Turkeys

turkeys1

While it’s a lot more fun on this blog to trash people desperate enough to write me, sometimes facts are handy.

So, in the spirit of a weekend in which we celebrate turkeys by beheading them, below are three charts gleaned from some recent reports which deserve a quick glance. They make a lie of those who say all we need is a little economic growth to erase debts; or maintaining a strong dollar is good for an exporting country like Canada; or that Canadians are a prudent people entirely capable of managing their own affairs.

Gobble this:

Saving2

The national savings rate has plunged over the past 12 months, as personal and household debt has soared to 140% of disposable income. So, where’s all the money going to come from to buy that house you just paid too much for?

Exports1

This slightly-fuzzy graph should put to rest any argument that a dollar at $1 US, or 95 cents, or 90 cents, or anywhere close to that mark is good for the country. The black lines are manufacturing shipments, and the red line is exports. No country can build wealth when it’s not competitive. If this were General Motors we’d be begging the government to save us. But who saves a country?

US deficit1

Not this one. The USA is in deep crap, its budget deficit worse than any which went before by a factor of 400%, and its tax revenues destroyed in the greatest destruction of wealth in the history of money. How many years will it take before America can (a) cut spending and (b) raise taxes. Five, seven or fifteen? And can Canada’s economy be restored without it?

The message remains: Be careful. Eschew debt. Diversify. And be very wary of the turkeys surrounding you. Heads are scarce.

HOWE STREET BANNER

Garth's latest podcast is here.

96 comments ↓

#1 Devil's Advocate on 10.09.09 at 8:50 pm

“This is a crisis in the works. And unlike previous recessions, lowering taxes to stimulate economic activity will not be enough this time. Demographic trends suggest that we will not be able to “grow ourselves out of it” like we did in the 1990s. The logic of the Laffer Curve, regrettably, will not work this time.” H.S. Dent

This is a demographic paradigm in which the increasing demand of government services by an aging population far exceeds the remaining working force expected to fund it. Taxes will rise. Interest rates will rise, unemployment will top up, but not for many, many years will it achieve the gross numbers of ready willing and able workers as during the 1990’s as more retire and fewer had been born to replace them.

How possibly can anyone rationalize that this current economic system will endure such a breakdown in the foundational economic fundamentals upon which it has depended for so many years. Keynesian Economics has ultimately now met it’s end of useful life as a means of economic stimulus.

These are indeed interesting times, different times. Yes , this time it IS different, but for reasons contrary to those which they who profess so. This time IS indeed different, different because the ways of old will not work this time. This is the calm before the storm. This is Keynes last hurrah.

#2 Investor on 10.09.09 at 9:01 pm

RBC announced today that they are increasing their 5 year mortgage interest rate to 5.84% up 35 points from 5.49%. RBC said it would be effective tomorrow, Saturday the 10th of October

#3 Steve on 10.09.09 at 9:01 pm

Garth, if you haven’t already read John Ralston Saul’s book, “A Fair Country: telling truths about Canada”, I would suggest you pick it up. It outlines in detail the abject failure of our political leadership to well…lead, or even imagine a Canada which is not a follower, from everything from Healthcare to Business.

You ask, “who saves a country?” Well, the answer is its leaders. There are plenty of business men, (for example), out there who know how to lead and have been successful. They could use that higher dollar to close the productivity gap that Canada has lagged in for years by buying new equipment and investing in other productivity boosting efforts. They could also view and imagine Canada as more than just proverbial “carriers of water and hewers of wood”. But we haven’t. In fact, as Saul points out, that was the point. Make us a commodity driven market and it’s easy for the Empire to the south to dictate terms to us, because we have nothing else to give. Give us failures for leaders who have a colonial mindset–who would rather we be followers of an Empire either in Washington or London– and plunge us further into self-loathing, self-destructive behavior, instead of investing in us, and thus saving us.

#4 kc on 10.09.09 at 9:04 pm

Great news… dollar sits @0.95… rush down to Wal-Mart and buy (China’s labour) to your hearts content… prices just got cheaper for your unemployment dollars.

cheers

#5 David Bakody on 10.09.09 at 9:12 pm

May all here have a happy and safe thanksgiving week-end. For most/all who visit here regularly you must have gotten the message by now ….keep your family close, pay down debt and save wisely. By doing this you will keep your head on straight.

#6 Grace on 10.09.09 at 9:16 pm

giving money and power to governments is like giving whisky and car keys to teenage boys. There used to be death and taxes; now, of course, there is shipping and handling too (GST, HST, carbon taxes, etc)

#7 Watched Bubble Never Pops on 10.09.09 at 9:55 pm

Harry S. Dent
http://en.wikipedia.org/wiki/Harry_Dent

“Dent has been criticized also by many economists for being downright wrong in several of his predictions. In fact, http://www.maxfunds.com, a financial reporting site awarded him the The “Ultimate Charlatan” Award. They write: “The worst investing advice usually arrives near the top and bottom of stock market cycles. Demographic trends guru Harry S. Dent is making the rounds again, and touting his latest book, The Great Depression Ahead: How to Prosper in the Crash Following the Greatest Boom in History ….”

In his 2006 work, Dent predicted, “The Dow hitting 40,000 by the end of the decade, the NASDAQ[‘s] advancing at least ten times from its October 2001 lows to around 13,500, and potentially as high as 20,000 by 2009 … The Great Boom[‘s] resurging into its final and strongest stage in 2007, and even more fully in 2008, lasting until late 2009 to early 2010.” Of course, those who read The Roaring 2000s, Dent’s 1999 masterpiece, should soon be buying each of us a turkey with all the fixin’s.

According to the book, only a year remains before the Dow breaks 40,000 and the Nasdaq hits 20,000, at which time we’ll simply amplify our fortunes by shorting stocks in the coming depression. We can’t underestimate how big this final move up will be before the depression kicks in, since The Dow and Nasdaq are currently quite a bit lower than they were back in 1999 when The Roaring 2000s was published.”

#8 Watched Bubble Never Pops on 10.09.09 at 9:58 pm

If the best fortuneteller a person can quote is Harry S. Dent Jr., then we should all breathe easy that this real estate boom will continue far into the next decade.

#9 CalgaryRocks on 10.09.09 at 10:54 pm

#2 Investor on 10.09.09 at 9:01 pm RBC announced today that they are increasing their 5 year mortgage interest rate to 5.84% up 35 points from 5.49%. RBC said it would be effective tomorrow, Saturday the 10th of October

RBC sucks. ScotiaBank is 4.19% for a closed 5 years.

#10 West Coast on 10.09.09 at 10:58 pm

Vancity term deposit:

Non-Redeemable, 24 to less than 30 months 1.300%

Credit Union Australia term deposit:

2 years ($1000-$9999) 4.55%, (10000-up) 5.35% Annually

http://www.cua.com.au/wps/wcm/connect/website/home/timesavers/irates/rates2

Why isn’t my money in an Australian Credit Union? Can anyone tell me why I’m not moving my money down under right now?

#11 Lance on 10.09.09 at 11:58 pm

The Fed is carefully engineering a decline in the US dollar – Canada is going to be hurt badly in the process. We could go to $1.10 or even higher. Our only recourse is to follow the same path and devalue our dollar as well.

#12 robert on 10.10.09 at 12:03 am

Garth

A veritable trifecta on the charts and commentary.

#2 Investor

And these “geniuses” will be rewarded with an avalanche of suddenly prudent mortgage business. Not.

#13 Ghost of Tom Joad on 10.10.09 at 12:03 am

Thanks Garth, that US budget graph says it all. @bama is not here to save the United States … he’s here to destroy it. He’s waging two wars currently, yet gets the Nobel Peace Prize. Anyone who doesn’t believe in the [email protected] [email protected] @rder globalist take-over, better give your head a shake. @bama == bad man.

PS: Please don’t take the H1N1 shots — not good for you.

#14 Chaostrology on 10.10.09 at 12:10 am

If you haven’t already seen the documentary, I.O.USA, rent it this weekend.

Really, “this isn’t going to end well”.

#15 Nostradamus jr. on 10.10.09 at 12:47 am

“”So, where’s all the money going to come from to buy that house you just paid too much for?””

…Well, BC should charge more from Olympic visitors.

…by collecting tolls after building a bridge between Tswassen in Vancouver with Sydney on Vancouver Island.

…by sending any unemployed BC citizen back to his native Province.

…Raising the Vancouver Airport Tax from $10 to $20

…Increasing rates on all parking meters

…HAVING OTTAWA INITIATE A SINGLE, FLAT TAX FOR ALL CANADIANS…

Nostradamus jr.

#16 Gregor Samsa on 10.10.09 at 2:01 am

Not according to Harper… he says everything is swell and that no tax increases are necessary (what’s that EI premium increase or the HST all about? I guess those aren’t “taxes”). Unemployment is falling (make no mention of the fact that this is due to public sector hiring).

It’s tough being a bear these days. Nothing but sunshine and rainbows abound, even though I swear it’s getting colder every day. But the news tells me to put on my bermuda shorts.

Most of us bears share the same problem – we are intelligent, rational thinkers. What we are not counting on is that our governments are not playing by the rules anymore. Look at what Harper is doing – he is embracing debt like it is a long lost friend. If government revenues fall by $1, he takes out $2 in debt to cover over the loss. Real money is being replaced by fiat. The bears extrapolate and say that in the long run this is disaster. I used to agree, but I am no longer certain. I just wonder what other rules they are planning to break when the time comes.

#17 Anon on 10.10.09 at 2:12 am

What are you filling in the 4000 gallon tanks?

#18 BigAl (Original) on 10.10.09 at 2:16 am

#3 Steve wrote “There are plenty of business men, (for example), out there who know how to lead and have been successful. They could use that higher dollar to close the productivity gap that Canada has lagged in for years by buying new equipment and investing in other productivity boosting efforts.”, and,

#6 Grace wrote “giving money and power to governments is like giving whisky and car keys to teenage boys.

In my experience, the most foolish thing to do for a society as a whole, economically or otherwise, is to put all your trust in ‘businessmen’ – the private sector.

For all those who salivate for the capitalist utopia, thinking that it will be perfect, all I say is that ultra-pure capitalism exists in most of the world today. The third world. There, capital = rights, capital determines everything. In pure capitalism, the masses suffer, and a few, supposedly the brightest and the best, rise to the top, and have total power. This always ends up in very short time to some form of right-wing totalitarianism or fascism.

But lets not even go that far. Lets take the present day, Canadian system. The oh-so-nice, well meaning business men and their lobbyists are right in there with the government officials robbing the rest of us. Are you honestly going to tell me that businesses that get contracts with the government ever say “oh no Mr. Public Official, what you’re willing to pay us for that contract is way too much, give us less.” Take my doctor friend who works as a specialist out of a hospital – he asked his receptionist to order a regular, normal, everyday scale to weigh some patients, just for a rough weight measurement. According to the private-company contract, they HAD to buy from that company, and the cheapest, simplest scale was $225 (really – it was just like a regular scale you buy in Wal-Mart). He told her he didn’t care about the ripoff contract, and told her to pick one up at the store – for $20.

