So, sell


GTA prices took 12 yrs to recover from last crash.

Twenty-two years ago I was hunched over a Dow Jones teletype machine in the corner of my newspaper editor’s office quietly muttering, “Holy shit.”

In front of me on the floor were feet of four-inch-wide brownish paper covered with stock market quotes and financial headlines. The world was apparently ending, with the worst-ever one-day market crash on record. By four o’clock, the ticker was running almost an hour late, as exchanges buckled under program sell orders. But it was clear, we were screwed by about 20%.

I dropped the woeful newsprint ribbon and walked the 200 feet through the newsroom to the clipping and photo archives. “Give me pix of the Depression,” I said to the librarian. And the next morning, I ran them.

But, there was no new depression – at least not for stocks. Within a few months they’d regained most lost ground but ironically, the real estate market was about to tank. One year after Black Monday, housing was in a steep slide, led by crashing condos. In fact, the average price for a home in Toronto would not recover for an astonishing 12 years.

I chewed on that a little today as I walked the clogged streets on my way to an interview with the Globe and Mail. Actually, it was a video shoot with their personal finance columnist, Rob Carrick, to be broadcast on the paper’s web site.

When I got there the video guy was excited to have me in the same room, since he’s hot to sell his house and reap a massive capital gain – if only he can convince his wife. I asked him how many years he’s owned the place. “All the way back to January,” he said.

Then he let slip that eight houses on his street have just changed hands, all with multiple offers. So, sell, I told him. And I bet he’ll make more money in nine months of ownership than he does standing behind that digital camera for the next three years. That’s how you treat an asset bubble. Wring the foamy guts right out of it.

Interestingly, the Globe had an article the same day on why the Canadian housing market hasn’t crashed as it did in the US. Written by a banker (National Bank economist Marc Pinsonneault) it reached the self-serving conclusion we were all saved by “prudent lending practices.”

Yeah, right. Like approving loans based on postal codes. Or self-recognition, no-proof mortgages for self-employed. Like having CMHC take all the loan risk on taxpayers’ backs. Or dishing out 5/35s like pills at a pharm party.

Actually there’s only one overriding reason our market rebubbled as the American one stayed stone cold, and that’s credit. Two and three per cent mortgages. A torrent of loan guarantee from money from Ottawa allowing moneyless purchases and bidding wars. And both bankers and real estate professionals pushing buyers into loans they’ll never repay. Loans which can turn into money crypts if the market corrects.

Which, of course, it will. If there’s any doubt we’re in the late stages of a classic asset bubble the camera guy put it all to rest.

Greed is good. Plus ça change.


Garth's latest podcast is here.


#1 Debtfree on 10.19.09 at 10:07 pm


#2 Joe Realtor on 10.19.09 at 10:13 pm

Interesting times indeed.

I know of a Realtor that gets a number of listings through CMHC because the original owners have lost their homes. She tells me that there’s a whack of them coming up quick here in good ol’ Southern Ontario.

Not too surprising when I know of at least one person who makes 70,000 a year and still managed to default on a $100,000 mortgage and lose the house. And this was before the market crash of the last year.

#3 InvestorsFriend on 10.19.09 at 10:13 pm

Over the years I have read of many banks and insurance companies talking about their diciplined underwriting policies. (They were, they claimed, avoiding lending to deadbeats and avoiding selling car insurance to alcoholics).

Some of these of course later crashed to some degree or other.

No bank will ever admit to imprudent lending until after the fact.

They can’t. Banking is a confidence game. Everyone will play the game as long as they can. Every thing is great here, move along, nothing to see here…

Until inevitably there a crash. And then we will all rush to rubberneck the scene and see if we can see any blood. If not involved we will be secretly or not so secretly gleeful.

It has ever been so…

#4 BobbyV on 10.19.09 at 11:19 pm

what prudent lending?. Risky loans are backed by CMHC aka Taxpayers ……….. lenders can’t lose, so they just keep funding.

#5 Joshua on 10.19.09 at 11:29 pm


Them last few entries have me thinking that this correction is going to take a lot longer than anticipated. Can you explain to me why Calgary and Edmonton median housing prices are like a 60 thousand dollar difference? Also, the parity of the dollar isnt really spoken about as a much of a bad thing.

Calgary housing is still way to overpriced. Especially when your getting small ugly ass houses.

Garth, give us a blog where you use your research skills and let us know whats been happening. You’re always so eloquent in putting information together.

#6 $fromA$ia "Garths Nugget Boy" on 10.19.09 at 11:50 pm

Garth, you know when the cammera guy tells you to buy its time to sell, sell, sell. Get out of Dodge!!!!

When the cammera guy is telling you he wants to sell.

It’s too late!!!!! Hurry, hurry sell sell sell were running out of fools.

Dont forget Dr. Kavorkians Conservative 5/35 pill.

#7 nonplused on 10.19.09 at 11:51 pm

What are they going to do to keep the market from crashing now? Go to 1% VRM loans, zero down and dust off the old 40 year amortization???? Actually, now that I mention it, I would not be the least surprised. A minority government cannot take chances with the housing market, even if they are supposedly a conservative government. It must go up, until somebody forces an election for some other reason or even just out of hubris. Then they can raise rates the day after the government collapses and blame the “political uncertainty” (i.e. the “opposition parties”) for something that was inevitable anyway. But better that than look like it was your own mismanagement. Ah, politics!

I remember the 80’s from the view of a teenager. Tough times for my dad. He was in the home building business. Lost everything but his tool van. But I also remember that coming out of that mess, he was able to rebuild and take on projects that were formerly way beyond his reach because prices were more reasonable and there wasn’t nearly as much competition. Eventually it snowballed into quite a nice business. So a recession isn’t all bad news. Nowadays he couldn’t even begin to buy into the projects he built because the base price is way beyond most small businesses to undertake, so he sits on his assets at a theoretical 3% cap rate. His own cap rate is much higher because he bought in better times, and he knows he should probably sell, but he doesn’t know where else to put the money.

#8 confused and a little crazed on 10.19.09 at 11:51 pm

So what’s the next step?

how about we drop the interest rates to 0.15 % . i know the % rates are affected by the bond market but since everycountry in feeling the same why not drops rates again all together

#9 $fromA$ia "Garths Nugget Boy" on 10.19.09 at 11:52 pm

Jim Flaherty’s 5/35 pill, wow!

#10 Keith in Calgary on 10.20.09 at 12:53 am

I was perusing the “How stupid are you” calculator on the PC Financial website 2-3 days ago.

Using 100 % of my wife’s income and 50% of what I historically earned in the last 5 years (because that is what has happened to my former industry)…….with $100K down we can afford a mortgage of $800K……..thankfully, we’re not as stupid as they think we are.

#11 Grumpydawgs on 10.20.09 at 1:31 am



#12 Onemorething on 10.20.09 at 2:04 am

RE owners, I please direct you to the port side of the ship where you can see a very nice beach. Rats and Vulchers sipping cocktails (in which they paid cash for) and looking back at us smiling!

Very odd looking smiles I might add!

One first time buyer looks to another and says, “Do you have water in your cabin too?”

#13 Onemorething on 10.20.09 at 2:30 am

Hey for all you VAN BULLS who think the Mainland Chinese and Hong Kongers are going to prop up your RE, first of all I agree with Garth, there is just not enough of them to make a small dent!

Furthermore, one of my key contacts in HK made it very clear that given both of these currencies are pegged to the USD, that they are all being advised to hold given the strong CAD.

They were actually looking at it as a best time to sell as the bubble is inflated and when asked about the challenges facing BC after the Olympics, the investors said, we’ll be long gone by then!

