On Monday, March 9th, the S&P closed at 683. On Monday, November 9th, it closed at 1093. The gain in nine months: 60 per cent. On the same day in March, the TSX finished at 7,466. Yesterday it quit trading at 11,486. The gain: 52%.

This means that if you’d bought some dozy index funds or EFTs (exchange-traded funds) with minimal management fees, you would have reaped one of the greatest short-term gains in stock market history. Better still, if you’d employed derivatives and bought a call option on the S&P or the TSX, your gains would have been amplified, since only pennies on the dollar were required. And if you did it with leverage, you’d have a new R8 right now and a babe on each arm.

Of course, the money made on such an investment would be in the form of capital gains, one half of which is tax-free. The other half is taxed at a maximum rate of 50%, but only if you’re in the top bracket. That means the max cap gain tax rate is 25%, or half as much as a ‘risk-free’ GIC yields. Stocks, ETFs, index funds and options also come without land transfer tax, legal fees, appraisal fees, realtor commissions or sweaty movers.

A year ago the market was dominated by fear. Investors couldn’t pile out fast enough. Today money’s pouring in through the windows, vents and electrical outlets. Greedy investors can’t get enough. This means, of course, that the market will correct. And while I stick with the forecast I made last winter that equities will far, far outpace economic growth, volatility will be a hallmark of our times.

That means when you make a capital gain, a windfall, a bonanza, there’s real logic in harvesting it. That holds true for stocks, commodities, or a house in Delta.

Hi Garth: I’ve just spent the last six hours reading deep into your blog, and agree with many of your thoughts. I have no idea if you have either the time to field general questions, but here goes anyway: I live in Delta, BC. with my girlfriend. Our house (purchased in 2000 for $283,000) is currently worth $620,000 (after $100,000 in renovations during the past three years and the real estate run-up). The mortgage currently sits at $180,000. I also have $50,000 sitting in my bank account ready to be invested.

I can either plunk that $50K into my mortgage, thus dropping the amount owed to $130,000. Or, I can take that $50K and put it into low-risk investments. Or, I can sell the house and move somewhere less pricey (further into the Fraser Valley, for example), pay the house fully out, and still have money to spare. I have no other debts, nor does my girlfriend, but we have just $40,000 in RRSPs and no other savings.

I know what’s going to happen in the next couple of years re: real estate, the economy, etc., and it’s the same scenario you envision. But the mortgage isn’t that big in the grand scheme of things, and we really do like this house. Seeing the mortgage we carry isn’t incapacitating, do you think we’d be foolish to just stay here?

Many, many thanks in advance should you reply. – Bruce

Like I said, Mr. Willis, there’s a time to sow and (verily) a time to reap. So, with a $330,000 tax-free capital gain, why the heck wouldn’t you grab the money? Sounds like you have the option of living where you want, after all. And if you do move up valley, you could be debt free and cash-positive.

But if she doesn’t go for that, don’t put that $50K against the mortgage. Here’s why: You’ve no other savings and just $40,000 in RSPs. That means 83% of your net worth is sitting in one asset – that house. That is a dangerous place to be, since this lack of diversification leaves you wide open to a real estate plop. Why throw more cash into the same basket when mortgage rates are still cheap?

It’s time to get some asset allocation going here, dude, so plow the fifty grand into the market with some nice energy or financial stocks or a well-run equity fund. If you have the room, do it through your RRSP, and also try to find ten grand for the two of you to add more growth assets inside a tax-free TFSA.

Would you be foolish staying there? No, Bruce.

Just $330,000 short of a load.


#1 Bottoms_Up on 11.09.09 at 10:56 pm

If you do opt for plunking the money into the market, do it in chunks. Pick your stocks, buy 1/3rd of your position this month, 1/3 of your position next month, and 1/3 of your position the month after. I’ve never had enough money to do this, but if I ever get it, I think this is what I’d do (I might even enter the market every 2 months).

#2 Marina on 11.09.09 at 11:02 pm


GARTH, don’t you expect another wave of stock market crash soon? I do.

#3 LS on 11.09.09 at 11:53 pm

Don’t sell the house. You like it there, your mortgage is relatively small. Even if the real estate market crashes 50% (pretty unlikely) you still won’t be underwater or even anywhere close to it.

Life is about more than money. A place to live is worth more than a few extra thousand (or even tens of thousands) in the bank. Do you really want to go from owning your own house to the hassle of renting just to possibly save a few bucks (not guaranteed!).

I’d stick the 50k in the mortgage and save a bunch on interest. Or do what garth says and invest it, but when I see the market having gone up 50% in 6 months, that’s not exactly a good sign for continued huge growth. So why bother with sleepless nights? It’s not like good stocks are a dime a dozen anymore. Life is best enjoyed in a relaxed state.

#4 Leaked Movie Script! on 11.09.09 at 11:56 pm

We’ve seen these big rallies before, during the great depression. For some odd reason speculators think that if stocks drop by 50%, it must be a screaming deal. And it is if you buy at the lows and use a stop loss.

But as Jesse Livermore tells us, it’s not a bull market unless it’s printing new highs. And in the modern age, something Livermore didn’t have to deal with, it has to be inflation adjusted highs. In real terms (and nominal at the moment), stocks have gone nowhere in almost 10 years. This is not the stuff of bull market dreams.

You can speculate if you like (nobody is investing at current P/E ratios), but be warned: know when to fold them. Volatility is rising again, and in the short term (last 10 years) that has always presaged a big drop.

None of the major markets are making new highs, despite the greatest monetary inflation in history, and despite constant rule changes and bailouts. This speaks to the amount of deflation still in the system. The government has thrown everything including the kitchen sink at the economy and developed a bunch of new things too. It’s making forecasting, which was already a pretty dismal science, into a total waste of time.

Look at the housing market in Canada. When Garth’s book came out, it was no doubt already overvalued and due for a correction. But who could have said with a straight face that CMHC would switch to 3.5% down (nothing really, that just covers their fees), 35 year ams, variable rate mortgages, and no limit to the amount they will lend, whilst at the same time Carnival Carney took rates to 0.25%, which is well below CPI, and promised to hold them there indefinitely? I have to say I didn’t see that coming as critical as I have been seeing it going.