This is how nice and honest the business world is with public money, no different from current and past politicians.

Either way, whether its businessmen or lifer politicians, it doesn’t matter. Its what accountability and controls are in the system. So if you really, really want things to change, quit your ideological right/left polemics and rivalry. Quit the merry-go-round. Recognize, from your basic economics and business theory, that self-interest is the basis for everyone’s actions – businessmen, politicians, lawyers, labour leaders, union members, workers, managers, reporters, teachers – everyone. And it is having strict accountability and controls, no matter who is in power, that can lead to any improvement in government. That is what we are lacking in governments at all levels – NOT a lack of business people in these positions.

#19 Peter on 10.10.09 at 3:14 am

Garth, I got this from Globe and Mail, ” As the recovery builds, joblessness remains one of the biggest worries. Laid-off workers are hard-pressed to find new jobs without taking cuts in pay and benefits. Canada’s economy created more than 30,000 jobs in September, Statistics Canada reported yesterday. But the gain was due to public sector hiring, while private sector employers shed more than 17,000 jobs. The unemployment rate stands at a troublesome 8.4 per cent. ” May I ask you why the heck our govt hired 30,000 people to do last month? What jobs are they doing ? I did not noticed that they are hiring that much people last month on Govt website ? Does this mean higher taxes taken from us from now on ?

#20 Bogdan on 10.10.09 at 3:21 am

who saves a country? – The watchmen, of course.

SNAFU

#21 Onemorething on 10.10.09 at 5:13 am

Garth, thanks for the big pic view that can both easily be discussed and digested at Dinner this weekend.

I’m off to the Canadians in Malaysia Turkey Black Tie Event tonight. Sure the topic of the economy will come up! Huuum, make some friends or loose some? Maybe just enjoy the feast eh!

Tomorrow off to see some land where I can potentially farm fish and diversify my portfolio.

#22 miketheengineer on 10.10.09 at 6:06 am

Garth:

In your last post you said,

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

How soon do you feel that things are going to go down hill?

Care to elaborate a bit more?

#23 SaraBeth on 10.10.09 at 7:44 am

You say to diversify… can you please put that into little words that a non-investor type person could understand? A little “investing 101” ?

#24 SaraBeth on 10.10.09 at 7:51 am

#12 Ghost of Tom Joad on 10.10.09 at 12:03 am

So now you are siding with the Taliban and Hamas?

#25 Robert1 on 10.10.09 at 8:34 am

Dim Jim Flaherty as Finance Minister of the Year ?

Barrack Obama as the Nobel Peace Prize recipient ?

Has the whole world gone MAD ?

respectfully,

Alfred E Neuman ( Stephen J Harper ) “what, me worry”

#26 Finanzkrise on 10.10.09 at 9:13 am

Down in Oregon for the long weekend, I noticed the following sign in front of a bank:

“Now’s a great time for home buyers. Ask us about 0% financing”

Obama may have won a Nobel peace prize, but his right hand man Geithner should NOT win an economic prize for backstopping new high risk mortgages (through Fannie, Freddie, Ginnie, FHA) while his banking buddies extract fees for processing the transactions, securitization, and then essentially offloading the risk to the taxpayer. It’s not much better in Canada (i.e. CMHC).

This practice of government intervention in the housing market (both Canada and US) will not work. It only buys a bit more time, and digs the hole deeper and thereby ensuring a worse hangover when the party is over.

#27 Basil Fawlty on 10.10.09 at 9:31 am

Successful economies are built through savings – investment – production. If we continually push our dollar down through zero interest rates and money creation, to stay competitive, is it any wonder there is limited savings? The world is pursuing competing currency devalautions, which reduces the value of savings and increases the cost of living. This is a recipe for failure.
In regards to businessmen putting our economy back together, good luck. They and their think tanks pushed so called free trade and globalisation on an ignorant public and shipped most of our manufacturing to the third world. Then they supported massive increases in credit to hide the damage down by eradicating manufacturing. Now these same people and their political representatives are in charge of solving the economic crisis, by using the same policies that created the “greater depression”. All supported by the dominant media quacks and kooks.
There will be no lasting recovery, living standards in North America are falling. Get ready for Son of Stimulus and the creation of more money out of thin air.

#28 Mark Carneys brotherinlaw on 10.10.09 at 9:33 am

Good going Garth, short term export gain for long term pain, follow the US dollar down to what ? They have massive bills to pay and have the choice of printing or reneging on their debt. Go there?!

We are being led down the same path with low interest rates, building houses we don’t need and can’t afford rather than promote a strong dollar to attract investment and have the savings to be able to buy/import capital equipment and promote home grown industry.

#29 DaleFromCalgary on 10.10.09 at 9:57 am

“It’s tough being a bear these days.”

Not really. It enabled me to unload some paper investments and convert the fiat currency to bullion and conventional oil.

It enabled me to watch a new infill directly across the street from my house to be listed for $949,000 on its completion in August 2008 and sell for $700,000 last month to a young couple who are so deep in debt that their marriage is already in trouble. (I can hear their shouting at each other from across the street.) They both drive leased BMWs; I can tell because the licence plates start with G and then a string of numbers, which indicates rental cars in Alberta. Schadenfreude, but sad.

Being a bear is easy. Tangibles matter, not paper. Buy physical gold, which has outperformed the stock market for two decades, has no counterparty risk, doesn’t need to earn interest (because interest is compensation for inflation and currency depreciation, not income), and will be always worth something. Buy conventional oil because the world production peaked circa 2006 to 2008.

Still haven’t seen your reply about those 4,000-gallon tanks you were filling. Seriously, I’m in the oil biz and if you don’t have monitoring wells and a backup plan for leaks you could be in expensive trouble. I don’t know Ontario law but I’m sure the Ministry of Environment has a few rules on the subject.

#30 Bill-Muskoka (NAM) on 10.10.09 at 10:05 am

This slightly-fuzzy graph should put to rest any argument that a dollar at $1 US, or 95 cents, or 90 cents, or anywhere close to that mark is good for the country. The black lines are manufacturing shipments, and the red line is exports. No country can build wealth when it’s not competitive. If this were General Motors we’d be begging the government to save us. But who saves a country?

OK Garth,

I have picked up the gaunlet mon ami! Nice graph, but graphs do not reality portray. You claim this proves your position regarding a high CDN dollar and our exports? Au contrare mon ami! It only proves that the world’s economy has gone way down. It also proves that Canada needs to look elsewhere for trade partners because the U.S. is economically DEAD right now.

I have family there who are in business and they have the inside skivvy on how the economy is really performing. It isn’t. In fact it is in the Penalty Box right now thanks to eight years of war mongering by the moron Bush and his Rethuglican cohorts and horribly bad foreign and economic policies for decades.

Of course exports are down like any other market reality because there is so little demand. We just witnessed the most major shakeup, or perhaps I should say shakedown, in modern history, certainly in my lifetime. GM (Gasping Motors) is in the toilet. China now owns Hummer (LMAO) and that means the U.S. War Hawks will need to step carefully because they can’t afford to engaged China in any manner or the parts get cut off for all their widdle macho toys that carry troopers, especially high ranking officers and Congress persons around.

Anyway, I know I will never change your mind regarding the Loonie’s value, but history will, eventually because you are smart enough to read reality mon ami!

At any rate, I hope you have a properly stuffed turkey and a great holiday. We got our’s yesterday and did the price comparison making Walmart sell a stuffed Butterball for Zehr’s price of $1.88/lb instead of their price of $2.47/lb. That felt good BTW. Nothing like a little good old bartering for business and holding corporate heads to the pencil sharpener.

Who knows, maybe some of your ardent RE followers will catch on that the same works for RE? I doubt it though because they are such fully indoctrinated Alter Boys and Girls seeking fame and glory via obscene debt load.

Seriously, have a great Thanksgiving. ;-)

#31 Herb on 10.10.09 at 10:14 am

Big Al (Orig) @ #17,

well said. What a pity that so many people cannot see this blinding flash of the obvious.

#32 Bill-Muskoka (NAM) on 10.10.09 at 10:15 am

Oh, and as to Who saves a country? The PEOPLE!

Read Jared Diamond’s “How Societies Choose To Fail or Succeed!’ Consider it the nanotechnology approach. Everyone doing their individual parts and ignoring all the widdle men behind the curtains using FUD to control them. These economic gurus need followers to feel important when all they really are is impotent. Put down the remotes, Blackberries and iPods and Git ‘er DONE!

Hopefully there are still enough people with functional brains to pull the rest of the brain dead populace back into reality? Although I am beginning to doubt it!

Now, its to work adding real value (tangible, touchable, seeable and recognizable) to our home making it a better place for us to live and when the day comes to sell and truly good place people will be happy to buy. remember, “If you haven’t got time to do it right, when will you find time to do it over?”

#33 Samantha on 10.10.09 at 10:49 am

#5 David Bakody –

Wise words. Wish you and everyone here a happy thanksgiving.

No turkey here. Just lots of gratitude. Every day is a gift.

http://www.youtube.com/watch?v=k-OlqERixVE

p.s. #16 Anon and #21 miketheengineer:

The answer is: Maple syrup. Garth loves pancakes.

p.p.s. Garth – If you’re storing what I think you’re storing, then ensure you add an additive to prevent deterioration of this commodity. It will deteriorate over time in either form.

#34 charles on 10.10.09 at 10:49 am

SaraBeth @23 thanks so much for pointing out the absolute polarity between waging war and supporting opposing political and ideological entities. Everyone knows you either support someone or bomb the crap out of them until millions are dead. Especially those Hamas guys in Iraq. I wonder if we could get you to join in our petition to allow Bush43 to run for another term, maybe two.

#35 charles on 10.10.09 at 11:00 am

Let me guess SarBeth. Alberta?

#36 JoeCalgary on 10.10.09 at 11:57 am

#12, GoTJ, re H1N1 shots: a warning from Australia about the needles.

“National alert on swine flu syringes”

http://www.theaustralian.news.com.au/story/0,25197,26184986-23289,00.html

#37 Grantmi on 10.10.09 at 12:07 pm

Ozzie Jerkass is on Michael Campbell’s CKNW show again! BUY, BUY, BUY!!!!

EVERYONE – the Swiss, Germans, Ozzies, Canada, GBritian…. all home prices are GOING UP UP UP!!!

BUY, BUY, BUY before you can’t get in!!!! lol

Move along!! Nothing to see here!

#38 charles on 10.10.09 at 12:34 pm

Like Jesus said that time he was riding his dinosaur outside of Drumheller where the edge of the earth used to be. You remember SourBet, “Let no man cast the first stone or thou shall be smithe.”