Inflated RE, Strong CAD! SELL SELL SELL! No brainer!

#14 BCR on 10.20.09 at 2:30 am

Thank you for posting the picture of T.O. and reminding me how ugly the place is

#15 Mike (Authentic) on 10.20.09 at 3:09 am

Love that line ” I asked him how many years he’s owned the place. “All the way back to January,” he said.”

Classic. Gotta be a bubble when “everyone becomes an expert, from Taxi drivers to video camera operators, to the homeless guy on the street” are giving “expert” advice on a matter they knew so little about just months prior. Buy now or never. Best time to buy. Etc, etc.

The question is when things really start to go wrong, when do we jump back into RE again and start taking to heart all the old lines again?

I think just like “Cash for clunkers” low interest rates will suck in only so many people and bring demand forward from the future. Less buyers in the future when:

A. You have so many peak bubble buyers underwater.
B. Everyone has bought a house
C. Everyone is “waiting those 12-23 years for houses to go “back up to what they bought it for”.

Great topic Garth. :)


#16 Mike (Authentic) on 10.20.09 at 3:13 am

New Bubble mortgage in the UK introduced:

“With the Lend a Hand Mortgage, you only need a 5% cash deposit, plus the backing of someone who wants to help you onto the property ladder by putting their savings up as additional security for the mortgage.

Up to two people – likely to be your parents, but anyone who wants to – can lend you a hand. They’re your Helpers

You only need a cash deposit of 5% of the property value, although it can be more.

Your helper will need savings equal to 20% of the property value.

Your deposit and the savings of your helper must equal 25% of the property value.”

Round and round she goes, where she stops, no buddy knows! But like musical chairs, there just isn’t enough for everyone to be safe.


#17 Jojo on 10.20.09 at 4:27 am

Yep, and the stock market crash will be again at Feb/02th/2010 and collapse in 2012 (Feb-Nov).
From Oct/26th/2009 we’ll see correction on the stock market.
Hmm, why is TSX index higher than DOW Jones
index from 2008?
It’s Never been in history of the stock market TSX index higher than DOW? It’s never been in the history
that Canadian Real Estate prices still increasing from 2006,2007 level when in any,any Western countries we can see current correction between 10% to 35%.
Toronto area RE avg.price:
2005 -avg. price $335,907
2006- avg. price $351,941
2007-avg. price $376,236
2008-avg.price $379,347
2009-Sept/avg.price $406,877
And in January 2009 you had screamed that we should not buy when avg.price was $343,632 when for first time in many years we saw correction. It will be RE collapse? One month ago you recomended to one guy from your blog to buy house for over 400k and he should put down all his savings about 250K because of Future Higher Interest? Last year I saw your comments about Gold will eventualy slammed less than $ 500?
Again my prediction that housing bubble in Canada will ended worst than USA and incoming great Depression will be between 2012-2016. First will see Hyperinflation and than collapse.Hmm,why?
Because Garth doesn’t know how to timed the market
and he doesn’t know fundamentals of his country.
Fed. Bank of Canada and politics support bubble when OMERS plan or Canada Pension Plan must buy Canadian Stock Market assets.

Oil price will go again $ 100 and in 2012 will hit $ 20.
New world trend of GREEN ENERGY means collapse of Canadain biggest invenstment in History-Canadian Oil Sands and much cheaper Green Energy resources than Canadian’s energy where Canada makes profit and
revenue over 30%.
New electrical cars, New wind powers,solar energy, new programs of hundreds nuclear powers plants in the USA,India,China and the rest of the world, and finaly big discoveries of Natural Gas in Venecuela,Alaska,Russia will bancrupt Canadian Energy Export next 2 to 5 years.
Still I’m wondering how goverment will deal in the future with 250 K new immigrants every year in Canada or 1 milion next four years?.Where we can see new jobs opportunites?Manufacturing sector went in the toilet and still our plants of GM,Chrisler and Ford are unprofitable. Nortel,Air Canada,next Bell Canada,Suncor?
Why we’ll have higher taxes and higher living expences in near future because of billions spent on
War in Afganistan, Vancouver Olimpics, Real Estate Bubble and Stock Market Bubble?
I don’t like to spent or support from my taxes even Dime for war in Afganistan,or RE,Stock Market, bailout GM,Chrysler or Helthcare consulting in Ontario.
Why you never mention Scandal in Ministry of Health of Ontario. Just for new software program and consulting services they spent over $ billion taxpayers money.
Who is in charge, nobody?
When the goverment wants to control the market and is no FREE and REAL Market than is real problem and collapse of the economy. Why we have highest Car Insurances,Mobile Wireless charges in the world?
Why LCBO,Tobaco Market,Gambling,Transit,
TV Broadcasting,even Tim Hortons must be only under Goverment ? Even now we are between top 3 western countries with highest income taxes. So we should be number one in the world?
So Garth, I’m not against our Country and I like Canada but our goverment went too far in the Total Control of the Market and this will create Total Corruption and UNREAL Market. Simmilar problem has USA but they still have much more Free Market,cheaper prices in stores,less goverment control of the Market,less taxes,insurances and finaly their motrgage interest is tax deductible from income.
More transparency and less goverment control of the Market will be better for Canadian Economy.

#18 Nostradamus jr. on 10.20.09 at 5:35 am

Praise the Higher Powers that

…The Canadian Govt will “tax” foreign currency speculators who are trying to drive up the Loonie and Bankrupt our Country.

…The Canadian Govt will protect our borders, to allow only the elite and wealthy to emmigrate here.

…The Canadian Govt is quietly spreading the word that Vancouver is different.

Nostradamus jr.

#19 frank pasquale on 10.20.09 at 5:56 am

Long way down for house prices. It aint over till its over

#20 David Bakody on 10.20.09 at 6:01 am

And won’t sales be great when Harper’s Sales Tax hits Upper Canada …. but wait …..there is good news… underground sales will skyrocket just to add fuel to the line Greed is Good … hello Ottawa if greed is good for votes then greed is good for the working class no. How else do y’all expect the peasants to afford to stay in their homes …… tax breaks!

#21 David Bakody on 10.20.09 at 6:04 am


For what it is worth housing sales appears to have slowed to almost standstill here in the East …. seasonal …. yea right …. many bin for sale since summer!

#22 ca on 10.20.09 at 6:20 am

Garth —

In your Howe Steet interview you say something about not expecting capital gains over the next few years. Could you elaborate? You were spot on about the recent rise in stocks, so I would appreciate more on your expectations for the market over the next 2-3 years.

#23 dd on 10.20.09 at 7:15 am

How can bistering price increases be a heathly RE market? I just see downside for the consumer.

#24 Samantha on 10.20.09 at 8:12 am

Announcement pending, and here’s the pre-game chatter:

There will be no rate hike before Christmas. — Garth

#25 Samantha on 10.20.09 at 8:32 am

And the pitch:

Rates held a record low (note the expression on MC’s face)

#26 pjwlk on 10.20.09 at 9:08 am

#2 Joe Realtor on 10.19.09 at 10:13 pm said:

“I know of at least one person who makes 70,000 a year and still managed to default on a $100,000 mortgage and lose the house.”

A person defaulting on a mortgage that is only 1.4 times his income surely suggests that he was doomed before he had even begun…

#27 young & foolish on 10.20.09 at 9:17 am

Real Estate is NOT an investment but shelter, unless it is a rental property providing a “service” (temporary shelter), or the retrofitting of an old unusable building into a contemporary livable space (ie. old factory turned to lofts).