There are no rules any more folks. Anything you thought “they”, being the government, would do to act as referees, is gone. We aren’t playing soccer anymore, and it isn’t even rugby (soccer with no rules) anymore either. It’s degenerated to some new sport where nobody even knows who’s team they are on or how many balls are allowed on the field. That’s why it’s good to prepare for the worst. A contest without rules is generally referred to as “all out war”.

So, to sum up, Canadian houses are not in a new bull market until they take out the 2007 highs (inflation adjusted, so add some small amount like 4%) on higher volume. The volume has to be higher too for it to be a bull, and the volume can’t just be Goldman Sachs (and others) front running server, which is driving 70% of the volume on the US exchanges right now.

Gold is not in a bull market either, it needs to clear something over $2000/ounce to take out the long established 1982 highs in real terms. This is a rally in a bear market.

Oil? Needs to clear $140 again with high open interest.

Hummers? There will never be a bull market in H2’s and H3’s. H1’s will probably be in great demand from various militaries so I might bet on that.

Is gold in a bubble? I think not. Internet circa 1999 is what a bubble looks like.

In fact there is only one bubble right now, and it’s in government debt. They can’t push bond prices much higher without driving yields negative, which is impossible since cash is the zero coupon bond, and ultimately there is no way any of those government bonds will be repaid.

You just need to look at the rapid rate at which all of the rules, from tax credits to FASB rules are being changed, to know that something isn’t right.

#5 Jack the Lad on 11.10.09 at 12:13 am

I’m not sure if it was Mish or Garth, but of of the two somewhere argued that the US dollar will shortly be climbing right back up (and equities, gold/oil, will fall down).

Can anyone explain how the USD will go up in spite of the fact the the US Fed is printing money like there is no tomorrow.

#6 Soylent Green is People on 11.10.09 at 12:44 am

For the right price anybody can have a babe on each arm, including me.

#7 Nostradamus jr. on 11.10.09 at 12:57 am

“”Many, many thanks in advance should you reply. – Bruce””

…No problemo Bruce…everyonce in a while I’ll do a pro bono.

…Easy…sell ur house in Delta and buy one in Vancouver proper.

They stopped making land in Vancouver Proper like 100 years ago.

Nostradamus jr.

#8 Joseph on 11.10.09 at 1:31 am


On an unrelated topic, I have a question that you can address at some future date. It is now clear that by and large international free trade agreements have benefited everyone but the USA. Given rising unemployment numbers there, why is the US leadership not passing legislation to bring production back home. It is insane to watch their manufacturing base continue to be relegated overseas when your own people are suffering for lack of solid employment. The argument of “protectionism” is silly because by not acting to bring production back home the US is basically saying that they are prepared to commit suicide economically so that foreign nations can continue to prosper at their expense. Their trade deficit numbers speak for themselves in that international free trade is bleeding the USA to death.This is insane. What is really going on here? Is it only a lack of backbone on the part of US leadership from bringing these jobs back to the USA? This is an important question because ultimately what happens in the USA will happen here in Canada given that our economies are so inter-dependent.

#9 TaxHaven on 11.10.09 at 1:54 am

Point: It’s not “worth” $620,000. To be fair, let’s call it an “estimated sale value”. But the figure is merely some individual’s assessment of the number of greater fools currently out there…it can change on a dime.

#10 Christopher on 11.10.09 at 3:12 am

buying real estate in the year 2000 is a good thing! thinking of buying in the year 2009 not that good unless you get it at the 2000’s price.

#11 NOBODY on 11.10.09 at 6:38 am

Looking at that pic, I know why Garth is obsessed with bulls…

#12 David Bakody on 11.10.09 at 7:23 am

Bruce ….. seems quite simple to me as Garth mentioned. It now becomes a matter where you want to set your roots, family and all that jazz. The biggest point Garth made is correct, putting all your eggs in one basket, it appears your present home with renovations is sound and manageable now if you can invest in RRSP’s and take the rebate and apply to your mortgage …. one will go up and one will go down all paid for by the government …. simple stuff for a guy like me who got lost on the second or third line of that high investment stuff above. You have done well so far and that is nice to hear.

#13 David Bakody on 11.10.09 at 7:41 am

#130 Pat on 11.10.09 at 12:29 am

Thanks for the reply Pat, the bottom line, a home is what people make it. There are 6 Billion people living on this planet and #1 city to live in is Montreal Quebec Canada for a host of reasons. For most all the money in world could not move them from their Oceans, moutains or the desert and list goes on. Your reasons and disapprovals are yours to have and hold. I would suggest however that there are a few hundred thousand people that may disagree. My wife told me if I won the lotto and wanted to move out of the area, send her postcard and enjoy my trip. A person asked George Burns once why he has not sold his big home since Dorothy died … to whit he said ” I know where my socks are” I was my own socks and put them away myself. (never lost once since the day I started doing it)

#14 double mike on 11.10.09 at 8:16 am

#8 Joseph

“… Given rising unemployment numbers there, why is the US leadership not passing legislation to bring production back home. … ”

Funny. What kind of legislation would it be? Tariffs? Last time they tried it caused Great Depression and ultimately WW II.

Besides what exactly should be done? Should they try to bring back electronics industry? Steel? Coal? Didn’t NA automotive fiasco show how bloated and inefficient any unionized workforce can become? Business is supposed to make money, and it always will try to do so. If assembling TV sets 10 times cheaper in China they will be assembled in China, unless we’re talking full blown socialism and 5 years plans.

#15 Some Guy. on 11.10.09 at 8:51 am

Ya, I’m confused again. Didn’t you say to exit the market right now as it has had too strong of a run given the fundamentals – but are now advising Bruce to enter the market in some capacity? While I do understand that you are being selective in which areas to put his money in, isn’t everything due for a correction right now??

PS> Your blog is the greatest thing out there – filled with your unbiased opinion and with nothing to gain. Refreshing.