#39 Increasing that 1% on 10.10.09 at 1:06 pm

Between Samantha’s link today and Dan in Victoria on Oct 7th (http://www.youtube.com/watch?v=VJMbk9dtpdY)- iye yi yiy
does remind to keep things in perspective and be thankful for what we do have that’s important.

Moms especially, (no offence Dads) please don’t stress this weekend- we need you around

Lady at chain coffee shop last night sharing with me her stress about needing to get ready for company, Dinner she needs to make, allready been working aft/evening nonstop, and she’s not a young puppy anymore, shouldn’t be doing this at her age, couldn’t get this time off…and yeah, feels like she could have a heart attack with the pressure …

expectations can kill

#40 Increasing that 1% on 10.10.09 at 1:16 pm

Sorry, my post above, link from Dan in Victoria comes up differently now – anyways, it was about Team Hoyt- the Father that entered marathons with his physically disabled son…

#41 are we being inflated? on 10.10.09 at 1:17 pm

Sounds great(just kidding) on paper but Garth the Gov’t doesn’t need to raise rates to create the scenario you end with. They can slow the boom down other ways. As you stated we are all tapped out(no savings) so I think the bidding wars are the last gasp for the house crazy. They have the most of the population locked in to a mortgage. So, less demand.
Even if our dollar was cheaper we would still have seen a drop in our exports. I think you are right but even if the dollar went to a $1.10 it’s not going to damage the manufacturing sector. The damage was done years ago with the pay packages and pensions. Who ever thought putting 20 – 30 years on a car line would get you a condo in Mexico and a big house in Ontario loaded with all that stuff from Walmart/Ikea and an SUV and a mid size sedan to boot. And the pay package and perks of management. That’s where it went wrong!
There are people in Asia – they live up stairs and they have a small manufacturing operation downstairs and they work it 7 days sometimes 12 – 16 hrs. And they make good money and they should.

#42 TJ on 10.10.09 at 1:31 pm

Royal Bank is raising its residential mortgage rates for fixed rate Mortgages by up to 0.35 percentage points.

More On Royal Bank Rate Hike

#43 Nostradamus Le Mad Vlad on 10.10.09 at 2:53 pm

#4 kc — Hi kc. — “. . . rush down to Wal-Mart and buy . . .”

This — http://smallsizeurl.com/517/ — may be chink in Wal-Mart’s (and Costco’s, etc.) armor.

Plus WM buys their stuff direct from China at the cheapest rate possible, transports it across oceans on their ‘special’ ship, berthing off the California coast and then expects North Americans to buy at inflated prices.

There is something to be said for paying a little more and getting quality, not quantity.
——
#10 Lance — Hi Lance.

Quite right; one possible reason for this is, is because they realize they are so screwed, too far into the quicksand to get themselves out.

From their perspective, it’s better to drag the rest of us down to their level and mess everyone up. Throw in a few wars, and it is deja vu all over again.
——
#12 Ghost of Tom Joad — Hi Ghost. — “PS: Please don’t take the H1N1 shots — not good for you.”

Good advice. Plenty of Vitamin D (free sunshine or buy supplements), lotsa zinc and a 30-min. or more brisk walk each day will do wonders for one’s health.

Besides, colds are the body’s natural way of getting rid of toxins that have built up over a few months, so Fisherman’s Friend or Buckley’s is sufficient.
——
#14 Nostradamus jr. — Hi Nostradamus.

“HAVING OTTAWA INITIATE A SINGLE, FLAT TAX FOR ALL CANADIANS…”

AMEN to that, bro. Make it fair and equitable for all of us, esp. those who are unemployed or looking for work.
——
#26 Basil Fawlty — Hi Basil. How’s Sybil?!

“There will be no lasting recovery, living standards in North America are falling.”

Same answer as #10 Lance.
——
#27 Mark Carneys brotherinlaw — Hi Mark. — “. . . reneging on their debt.”

October or Spring Surprise? Wouldn’t put it past them, esp. as Bernanke and Geithner are running the show, not Obama and the WH.

See Lance’s #10 post.
——
#38 Increasing that 1% — Hi Increasing.

“. . . keep things in perspective and be thankful for what we do have that’s important.”

Good post. All we need is sufficient to look after ourselves; any more is excess and can be used by another who needs it more.
——
The Daily Bail’s take on Obama’s Nobel thingameejig. — http://smallsizeurl.com/516/
Plus this — http://smallsizeurl.com/518/ — from a man who just won the NPP. Again, it is not Obama, it is the behind-the-scenes people who are directing the traffic.
——
The G7 vs. the G5 in charts; good article. — http://www.newsneconomics.com/
How are the provinces faring with tax revenue? — http://smallsizeurl.com/tax/
——
CanWest is all over the place — see the lead-in pic! — http://smallsizeurl.com/514/
“The New Republic, owned by the ultra-rich Asper family through their behemoth CanWest media corporation, attacks Jones as an anti-semite extremist for daring to expose the move towards global government.”

So much for behemoth; CanWest filed for bankruptcy a few days ago.

#44 Future Expatriate on 10.10.09 at 3:12 pm

The greatest turkeys of all… those who think BC’s narco-economy driven real estate boom is going to go on forever… the writing’s on the wall:

California to Legalize Pot

50-60% drop in BC housing prices as the grow-opS next door go bust and their operators head south to the new Promised Land.

#45 Daystar on 10.10.09 at 5:25 pm

Yeah, there are some strong dollar commentors out there. I personally like a strong dollar for personal reasons, but I wouldn’t run the nation with a strong dollar policy or a loonie at par plus. If I was PM right now, I’d be on the phone keeping Mark Carney’s interest rates as low as possible to keep our loonie from appreciating against other currencies.

But here’s the stickler! Keeping current loose mortage lending regs in an extremely low interest rate environment has reinflated the 2008 housing bubble to one that is even larger today. It is creating false illusions concerning mortage affordabily and this is creating rapid asset inflation the likes of which has brought other nations like the U.S. nation/bond markets to its knees. CMHC has been in my opinion extremely poorly handled since the Conservatives have taken power in 2006, so much so that a Canadian recession due to a real estate correction at some point is now inevidable from CMHC’s regulatory creation of a Canadian housing bubble.

Its the direct fault of the ministry of finance along with the PM who is responsible for keeping asset bubbles from forming, its been obvious to the Canadian banking indusry for some time now that we have a bubble and its just started to enter mainstream media as a major concern. BMO, NS, CIBC, TD, RBC, BoC, all either have economists or former chairman speaking out against rapid asset inflationary policy, or they are raising their own banking rates in an effort to protect themselves and their customers from losses and rightly so in the wake of a federal government that will not set sound logical mortgage regulatory policy in CMHC. David Dodge has also spoken of such concerns suggesting that interest rates will not be enough to fix Canada’s problems and that something has to be done with asset inflation back in the spring when rated dived in April. Its now October and nothing has been done to stop fuelling our home bubble’s growth.

In the month of August, we ran a 2 billion dollar trade deficit. Exports dropped off by 5%. This is in part caused by the rising loonie as evidenced by this graph:

http://www.x-rates.com/d/USD/CAD/graph120.html

We’ve been over this before. The sweetspot with the Canadian dollar is somewhere between .80 and .85 cents. Once our exports are sold past .85 cents, it begins to become infeasable for the U.S. to import commodities that they already produce. When our dollar rises past .85 cents to say… .90 cents, there is no incentive for the U.S. to import lumber meaning that in a post sub prime era the U.S. can and should meet their own domestic demand through domestic production. The same goes for pretty much all other manufactured goods commodities that the U.S can self supply… except energy. Since the U.S. is so energy dependent and since energy relies so much on pipeline infrastructure for delivery to save costs, the Canadian dollar can rise close to parity without it effecting our bottom line but should the Canadian dollar rise above the U.S. dollar, at this point I would expect oil tankers to become much busier than they are now. Natural gas is one of the few commodities that the U.S. would have a hard time looking elsewhere for… to a point. I can see the U.S. still becoming importers at 1.20 but even at par, the U.S. would begin to look for other energy alternatives.

Aside from this, our Canadian government should have anticipated the greenback’s fall from unravelling bond markets world wide as a result of the subprime and financial’s fallout and what this would do to the Canadian dollar, Canadian exports in creating 2 billion dollar trade deficits. They should, in reality, be anticipating trade deficits to grow as the loonie appreciates against the U.S. dollar and outside of BoC’s rock bottom interest rates, I have seen this Conservative government do absolutely nothing about it. Is there more our federal government can do? Believe me, there is plenty!

So what are the easy answers? This Canadian government should have tightened mortgage regulations back in April. They should have left mortage regs alone in 2006! But they didn’t. And we had a bubble in 2008 caused directly by 40 year/nothing down regs in a relatively low interest rate environment. Now, our 2008 bubble is bigger this year directly as a result of 3% VRM’s combined with 35 year, 5% down regs. 2009’s mortage affordability has never been this cheap in all of Canada’s history and is better than it was in 2008 which pretty much makes mortage affordability a record of sorts in terms of qualification and affordability, ask any banker. This has further allowed the 2008 bubble to become a 2009 Bubble II and this should have never been allowed to happen with Canada in recession.

Why is this happening? There will be 2 prevailing answers to this question from here on in. The first is, quite simply, that the Harper government is trying to buy a majority through rapid asset inflation policy that creates a wealth effect (and such things are fine, we are all worth more as our houses appreciate, consumers will spend more, be more speculative in the markets and happiness will improve, although its all sadly unsustainable and easily proved as to why. Take those low interest rates away, toughen mortgage regs, the two stimulatory components that artificially prop up home values and it all goes south in a hurry. Just ask George Bush). The second answer lies with keeping interest rates low to keep our dollar lower (which Mark Carney is doing), and keeping assets inflated or rising to create employment in housing, retail, construction and financials, to combat the recession (y’know, the unsustainable wealth effect I spoke of earlier).

Now… I shouldn’t have to mention the obvious dangers of rapid asset inflationary policy that has already run its course full throttle since 2006, inflationary policy that was entirely unnecessary, but I will. They create bubbles and we have a whopper in Canada now in real estate. Did we need a bubble by the way? Realtors? What do you think… did we need one? Bankers? Lawyers? All those who profit off of bubbles, did you enjoy this one? Got news for you, assets would have appreciated just fine without the loonie tunes mortage regs. We’ve got boom alright… but we will now have bust so unless you all have just retired, we will all be paying our dues.

I shouldn’t have to mention the obvious reasons why CMHC should never have walked away from 25 year 10% down mortage regs to replace them with 40 year nothing down regs at a time when the economy was already healthy, real estate was already inflating and asset valutions were increasing with good numbers prior to 2006.