You do your name proud. — Garth

#28 CashMan on 10.20.09 at 9:22 am


I get it. You’re THE JoJo…from JoJo’s Psychic Alliance. Did you misplace your meds or is stream of consciousness how you always communicate?

#29 Kurt on 10.20.09 at 9:29 am

Joshua: Calgary’s bubble had a number of things driving it that were absent elsewhere. One was a one-time shot due to people exercising oil and gas company stock options during the market run-up, dumping huge amounts of money into the housing market as everyone tried to move up at the same time. Another was the high rate of in-migration due to the red-hot economy. But neither of these woud have run prices up nearly so high without the final factor that I heard from a home-builder: the spike in demand over-ran the capacity of the land-development pipe-line. We’re now seeing the pipeline catch up and so far in my neighbourhood we’ve seen price declines of 10-15%. If gas doesn’t get more expensive real soon, we’ll see more than that.

#30 Mike (Authentic) on 10.20.09 at 9:32 am

Boc admits Deflation YoY of -0.9%

“Inflation data for September showed a decline in headline inflation on a year-over-year basis to -0.9”

Thanks Samantha

#26 pjwlk “A person defaulting on a mortgage that is only 1.4 times his income surely suggests that he was doomed before he had even begun…”

Unless he is one of the 10% of Canadians that lost their job this year or had their hours cut, maybe they had other 140% debts to income like the average Canadian has?


#31 Joe Realtor on 10.20.09 at 9:34 am

pjwlk wrote:

A person defaulting on a mortgage that is only 1.4 times his income surely suggests that he was doomed before he had even begun…

I think it is rather indicative of those people that HAVE to have the BMW, the boat, the 50 inch Flat screen TV, and other toys keeping up with the Joneses that they lose their house in the process. I see it happening with increasing frequency – in situations where the person is still employed.

My point is that there are a large number of people out there that are/were one or two paychecks away from defaulting even WHEN they are employed.

Now that the taxpayer is pretty much footing the bill for any differences between what the lender lent and gets back, it will be interesting to see how power of sales work from this point on.

It can’t end well.

#32 LeftCoaster on 10.20.09 at 9:40 am

I live in Victoria. About two months ago I received an unsolicited call from a RE agent with a listing up my street. He asked if I was interested in purchasing the property or knew anyone who was. I said no then hung up wondering:
1. how did he get my number?
2. if the market’s so hot why was he cold calling?

Now, last night, our realtor called up asking if we’d seen anything we wanted to look at. They confessed there wasn’t a lot coming up in our price range ($500K). When I asked how things were going the answer was “good, lots of multiple offers”. hmmm … then why are you calling a bear like me? It’s winter and I’m hibernating.

#33 ExpatInNC on 10.20.09 at 9:44 am

This article is interestings:

Part of the last paragraph is telling:

“The U.S, is getting pumped off exports and inventories this half, while Canada is left to get its growth from consumers and builders….”

Canada needs to get growth from consumers…hence the desire of the gov’t to ensure the housing market ballons larger…consumers will be forced to consume more (debt) and builders will keep building. If things were to take its natural course, the housing market would correct, builders wouldn’t build and hence the growth we depend on would vanish.

This clearly shows (to me at least) that it is key for the gov’t to ensure Canadians keep spending (low rates, CMHC working overtime, realtors-based statistics make headline stories, etc).

Dangerous game being played at the expense of the average Canadian.

#34 Debtfree on 10.20.09 at 9:59 am

Home Financing Without Qualifying/ Lease to Own/ Assumable

40k down for over a million …. what the ……

#35 The Great Gazoo on 10.20.09 at 10:06 am

Wow reporting from the ‘world class’ GTA:

– from outta nowhere the headline today has auto insurance going up for millions by 14% in Ontario

– stagnant wages, stagnant employment, sky-rocketing housing costs

Was walking through the “Bayview Village” (yes the -village- located by the 401 emitting noise and disgusting fumes 50 meters away from your “village luxury condo” what a place to raise kids – ugh) saw a young lovely couple going for a stroll, alas they were arguing, the young lady was cussing out her male partner that she still wants to dine out once a week, as the male replied its not in the budget anymore and he promises to buy and make her dinner the night they are supposed to go out – she continued to berate him.
I walked past thinking…… I hope they got auto insurance in their budget adjusted lol…

#36 Andrew toronto on 10.20.09 at 10:07 am

Garth, I remeber very well when the housing market tanked 22 years ago , because I was young and Nieve and purchased at the top .. Ever since I vowed I would never fall for that again and sold that property which I had orginally bought for investment , ended up living there for the last 19 years .rented it for a few yrs. I sold last year before the market tanked. I have been renting since and will wait this out, I only wished there was someone like you 22yrs ago warning of the dangers.. I learned my lesson , Now it time for everyone else to learn there’s , unless there here or are paying attention. Should be interesting to see what percentage it will drop this time .. Good luck to us all

#37 Nostradamus jr. on 10.20.09 at 10:08 am

I predicted nearly 500 years ago that…

…on October 20th 2009, the World’s international trade would be at an effective standstill.

…rumblings would begin by Dufferin County Ontario Citizens for the formation of a new National political party.

…similar rumblings from North Vancouver BC to support the National Conservative Party to lead Western Canada to secede from Eastern Canada.

Nostradamus jr.

#38 smw on 10.20.09 at 10:20 am

Garth, nice to see you shed some light on the 87 crash and the 90’s housing stagflation.

It took two full years after the shock of the 1987 stock market crash the TSX to get back to pre-87 crash levels(4000).

Then, by 1990, the TSX was down again by 25%, or to 3000. It wasn’t until the fall of 1993 when the TSX lifted above 4000, the high of 1987.

The housing market didn’t start to move negative until 1990 – 1991.

In Ottawa for example, if you bought at the top in 1993, you didn’t recognize gains until 2000. That is 7 years of negative or minimal equity in what the media calls the most sustainable market(because of government).

History doesn’t necessarily repeat itself, but it sure rhymes. With the stock market currently being considered overvalued, minimal prospects for consumer growth, we are poised for a drop in both housing and equities.

I’m sure like today, there were lots of prognosticators telling us in 1989, that the worst was behind us.

How wrong were they?

#39 GregW., Oakville on 10.20.09 at 10:28 am

Hi Garth, FYI, 6-1/2 minute video

Ron Paul: US Dollar Collapse When China Stops Buying Debt
Subprime Blogger
October 19, 2009

In February of 2009 Ron Paul warned of a US Dollar collapse when China stops buying out debt in this video (below). There are many good points that Mr. Paul points out in the video but none were more prophetic then calling for the dollar bubble to burst. When the video was recorded the US Dollar index was around 86. Today the US Dollar Index is currently at 75.5.

Another ironic fact about this video is that shortly after this video was recorded President Obama went on 60 Minutes and made the statement that “the dollar is still strong.” Unfortunately the dollar was not strong and we have seen that as a 10% drop has happened since the president’s statement. For those of you wondering why the value of the dollar continues to decline it is truly supply and demand.

The Federal Reserve Bank continues to print money at will. The billions of dollars that have been created out of thin air because of the stimulus package are only decreasing the value of the dollar. Not only is the value of the dollar decreasing, the Federal Reserve Bank is causing people to do things that they normally would not do. With extremely low interest rates people are going to buy homes. There is no problem with people buying homes except that many of these home buyers cannot truly afford homes. For reference to this take a look at the subprime mortgage crisis…

#40 Bobby on 10.20.09 at 10:38 am

For #32, Leftcoaster,

You have hit the nail on the head. If things are so rosy why is an agent calling you? Because it isn’t that rosy, in fact it is rather awful. Ever wonder why the RE industry quotes average prices, rather than the median price. Because the median is trending down due to the majority of sales being at the low end, with 0$ down and 35 year amoritizations. Moreover, there are a lot more realtors than sales and if they don’t sell they don’t get paid.