Simple. (a) If you have been in the market and scored a 50% return since the Spring, cash in. Bird in the hand. (b) If you are not diversified and lack growth assets, then anytime is appropriate to enter, since this is a long-term (at least a few years) ascending market, albeit it with violent gyrations. Bruce is a one-trick pony, and in this environment that’s a gelding. — Garth

#16 cJ on 11.10.09 at 9:05 am

garth I’m confused on one thing, if i understand correctly you believe the end of the housing market will come because of an increase in rates. I know you suggest other factors like demographics, climate change but those are probably a decade away at least. So, what happens if we have a situation like Japan has experienced for the last 10+ yrs, ie low interest rates, high unemployment and low GDP growth. I think that is a very distinct possibility here in NA. If that happens then its very possible that housing may never correct and in fact given extra stimulus (like Obama has done) go higher. Housing markets around the world are moving higher, should I consider this a possibility in Canada or am i missing something? There is no guarantee that rates will go higher in the next 10 yrs and over that time I could conceivably pay off my house at an all time low rates.

Won’t happen. RE is based on supply and demand. Demand is getting close to being exhausted and cannot rise without a further interest rate decline. But rates have bottomed. Therefore only income increases will keep the fires burning. And how many people do you know getting raises – or even their jobs back? BTW, Japan’s real estate market crashed and never really recovered, despite dirt-cheap money. It’s all about the middle class. — Garth

#17 Downsized and Delighted on 11.10.09 at 9:16 am

$330,000 tax free capital gain????????? Let’s recap:

Expected Sale Price $620,000
Less Real Estate Commission 4,000

Net $616,000
Less Costs:
Purchase Price $283,000
Land Transfer Tax
estimate 3,000
Renovations 100,000

Net Gain $230,000

So if you get your price you will be 230,000 ahead. Of course this doesn’t include any extra expenses such as furniture and appliances that you will need to repurchase to fit your new home. If you buy again, you will pay land transfer again, legal fees, moving expenses, and you will be making the number one mistake in real estate investing – you will be moving to a less desirable location.

Lateral moves in real estate are usually a big waste of money unless there is a compelling reason to do so.

So is blog arithmetic. Living in a home for 9 years and upgrading is more in the ‘lifestyle’ category than capital costs. The guy’s leaving big money on the table by staying in a property that has appreciated, when he is seriously undiversified and exposed to risk. Whatever the number is for him, it’s crucial, since besides that house, he’s essentially wealthless. Compelling enough? — Garth

#18 The Dude on 11.10.09 at 9:18 am

Garth likes R8 too?
Nice… Great minds think alike. Screw the Porche, Audi R8 all the way! (After cashing in the rally)
BTW I like babes too. That’s 2 for 2!

#19 Gord In Vancouver on 11.10.09 at 9:25 am

In today’s financial markets, you must have balls of steel.

#20 Downsized and Delighted on 11.10.09 at 9:32 am

#15 – Some Guy “PS> Your blog is the greatest thing out there – filled with your unbiased opinion and with nothing to gain. Refreshing.”

I enjoyed your question to Garth – it was bang on! Your comment above however deserves some scrutiny. Garth makes his money from speaking engagements and writing books. At least consider who is going to hire Garth to speak given his “unbiased” thoughts on this blog?

You have no idea how I make my money. But it’s not here. You come daily to partake and engage in the information exchange, which costs you nothing. At least be a gracious guest. — Garth

#21 cJ on 11.10.09 at 9:33 am

garth i appreciate your response but demand can also be effected by raising wages not only a decrease in interest rates. If you are saying interest rates are going up then that implies inflation and that means an increase in wages which would support housing prices….arggghhh, my brain hurts!!

Rates will rise because of the demand for borrowed money, not because of inflation. Government debt must be financed. Rates are used to curtail inflation after it appears, not usually to modify it in the gathering stages. The BoC will have no choice but to increase the cost of money, since the US will do so to support the greenback next year or in early 2012. — Garth

#22 Grantmi on 11.10.09 at 9:34 am

I was wondering the same thing about Japan’s RE market as well during those years of CHEAP CHEAP $$$.

Ouch! Whistler Ski Slope!


#23 robert on 11.10.09 at 9:49 am


Nice dose of reality post LMS.

I know the correlation and causation argument but I still think Japan might provide the best road map of the bond market going forward. Don’t forget the US mightily criticized Japan’s “zombie” bank plan in the 90s yet has pretty much adopted the same extend and pretend playbook. Why would the outcome be terribly different? I agree that much of the debt will never be repaid (at least not in several lifetimes) however the same can be said for a lot of the mortgages written in the last few years and that certainly has not stopped house prices from rising into the stupid zone.

#5 Jack

The US dollar is being used as a carry trade vehicle in the same way the Japanese yen was. Speculators are borrowing low interest dollars and leveraging them to invest in “hot” stories like commodities, corporate bonds and emerging markets, all of which offer the illusory perception of higher yields. I say illusory because the gains are predicated on the ongoing, straight line devaluation of the world’s reserve currency not because of any real, sustained fundamental demand. In fact the demand for many commodities is still falling in terms of their real non-speculative end use. Unemployed or underemployed workers (and similarly idled or under utilized industry) consume less oil, less electricity, less gas. Unfortunately over-speculation by way of carry trade and artificially low interest rates has temporarily (re)inflated commodity prices far beyond what is justified by today’s supply and demand. Thus, at least in the view of this humble observer, peak credit rather than peak oil is paving our road to serfdom and driving our economy to dysfunction.

While the eventual destination (complete worthlessness of the US Dollar and all fiat currency) is hardly arguable, history has taught us the path is long, uneven and fraught with enormous risk for those who engage in the carry trade gambit. A great deal of the debt in the world today exists in the form of US dollars and will have to be repaid in US dollars. While it appears that policy makers in the US are up to their same old devaluation tricks their efforts, in the end, will be seen as futile and misguided. Most people simply do not realize the debt mountain has grown by several Everest orders of magnitude beyond our dear leaders’ capacity to manipulate (ie. inflate) a positive outcome this time around.