I shouldn’t have to mention the collossal mistake CMHC has made since the Cons have been in power in more than quadrupling the existing bond values of its mortage backed securities. CMHC is now exposed to roughly a trillion dollars worth of real estate insurance and mortage backed securities (bonds) that they insure… true… but if real estate defaults, it is my understanding that CMHC will end up paying double from defaults.

I shouldn’t need to bring up the craziness of our federal budgets sheer size or the complete lack of anticipation of Canada’s 2 billion dollar monthly trade deficits… but I will.

http://www.youtube.com/watch?v=rm29cgVXJTk

I will, because this second reason, the one the Cons would want us to believe, the one that suggest rapid asset inflationary policies are not only good through good times but good through bad…. is failed policy. Its just as failed a policy as expecting tax revenue gains once interest rates rise deflating assets.

Rapid asset inflationary policy is a failed policy through good times more than anything because it simply isn’t needed to inflate valuations. All we get when rapid asset inflationary policies are set from the government either through CMHC or interest rates, is a bubble! And bubbles, as we all know, pop when such stimulus inflationary policies are taken away (i.e. higher interest rates, tougher mortage regs). Nations should be wary of bubbles for these reasons because once a bubble has formed, there is nowhere else for the market to go but down and if a government looses its ability to keep rates low from deficit spending and trade deficits, the nation has just led its people into a long, nasty recession.

Is there a time when rapid asset inflationary governmental policies can be introduced? Yes… there is. Rapid asset inflationary policies can only work with assets at or near bottoms of a Real estate market gone bust. (the U.S. is trying it now) And even there, it could be quite difficult to keep fed rates low or loosen lending regs if the government needs interest rates to be high to prop up its currency and/or attract investment, or, with the case of mortage regs, be unable to do much do to lending regulations already being too loose to too long.

Mark these words. The longer the Conservatives continue with rapid asset inflationary policies, the worse our economical future will become. The higher housing valuations rise with nothing concrete driving it, no increases in income, no private sector employment gains, no surplus’s other than record low interest rates (of which the banks themselves are raising their rates to customers now) and measurably loose lending regs, the harder our RE markets will fall because there are no positive fundamentals supporting asset inflation to begin with other than cheap, temporary mortage affordability and when our markets do fall, it won’t matter wether or not recourse loans exist in Canada. 2 missed payments, and the house is still gone. The only difference between Canada and the U.S. housing booms gone bust will be that Canada ironically will be filled with much greater numbers of lawsuits as financial institutions sue those filing for bankrupcy.

#46 Daystar on 10.10.09 at 5:53 pm

#40 are we being inflated? on 10.10.09 at 1:17 pm

“Even if our dollar was cheaper we would still have seen a drop in our exports. I think you are right but even if the dollar went to a $1.10 it’s not going to damage the manufacturing sector.” – are we being inflated?

The U.S. is shrinking spending on imports as their dollar devalues and their economy worsens. They have no choice. Naturally this is going to hurt Canadian exports to the U.S., but our rising dollar doesn’t help. They are simply importing less product for the same dollar value from Canada. Will the U.S. look to other markets for our manufactured goods as a result of a higher looney? Absolutely. And our manufacturing sector is being damaged with all that Canada manufactures that the U.S. can manufacture on its own, there should be no question of this especially so, once the loonie climbs above .85 cents.

Take for example the Blackberry. Most think its in its own little niche, a smart phone that is essentially a hand held computer in the palm of your hand. Not so long ago, it was in a league of its own. Now it is facing more and more cometition. And its expensive. High end. High end product traditionally doesn’t do well in recessions. Blackberries are expensive in Canada and what was selling cheaper in the U.S. at .80 cents is suddenly much higher now, no? And thats all profit margins disappearing by the way… Try buying a blackberry in the U.S. with a loonie around a 1.10. Would you as a battered from a recession U.S. customer look for a blackberry with the pricetag it carries? Would you as a customer look at rest of the competition upon seeing the price tag alone? You bet you would. And its not just blackberries, its everything we manufacture whether its a brand product like the black berry or generic auto parts for GM or Ford.

In short… expect damage.

#47 Live Within Your Means on 10.10.09 at 6:37 pm

We left for Bangor in the middle of Thursday night, spent Friday night there, coughing, sneezing and just feeling lousy. Decided to cancel our 2+ days in Boston. Better to feel ill in one’s own home than in a motel. When we turned off the highway, within a km of our house we both commented on the number of homes for sale. And this is in Dartmouth. The other day I noticed a RE sign on our street was removed. Back went the house flipper’s sign. Its been on sale since the spring. I know that our RE market has not skyrocketed like TO, VCR & Calgary, erc., but in my area I’m noticing more & more houses for sale. Makes me wonder if people haven’t gotten way over their heads here as well, having lost jobs.

Anywho, we’re glad to be sleeping in our own bed tonight – kleenex, etc. on the n’table.

#48 David Bakody on 10.10.09 at 6:57 pm

It was mentioned over a wonderful family meal out at a waterfront pizza place that several up scale restaurants are closing as many people are downsizing their evening outings. So believe what you will about Canada’s recession proof economy. I have seen this coming for well over a year …. you know the line, the tourist are coming, the tourist are coming ….. yup Harper’s buy Canada plan is working! So run out and buy gold or real estate …. oops many reports posted above confirming interest rates are rising and headline news of wage restrictions or roll backs, add the highest ever tax grab in Canada’s history called Harper’s Sales Tax effecting 16 million Canadians that will have consequences on all Canadians and tourist alike … oops again did I mention taxing tourist even more while their money is worth less here in Canada in hospitality industry ….. Hello Mr. Harper and Mr. Flaherty are we missing something in your plan to help build US Canada trade relationships.

#49 David on 10.10.09 at 6:59 pm

I was in Alberta last week and even if it sounds impressionistic, there was the distinct smell of death everywhere. Escalades clogging the roads to nowhere. Lots of phony happy talk about real estate and even more false hope about the Loonie somehow magically and painlessly self correcting along with commodity prices.
This party will end badly, make no mistake.

#50 Live Within Your Means on 10.10.09 at 7:30 pm

#29 Bill-Muskoka (NAM) on 10.10.09 at 10:05 am

At any rate, I hope you have a properly stuffed turkey and a great holiday. We got our’s yesterday and did the price comparison making Walmart sell a stuffed Butterball for Zehr’s price of $1.88/lb instead of their price of $2.47/lb. That felt good BTW. Nothing like a little good old bartering for business and holding corporate heads to the pencil sharpener.

……

Bill, a couple of years ago, we bought 2 Turkeys in Houlton, ME for about 69 cents a lb. Bought one for my sis here & took one to take to my B&SIL in Mtl – Part of our contribution. Took a prime rib roast to my sis & familt too in Mtl. as that’s what they like. Can’t get over the diff. in prices in US vs Canada.

We bought a 4 lt. of California Merlot for $15. in Bangor – goes for about $34 here. Bought 2 40 oz. of Scotch at the border (husband likes Scotch) for $15. ea , double here for same brand. As we figured we’d have to pay duty on booze because we came home early due to flu, we decided to at least max our our $50 allowance for being in the US for 24 hours. Bought 10 lbs of butter, salted and unsalted. Paid $2 US per lb. ea. I just bought salted at Costco for close to $4. lb and almost $5. lb. This is ridiculous. Luckily the customs guy did not ask us if we had any booze, tho we declared that we had spent $59. in the US. We did mention we had to cancel our reservations in Boston due to flu and he said he was suffering from it too. We were totally ready to declare the booze if he had asked us if we had bought any. We always keep our receipts.

#51 taxpayer like you on 10.10.09 at 7:41 pm

Daystar et al Re: The canuck buck

Here’s a currency converter site I reviewed:

http://www.oanda.com/convert/fxhistory

Over the last cycle from its low, the Cdn$ has greatly
appreicated against the US$, pound and yuan, a little less when compared to the Yen, less still to the Euro and rupee. But check the Oz$. Its been on a rampage.

But my real point is that its the market that sets
currency values. Is Canada seen as a safe haven because
of its commodities, its stable RE values, or its banking
system? Or is it just not as bad as the US or UK? Whatever. The dollar will seek its equilibirium where the
products Canada offers to the world remain competitive.

#52 Tony on 10.10.09 at 8:02 pm

Ontario’s unemployment rate will spike upwards toward 15 percent next year. I’ve seen aberrations in an unemployment report on October 9th but two facts the minimum wage hike the highest in history takes place January 2010 in Ontario and the spike in the Canadian dollar can only mean Ontario’s unemployment rate will likely double next year. The time to buy long term Canadian bonds is now as housing will double dip after a collapse in the stock market indexes.

#53 Kash is King on 10.10.09 at 8:48 pm

Imagine if by some miracle, all the nations of the world had their debt forgiven in an old fashioned debt Jubilee?
Then imagine if all there was to pay in taxes was a 14% HST to run gov’t budgets?
Dunno, just sayin’. But that would be something to give thanks for.

Peace to all beings everywhere.

#54 Devil's Advocate on 10.10.09 at 9:27 pm

I’ve been working with a buyer on four prospective properties. Each is over priced. My client has made, what I consider to be very reasonable, if not generous, offers on each and when the seller countered (unreasonably) we moved on. In each case the sellers and/or their agents quoted strong statistics. Yet the odd thing is they are now chasing US, wanting us to return to negotiations on their property. All this SPIN is not so much causing buyers to get off the fence as setting high expectations of the sellers. Things are changing though.

House prices move up a lot faster than they ever move down because sellers are generally a lot greedier lot than the buyers. Right now I am seeing a lot of greedy sellers in the market. Quite frankly I look forward to them getting their just rewards. I can feel it in the wind there will be a shift in the near future… I can just feel it. After years in the business you get a sense for these things. There are going to be a lot of sellers regretting not having taken what looked like low-ball offers today but will prove to have been damn good offers… damn good.

#55 Patience on 10.10.09 at 10:29 pm

#53 Devil’s Advocate

If you want some future business – send me an email to [email protected]. I will be buying when the time is right. I believe I live in your area.
P.S. Enjoy the blog and the coments.

#56 nonplused on 10.10.09 at 10:48 pm

#45 Daystar

I thought Blackberries and iPhones were manufactured in China? Designed in Canada and California, sure, but built? Heck, even the last pair of K2 skis I bought was made in China. K2 was the most significant American producer of skis. Now they just design them, and send the plans to China. Fun skis though. But my Fishers and Elans are still better, and built in Europe. Although I think Elan moved production into the former Soviet Union somewhere.

53 Devil’s Advocate

I don’t think current market conditions can be blamed on either buyers or sellers. CMHC is insuring zero down, 2.5% VIM, 35 year am mortgages for everyone and their dog. If everyone has $400,000 worth of financing available, and I mean everybody, why wouldn’t you raise your prices? That is how a credit bubble works.

On the rise of the loonie:

Money is meant to be strong. Who wants to own something that is constantly loosing value? Sure, when exchange rates between trading partners fluctuate rapidly, it causes all sorts of dislocations. But just because the American currency is under a lot of pressure isn’t a good reason to intentionally destroy our own.