There are a lot of homes at Bear Mountain that have been sitting for sale for a very long time.

The market is really overpriced. Just look to the States to see what we are in for. No, Canada is not different!!!

The big question is what clown would get into a bidding war for a home and then make an offer with no conditions. Probably not a clown, but an idiot. Moreover, any realtor that would suggest such a move is certainly unprofessional at best, and only interested in securing their commission.

It’s going to get ugly.

#41 Bill-Muskoka (NAM) on 10.20.09 at 10:39 am

‘Money, money, money!

Must be funny

In a rich man’s world?’

Have fun folks!

#42 young & foolish on 10.20.09 at 10:46 am

it seems that :

A) people have to live somewhere and will always have to pay for shelter (practical)

B) more people want to “own” their nest than not (emotional)

hence, there will always be buyers

#43 Reg on 10.20.09 at 11:08 am

Here’s a twist. Someone I know just moved in with their mother. They were both renting seperate apartments and decided to move in together. So a house was bought, with next to nothing as a down payment and a low interest mortgage, and amortized over 35 yrs. I told these people to rethink this as costs will probably go up drastically before their mortgate renewal is due in 3 years. Also, I said to get a 25 yr. amortization. The financial guy said they had nothing to negotiate with, so they HAD to take the 35 yr. (Shaking head).

Anyways, they put the entire house in the mothers name, who is 69 yrs. old. Their thought is if the mother dies (which will certainly happen before the mortgate is paid off), the insurance will pay the remaining mortgate of the house off. Her will leaves everything to the son she is living with. So… they see it as a good thing.

I just can’t see this going well, but hey…what do I know.

Any thoughts?

#44 OttawaMike on 10.20.09 at 11:19 am

#13 Onemorething on 10.20.09 at 2:30 am
Re: Selling to the Chinese at the peak.
I Agree with your synopsis.The old myth about the Chinese coming and buying Canadian real estate anywhere/anyprice has been propagating for 25 years now. First it was the Hong Kong takover of ’97 that was supposed to cause a huge exodus of cash to Canada. Yes there was some money spent here but mostly it was a non event. I have spoken to a few well heeled Chinese immigrants and the general consensus among their monied set : Canada is overregulated and over taxed.

I am one of the lucky sellers that did well on my first house in ’88 in Scarberia,Ontario. The neighbour across the street had a brother in law who was the CFO of the Hong Kong Railway Corp. He was looking for investment properties and bought my house in a bidding war with another couple. Private sale, no pimps involved.

Currently we take in about 20,000 Chinese immigrants/year. Even if they were all millionaires, there is no way they could maintain this bubble.

#45 taylor192 on 10.20.09 at 11:27 am


They have slowed to a halt in the West too. Vancouver detached sales for the week of Oct 7-14: 4. FOUR! Out of 566 active listings. In recent weeks as many listings expire as sell.

Few sales, more people giving up and taking their houses off the market, …

#46 randi on 10.20.09 at 11:55 am

Umm.. actually prices in Toronto skyrocketted following the 1987 crash:

In fact, if you missed that rally you had to wait many years to get in at an affordable price again. Perhaps if you were stupid and overbid on a downtown condo or something, then maybe there was *some* price decline by October 1988.

But no one buying conservative property in Toronto in 1988 would have to default given later price action. That smells like classic fear mongering fantasy.

Supply is constrained (artificially or not) in the GTA right now and prices can continue this way for a long while.

Actually, it looks like people are being rather rational buy jumping into homes right now.. if you look at the historical patterns.

Well, if you look at them accurately that is.

#47 Eduardo on 10.20.09 at 11:58 am

Quickly, for all the people who were quick to say I was wrong when gas was in the 2s and saying it was going to 1:

NG is 5.15 right now. 85 cents away from my target of 6 dollars by the end of the year.

…just saying.

#48 Popeye on 10.20.09 at 12:09 pm

Interest rates.

If one were to believe the media hype, one would have locked their variable rate into a fixed rate sometime during the past few weeks.

If one were to frequent Garth’s blog here, one would have known intuitively that there’s no way the BoC would raise their rate. Their rate may even be held low for years. Time will tell.

Thanks Garth, for saving me thousands of dollars.

#49 Guan-Di on 10.20.09 at 12:11 pm

# 10

The best part of that calculator, and I suggest everyone give it a try, is that if you plug in a house price you feel comfortable with (ie one that means your down payment is 25% or more) it automatically shows you, in comparisson, just how deep they would be willing to bury you in debt: nearly 6 times what I would have considered reasonable. If these are really the numbers banks are using (+/- 50% of net income to pay your mortgage) it’s no wonder the innumerate masses are lining up around the block to bid on houses. And to think I could be almost $1 million dollars in debt right now if I wanted to be… I know you keep saying it, but it bears repeating… this will end badly!

#50 smw on 10.20.09 at 12:12 pm

#37 Nostradamus jr.

The real question is, when will you secede from this website?

#51 randi on 10.20.09 at 12:33 pm

#38 @smw: “The housing market didn’t start to move negative until 1990 – 1991. ”

Confirmed. Imagine the pain of sitting through two years of YoY 15% price increases like 1988-1990. And then continuing to rent until 1992-1993 when you can finally say ah-ha!!! Garth was right! I can buy in at 1988 levels five years later (note that low 1987 levels never came back).

And then sit on further price erosion until 2000 (7 YEARS!) while you wonder why you wasted tens of thousands of dollars on rent between 1988 and 1993, and started paying down the mortgage five years later than your peers (and in today’s case, 5 years from now, you will have much higher rates to contemplate against WORST CASE similar prices).

So what does anyone make of today’s discussion? I guess Garth is saying this is 1988, so don’t buy. But instead, wait until around 2020 when the market is rebounding again (like the 1988 to 2000 GTA progression).

Can anyone smell 12 years of rent money burning in the oven?

Fellas, this is turning into a guide on staying single, childless, despondent and seriously financially pathetic.

Say it ain’t so Garth!

#52 Partisan Spectator on 10.20.09 at 12:45 pm

Jojo #17
Ever wondered why “Nineteen Eighty-Four” by George Orwell is never on the shelf in Chapters?

#53 jungberg on 10.20.09 at 1:03 pm

#13 & #44

I want to agree, but there are a lot of unknowns that the stats don’t reflect. Numbers show the actual number of foreigners holding real estate are relatively low, but a lot of would-be investor buy property in their kids’ names.

This means that the kids have real estate as Canadians even though a good chunk of the down payment came from their non-Canadian parents.

It’s part investment, and part help-the-kids-buy-a-place-to-live.

#54 Bruce on 10.20.09 at 1:08 pm

Personally Garth, I’ve reached two basic conclusions:

1) People enjoy being lied to and don’t care;
2) People expect to be lied to and still don’t care.

It’s NOT a recovery. What *I* am seeing are more and more people developing a false sense of security and overconfidence because they believe the markets are rallying. They think things are getting better because the “government” tells them so, backed up by irrefutable “data”. The problem with this so-called “data” is that it has been skewed and manipulated to agree with their cooked-up figures. The reality is that the numbers do not add up, and in fact, point to an almost certain fiscal disaster. It’s pure mathematics folks, plain and simple. Imaginary numbers may exist, but only in the minds of a select few.