There is a mathematical limit to the amount of debt an economy and society can bear. No matter how low interest rates go, if debt is unchecked and continues to grow, the cost of supporting it will eventually exceed all expenses and consume all income. On our present course we are careening towards that mathematically certain wall at 90mph in a 72 Dodge Polara with bad brakes, worn out steering and no seat belts.

#24 David Bakody on 11.10.09 at 10:07 am

Nothing changes, nothing changes ….. housing goes up and housing goes down … the same with stocks. For the most part people do exactly what they want, the difference is a few people educate themselves first wrt to finance, usually these people have grown up with it. Others learn by trial and error. Mr. Turner has been gracious enough to provide an overview of the facts in hope that many will be able to cut the error factor to a minimal period of time.

For what it is worth our biggest problem lies in Ottawa and Washington and I have come to the conclusion that both are a loss cause.

So live in moderation, pay down debt and invest wisely, should you want to play with the big boys, be prepared!

#25 Pat on 11.10.09 at 10:11 am

@#13 David Bakody,

Please don’t take my comments about that Dartmouth neighborhood personally. I am sure that you and your relatives and friends who live there like it. However, this does not mean that the RE prices there are not inflated.

And one more thing. Perhaps the reason you like Dartmouth is because you grew up there and/or your friends and relatives live there too. So you can see that to an outsider Dartmouth (and most areas of NS) do not have the same appeal as to the locals.

Maybe you can help me answer this question – where does the money come to support the appreciation of RE prices in the Halifax area since 2000? I am wondering, sincerely.

#26 TorontoBull on 11.10.09 at 10:20 am

BTW, Japan’s real estate market crashed and never really recovered, despite dirt-cheap money. It’s all about the middle class. — Garth
So did their stock market, albeit at a much worse rate…

As I said, this will not be out experience – in terms of rates of markets. Canada is not Japan. — Garth

#27 tony on 11.10.09 at 10:23 am


You’re telling this person to put money into the equity market, but earlier in the blog you are telling readers to harvest their money. Should you only stay in if your money is in RRSP’s and the TFSA?? Please clarify!

Already clarified. — Garth

#28 Onemorething on 11.10.09 at 10:24 am

Get the money, Get the money!

Sell that house! Rent enjoy for 12 months then pick it back up for $400K.

Oh ya, my S8 is for sale! It’s in Kongers though!

#29 Downsized and Delighted on 11.10.09 at 10:32 am

He has $50,000 in cash and $40,000 in RRSPs besides the house. That isn’t exactly “wealthless”. He has $400,000 equity in his house valued at over $600,000.
If the market drops 20% his life will not change at all.

If he sells the house and sits on the cash for awhile, the market could drop and he would be able to repurchase a home at a lower cost. That’s a very appealing option.
It does involve putting one’s life on hold – perhaps indefinitely. Only Bruce can decide if he wants to do that. For couples with kids it involves a little more – like spending (investing?) your kids’ childhood. Personally, I wouldn’t do that.

There is no mention of children. Meanwhile, I am waiting for a retraction of your earlier statement. — Garth

#30 Downsized and Delighted on 11.10.09 at 11:21 am

I will happily retract the statement Garth and restate it in terms that are more appropriate.

When anyone makes comments on this blog or the internet in general we should all ask ourselves “what is the motivation for these comments?”.

We are all biased Garth by our life experiences, our occupations, our investments, our real estate holdings – etc.

#31 Grantmi on 11.10.09 at 11:25 am

Here the other looming crisis!!!! Health Care!!

With the Boomers getting older and older. (and.. Please no anti Boomer bashing comments! I’m one of them… mind you at the long tail. BUT>>>> is it just me.. but are the front end BOOMERS MORE cranky then the past group. man oh man! It’s like… “get out of my way!”)

With the Canadian G. funding close to 70% of health care.. I see more taxes coming folks!!

“This will not end well!”

#32 Devil's Advocate on 11.10.09 at 11:26 am

“Rates will rise because of the demand for borrowed money, not because of inflation. Government debt must be financed. Rates are used to curtail inflation after it appears, not usually to modify it in the gathering stages. The BoC will have no choice but to increase the cost of money, since the US will do so to support the greenback next year or in early 2012.” — Garth

What is quite disturbing is that it is not the demand for conumer debt which will cause rates to rise but rather that of government. In their effort to suck the last hoarded dime from our pockets they are taking too the lint.

Story (fictional but is it…)

Tourist rolls into town, needs a place to stay, checks into a hotel, asks to see a room, gives a $100.00 bill as a deposit.

As soon as the tourist leaves the lobby the hotelier grabs the $100.00 runs down the street and gives it to the news paper owner with whom he has a $100.00 debt for advertising.

Once the hotelier leaves the news paper building the news paper owner runs down the street and pays the paper mill which supplies the newsprint to the newspaper.

News paper owner leaves and the paper mill owner runs down the street and pays the trucker who delivers the raw newsprint to the newspaper.

Trucker then runs down the street and pays the local hooker.

Local hooker runs down to the hotel and pays the hotelier for the rooms she rents.

Tourist comes back to the lobby and tells the hotelier the room was not satisfactory. Grabs the $100.00 bill off the front desk and leaves.

Everyone in the town is happy as their bills have been paid.


#33 $fromA$ia on 11.10.09 at 11:32 am

I found this pretty interesting. US dollar/ inflated markets reflecting weak US currency could mean US stock market is tanking while showing a rise.

#34 Hiteclowtec on 11.10.09 at 11:36 am

The TD Bank is also counting on rising rates. Garth do you think they will crest 6% by 2019 ?

