www.newswire.ca/en/releases/archive/October2009/09/c5663.html

Yes people can still feel cocky with their variables at next to nothing and relying on old Goldman Sachs stooge Mark Carney to follow through on his “promise” to keep the BoC rate down but we all know he cannot make this promise and he never should have.

Cover your face, the bubble is soon to pop……

#90 Seilfworcehtsa on 10.09.09 at 7:55 pm

#72 Jon B

?#1 Scotch Whisky if he is smart.
“”‘2 This will be a winter of discontent. Trading nations need a high dollar and self interest dictate that they buy dollars but eventually the supply may overwhelm the demand. However, not to worry…..we have super finance minister Flaherty looking after our interests.

#91 JB on 10.09.09 at 8:02 pm

Right now the honesty of our free enterprise system is being undermined and the return to fundamentals delayed by the BOC’s free money. Not a great way to set an example for young people who are doing the right thing and saving for a down payment. In other words, people are being forced to borrow and leverage…otherwise forget any decent return on their money. Don’t buy the bait…eventually the real estate market will return to fundamentals…it has to.

#92 taxpayer like you on 10.09.09 at 8:24 pm

kc @86

Thanks for reminding Canadians about the trashed forest sector. Living in BC I can fully appreciate this. The sector is naturally cyclical, and ironically, I believe the low
canadian $ was a factor in softwood agreements with the
US, along with the stumpage fees which were continually
attacked by the americans as a subsidy, and continually
ruled by the tribunals as not. If the cdn$ was at or near par, then the US cant bitch.

I think Eduardo makes a strong point with the auto
sector. From this standpoint, it looks like the auto sector
was on a gravy train for the last 60 years, and now
things are starting to correct.

#93 HouseBuster on 10.09.09 at 8:26 pm

TD RAISED mortgage rates today!

#94 Nostradamus jr. on 10.09.09 at 8:30 pm

Ummm…Capital flows to wherever big money flows.

….and in Real Estate, big World money keeps flowing into Vancouver Proper Real Estate.

Nostradamus jr.

#95 Wealthy Renter on 10.09.09 at 8:40 pm

http://www.theglobeandmail.com/real-estate/royal-york-and-the-queensway/article1316975/ The house sold for $6,600 in 1978 and resold 31 yrs later for 53x (yes times) more at $350,000. I wonder if my bungalow will be worth over $10,000,000 in another 20 yrs? Not likely.

Hi JM,

I believe there is a bubble too, but I almost choked when I saw that price.

I don’t know if the folks at the G & M are liars, or just stupid and ignorant fact checkers. That house might might have sold for $6600 in 1948, but not 1978.

I was born in a house on 30th street (not too far away from this house.) It was a shack that backed on to the Flintcoat SP? tar company. The original owner’s son died in WW2, so he ripped up the floors and dug (with a shovel) the basement apartment for his daugter-in-law and grandson to live in. My parents sold that house for 40K in 1976.

There is no way that nice little property sold for that price in 1978.

#96 CalgaryRocks on 10.09.09 at 9:07 pm

#84 glw on 10.09.09 at 6:37 pm #77 Mike Oxlong
Find out about the transfer payment to BC that prompted the invoking of Harper Sales Tax by the BC Liberals after denying that they were bringing it in prior to the last election – they lied.

Why would you blame Harper for the provincial Liberals acting like cheap crack adicted prostitutes?

#97 D from London, ON on 10.09.09 at 9:25 pm

# 41 – Onemorething

Amen to that! I read and try to learn from the core members of “the consortium” and skim the posts made by the rest for shits and giggles.

#98 Future Expatriate on 10.09.09 at 11:16 pm

“Proof gold is not money. Money is a medium of exchange. — Garth”

“All in due time, my Pretty… in due time.” – The Wicked Witch of the West and the Mongol Horde II.

#99 Eduardo on 10.10.09 at 11:32 am

– never in my life have I heard management say: “Oh the dollar is in so and so condition, lets (not) invest” HA HA HA

Well then you shouldnt care if the rest of us have a strong dollar. Don’t be surprised when you’re out of business because you can’t stay competitive.

#100 Martin on 10.10.09 at 11:33 am

I think this adds, yet again, to my conclusion taht wrestling Canada,and Canadians, out of debt and deficit is likely impossible. We have consumers who want it all and want it know led by politicians who get elected by telling them they can have it all and have it now supported by a media that encourages people to want it all and want it now and , who, added bonus, forever tell people they’re victims if none of the above happens.

Seriously though, I think Canadians are on the cusp of a major wakeup call and I don’t see any sector of society, citizens, politicians or the media, looking at the implications.

#101 Eduardo on 10.10.09 at 6:36 pm

“DUDE…. are you aware that for every 1 auto job there are/were 4 forestry jobs in Canada? you logic is slightly leaning for one direction.”

I didn’t but last I checked that has’t been a booming industry for a long time.

#102 Tony on 10.10.09 at 8:09 pm

The Canadian banks will drop rate not raise them. The ruse perpetrated by the US central bankers and the government can’t last as even the average dope in America will figure it out. All the insider trading on wall street is on the sell side. No CEO’s are buying stock *all* of them are selling. The stock markets will crash and burn and the inevitable second leg down in the world real estate markets will take place. All of this bodes well for long term bonds. All the suckers holding gold and silver will lose their shirts.

#103 Future Expatriate on 10.11.09 at 5:38 pm

OK, since no one’s come up with it yet, I’ll take a chance… if it doesn’t get posted at least Garth will hopefully get a laugh.

When beavers go bald… good? Bad? Discuss…

#104 Bill-Muskoka (NAM) on 10.11.09 at 6:18 pm

103 Future Expatriate

Well, first of all, we will have the real ‘skinny’ on the situation! BTW, saw a live skunk run across the road last night. I can’t remember ever witnessing that before because all the others were Road Kill and Stinkin’ to High Heaven! I did notice that skunks do not look at vehicles (no eyeball reflection) they just mosey across. Kind of a fatal way to cross a road for anyone.

Meanwhile, snowflakes were falling today. Not much, but the air had that nasty feel to it. Started up the snowblower just to make sure it was prepped and ready to go!

Sheesh, no real summer, no real economy, and winter seems to want to make an early entrance? Must be Canada, eh?

Happy Thanksgiving Day (unless you’re a turkey I presume?).

#105 Future Expatriate on 10.12.09 at 2:01 am

#104 – Thanks Bill… same to you and yours.

I quit celebrating mine on Nov. 25 YEARS ago (about the same time I became a future expatriate from the US)… looks like by then I might have finally made it! Can’t wait.

#106 Future Expatriate on 10.12.09 at 11:48 am

#104- Hey, skunks are just like 0% down real estate buyers… if they can’t see the semi coming, they can’t get squished.

And if they do get squished, they never know what hit ’em in the first place.