#55 Mike (Authentic) on 10.20.09 at 1:12 pm

#46 randi “Umm.. actually prices in Toronto skyrocketted following the 1987 crash. In fact, if you missed that rally you had to wait many years to get in at an affordable price again”

Randi take a look at Calgary. Plus you are forgetting on your Toronto chart “Inflation adjusted prices in today’s dollars”, when you do that, you’ll see a very different outcome. Don’t trust the TREB to provide you unbiased stats.

Proves it could happen anywhere, even when oil and gas is booming (or mfg in Ontario).


#56 Ultraman on 10.20.09 at 1:13 pm


I doubt that the mother will be able to get life insurance on the mortgage. For most Insurers the enrollment age limit is 64. A non smoker without serious health issue would pay almost $1000.00 a month in premiums for $500k of coverage. In other words both the son and the Insurer are gambling on the longevity of the mama and my bets are on the Insurer to win the game.

#57 Ultraman on 10.20.09 at 1:15 pm

Reg, sorry my quote is wrong on the Life Insure. That was for joint coverage. The cost for the mama is about $1.35 per month per $1000.00 insured, so $655.00 for a $500k mortgage which is generally the maximum benefit.

#58 taylor192 on 10.20.09 at 1:21 pm


There’s one big flaw in your argument:
You had to buy in 1987 and sell by 1990 to walk away with the huge gains. If you sold in 1991 you still had some gains, in 1992 all gains were wiped out till 1998.

If you practice house flipping you could have profited, otherwise for the majority of that are buying personal residences, we’d be stuck in houses with little equity for more than a decade. Worse, if we bought in 1988-1990, we’d be stuck with negative equity for a decade.

Using your own chart, where do you think we are today? A repeat of 1987 or 1989?
I’ll guess 1989, and I’m not prepared to spend a decade in zero or negative equity.

#59 Keith in Calgary on 10.20.09 at 1:21 pm

#49 Guan-Di……

It “will” end really badly I am afraid……..I forsee a tax credit like Barry Obailout has used in the US as being the next thing they suggest here…….unless the US raises their interest rates sooner than later, then we will have to follow.

#60 Pjwlk on 10.20.09 at 1:34 pm

#30 Mike (Authentic) on 10.20.09 at 9:32 am said:

“Unless he is one of the 10% of Canadians that lost their job this year or had their hours cut, maybe they had other 140% debts to income like the average Canadian has?”

The original post didn’t mention a job loss or hours cut but okay I buy your argument or a 10% chance. I was thinking however that there are probably a number of other acceptable and workable options other than defaulting on a mortgage – like selling perhaps.

I also believe that 140% debt/income ratio is a choice for most people, one that they make over and over again during a long period of time. The debt in most cases is likely held against the equity in their house.

#61 PeckedToDeathByDucks on 10.20.09 at 1:35 pm

Study: Internet ‘Altering Our Brains’…

“People who read the above article also showed interest in how the Large Hadron Collider was ‘being sabotaged from the future and how Obama team controlled the media.” is the first sentence that sputters out of his chickenlips. I hadn’t seen the guy in nearly a year and now there he was vibrating his drumstick fingers on the bar table with renewed, bug-eyed, hyperactive intensity.

How you been? I asked Chickenlittle’syoungerbrother. I haven’t seen you since I went for a p and you had disappeared. The bartender said that you were screaming about nefarious black helicopters as you raced out the door. Last time here, the Garth told you to take your meds because of all your yelling about some sort of Pandemic being engineered in the near future. Are you more at ease now?

“At ease? Ease? Ease rhymes with bees. Have you heard what’s happening to the bees? The bees will bring us to our knees! Food gone within months. And the pandemic…haven’t you heard? Nurses in California striking. It’s not going to end well. You keep hearing that the wurst is behind us. What kind of perverted talk is that? There is no wurst. It’s all baloney.”

Trying to help, I pointed out to him that the the Internet was like a large lunatic room with strangers going in and out yelling confusing inanities and perceived certainties at each other. Nobody every really listened and understood. See…there goes some guy flashing signs:
“Beware the Financial Undertoad”.
“You are the Wallet of Last Resort”
“Hep me Flaherty, I’m as short as you.”
What the heck does all that mean?

“Mean? Mean? Yea, that’s the word. Ugly, nasty, predatory, selfish, lying, stealing mean. How else can you explain it? The chasm between the rich and poor grows. London housing prices are hitting new records while their government is in the biggest financial, money-printing mess ever. Apple makes record sales and revenues attributed to back-to-school sales, while unemployment and foreclosures increase and Detroit can’t afford to bury their unclaimed dead. They manufacture a homeless girl doll that lives with her mother in a car..the price $89. Speculators are buying foreclosed homes in Vegas a dozen at a time while the homeless go to shelters. Financiers are reaping record bonuses with the proceeds from the money used to bail them out. Wasn’t that money supposed to be for the home owners? Luxury car sales are doing well. Obama’s throwing parties and travelling in style while their deficit balloons. He wins the Nobel Peace Prize as things go boom. Banks too big to fail are even bigger now. Canada has a deficit that’s getting even larger while the Harpo plays piano. Canadians see this and say…hmmm, he’s not that bad after all. Yea, mean is the word.

There were chicken feathers snowing all around us. He took a deep breath……

#62 Pjwlk on 10.20.09 at 1:46 pm

#31 Joe Realtor on 10.20.09 at 9:34 am

Joe wrote:

“I think it is rather indicative of those people that HAVE to have the BMW, the boat, the 50 inch Flat screen TV… …My point is that there are a large number of people out there that are/were one or two paychecks away from defaulting even WHEN they are employed.”
I Agree, it’s been said that the majority of people are only 3 pay cheques away from the street. I believe that.

A acquaintance of mine is unfortunately in the same boat as your friend. He however just lost his job, and doesn’t really have any skills or education to speak of. His wife told me last week that if he doesn’t get work fast, they’re sunk. They have everything on credit and not a dime saved. I hate to say it but neither of them put a second’s thought into what the future may hold.

In his line of work, it is now a race to the bottom for wages. Sign of the times I’m affraid…

#63 Owl on 10.20.09 at 1:50 pm

I don’t think it will end as harshly as you suggest but to you optimists…it aint going to get much better either…the future for housing is ‘zombie housing’ and perhaps zombie owners depending upon how much they risked up front. On the buy side, the housing market is proped-up by low rates. On the sell side, we will move into a saturated market (if were not there already) so owners either can’t sell or they wait for better times. This means lots of inventory ready to move with nowhere to go.
Regardless, its check – mate for the banks.

To would be home buyers, strongly consider renting before taking the plunge!

#64 Debtfree on 10.20.09 at 1:56 pm

Garth, any thoughts on 30 year ams on commercial re .

#65 Joe Realtor on 10.20.09 at 2:03 pm

#40 Bobby wrote:
The big question is what clown would get into a bidding war for a home and then make an offer with no conditions. Probably not a clown, but an idiot. Moreover, any realtor that would suggest such a move is certainly unprofessional at best, and only interested in securing their commission.


Not quite Bobby, but you’d be surprised. The Realtors duty is to advise their client of all of their options. This includes the prospect of going in with no conditions. I always follow this up with “but I don’t advise doing that”. If you don’t advise of all the options available, you’re then accused of withholding information.