TD Bank Monthly Pay Step-Up Extendible Notes, May 2010 to November 2019

Short Description: Offering of Extendible (at Issuer’s Option) Step-Up Notes
Maturity: May 24, 2010
Coupon: Year 1 @ 3.15% s/a
Year 2 @ 3.25% s/a
Year 3 @ 3.35% s/a
Year 4 @ 3.55% s/a
Year 5 @ 3.80% s/a
Year 6 @ 4.05% s/a
Year 7 @ 4.50% s/a
Year 8 @ 5.00% s/a
Year 9 @ 5.50% s/a
Year 10 @ 6.00% s/a
Price: $100.00 CDN per $100 par value.
Yield to Maturity: 4.14% semi-annual ; 4.19% annual
Settlement: November 24, 2009.

#35 gordon on 11.10.09 at 11:38 am

List your house for sale with an agent that will bring you offers that will let you lease back your home for a year.

If the market rent for your home is $2,500 per month, have the agent explain that you will pay $3,000 per month with a years lease.

List the house $75,000 more than your competition and only take a full price offer.

What your trolling for is the greater fool who is willing to finance another $75,000 in order to get an additional $500 a month rent. Why will it work, because the $75,000 is someone else’s money (the bank) and the $500 (less the additional mortgage cost of say $250) goes into the prospective buyers pocket.

Result. You get to live in your home for another year or more. You pay an additional $6,000 a year in rent but received an additional $75,000 in tax free money.

If the market falls in prices, you buy back your home or buy a better property.

You gotta love a greater fool market.

“Greed is Good”

#36 David Bakody on 11.10.09 at 11:56 am

From to-days Guardian.

Lloyds Banking Group to cut another 5,000 jobs Unions accuse the bank of ‘corporate arrogance’ as the HBOS takeover claims more victims

The slash and burn to influence false market conditions continues sucking more into the game….

When only a handful remain at their desks stressed to the 9’s what will happen then? Throw them to the wolves and hire from the first 20% I have spoken of.

The crash will happen without warning to millions who just wanted another month or two or so before they made their move. The more things change the more they remain the same.

#37 frank pasquale on 11.10.09 at 12:05 pm


No the hooker is the loser as she lost money on her services .
She had to sleep with a stinky trucker and has nothing to show for it.

The trucker is the winner. Unless he had to sleep with a stinky hooker.

#38 taylor192 on 11.10.09 at 12:09 pm


On a different note, here’s an article that agrees with you about cutting spending and raising taxes.

The article states that GDP growth will lag for a decade, thus deficits cannot be paid off with increased tax revenues from an economic rebound. Deficits must be controlled with balanced budgets and increased taxation.

#39 Peter Wiener on 11.10.09 at 12:09 pm

# 4

Great synopsis and description of the investment environment and ecology at this time. Thanks for the post.

What are you doing now for investment of your life savings – staying in cash? I know it may sound stupid, but the alternative to me is playing in a rigged game of buying overvalued securities dealt by criminals in
a casino where the owners keep changing the rules. I, as you point out in your post, cannot “invest” this way, only “speculate” and I am not prepared to gamble my hard earned assets.
Any suggestions?
Thanks in advance for any insights, again thanks for your post.

#40 taylor192 on 11.10.09 at 12:21 pm


You’ve left a couple variables out of the equation:

1. How old are you?
2. Do you have kids?
3. Do you have any other form of pension?

Lets say you are both 35yo, each make $50K for a total of $100K with no pensions. You’d want to aim for 60% ($60K) at 65yo and live till 85yo.

With $40K in your RRSP, and lets say 7% returns to retirement, 4% after retirement, you need to put $10K into your RRSP every year till retirement. That’s 10% of your total earnings, and should be easy to do.

Or dump the $50K into your RRSp for a total of $90K, and you’ll only need to contribute $6.6K, or 10% before it’ll be worth it, and I doubt that in the burbs you’ll be as affected as the over-priced Yaletown condos after the Olympics.

#41 David Bakody on 11.10.09 at 12:34 pm

More news from the other side of The Pond.

There’s less oil in the world’s reserves than the International Energy Agency says, according to insiders. Terry Macalister reports that the allegations undermine the energy policy of western governments, including Britain.

And that ladies and gentlemen is a Big Hello! AND a host of issues ….. all bad!!!

#25 Pat on 11.10.09 at 10:11 am

No I do not, again for what it is worth all this really after dinner conversation. Those who wish to research and check out the real state of world affairs can do so. I will say thought in to-days world it is best to at least understand exactly what is going on.

Pat as most here know, I am a Hamilton boy and once proud Local 1005 Stelco Hilton Works member raised in Wentworth County and have lived in Nova Scotia for a very long time. Not sure I would return but often thought of nice place in Bronte would work …. would have to be near water, having said that I fully understand our friends out West who would miss the mountains.

#42 Dave on 11.10.09 at 12:37 pm

it seems a lot of people on here end their post with “this will not end well” in order to follow Garth. I’m having trouble making a point and being able to use that same line..

hmm, I got one! I ate Taco Bell last night – 5 soft tacos and a fries supreme with extra cheese and chili. My stomach has been rumbling this morning. This will not end well.

#43 $fromA$ia on 11.10.09 at 12:39 pm

#34 Hiteclowtec on 11.10.09 at 11:36 am The TD Bank is also counting on rising rates. Garth do you think they will crest 6% by 2019 ?


Thats pretty funny Dude, we’ll likely see 6-8% or more within a few years.

#44 RJD on 11.10.09 at 12:43 pm

Don’t move up the valley. Have you ever been there in summer where all of Vancouver’s smog gets trapped?

#45 Drew on 11.10.09 at 1:15 pm

$300g’s is a good chunk of pocket change. Like the Steve Miller Band song goes, “Take the money and run”. Invest the $300g’s, rent for a few years and capitalize on the RE market bust.

#46 Bill-Muskoka (NAM) on 11.10.09 at 1:28 pm


So, based on the picture, does this mean we are seeing ‘end’ of the recession, or is it just a ‘ballsey tail’?? ;-)

#47 Tim TodlleHeimer on 11.10.09 at 1:38 pm

Heard it all before… on this blog:)

Memorable Quotes

“The Canadian economy is headed for a decade of stagnant growth that will test the budgets of governments and ordinary Canadians”

“It is critical to recognize that things will not simply return to how they were”

“households cannot continue to borrow at rates exceeding income growth and prospective asset appreciation.”