That is why gold and silver have always been, and will always be money. Yes, especially with government manipulation, the price can vary wildly, but without government manipulation the risk of a complete Argentinean style collapse is non-existent. It rises and falls (or should I say the prices of goods priced in gold rise and fall) with demand. And if it (gold) gets too expensive miners correct the imbalance.

(And don’t bring up the 80’s. Gold had no business being at $850 back then, it was a panic reaction to the delinking of the US dollar from gold and Volker was able to put it right. This time there is no panic, just too many dollars. Gold nicely forecasted the deterioration of government finances for the last 8 years. Silver on the other hand has disconnected, so the world apparently sees it as an industrial metal now. You don’t hear the Chinese talking about wanting to increase their silver reserves. I don’t even think any central banks still have silver reserves.)

Besides, if you have a job or savings, deflation (I mean lower prices for whatever reason) is a good thing. You get more goods and services for your money. As long as prices fall faster than wages, life is good. Not counting unemployment.

But it’s not going to happen here or in the US. I have long argued on this blog that if the US experienced anything like real deflation in prices they would change the rules until they got the CPI going up. They managed that in March 2009 according to iTulip.com.

Deleveraging, on the other hand, is much harder to stop. So far they have managed to bail out the big banks temporarily, and I think they will do whatever they have to so that the big banks do not fail, but smaller banks are failing right, left and center. Even CIT didn’t make the cut, and they are pretty big. But they don’t have a lot of consumer customers, so they won’t cause a bank run. Only businesses are going to notice, so no bailout.

Even in the great depression they managed to turn 15% deflation into 15% inflation in one year by changing the rules. They will change the rules again and again if they have to.

Will it bring back the jobs? I don’t know. But enjoy the strong dollar while it lasts (if you have any) because the BoC is not going to take this lying down! They will even change the rules if they have to. Do some “quantitative easing” (buying government debt directly with newly printed electrons) if they have to.

Here is the wiki on the BoC: http://en.wikipedia.org/wiki/Bank_of_Canada

Interestingly, it was originally a private bank like the US Federal Reserve, but is now a crown corporation. Note the mandate of the bank is to keep inflation between 1 and 3%. Not -3%. They have a pretty good track record and I think they will succeed. Give them some time. And if the Canadian dollar has to be taken down to do it, they will. They have the same mandate as the US Fed.

Why everyone thinks inflation is a good thing I don’t know. It has the same effect as property taxes. At a 2% property tax rate, the effect is to return all of your assets to the government in 35 years (it compounds).

The right target for inflation is zero. Only supply and demand should influence prices, not monetary policy.

#57 Dave on 10.10.09 at 11:13 pm

House prices move up a lot faster than they ever move down because sellers are generally a lot greedier lot than the buyers.
————

Sorry, you’re wrong. Study psychology. Fear is stronger than greed once fully expressed. Just like the fear in the stock market from oct 2008- march 2009 caused panic selling that erased all greed (gains) from 1999-2007

#58 Keith in Calgary on 10.11.09 at 12:02 am

#53 Devil’s Advocate…….

Then you come back to the table and offer 10% less than your initial offer was the first time and tell them, “if your phone doesn’t ring, it’s me”………

#59 Nostradamus Le Mad Vlad on 10.11.09 at 12:08 am

To posters I mentioned earlier — http://smallsizeurl.com/jolly/ and http://smallsizeurl.com/520/ Comment by wrh.com:

“The global change from the dollar to the Euro will crash the US economy. Maybe that is a good time to replace the Federal Reserve, not to mention the Federal Government that allowed it all to happen.

“Last month, Iran announced that its foreign reserves would be held in Euros from now on instead of dollars. The last country to make this declaration was ‘pre liberation’ Iraq.”

There is the reason for the soon-to-be attacks on Iran. If Russia or China have satellites equipped with lasers and can pinpoint, then destroy Dimona, that will shake the planet up when they hit it directly — without using aircraft.

Take into account that Russian prof.’s assertation that the US will split into six separate states, supposedly next summer.

The latter could well happen very quickly, as US forces will be stretched so thinly across the globe that the draft could be reinstated.

The troop surge, as well as the troubles happening in AfPak taking place there is painfully clear — they are right next door to Iran.

The preceding leads to Robert Fisk’s 2:39 interview — http://ncoal.com/blog/?p=346

There’s a whole lotta dung about to hit the fan, and it goes way beyond housing and the economy.

China’s growing influence over the US; this will play a major role in the above, albeit on a quieter scale. — http://smallsizeurl.com/521/

44 second clip of a portal to the other worlds (over Moscow). Hay baybz, I’m outta here! —
http://www.youtube.com/watch?v=PZwH18sM3FU

#60 cashman on 10.11.09 at 12:55 am

This is just the calm before the proverbial storm that the ultra rich have in store for us. On tuesday, several oil producing countries including Russia, Saudia Arabia et al have “threatened” to divest themselves of the US$ and settle their debts in Euros. Of course they later denied such a statement, but can you believe anything an appointed gov’t says. Once the US defaults on their ‘loans’ there will be a new north american common currency called the ‘amero’ and then all hell will break loose. All for the amusement of the Bildeberg’s, Rockefeller’s, Rothschilds. Also, there will be a global financial crisis, worse than what we have now. Then we will be forced to take a chip or magnetic bar code on our hands and/or foreheads just to buy and sell everyday things. But don’t worry, Jesus will come and eventually put an end to all this corruption.

#61 Eduardo on 10.11.09 at 1:20 am

So just so I understand: Most of you guys don’t want low rates but you also don’t want a rising dollar from raising rates… hrmmm.

To be clear, I’d like to see Canada’s rates rise and the elimination of 0 down mortgages or anything higher than 30 year mortgages.

For all the people who are saying the CAD has increased so much, plot it against anything other than the US dollar and you’ll see that it’s mostly the USD that’s falling. The export model has to change to include exports to other countries instead of the US.

One last thing Garth, if the govt wants a devalued currency it’s not hard to do… print money… and pay off debt with it or give to individuals to pay off debt in the form of stimulus like the US. Simple, no?

RE 45: RIM doesnt manufacture all the components erryin Canada so they are buying parts cheaper from China/Taiwan/wherever with a stronger dollar. RIM is doing fine.

RE 44: I agree with some of what you say but be careful when you say that it’s the Harper govt’s fault for the inflationary policies: “the Harper government is trying to buy a majority through rapid asset inflation policy that creates a wealth effect”.

The Liberals were screaming bloody murder to cut rates and stimulate the economy and organized a coalition of 3 parties to ensure it happened. They also could have raised a non-confidence motion at any time, but they didn’t and are therefore also responsible as part of the govt. They wanted more spending and stimulus.

#62 Eduardo on 10.11.09 at 1:36 am

RE 48: Single worst but most hilarious post I’ve ever seen here.

“I was in Alberta last week and even if it sounds impressionistic, there was the distinct smell of death everywhere. Escalades clogging the roads to nowhere. Lots of phony happy talk about real estate and even more false hope about the Loonie somehow magically and painlessly self correcting along with commodity prices.”

Hahaha “smells like death”. I dunno but I’ve never seen a smog warning in Alberta *cough* Toronto and Southern Ontario *cough*

I’d wager that the air quality in Fort Mac is better than Toronto.

You did forget that when we’re busy talking about the dollar and investing in real estate (which is basically all the time) we wear cowboy hats and boots, drag trailers with quads/seadoos/boats at the same time with our Hummers/Escalades, think of ways to inflate assets, start oil bonfires for fun/heat, dump whatever we don’t burn in rivers, drill in our own backyards without permits (because we’re cowboys) and of course we flare it all even if it’s sour.

#63 Daystar on 10.11.09 at 1:51 am

#50 taxpayer like you on 10.10.09 at 7:41 pm

“But my real point is that its the market that sets
currency values.”

Generally, you are right. It is the market that sets currency valuations in terms of the Bank of Canada being reactionary instead of proactionary with interest rates changes. Canadians had a great run, they truly did. And for reasons we’ve all pretty much lived through, we did it through earnings and asset growth. We doubled the size of our GDP in a decade but since 2007, 2008, one can safely say that our economy has slowed down. The subprime and later financials and bonds meltdown of the U.S. economy followed by its greenback were beyond our control and its no doubt negatively impacted our economy. However, we should have seen it coming. Some did. Even Harper did as it prompted him to break his own election laws and force an election on Canadians last year.

My point is that this government has negatively impacted our economy as well by inflating real estate valuations too rapidly and for too long. It will take some time to see just how serious the impacts of real estate inflationary policies will be.

We have also lost some highly noted large market cap companies through foreign M & A’s that should have either been stopped outright or have found better corporate suitors to keep these corps in Canada. We’ve lost four of our top five miners (Alcan, Tech Cominco, Inco, Falconridge), our largest oil and gas corp (Petro Can) and our second largest tech stock. I shouldn’t have to mention what has happened to IT’s as a result of Conservative taxation changes. As a result, our GDP and employment growth has shrunk more than it needed to.

“Is Canada seen as a safe haven because
of its commodities, its stable RE values, or its banking
system? Or is it just not as bad as the US or UK? Whatever. The dollar will seek its equilibirium where the
products Canada offers to the world remain competitive.” – taxpayer like you

We’ve got an great reputation for having a top notch economy but the reasons why international investors would think so would vary. Generally, I would say its our history and 10 year success story following the mid 90’s. But beyond this, we are resting on our lorels. Our regulations that have led to our nations financials and real estate markets being so strong have been loosened. Real estate valuations have been artificially driven higher for some time now. Our banking industry has also faced deregulation from the Conservative government. The bloated numbers of new issuance of mortgage backed securities since Harper has come into power should give all Canadians deep pause and concern for Canada’s economic future:

http://whispersfromtheedgeoftherainforest.blogspot.com/2009/09/prime-minister-responds-to-cmhc.html

I did find one mistake with this link below (40 year zero down amortizations came in July of 2006) but the rest of it is accurate including conclusions:

http://whispersfromtheedgeoftherainforest.blogspot.com/2009/07/canadas-emerging-credit-quagmire.html

Just a note to readers, what I mean by assets is real estate specificially (I should be calling them hard assets). Stocks, bonds, gold and cash to me are liquid assets mainly because they can depreciate, appreciate and be bought or sold overnight and I’m taking the time to differentiate between the two for good reason. Most of the time, real estate and stocks fall and rise together… but one of the two will lead and the other, follow. Sometimes it is real estate that is the leader, determined by interest rates and mortage regulations (mortgage affordability) that are determined initially by government policy and currency trends that profoundly effect CPI and trade. Otherwise, it is personal income and corporate profits that lead. When the Conservatives came into power, our economy was led by earnings. Outside of Energy, since 2007 and onward it has been real estate that has been the strength of our economy.