People are strange. You strongly suggest to them to do one thing and they do the opposite. I detest multiple offers and generally try steering away from them, but I work for my client. I present information gauging what prices have been like in the area and suggest a range, or advising to walk away. Guess how many don’t listen when I say “lets walk”? When they get emotionally invested on “winning” I try to be the voice of reason. You aren’t “winning”, you’re getting taken. I’ve had people ignore my advice, add 10 grand to what I’ve suggested, because “we just have to have this house”. I’ve seen people pay $600,000 for a $500,000 house (not my clients) but not want to even pay for half of a home inspection (that my clients wisely had done), because thats $200.00 “out the window”.

Yes, just like other professions, there are plenty of unprofessional Realtors out there, but not all of them are simply interested in commissions. Unlike some of them that have reputations of stirring up multiple offers, and then sending all offers back for “improvement”, some of us like to be able to sleep at night.

#66 Munch on 10.20.09 at 2:04 pm


Did I win the PRIZE, already?


#67 PeckedToDeathByDucks on 10.20.09 at 2:04 pm

Daffy Ducks Peck at Corrupt Politicians

#68 Vancouver_Bear on 10.20.09 at 2:07 pm

#37 Nostradamus jr. on 10.20.09 at 10:08 am

Garth, please block this separatistic communist from this website. Or tell us his IP address and we will take care of him once and forever.

#69 jess on 10.20.09 at 2:21 pm

Interestingly, the Globe had an article the same day on why the Canadian housing market hasn’t crashed as it did in the US. Written by a banker (National Bank economist Marc Pinsonneault)

…didn’t they buy the mortgage arm of Canadian Tire?

#70 Dave on 10.20.09 at 2:21 pm

@ #29 Kurt, I think that if we get another oil spike this year it won’t have the same effect on Alberta as 06-07. I would argue that the real crises began when oil hit $147 and world trade slowed to a halt. I believe that we would see a similar situation around 100-110 this year, hardly enough of a price gain to prop up the province under the lack of leadership of Stelmach.

#71 jess on 10.20.09 at 2:41 pm

October 20, 2009

I wonder what MR. Black thinks of this?

LONDON — Former prime minister Jean Chretien has been awarded the Order of Merit by the Queen in a ceremony at Buckingham Palace.

Seventy-five-year-old Chretien is only the fourth Canadian to be presented with the order.

#72 nonplused on 10.20.09 at 3:04 pm

I knew it! Tax Free Savings Accounts are another scam for chumps!

Your gains are tax free as long as you don’t have any. If you have some gains, well, we’ll change the rules.

It’s just another account to generate another round of fees for the banks. If the government thought anybody would actually make money and avoid taxes they never would have set these things up.

#73 My_View on 10.20.09 at 3:29 pm

What the heck Garth?

My comment doesnt get posted, why? It was on topic. I really can feel the irony when my views are not welcomed! Anyways the buble will last for another 2-3 years, bring it on renting haters!

Views are always welcome. But lose the attack. — Garth

#74 Watched Bubble Never Pops on 10.20.09 at 3:36 pm

#42 young & foolish

Are you retarded?

#75 David Bakody on 10.20.09 at 3:43 pm

CBC News:

Loonie tanks on tough central bank talk

The loonie was trading at 95.23 cents US a little before 4 p.m. ET, down 1.92 cents from the end of the day on Monday.

Does this mean 100,000 new jobs and people running out and buying homes? If so both Harper & Flaherty will be holding yet another $100K news conference confirming once again the recession is over and a upstart in new housing. yeah right!

#76 Kurt on 10.20.09 at 4:21 pm

#70 Dave – I would agree, for a number of reasons. First, it has been noted that since the 50’s, recessions are preceeded by (probably triggered by) spikes in energy prices. Second, gas is the story in Alberta, has been for a while – conventional oil is built out, unconventional isn’t that profitable. Third, the RE spike was in part caused by the exercise of options that had been held for years, waiting for the right stock price – that pool has not been replenished. Then, of course, the change in royalties has changed gas from the bonanza it once was to merely OK (or less than OK with current pricing) so we won’t see explosive development again. If anyone is looking for a bubble to ride, don’t look in Calgary.

#77 young & foolish on 10.20.09 at 4:32 pm

#74 WatchedBubble Never pops ….

I must be retarded since I expect to live for free, and since I know that people never make decisions based on emotion, like buying houses when they are expensive and beyond their means.

#78 POL-CAN on 10.20.09 at 4:45 pm

2 pay cheques from being homeless

The fact that this is not receiving wider MSM coverage is truly scary. Makes you wonder what else they are keeping from the public.

Since the average Canadian is now more in debt then the average Amerikan was before the meltdown started, we should all be wondering if this is in store for us.

#79 rory on 10.20.09 at 4:54 pm

#72 nonplused

I just read the article you posted …I read that cheats are having to pay back their cheating profits …I really do not get your over reaction on this one …what’s up?

#80 X on 10.20.09 at 5:08 pm

RE#42 -‘A) people have to live somewhere and will always have to pay for shelter (practical)

B) more people want to “own” their nest than not (emotional)

hence, there will always be buyers’

A-not all people can afford to buy, some are forced to rent due to finances. And why overpay for the needed shelter? That makes no sense.

B-I am sure there are more people who want to own, rather than rent….reality unfortunately dictates that they will continue to rent.

True there will always be buyers (as you stated), but really what is needed to continue the upward trend in sales/prices is for there to continually be more buyers than sellers in the market.

All that you have proved…as Garth has been telling us…is that there are Greater Fools out there who buy for poor and unrealistic reasons.

The best thing you can do is to read as much as you can about RE/finances and buy Garth’s book!

#81 shane on 10.20.09 at 5:17 pm

Garth, Bank of Canada warns of economic damage as loonie drops….. i always thought its better when our loonie is around 85-87cents is good for the economy?? why is it bad now??


#82 Bull on 10.20.09 at 5:23 pm

The sky has been falling ever since I started reading this blog.

#83 dd on 10.20.09 at 5:36 pm

#47 Eduardo.

..NG is 5.15 right now. 85 cents away from my target of 6 dollars by the end of the year…

Sure. Six bucks. NG is 15% over the 5 year average. Long term very bullish. Short term it is going back down. Not enough demand and too much supply.

#84 dd on 10.20.09 at 5:39 pm

#37 Nostradamus jr.

…I predicted nearly 500 years ago that…

You sound like an annoying ewok.

#85 Dave on 10.20.09 at 5:40 pm

damn Garth, I must say you’re good. I spend money on news letter subscriptions and sift through hundreds of different analysts to get different opinions. You’re amongst the most accurate, and you’re free!!

The least I can do is purchase your books when they’re released to return the favour.

Everyone here should appreciate the information this guy gives to us on a daily basis and for free.

Thank you sir

#86 jess on 10.20.09 at 5:45 pm

the run-up to the 1987 crash was characterised by a widening US current-account deficit, weak dollar, fears of rising inflation, a fading boom in American house prices, and the appointment of a new chairman of the Federal Reserve Board. mr. DREAMSPAN.

Anyone remember the case against Bankers Trust?(derviatives called wedding ring?)
Doesn’t Eurozone have more leveraged buyouts than the u.s.a? I don’t understand why the Euro hasn’t fell against the dollar?

Here’s a brief summary of neither confirming or denying that went on in the 90’s

#87 Midtown on 10.20.09 at 5:49 pm

#72 nonplused Read the article carefully – the clawback applies only if you exceed the $5000/year limit on TFSA, not if you have gains in it. The new rules are for people who deliberately overcontribute because gains offset the penalty.