” the slower economic growth will impact Canadians’ standard of living”

“TD expects an aging population in Canada will slow labour force growth and the country will need significant productivity gains just to keep the economy on track”

“Kevin Page, the Parliamentary budget officer, is preparing a major report on the impact of the aging population”

“both Ottawa and the provincial governments must curtail spending since inflation-included nominal growth, on which tax revenues are based, will not advance much above four per cent”

#48 jess on 11.10.09 at 1:48 pm

If i was you i would sell -cash is still king in my view. too much uncertainty /rule changes etc.

I wonder what the treasury secretary meant by ‘non traditional’ channels.

“It would require large institutions to hold more capital and pay higher regulatory fees, as well as allow the government to liquidate them in an orderly way if they begin to fail. The plan also seeks to bolster nontraditional channels of finance to create competition for large banks. If Congress approves the proposal, Geithner said, it would be clear at launch which financial companies would face these measures.

Economists and officials debate whether these steps would address the too-big-to-fail problem. Some say, for instance, that determining the precise amount of capital big financial companies should hold in their reserves will be difficult.

Geithner acknowledged that difficulty but said the administration would probably lean toward being more strict. Taken together, the combination of reforms would be a powerful counterbalance to big banks, he said.

“Our system is not going to be significantly more concentrated than it is today,” Geithner said. “And it’s important to remember that even now, our system remains much less concentrated and will continue to provide more choice for consumers and businesses than any other major economy in the world.”

Mr. Henry Liu makes interesting points in regard to the problem of less competition.

“In mathematics, the theory of large numbers includes the phenomenon of exponential growth which occurs when the growth rate of a mathematical function is exponentially proportional to the function’s current value. Such exponential growth is mathematically unsustainable and will eventually implode.

Multilevel marketing, for example, is designed to create a large marketing force by compensating not only for sales it generates, but also for the sales of the other marketing forces that each market force introduce to the company, creating a limitless down-line of distributors and a hierarchy of multiple levels of compensation in the form of a pyramid, such as that employed by Amway Corporation. The crisis in sub-prime mortgage is caused by massive network marketing, even as each subprime mortgage individually is only a small contract.

No bank, however big and well capitalized, can withstand the onslaught of a systemic breakdown of market-wide counterparty exposure built by multilevel marketing of liabilities such as subprime mortgages and their securitization.

Thus the problem of systemic market failure is caused not merely by unit bigness, but also by the absence of firebreaks to prevent unsustainable exponential growth in risk exposure and the resultant systemic contagion effect of large number failures from chained counterparty reaction. It is hard to understand why policymakers are not cognizant enough of this obvious fact to focus on the need for firebreaks in interconnected financial markets. These firebreaks are needed both prevent the buildup of risk chain reaction and to contain systemic failure contagion.

#49 Roial1 on 11.10.09 at 1:58 pm

#44 RJD on 11.10.09 at 12:43 pm

Don’t move up the valley. Have you ever been there in summer where all of Vancouver’s smog gets trapped?


Move to the Comox Valley. (There really is a “Lotus Land”)

Hell, For $299,000 you can buy a large half (1600sqft) of a duplex on a golf coarse in Campbell river. (comes with membership in the club.)

#50 Men With Hats on 11.10.09 at 2:17 pm

That is it . I am going to play Russian roulette with a fully loaded revolver .

#51 jason on 11.10.09 at 2:20 pm

Well there is not much use talking to the Vancouver real estate true believer is there? The scene is reminiscent of the old movie the ‘Night of the Living Dead’. Zombies roaming in the dark night and continuous cold black rain screaming ‘it’s the greatest place on earth’.

Then there’s the big English word tautology; as in a dog is a ‘canine creature’. Ask the true believer why the price of a rental property would go up without an increase in the rents. Well they will say it’s the value of the land.

There’s a big difference of course between Yankees and Canadians. Canadians are self effacing humble folk. Yankees are natural braggarts and stentorian to boot. I’ve been told that in Texas they even have a license plate that says ‘the greatest place on earth’!

The latest from the local (Sewery B.C.) papers (The Leader Nov. 6, 2009) has a Native Indian Band wanting to have private land developers pay a ‘development fee’, and undoubtedly there will be 12% HST on top. The true believers won’t worry though. Heck its only $10,000 or $15,000 or $20,000 on a $500,000 home. When the other thousand Native Indian Bands get the same idea well that’s not a problem either. After all it’s the ‘greatest place on earth’. Pretty soon that home will be worth a billion dollars. I think it’s a great idea too. Eventually you lay ten paving stones for a patio and pay a development fee, plus HST of course.

Personally speaking I’d spend the rest of my life in black continuous cold rain before I’d ever live in the sun and warmth of Florida.

#52 if you don't like it on 11.10.09 at 2:21 pm

Keep your house and keep enjoying life. Period.

As someone said earlier, it’s not all about money, its about enjoying life.

#53 dd on 11.10.09 at 2:39 pm

#7 Nostradamus jr

…They stopped making land in Vancouver Proper like 100 years ago….

Doesn’t the silt coming down the Frazer river add to the land mass? So in a million years from now Vancouver land mass will actually be growing! Not to worry if you are an old fart like Nost.

#54 CalgaryRocks on 11.10.09 at 2:51 pm

With $40K in your RRSP, and lets say 7% returns to retirement, 4% after retirement, you need to put $10K into your RRSP every year till retirement.

This sure sounds easy when you can pull ROI% out of thin air. Maddoff had to run a Ponzi scheme to get 12% fake returns but average schmoe is gonna get 7% without even trying for the next 40 years.


#55 Vancouver_Bear on 11.10.09 at 3:05 pm

And here comes Canadian style lost decade:

#56 pjwlk on 11.10.09 at 3:11 pm

#4 Leaked Movie Script! Awesome post! There are times when I start questioning myself and the wisdom on this blog, and when I really need an infusion of sensibility to hold back the tide of MSM BS and the BS from all the seld proclaimed “positive thinkers”. Your post today has provided a lot of sensible thinking for me to ponder.