We’ve gone through an excellent run of both earnings profit and hard asset appreciation since the mid 90’s. But since the summer of 08′, earnings income has dropped substantially. The only thing that is propping up our economy is real estate through are low interest rates combined with loose mortgage regulations. Rapid inflation of real estate valuations has shot up stock markets from an oversold environment to where we are now due to the wealth effect rising real estate valuations create. If either of these two components change, if interest rates go up and/or mortgage regs tighten, this bloated Real estate bubble pops and in its wake, all of the jobs created this year in the financials, in retail, in housing construction starts, in home reno’s and realty, these jobs are gone and then some, not to mention that most of us will devalue in net worth. And when one thinks about where all the job growth has come from this year, it hasn’t been anywhere else (other than the public sector from seasonal changes, i.e. teachers getting back to work) Where it ends…. the economic downturn coming to Canada will be measured in years because the downturn will be led by real estate. As the downturn begins, consumer confidence and spending will shrink, taking a big bite out of all facets of our economy.

At some point, true, the market will self correct. A lower loonie beginning next year or no later than 2010 will help bring back manufacturing jobs say in…. 2011, 2012? Later if at all? Lets consider that much of our manufacturing will either be bought out or go broke in the meantime so when favorable conditions (lower loonie) come back, Canada will have to rebuild in some sectors, from scratch. Its like asking Canada to come up with a Nortel within 2 years… not going to happen. In the meantime, real estate will be dog. Think about this means to future tax revenues that this Conservative government says will come back all on its own and why their budget predictions are so out to lunch.

And lets think of this for a moment. Real esate has been responsible for a near whopping 20% of our GDP.

http://www.cmhc-schl.gc.ca/en/corp/about/anrecopl/anrecopl_010.cfm

Will this economy shrink with a real estate bubble gone bust? Will the “wealth effect Canadians so enjoyed since the 90’s in real estate turn to a “poverty effect”? Will the stock markets suffer in terms of major money and consumer confidence leaving the markets? And what will be the fate of Harpers beloved mortage backed securities and later, the loonie as our Canadian reputation of having a top notch economy goes bust…

I can tell you all outright. The only thing Canada has going for it right now is commodities. If the world continues to populate and consume, it could save us as it always has, keeping our economy from a total bust. Otherwise, this is precisely where the Canadian economy is headed a major change in government. The sun is now setting on real estate. The loonie will climb to par against the dollar and later, begin to fall from sustantial federal/trade deficits… but this will be measured in months, not years. Interest rates will rise modestly without the BoC raising rates by a quarter point from our chartered for 3 very good reasons:

1) To force their customers to lock into 5 and 10 year mortgages and to keep their customers and themselves from going broke.
2) To stablize asset inflation because the government either can’t or won’t through CMHC.
3) To generate profits through widening the spread between the BoC and interest rates set by Canadian banks in an effort to beef up liquidity before Canada’s second and far more serious recession hits.

Other factors such as a high currency killing our exports leading us into trade deficits won’t help. By the time our currency falls back below .90 cents, the damage to manufacturing will be done. This, combined with reduced U.S. imports from Canada, will decimate whats left of Canada’s manufacturing. Policies like the taxation of income trusts and turning a blind eye to foreign M & A’s won’t help.

And if I dare make this post longer, Nortel is a prime example. One cannot simply expect Canada’s once largest tech stock/telecom in both earnings and market cap to disappear overnight without it making waves to our economy. At one time Nortel was responsible for over 2.75% of Canada’s GDP. Now… workers that trusted the existence of Nortel pensions have found out they don’t have them any longer. Nortel had 55,000 employee’s before they filed for bankrupcy protection in the spring of this year and had 125,000 employee’s in their hayday. For the difference of 20 million in bids between RIM and Erricson, the feds up and decided that a 20 mil spread between bids (in what I viewed as an unfair bidding process) was enough to watch 55,000 jobs walk away from Canada. Why… they didn’t even review it.

http://www.nytimes.com/2009/09/17/technology/companies/17nortel.html

Interestingly, there are a number inaccuracies from the above link that should alarm us as taxpayers to how badly the Nortel acquisition has been handled. Tony Clements has said that federal money had not been used to develop Nortels wireless technology. Federal money was, however, instrumental in the development of Nortel itself and with inflation adjusted values, federal investment into Nortel not counting tax breaks is by today’s numbers in the hundreds of millions of dollars.

Nortels demise wasn’t solely the reality that Nortel for its last few years was unprofitable. What damaged Nortel the most was a tremendous number of writedowns and a run on its stock throughout its history from short positions that also cost the corporation hundreds of millions. This could have been far better managed by the way, than it was not only by successive governments through greater regulation of shorts in the markets but also with the leadership of Nortel itself and this especially so includes what has happened since the spring with the sale of Nortel.

Personally, I don’t know why Nortel ever wanted to sell Nortel’s CDMA and LTE section. This was the only hope that Nortel had to re-rise. MEN is really the trend of IT/Telecom. Customers need this 40G/100G bandwidth to support quick and real-time communication and what a fit this technology would have had with RIM.

And I believe that investor also recognizes this technology. So, to sell all the other department for debt and keep this one for Nortel is the best choice. Also, Nortel should have boxed up itself as the telecom supplier. It’s better to think about the future and depend on Nortel’s experience to dig out some 0 risk and high benefit field. For example, to be a centre telecom standard test supplier, or to move to IP based new media…. or voice command… its very aggrevating from a Canadian investors point of view in terms of what has happened to Nortel and why because they had solid wireless technology that could have replaced shortfalls in optics. Those who would disagree are likely running down that which they don’t understand.

http://www2.nortel.com/go/news_detail.jsp?cat_id=-8055&oid=100257883

#64 Daystar on 10.11.09 at 1:53 am

Devil’s Advocate on 10.10.09 at 9:27 pm

I totally agree. There is a great deal of greed out there from sellers right now. This will change to fear and will be measured by months, not years.

#65 Future Expatriate on 10.11.09 at 6:00 am

Speaking of turkeys, good report on the truth of the Mideast Wars.

Warring for Dollars

The only problem the US has is they’re in hock up to their eyeballs to China fighting two wars.

And now they’re going to try three? Not if China has anything to say about it.

And they do. In many more ways than one.

#66 David Bakody on 10.11.09 at 6:19 am

#53 Devil’s Advocate on 10.10.09 at 9:27 pm

There is an old line …. Check what the cook is eating for a good choice of a meal ….. my past banking person just sold her house recently when she had once mentioned it was a keeper. Interesting It is the subtleties of life that provide the best instinct to making a good decision.

#67 miketheengineer on 10.11.09 at 7:01 am

Garth et al.

In the toronto star today. 32% increase in bankrupcy from last year. Interesting recovery?

Talked with a buddy of mine, his wife does real estate in GTA. She is quite successful at it to. These are good folk, always trying to help people.

He told me that for the last little while, most of his wife’s business was from people who were selling, because they either wanted to down size or had to down size due to job loss, etc. He also said, that homes were still moving pretty good. So if you are thinking of selling in GTA, do it now while things are still hopping.

http://www.thestar.com/business/article/708355–10-000-bankruptcies-in-august

#68 Mike (Authentic) on 10.11.09 at 7:19 am

I see the points agaist and for having a strong Canadian dollar. But what I see is a weakening US dollar and Canada wanting our dollar to be “weaker than the USD”.

There is lots of talk about the USD still falling in value as it has for some time now. Does the Canadian dollar chase the USD down the hole then just so our goods are cheaper in the USA and American’s can snap up Canadian bargins?

As oil (for example) is priced in USD the the world buys it in USD, it won’t matter outside of the USD what the USD price for it is because the USD will float around other currencies of the country that purchase it from Canada.

Thus you could have a $1.50 CDN to USD (50% increase from now). Oil at $105 USD (50% increase from now) and it is still the SAME price to Canadians. Substitute any other currency and country and get the same result.

The losers in the above example would be USA and holders of USD currency, every other country in the world would still be paying the “same price” for oil as they did before.

Mike

#69 mikef on 10.11.09 at 7:29 am

Couldn’t agree more #51 Tony.
This is an aberration.

My guess is all the pimple face kids working at
McAcrylic, Burger Thing and The Crap went back to school
in September hence the drop in participation rate and
were replaced by the umemployed hence the drop in
uneployment

#70 lgre on 10.11.09 at 8:41 am

“RE 45: RIM doesnt manufacture all the components erryin Canada so they are buying parts cheaper from China/Taiwan/wherever with a stronger dollar. RIM is doing fine.”

Rim has the same destiny as Nortel does, unless it gets its act together. The Co is a one trick pony, and unless it comes up with other products or services it will be swallowed up in the industry by the likes of Apple and microsoft.

#71 Devil's Advocate on 10.11.09 at 9:09 am

#56 Dave on 10.10.09 at 11:13 pm

I disagree Dave. There are two things a seller hates most; 1. Selling for less than they paid and 2. Selling for less than their neighbour recently did. Of “fear and greed” fear has little to do with the buying and selling of real estate, other than the fear of being priced out of the market which only “Greater Fools” fall for that line.

Another interesting aspect of the buying and selling of real estate is that buyers buy on emotion and later justify their actions with logic (cognitive dissonance ). But then I was an economics major not psychology,

This is with respect to residential real estate; commercial is a whole different story, but we are generally speaking of “homes” here. That we are speaking of “homes” we are speaking of a consumable. The old ways of real estate being considered “one of the biggest investments the average person makes in a lifetime” will soon and for a time loose it’s selling points as buyers come to realize there is a cost to putting a roof over your head be it renting, a 100% mortgaged home or a home owned free and clear.

Bottom line; I don’t think seller are selling today because they are afraid of loosing much of their equity but rather the greed to take profits at the peak of the market. And for that to happen there must be someone willing to pay the peak price. I just tend to believe we are at the peak of the price curve to a point where many buyers are coming to realize so and beginning to balk at the prices. Once this happens on a significant level it will be too late and that fear you speak of in the minds of sellers will never happen as the shift moves directly from greed to despair.

#72 Watched Bubble Never Pops on 10.11.09 at 9:38 am

#55 nonplused

“Only supply and demand should influence prices, not monetary policy.”

Montary policy is needed to deal with the consequences of greed and fear which both distort supply and demand.

#73 Got A Watch on 10.11.09 at 9:43 am

Daystar – Your comments are usually bang on. But when you say “Nortels demise wasn’t solely the reality that Nortel for its last few years was unprofitable. What damaged Nortel the most was a tremendous number of writedowns and a run on its stock throughout its history from short positions that also cost the corporation hundreds of millions.”

I think you are looking at it backwards. Shorts can only help push a company’s stock price down, it takes world-class bad management who are grossly incompetent to cause collapse. Many companies have large short positions put on their shares by speculators, but they do not go out of business. If Nortel was not so badly managed and not losing so much money and not had a so obviously wildly over-valued stock price, less shorts would have piled on and the price would have not gone to <$1.