#88 Dave on 10.20.09 at 5:52 pm

while you wonder why you wasted tens of thousands of dollars on rent between 1988 and 1993, and started paying down the mortgage five years later than your peers


I know why I’m paying rent rather than mortgaging, because I get to keep over $200,000 between my new wife and I to explore the stock market after the biggest post bubble contraction since the great depression. Flexibility works and so have our investments which many are up triple digit percent this year.

Just because real estate is the only thing you understand (because someone undoubtedly banged it over your head) it doesn’t mean its the only investment vehicle that works.

#89 BD on 10.20.09 at 5:52 pm

It says a lot about our countries long term outlook when Russia is planning on building up manufacturing to 50% of their economy. Canada’s answer is to build a pipeline so huge to the U.S. to send raw bitumen that we brag how to fill it will cause a shortage of oil while shutting down the building of any new upgraders in this country.

#90 Lily on 10.20.09 at 5:57 pm

Is everything just doom and gloom?

#91 Two-thirds on 10.20.09 at 6:14 pm

If you ever think the stock market is rigged, you are not the only one, and here is a good article on the subject by MATT TAIBBI:

“The nation’s largest financial players are able to write the rules for own their businesses and brazenly steal billions under the noses of regulators, and nothing is done about it. A thing so fundamental to civilized society as the integrity of a stock, or a mortgage note, or even a U.S. Treasury bond, can no longer be protected, not even in a crisis, and a crime as vulgar and conspicuous as counterfeiting can take place on a systematic level for years without being stopped, even after it begins to affect the modern-day equivalents of the Rockefellers and the Carnegies. What 10 years ago was a cheap stock-fraud scheme for second-rate grifters in Brooklyn has become a major profit center for Wall Street. Our burglar class now rules the national economy. And no one is trying to stop them.”

Can someone be financially responsible *and* be rewarded for it these days?

It’s time for a revolution.

#92 michael on 10.20.09 at 6:53 pm


Need a positive post. Too many vultures feeding off your recent reports.

#93 Bruce on 10.20.09 at 7:07 pm

#94 DaBull on 10.20.09 at 7:07 pm

#90 Lily
On this blog … Yes

#95 jungberg on 10.20.09 at 7:27 pm

#51 Randi
Can anyone smell 12 years of rent money burning in the oven?
It’s easy to think that you’re throwing away money by renting as long as housing prices go on an upward trend. Even so, what buyers I know don’t seem to take into account is that owning also means throwing money away toward:
– maintenance or maintenance fees
– property tax
– potentially higher utility costs
– maybe mortgage insurance
– and lots in interest

All of that, you’ll never see again. On a $400k mortgage at 5%, I calculate almost $20k gone in interest paid after one year, just like that.

End of 5 years, again at 5%, your total interest paid is over $97k. Add in $200/mo. maintenance for another $12k. Say another $10k in total property tax, and you’re up to $119k gone. Total paid to principle = almost $24k.

Rent @ say $1500/mo after 5 years gets you to $90k, and the the $500/mo you save pockets you $30k in cash (without even adding interest).

I know this has been beaten to death before, but there’s no right or wrong way in terms of rent or buy. Adjust the numbers a bit — buy a cheaper place, pay more for rent, whatever. In either case, it all comes down to living within your means and being smart with your money.

#96 Nostradamus jr. on 10.20.09 at 7:36 pm

U.S. Treasury Secretary Hank Paulson met with GS Board in Moscow???

“”During that long summer between the collapse of Bear Stearns and the collapse of Lehman Brothers, Hank Paulson held a secret meeting with the board of Goldman Sachs in Moscow.

When Paulson learned that Goldman’s board would be in Moscow at the same time as him, he had [Treasury chief of staff] Jim Wilkinson organize a meeting with them. Nothing formal, purely social — for old times’ sake.””


“”When Paulson learned that Goldman’s board would be in Moscow at the same time…””

What? Have you ever tried to get a board meeting scheduled? You think Raj Gupta, Lakshmi Mittal, Lois Lieber, Ruth Simmons, John Bryan et. al. would just happen to all be in Moscow at the same time? Either they weren’t; the “board” was really the GS Executive Committee (a different animal entirely), or there was a Moscow Board meeting. Doesn’t make any sense.

#97 DaBull on 10.20.09 at 7:36 pm

#84 dd

Sure. Six bucks. NG is 15% over the 5 year average. Long term very bullish. Short term it is going back down. Not enough demand and too much supply.

If you believe that then short.

You can sell a couple of April contracts @ $6.14 and buy them back anytime up to April for cheaper and make a pot full of money, if your that confident. If that’s not short enough you can sell the November contract @ $5.16 and cross your fingers it goes down tommorrow or the next day or a least stays flat. If your wrong it will only cost you $10.00 per contract for every 0.1 of a cent it goes up. If your right then you make $10.00 per contract for every 0.1 of a cent it goes down. Not a bad return if your right. A real hit in the old pocket book if your wrong. You never know you might get lucky. Go ahead it’s real easy, if you got the kahoonies. Tell us all how it works out for ya.

PS: Don’t forget commodity trades are settled at the end of every trading day. It’s not like a stock that you can buy and hold through the up’s and down’s.

#98 Bruce on 10.20.09 at 7:44 pm

It’s not “doom and gloom”, it’s reality. It’s what “they” don’t want you to know. You need a lot of intuition and insight to see and understand what’s really going on right now. I for one do NOT believe a word people tell me anymore. The governments and banks are inherently corrupt, and our world, for all practical purposes, is BANKRUPT. The reality is that the game is up, or will be up soon. It’s a sick, twisted, demented game that is being run be a select few…

#99 Onemorething on 10.20.09 at 7:53 pm

#90 Lily,

Yes for those who dont prepare themselves!

#82 Bull,

Yes the sky has been falling probably since 2001 but governement/banker Ponzi’s inflated the bubble so big it kept the sky just where it is. It wont be long now though!

#100 TJ on 10.20.09 at 7:56 pm

On Tuesday, March 11th, 2008, somebody — nobody knows who — made one of the craziest bets Wall Street has ever seen. The mystery figure spent $1.7 million on a series of options, gambling that shares in the venerable investment bank Bear Stearns would lose more than half their value in nine days or less. It was madness — “like buying 1.7 million lottery tickets,” according to one financial analyst.

But what’s even crazier is that the bet paid.

At the close of business that afternoon, Bear Stearns was trading at $62.97. At that point, whoever made the gamble owned the right to sell huge bundles of Bear stock, at $30 and $25, on or before March 20th. In order for the bet to pay, Bear would have to fall harder and faster than any Wall Street brokerage in history.

The very next day, March 12th, Bear went into free fall. By the end of the week, the firm had lost virtually all of its cash and was clinging to promises of state aid; by the weekend, it was being knocked to its knees by the Fed and the Treasury, and forced at the barrel of a shotgun to sell itself to JPMorgan Chase (which had been given $29 billion in public money to marry its hunchbacked new bride) at the humiliating price of … $2 a share. Whoever bought those options on March 11th woke up on the morning of March 17th having made 159 times his money, or roughly $270 million. This trader was either the luckiest guy in the world, the smartest son of a bitch ever or…

Or what? That this was a brazen case of insider manipulation was so obvious that even Sen. Chris Dodd, chairman of the pillow-soft-touch Senate Banking Committee, couldn’t help but remark on it a few weeks later, when questioning Christopher Cox, the then-chief of the Securities and Exchange Commission. “I would hope that you’re looking at this,” Dodd said. “This kind of spike must have triggered some sort of bells and whistles at the SEC. This goes beyond rumors.”