Thanks for your contribution.

#57 TorontoBull on 11.10.09 at 3:46 pm

As I said, this will not be out experience – in terms of rates of markets. Canada is not Japan. — Garth
Canada is not US either, still:
The economy in the U.S. could rival Japan’s so-called “lost decade” of the 1990s, Rosenberg said. “This has some prints of Japan in many respects,”

Garth, you may be surprised by the similarities between Japan and Canada. I suggest you check the following experts:
1.Hirayama, (housing)
2. Okina, Shirakawa, and Shiratsuka (on the factors on the formation of the bubble anf the post-bubble economy)
3. Cowling and Tomlinson, on ‘hollowing out’ of Japanese industry

Granted there are differences:
1.Japanese property market became much more inflated than Canada’s (they had intragenerational loans). Actually it resembles Vancouver the most.
2. Japan’s demographic situation is worse than Canada, which actually might help to mitigate the price declines here.

There are more issues at hand, but these are rather important

#58 Hiteclowtec on 11.10.09 at 3:46 pm

#43 $fromA$ia

6% to 8% in a few years you say !! Would be great news for a lot of retirees, trying to live on what`s left of their funds.
What If we end up with a Japan style 0% forever_ ???

#59 jess on 11.10.09 at 4:26 pm

“credits to reduce their own tax bills”

WASHINGTON (AP) — Fannie Mae said Monday it may have to ask the government for more financial assistance because the company cannot sell $5.2 billion in tax credits.

The Treasury Department last week blocked the mortgage giant from selling about $2.6 billion in low-income housing tax credits to investors that included Goldman Sachs Group Inc. Because the investors could use the credits to reduce their own tax bills, Treasury said the sale would result in a loss of tax revenue greater than the savings to the government.

“We have said all along that we would make determinations based on what is in the taxpayers’ interests,” said Andrew Williams, a Treasury spokesman.

Fannie Mae requested $15 billion in financial aid last week after reporting a $19.8 billion quarterly loss, bringing the taxpayers’ bill for the mortgage company’s rescue to $60 billion.

#60 Toronto C9 Renter on 11.10.09 at 4:48 pm

to #54 “where is the average schmoe gonna get 7% ROI”

Not rocket science. Random examples of stable dividend stocks currently distributing in that range:


etc, etc

You don’t have to start your own Ponzi to earn a respectable return. (However starting your own Ponzi might be fun)

#61 Keith in Calgary on 11.10.09 at 4:54 pm

We should keep a running total of how many times the word “UNEXPECTED” appears in MSM reports pertaining to the economy over the next 12 months.

#62 David Bakody on 11.10.09 at 6:12 pm

It now is most apparent the words spoken on this site by Mr. Turner (and we who cared) all couched in various sponsored speaking engagements from coast to coast are now being reinforced by TD Bank who can no longer sit in silence.

OTTAWA – It may one day be remembered as the lost decade, in economic terms.

A new report published by the TD Bank says Canada is headed for a decade of stagnant growth that will test the budgets of Canadian households and governments alike

My 2 cents …. The cost of electing a man who said; “Just me a chance” over 3 years ago will be more than ever be playing the blame game and wait till next year until he moves on to some plush appointment and he will continue spending your/our money. What’s this got to do with RE ….. once again “Everything” because both Mr. Turner and the TD Bank know far-far, to-too many Canadians have all their wealth literally hanging over their heads with absolutely “No Job Security” and this government as well as others can only generate income by raising interest rates and taxes. Think if there just one smart finance person within the G-20 that had a plan he/she would be putting it forward, but no they just continue to print more money while oil rich countries sit and wait, but the problem is (BIG) who will have money to buy it?

Not all doom and gloom for those who educate themselves in self preservation in tough economic times.

PS: even more terrifying Google FN 57 Pistol and thank your lucky stars you live in Canada even with cracks in our Canadian Shield.

#63 Devil's Advocate on 11.10.09 at 6:21 pm

#64 Bill-Muskoka (NAM) on 11.10.09 at 6:21 pm


Gazing upon the ML Bull I start thinking of Rump Roasts and Steak! Anyone got a sharp knife or cleaver handy?

#65 Bill-Muskoka (NAM) on 11.10.09 at 6:23 pm

#61 Keith in Calgary


Now there is a word Nostradumas can never use and keep face, eh?

#66 Bill-Muskoka (NAM) on 11.10.09 at 6:28 pm

Speaking of the stock market and all that jazz, here are the latest on one of those fine Shysters, the infamous Earl Jones!

Jones unlikely to spend Christmas behind bars

Jones’ employees unquestioning: Bankruptcy papers reveal chaotic office

#67 Two-thirds on 11.10.09 at 6:34 pm

Canada’s “lost decade”

“A new report published by the TD Bank says Canada is headed for a decade of stagnant growth that will test the budgets of Canadian households and governments alike.”

Once again, demographics are at play here.

The obvious question is: how to position oneself to not only prevent financial damage but actually prosper during a “lost decade”-type event.

What would the average Japanese middle-class citizen do differently if they were to go back in time prior to their lost decade?

Avoid RE? Buy gold? Short their index?

#68 CalgaryRocks on 11.10.09 at 6:50 pm


I don’t know, some of these are down some 80% high to bottom. Way too volatile for my RRSps

#69 Schroedinger's Bull on 11.10.09 at 7:22 pm

#32 Devil’s Advocate:

You seem to be implying that you’ve stumbled onto some cleverly hidden secret…but you haven’t. Money is just the medium of exchange. Your story illustrates very nicely how money SHOULD work.

i.e. I need a house, and I’m a baker…well, I could bake you 100,000 loaves of bread, but what would you do with them? Without money, we’re both screwed…with money, on the other hand, you can store up your need for bread and use it up over time…therefore our needs coincide and we’re both happy.

In your story, the money is a red herring. Everybody’s exchanging services. The money’s just there to allow it to happen.

#70 Sukh on 11.10.09 at 7:24 pm

Garth, how about adding a ‘thumbs up’ and down feature to individual posts??