So lets put the blame where blame is due: management (for 90% of the blame at least). If Nortel was a better run company with stronger books, the stock price would have fallen, just like every other dot-bomb stock of that era, but they would still be in business.

Blaming the short-sellers is just an excuse from those (management, shareholders) who want to point the finger at anyone but themselves. Management, if they really had "valuable assets" should have been able to make something of them. Shareholders should have demanded better management, and pressed for a new Board of Directors etc. The "massive write-downs" would not have been so massive with competent management. Etc, etc – if they wanted a model on how to do it right, they could have just emulated Cisco in approach. Instead they channeled the style of the "Acme Bullwhip Works" circa 1920 – refusing to change their direction in the face of changing times. Bankruptcy was almost guaranteed with their approach.

There was obviously some value there, or Ericsson would not have bid for them, nor RIMM. You can blame the Government, but I would say RIMM failed to win because their bid was flawed and did not follow proper procedure – Jim Balsiillie is a poor negotiator, he always tries to tilt the bidding process his way, in a manner that ruffles feathers – exactly the way he approached the bid for the NHL team and failed. Not just with a low bid, but with "conditions" attached that others do not include in their bids. And then complain afterwards that the "bidding process was unfair!". Sure.

Disclosure: I did not short Nortel stock. But I should have.

#74 OttawaMike on 10.11.09 at 10:09 am

Nortel was a mismanaged company on a grandiose scale.Plain and simple.
I’m not happy to see what happened to them but it is how a free market system is supposed to work.

The govts. explanation was always that most ex-Nortel staff are well educated and can land on their feet, unlike an auto sector assembly worker with a Gr. 12 diploma.

I still wonder if Nortel would have been the beneficiary of bailouts had their flameout only commenced in ’08?

#75 Munch on 10.11.09 at 10:38 am

#1 “This is Keynes last hurrah.”

Amen to that, Brother!

#76 Daystar on 10.11.09 at 11:16 am

#72 Got A Watch on 10.11.09 at 9:43 am

Oh, I agree that Nortel was badly managed, there is no question in my mind about that. Nevertheless, I maintain that not only was the bidding process one that was less than favorable to Nortels interests, the sale of Nortel should have been reviewed by the federal government to see if it indeed was in the best interests of Canadians, especially when the bid spread between RIM and Ericcson was a mere 20 mil.

We are talking once again, about 55,000 jobs and pensions for Canadians at stake if Nortel could turn it around, not to mention Canada getting out of the wireless and telecom sector in a big way. The feds should have done what they could to see that Nortels tech and jobs potential stay in Canada or at the very least, looked at it. They had the incentive to do so with federal money spent in Nortel in the past… they had jobs to protect, pensions to protect, they have a currency issue with 1.1 plus billion worth of new money coming into the economy not helping matters any in terms of forcing the loonie to rise… they never bothered to review it and had all the reasons why they should.

Whats the angle to not look into Nortel… rah, rah, free trade? Big whoop. Lets pump up this years GDP a billion plus with the sale perhaps? To me, it says a great deal about this Conservative government to not have even bothered to look.

As for shorts, from my understanding, when someone shorts a stock, they buy that stock from one or more investors who are selling shares. If the stock goes up and the investor sells, the investor sells to a buyer at a loss. If the stock goes down, they sell the stock to the corporation itself and the corporation takes the loss. In this way, there can be a run on any stock that qualifies for shorts (I believe the stock value has to be over $2.00 to qualify with some cap restrictions and sector restrictions in some markets) and has a large number of short selling placed on the stock, the value of the stock goes down and the corporation can’t cover the shorts with cash on hand. My memories foggy, but I recall something about over 200 million in Nortel losses stemming from shorts over the last 6 months of trading.

Could Nortel have prevented this from happening? Sure they could have. Nortel did a 10 : 1 share buy back that increased their stock value well over $2.00 bucks a share, giving them exposure to short selling risks. I can see why they would have tried it, but it was a bad call overall because it exposed them to short sell risks at a time when they were highly vulnerable to losses. Nortel management should have toughed it out with cheap shares but didn’t do so. Anyways, Nortel’s time in the sun is done and its a shame. They were, not all that long ago one of the top telecom corporations in the world.

#77 DH on 10.11.09 at 11:29 am

The housing market is going to keep going up for a couple more years now that the CDN dollar has been going up. The government isn’t going to be raising interest rates any time soon. They will not raise interest rates until at least the US makes a move significantly. The Americans know that devaluing their dollar is the key to employment recovery so they’re not motivated to raise interest rates either.

Come here more often. Mortgage rates are set in the bond market, not by the BoC. — Garth

#78 Mark Carneys brotherinlaw on 10.11.09 at 12:10 pm

It is all relative YOY :)

Euro up on US dollar and UK pound

Yen up on US dollar and UK pound

Aussi up on US dollar and UK pound

Loonie up on US dollar and UK pound

The US would like to inflate their way out of their debts and import their needs in non deflated dollars, you know things like oil etc. and my brother in law Mark is set to oblige them, see http://www.bank-banque-canada.ca/en/speeches/2009/sp081009.html this speech by Paul Jenkins the senior deputy governor of the Bank of Canada:

This framework includes three instruments. The first is a conditional statement about our target policy rate, which is the one unconventional instrument we have employed thus far. The second is quantitative easing, …

#79 Devil's Advocate on 10.11.09 at 12:14 pm

#76 DH on 10.11.09 at 11:29 am “The housing market is going to keep going up for a couple more years now that the CDN dollar has been going up”.

In very short order the CN gov’t will be doing everything they can to devalue the CDN$ against the US$ as they are our largest trading partner and our business and industry is going to suffer dramatically once the CDN$ busts above par the US$.

That and, as Garth continues to need to point out to you and others uninformed, it is the bond market (the free market) which ultimately sets interest rates NOT the BoC. The sooner Gov’t accepts that when they push on one part of the economy it causes a buldge in another part the sooner they will realize that their attempts are ultimately as futile as herding cats. Thge free market will ultimately find the correct equalibrium far better than any government can.

#80 JoeCalgary on 10.11.09 at 12:24 pm

#55 nonplused, thank you for that. You are one of the few here whose words I read carefully. You always raise very valid points.

Why does BoC have an inflation goal of 2% rather than 0? IOW, why do we need inflation at all?

And why is there so little discussion around inflation, especially inflation of the basics like food and goods needed for household operation? The dishwasher soap for which I paid $8 last year is now $22! Surely price inflation of basic goods and services alone is a nightmare for those on fixed incomes, not to mention the growing numbers of unemployed and underemployed.

Why are reporters, pundits, analysts, bloggers, etc. ignoring the real pain the present economy is causing in so many ways?

#81 jess on 10.11.09 at 1:30 pm

#55 – you may enjoy this

http://www.bankofcanada.ca/en/dollar_book/
History of the Canadian Dollar
by James Powell

The history of Canada’s money provides a unique perspective from which to view the growth and development of the Canadian economy and Canada as a nation. Author James Powell traces the evolution of Canadian money form its pre-colonial origins to the present day, highlighting the currency chaos of the colonial period, as well as the effects of two world wars and the Great Depression.

He also chronicles the ups and downs of our dollar through almost 150 years and describes its relationship with its U.S. counterpart.

#82 Watched Bubble Never Pops on 10.11.09 at 1:56 pm

Ever wonder why the 2% inflation target is important?

http://www.investorgeeks.com/articles/2007/03/28/ever-wonder-why-the-20-inflation-target-is-important/

#83 jess on 10.11.09 at 1:57 pm

as Mr. Moyers says: Don’t just get mad get BUSY

so what were those newly created government jobs
———–
lobbyist in lobbyist out….
6/1

http://www.youtube.com/watch?v=pg7xhTyOtAk

http://en.wikipedia.org/wiki/Muckraker#Landmarks_in_Early_20th_Century_Muckraking

#84 Shawn Allen on 10.11.09 at 2:33 pm

Nortel – I interupt the opinions to present some facts.

But first some more opinions:

Nortel should have issued a few shares when its price was gigh and paid off all debt. Without debt it is hard to go bankrupt.

The company was clearly ran by idiots and or thieves for years.

John Roth, I believe, pumped up the share price and was the first of a number of (in my opinio) incompetent CEOs.

Now some FACTS

The media had a role too. Even in the days of the $100 share price ($1000 when adjusted for the later 10 to 1 stock consolidation) Nortel lost money most years. On a GAAP accounting basis they LOST money. But the media and the company focused on pro-forma earnings and reported that they were making money.

In 2000 they lost $1.316 billion, in 1999 they lost $351 million.

But the company reported 43% gross margins both years and profits from operations of $2.3 billion 2000 and $1.4 billion in 1999

They said Operating profits
*Excludes the after-tax impact of Acquisition Related Costs (in-process
research and development expense and the amortization of acquired
technology and goodwill from all acquisitions subsequent to July 1998),
stock option compensation, and certain one-time gains and charges.

hahaha… we made a profit if we just exclude billions in expenses hahaha. Meanwhile people belieived this crap and bought the shares.

The short sellers were right the company was worthless, as far as the equity value, for years.

Short sellers vote with their wallets… that is what markets are about.

Disclosure: I personally have very rarely ever shorted a stock. Just because a company is worthless does not mean the share price will decline. Garbage can be held aloft for a long time with copious and extended blowing of hot air. But eventually gravity wins.

Eventually we can hope to see criminal charges against past management. But it’s not clear that what they did was criminal. They actually did report the losses, it was just that the market chose to focus on the false-god of pro-forma earnings. Investors and anaysts as a group chose to be stupid and ignore reality.

#85 Shawn Allen on 10.11.09 at 2:38 pm

# 18 Perter said:
Canada’s economy created more than 30,000 jobs in September, Statistics Canada reported yesterday. But the gain was due to public sector hiring, while private sector employers shed more than 17,000 jobs. The unemployment rate stands at a troublesome 8.4 per cent. ” May I ask you why the heck our govt hired 30,000 people to do last month? What jobs are they doing ? I did not noticed that they are hiring that much people last month on Govt website ? Does this mean higher taxes taken from us from now on ?

WOW… that was worth repeating.

Only the government is hiring and we call that a sign the recession is over!.

Before this is over I fully expect job cuts and maybe even pay cuts for government.

It’s one thing for government to spend money on lasting things like roads and schools but I don’t think it is the time to hire more workers.

#86 Shawn Allen on 10.11.09 at 2:47 pm

A higher Canadain dollar means Canadian houses are even more over-priced in terms of what that amount of money will buy in this world.

When the Canadian dollar rises then, all else equal our houses get more expensive in terms of the amount of oil,gold and all manner of imported goods.

Why is a Canadian house that a couple of years ago could be traded for a single Florida house, now suddenly worth two Florida houses?