Cox nodded sternly and promised, yes, he would look into it. What actually happened is another matter. Although the SEC issued more than 50 subpoenas to Wall Street firms, it has yet to identify the mysterious trader who somehow seemed to know in advance that one of the five largest investment banks in America was going to completely tank in a matter of days. “I’ve seen the SEC send agents overseas in a simple insider-trading case to investigate profits of maybe $2,000,” says Brent Baker, a former senior counsel for the commission. “But they did nothing to stop this.”

That this was a brazen case of insider manipulation

#101 miketheengineer on 10.20.09 at 8:13 pm


I still can’t believe that we pay what we are paying for gasoline at the pumps, hydro, etc.

With all the factories shut in Ontario, and 20% of the American population, out of work, North America, one of the largest consumers of energy and products in the world, MUST BE SWIMMING IN GASOLINE AND HYDRO.

I think that the N.A. market for oil and gasoline will implode soon, as the glut on the market, and the lack of buyers becomes so evident, they can’t hide the facts. I mean think of it. If there are 100 million people working full time, and 20 million are outa work. Each would have burned through say 50Litres of fuel a week going to work. That has gotta be equivalent to a good size oil field and several processors.

Why is the price soooo high?

#102 DaBull on 10.20.09 at 8:45 pm

#99 Onemorething

I hope your not considering suicide???

#103 Nostradamus Le Mad Vlad on 10.20.09 at 8:54 pm

#90 Lily — “Is everything just doom and gloom?” — and —
#95 Bruce — “. . . that is being run be a select few…”

Not all D&G, just a major dose of the reality of life. 95% of the stuff that happens is orchestrated by the Rockefellers, Rothschilds, The Bilderburg Group (a.k.a. the NWO) and their minions, so it is never covered.

As to the leftovers, six per cent of individuals control 96% of the m$m. Use the media FWIW, but don’t ever take it as gospel. Garth can only write his columns based on what he knows, then tells us.

The other links, which are not controlled by anyone are good add-ons to his posts. There will always be opposites — positive / negative, good / bad, rich / poor, male / female, etc.

For instance, the swine flu (last line from second link) — billions; Europeans
“Danes, Finns, Germans, French, Spanish, Belgians, Dutch all refusing to roll sleeves up despite government, media pressure”

The usual economic stuff —
going down?;
rich and poor

Then this wonderful country — “Like having CMHC take all the loan risk on taxpayers’ backs. . . A torrent of loan guarantee from money from Ottawa allowing moneyless purchases and bidding wars. And both bankers and real estate professionals pushing buyers into loans they’ll never repay. Loans which can turn into money crypts if the market corrects.”

If all else fails, declare bankruptcy for the country and hand it over to China or (better yet) pass the buck to those suckers in the workforce!

Oh wait, they’ve already been laid off, the manufacturing and technology sectors went to other countries, as wages are a buck an hour with no benefits. Well Stanley, that’s another fine mess you’ve got us into!

BTW, what exactly does happen when taxpayers won’t pick up the tab for the above? None of us ever voted on the AfPak mission, yet the CPC quite happily spends our money as if it’s going out of style.

This effectively opens the door to WW3. — guess who

#104 Herb on 10.20.09 at 8:58 pm

Pecked to Death,

thanx for your #61, Ducky, a touch of divine comedy to make sense of it all, to the extent that it can make sense.

We are so screwed, well, all 99% of us who are not in banking or otherwise deserving of being bailed out.

#105 eddy on 10.20.09 at 9:15 pm

12 yrs to recover, thanks to low mortgage rates. in 88 rates were over 11%, and had been steadily falling from over 20% in the early 80s.

#106 nonplused on 10.21.09 at 12:03 am

#79 rory

How do we know they are cheats? What’s a cheat? Is it a tax free account or not?

Here’s my thinking. Let’s say that I decided that I wanted to by some “tiny options” on a speculative bid. To further explain, let’s say I thought Suncor (for example) was going to have a dramatic drop in the near future, but I didn’t want to put out a lot of capital in my regular trading account shorting them because the market is acting so frothy. Too much capital risk. So I instead want to buy a bunch of way out of the money puts, which are usually somewhat cheap per share. But if the puts pay out it could be a big payoff in percentage terms. So I decide to use the money in my tax free account to buy $5000 worth of put options on Suncor at $10.00 and I haven’t done any research but let’s just say it cost me $0.50 a share. Now I have 10,000 shares short, and Suncor (or whoever) goes to $5.00. I have a gain of $50,000 +/- on my puts. Nice gain. Why wouldn’t you put your highly leveraged speculation in the tax free account???

But Gov thinks it’s cheating. Why? I would be allowed to do the same thing in my full tax trading account. Why is it cheating if the government creates a tax free zone and I use it to make perfectly legitimate trades?

The government doesn’t like it because a few savvy investors did just that. They took $5000, used it to make whopping speculations that might have wiped out the $5000, but instead paid off, then did it again a second time. Now they are “sophisticated traders manipulating the accounts”, where really they just got really lucky a couple of times in a row putting the bets in the account that made the most sense tax wise in case they paid off.

I find it hard to believe that’s cheating. Buying options or other strategies is legal.

The fact is, if you create a tax free zone, the masses will flock to it.

What the particular trades the suspects made were I do not know. But I suspect they were legal trades or the government would be throwing them in jail, not revamping the rules.

#87 Midtown

If I misread the article and your interpretation is correct then I stand corrected. But I don’t know why they would have referred to the targeted individuals as “sophisticated traders” then. I have to imagine that the folks over contributing are buying $10,000 worth of puts or even $100,000 but doing so because they want the gains tax free. So, pay the penalty. But I agree that if all they are doing is increasing the penalty or prohibiting over contribution, no harm done.

I really doubt that is the government’s concern, though. They made a penalty to raise a revenue, or they would have prohibited over contribution. No, they are worried about the gains.

#107 Onemorething on 10.21.09 at 4:12 am

Da Bull, why would I do that when there are some fantastic opportunities to be had!

On the contrary brother, I thrive on the adversity, and there is lots it going on right now!

However your handle does suggest financial suicide!

Let’s hope you do okay!

#108 Soylent Green is People on 10.21.09 at 12:55 pm

I will not read the comments, I will not read the comments

#109 Bull on 10.21.09 at 1:12 pm

#99 Onemorething
Doesn’t this prove there is a basic flaw in our financial system. As long the flaw is there, the sky will never fall. What does it mean for common folks like us? Learn to swim and enjoy life.

#110 David Bakody on 10.22.09 at 8:04 am

US of A Nation debt at time of this posting.

– $ 11,977,470,080,311

Just for thought I think when this number hits $12T there will be a lot of chatter especially from the Republicans stating Pres Obama is driving American into debt and then he might just cave into what Garth has stated or it will pass as they head for 13-14 and beyond. But the bubble will burst or paper money is worthless and it will prove the world does not run on paper money just military might.

#111 positive attitude on 10.25.09 at 10:51 am

The vast majority of postings here seem to attract a kind of contrarian ‘gang’ that defines itself by understanding the true reality and profiting by that understanding usually at the expense of a ‘fool’. ‘Fools’ in positions of power (bankers, politicians, media) are the worst of the lot. What a sad way to live your life trusting no one, waiting for the doomsday and looking for another data point to validate your reality while you wait.

My view is that you can be realistic and positive at the same time. If you need a house buy one within your means or rent if that makes more sense for you. Both options are fine, one is not better than the other they are just different. We will have tough times and better times, the cycle goes on as it has done for many years. Save as much as you can, work hard, respect yourself and respect others. Same stuff most of us teach our kids. Quite simple really.

Best regards