At some point arbitrage takes over and more Canadians spend more money in teh U.S. (imports and vacations) and less in Canada. And not a few retired people move to the U.S. for half the year or even more and take half or more of their spending with them. And fewer Americans come to Canada to spend money.

A higher Canadian dollar adds to the pressure for Canadian house prices to drop.

Admittedly it does add pressure to keep our interest rates low. But that can’t last forever.

#87 robert on 10.11.09 at 3:21 pm

#49 Live Within Your Means

That $0.69/lb turkey you bought stateside two years ago is probably not far off the $0.97/lb turkeys for sale at NoFrills, FoodBasics, PriceChopper etc. considering the exchange rate then. I get my eggs, milk and butter at Shoppers Drug Mart and have never paid more than $2.97 for a pound of salted butter. FoodBasics has it on this week for $2.77/lb.

#88 TJ on 10.11.09 at 4:14 pm

Once again you and I meet on a Sunday before a week that will shake the World.
Or, maybe not.

This week, we will see a Stock Market meltdown start that will take your breath away.
Or, maybe not

Why?

“Nobody knows what the hell is going on”, says my friend from Vancouver’s Financial heartland.
“Valuations are stupid, the Bank of Canada is doing a deer in the headlights impression as we are staring at the scary collapse of the American Pfennig….”.

Swell.

As we mark year one of TARP in The United States we are starting to see the rats come up from under the floorboards, and the Captain hasn’t got any more Kill-X.

The off books ‘Fantasy land of Fraud’ known as Derivatives are starting to be dragged kicking and screaming into the light of day and the whole world realizes that this ‘ten years of prosperity’ is really the crackup boom at the end of at least 50 years of Financial Chicanery, and that’s being Conservative.

Seth Freeman, in his new Book on the coked up life of a London City Trader, says that cocaine abuse is ‘the dirty little Open Secret of The City’.
How many zipped and dipped trades were made in a frenzy of a drug induced haze?

A goodly number of Banks that played fast and loose and loaned money to killers on Death Row, and the “ratings” agencies where you could get Mezzanine debt bumped up to AAA, for a fee, are denizens of Zombie City.

Blind ‘Regulators’, and the naked shorting, black box toting, MBA carrying, front running, pump and dumping, tax avoiding, embezzling cheats have made damn sure this Bubble Behemoth is DEAD.
‘Double Dead’, as they used to say in one of those Cartoons made in the Thirties.

The poor taxpayer, the entrepreneur, the Police Officer, the Pizza Parlor guy, they are all done, and they don’t know it yet.

59% of Canadians admit to being 7 days from the fiscal cliff. It is probably as bad everywhere but North Dakota * Look it up.

P/E ratios are really around 120, on the S&P!

There are of pallets of Hundred Dollar Bills and Credits at the BIG banks. But they owe far more. They can’t lend…because they are bust.

Big leveraged Media Companies are the Canaries in the Coalmine. Television Stations are going dark and the Local Newspaper is becoming a relic of the 40’s.
USA Today admits advertising revenue is down 17% – because let’s face it – no one has many loose pesos to blow on much more than the mortgage payment and FOOD.
“This Christmas Season is going to be a disaster”, says Gerald Celente, from Trends Research.
I tend to believe him.
Mr. Celente’s slugging percentage would make Albert Pujols weep.

This week – the tip will come as the slide starts to pick up steam on DJIA and DJTA, as well as kick off of the Chinese death March in Shanghai.
The Indian Stock Market has been in Euphoria mode as the Yen keeps rising and driving a stake in Japanese Exports.
That must be the reason I see so many Japanese gents at the local sushi joint, making suicide dives into bottles of Johnny Walker and Grey Goose.

Short – run, hide.

Jim Rogers says he isn’t buying anything.

Again.

Good advice, methinks.

But – on the other hand, maybe we should open that Brokerage on the moon and sell the water rights to the Farmers in California.

#89 steven rowlandson on 10.11.09 at 4:23 pm

Hello Garth.
The way I see it if one wants economic growth some sacrifices have to be made. It starts with government slashing its expenses to free up lots of money to pay interest and principle against the debt untill it is all gone no matter what. As far as taxes are concerned one should hold the line untill the national debt is wiped out. All that money needs to be reinvested and should flow into the private sector and in theory stimulate the economy. As for laws that mandate spending, those should be repealed and replaced with nothing. Saving Canada requires government that has almost no social conscience and stands where the profit is. Going into debt to keep political promises that have no limit to liability is a recipe for disaster. That is why one should look to the original BNA act as a guide to what the federal government should do and not go beyond those limits. As for the USA if they don’t get back to the constitution and scrap the rest then they are toast.

Steven

#90 Live Within Your Means on 10.11.09 at 4:44 pm

Gees, neighbours saw my hubby’s car in the driveway and called wondering what was up as we were not supposed to get back until Tues eve. They just delivered Thanksgiving Dinner to us, with all the trimmings. They ate early with their 2 grandchildren. Fab neighbours and we reciprocate too. I’m looking forward to staying home this Christmas and hosting a party. I really don’t understand people who move every few years just to gain a few bucks.

#91 robert on 10.11.09 at 4:57 pm

#52 Tony
The unemployment rate where I live (London) is 11.2% and rising according to a recent headline in the Free Press. My wife has been out of work as a technical writer since January with zero response (and I mean zero) to the 50+ resumes she has sent out (including many for positions she is over educated and over qualified for). We’re not in a position to move right now because I have two kids going to Western. Whenever I hear finance types proclaiming the recession is over I wonder what planet they are from. A jobless recovery indeed. No one in the real world has any illusions about the Orwellian absurdity of such a pronouncement.

Nice to hear someone else sees potential in the Long Bond in such a deflationary environment. If however you are concerned about the Canadian dollar coming back to earth US long dated treasuries might also be a consideration.

#92 David on 10.11.09 at 5:17 pm

Eduardo, thanks for the compliment. You should try exporting Canadian products to the California market these days. Undoubtedly your sides would be splitting with laughter every minute.
The Nortel tragedy is worthy of its own blog. Having a brother who put nearly 30 years of his working life with Nortel almost makes me cringe when the name comes up in discussion. Currently he is medically disabled with MS and has absolutely no idea yet what will happen to his pension. The turning point it seems was when Nortel shifted from product engineering to financial engineering. Canada effectively removed itself from being a world leader in telecommunications and scientific R&D this year which is a sad state of affairs.
It really is a big problem when Canada’s principal trading partner stops buying or simply can not afford to buy from Canadian companies.
Raising interest rates would certainly encourage people to start saving and avoid debt. The down side would be a higher valued Loonie leading to more job losses and declining revenues. Not much wiggle room left at all.

#93 Future Expatriate on 10.11.09 at 5:36 pm

#68 – VERY interesting article on the future of the Loonie vs. the USD:

Loonies For Dinner

Strange, creepy, discomfiting, but suggestive that Canada might not follow the US down the tubes because there will always be worldwide markets for her exports and national resources.

#94 Live Within Your Means on 10.11.09 at 5:36 pm

#87 robert on 10.11.09 at 3:21 pm
#49 Live Within Your Means

That $0.69/lb turkey you bought stateside two years ago is probably not far off the $0.97/lb turkeys for sale at NoFrills, FoodBasics, PriceChopper etc. considering the exchange rate then. I get my eggs, milk and butter at Shoppers Drug Mart and have never paid more than $2.97 for a pound of salted butter. FoodBasics has it on this week for $2.77/lb.

Robert – We’ve 2 choices here – Sobeys or Superstore (Loblaws). That’s it in supermarkets. IIRC, Turkey is $1.69 a lb. here. We do have Walmart but I haven’t noticed their prices are much better. We have Shoppers that occasionally has butter & eggs on sale for a day or 2 . I’m not going to make a special trip to buy eggs or butter which usually have a max quantity per shopper or they’ve run out of the article. Also, we only eat about 4 or 6 eggs every 2 wks. We don’t have the choice or competition that larger markets enjoy. We’re just 2 in our household, but I do stock up when non-perishables are on sale.

#95 Live Within Your Means on 10.11.09 at 6:12 pm

#55 nonplused, thank you for that. You are one of the few here whose words I read carefully. You always raise very valid points.

Why does BoC have an inflation goal of 2% rather than 0? IOW, why do we need inflation at all?

And why is there so little discussion around inflation, especially inflation of the basics like food and goods needed for household operation? The dishwasher soap for which I paid $8 last year is now $22! Surely price inflation of basic goods and services alone is a nightmare for those on fixed incomes, not to mention the growing numbers of unemployed and underemployed.

Why are reporters, pundits, analysts, bloggers, etc. ignoring the real pain the present economy is causing in so many ways?
…..
Right on. I asked hubby last week to pick up Cheer liquid laundry detergent at Costco. He did for around $18.+ but it was a little over 5 liters. I checked my current one that, IIRC, I paid about the same price in the spring. It was about 8.8 liters. Talk about inflation. I’ve noticed prices going up & quantities being reduced across the board.

#96 Dave on 10.12.09 at 12:09 am

I disagree Dave. There are two things a seller hates most; 1. Selling for less than they paid and 2. Selling for less than their neighbour recently did. Of “fear and greed” fear has little to do with the buying and selling of real estate, other than the fear of being priced out of the market which only “Greater Fools” fall for that line.

Another interesting aspect of the buying and selling of real estate is that buyers buy on emotion and later justify their actions with logic (cognitive dissonance ). But then I was an economics major not psychology,

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it doesn’t matter what sellers hate – whether its a barrel of oil or a residential real estate property. So did everyone who bought oil at $147 a barrel hold onto it when it hit $30 a barrel? We wouldn’t have a market if what you say was true. People get fearful and panic sell in the decline of any asset price. Once the asset declines slightly the thought process is: “ah, it’ll go back up” followed by “hmm, I’ll just average down”, then “hey, I’ll just average down a bit more”, followed by “this is taking long to go back up” then “what the heck, this is still going down” then “I don’t want to lose all my money!!” then “FOR THE LOVE OF GOD I HAVE TO SELL”

markets and especially bubbles, have a special way of beating the piss out of people’s emotions and psyche.

There is fear and greed in every market. Greed on the incline and fear on the decline. You’re assuming there’s no fear in the real estate market because it has been dormant on the incline of the bubble because of greed. As soon as the fundamentals that exist (homes are unaffordable for the average person in Canada), spark the trend downwards, fear will rear its head and the emotions of the masses as I explained in the previous paragraph will be expressed.

The real estate bubble of 1991 triggered the behaviour I spoke of. Everyone was a genius while they were buying in 1987, 1988, 1989, 1990. Greed was everywhere (at the top of th market as usual). Panic selling and fear was everywhere by the mid 1990’s and people didn’t want anything to do with real estate…the herd was disgusted with real estate (which was the best buying opportunity for real estate).