#71 john m on 11.10.09 at 7:44 pm

The stock market in our current environment (and obviously for many years to come) is like a big slot machine with no sustainable enterprise in its coffers or future just simply relying on the suckers standing in line to deposit their money…..occasionally paying out some serious cash to a small percentage gradually eating up the majority’s nest egg……… like real estate , our security and our way of life are all headed for a crash….unless our powers that be had a plan———-in my opinion they don’t……….everyone seems to think this is all going to go away “its only a temporary recession”………….the huge debt,responsibilities and liabilities that have been piled upon the average Canadian taxpayer will not go away for many years and daily the time span for recovery (if at all possible) is increasing without any plan for recovery that i know of………does anyone?

#72 Andrew toronto on 11.10.09 at 7:55 pm

Question , does the HST take effect prior to closing a deal on a new home.. for example if someone was to purchase a new home today and close in JULY 2010, does that mean HST will be included in the price .and of course the home would be over 400,000 thanks in advance

#73 Bottoms_Up on 11.10.09 at 8:11 pm

#66 Two-thirds on 11.10.09 at 6:34 pm
The Japanese would have gotten out of real estate and hoarded cash.

Just heard a Toyota commercial say this: the MRSP for a corolla today is less than 7 years ago….can you say ‘deflation’?

#74 jess on 11.10.09 at 8:12 pm

Was all that bubble making financial machinery worth it? yippeeeee i forgot we got the ATM machine!

Can china really continue as if nothing has happened to their environment …how can they blame the west? It would seem to me that ‘to grow rich is glorious’ didn’t intend to cover the counterparties featured in this link below.

#75 kitchener1 on 11.10.09 at 8:34 pm

Regarding Japan:

Canada is not Japan, I don;t think we will ever have 100 year ammorts.

Japan had the carry trade keep them afloat for years, you can;t do the carry trade if all the G20 are keeping rates in sync.

Japan citizens as a whole had savings vs Canadians who are in debt.

The carry trade went against them last year and it slaughtered their stagnant economy

The aging demographic:

Being a boomer sure had its advantages but it also has its disadvantages.

Everyone cashing out of the stock markets at the same, they have the largest % of wealth and when they move their capital the market reacts.

Everyone trying to cash out of their homes at the same time.

There is no market force that could equal the combined wealth of the boomers.

Ironic because they need interest rates at 7-10% to generate good returns on their investments, yet that interest is going to kill their #1 asset, Real Estate.

The biggest trend I see in RE from boomers is a resurgence in smaller towns outside city centers (1 hour drive from the core) In Ontario, I see Barrie, Collingwood, Oshawa, Kitchener, Guelph, Cambridge doing well as the boomers can sell their homes in the city cores for good $, by small war time bungalows for cash in a small city as well as some vaction property and still have $ left over to invest.

The future of RE in Canada is going to be very region or town specific

#76 Nostradamus Le Mad Vlad on 11.10.09 at 8:43 pm

Bull’s Balls? In some exotic locations (my stomach), they’re a delicacy!
#143 Daystar — “Its my time for sun now :-) Namaste.. Lorne Mccuaig

Brain! How the hell are I? You’re in pretty good shape!
This is training currently going on in Canada for the Pneumonia / Ebola Virus, which is what is happening presently in Ukraine.

Supposedly, the Ebola virus has a 90% success rate at population downsizing; this is combined with the H1N1 virus. Also — Bioweapon
and Nutz!
Gold money bugs — you figure it out. — Gold or Money

#77 jess on 11.10.09 at 8:45 pm

Is this an or else or getting close to a temporary jubilee?

Easing debt classifications means less transparency and causes anxiety for overseas investors,” said Nemoto. “They may lose business opportunities overseas and find it difficult to raise funds abroad.”

Potential to ‘Backfire’

Japan’s three largest banks, including Mitsubishi UFJ Financial Group Inc., posted combined losses of almost $14 billion last fiscal year as bad-debt charges surged.

“There is a potential for any proposal along the lines Kamei has made of debt moratoriums to backfire horribly,” said David Threadgold, a Tokyo-based analyst at Fox-Pitt Kelton. The plan could make banks more reluctant to lend to small firms, Threadgold said.

The moratorium, postponing repayment of principal and interest, will be extended to individuals as well as firms Kamei said. It will aim at giving relief to companies with about 100 million yen ($1.1 million) or less in capital.

Corporate bankruptcies increased 12 percent to 16,146 in the year ended March 31, the highest in six years, according to data from Tokyo Shoko Research Ltd. Loans to small enterprises fell 2.3 percent in August from a year earlier, the ninth-month of declines, according to data from the Bank of Japan today.

#78 Investor on 11.10.09 at 9:20 pm

Q. Has Greenspan learned any lessons from the stock market bubble?
FS. He certainly remembered how to lure the public into an inflating bubble: cut interest rates. The platform for wild housing speculation was the fed funds cut from 6.5% in 2001 to 1.0% in 2003. Money always chases the rising asset class, especially when so much of the money is superfluous to the “real” economy: From the time Greenspan was named Federal Reserve chairman until he left office, the nation’s debt rose from $10.8 trillion to $41.0 trillion. The “real” economy only grew by a fraction of that rate-of-growth. Alan Greenspan had turned the country into a gambling casino.
The median cost of an existing, single-family house in California rose from $237,060 in 2000 to $542,720 in 2005. We can see the consequences are spreading far beyond the housing market.

#79 Evangeline on 11.10.09 at 9:35 pm


((What would the average Japanese middle-class citizen do differently if they were to go back in time prior to their lost decade?))

I was talking to a financial planner at TD last week and she told me that she had lots of Japanese clients. What a lot of them did was offshore their invesments in Canada, Australia, etc. where the markets did better, and only withdrew what they needed.

Problem is today … the problems are global so there is nowhere to hide.

#80 Boombust on 11.10.09 at 9:54 pm

“…has a Native Indian Band wanting to have private land developers pay a ‘development fee’”

Oh, you can bet they’ll get their pound of flesh.

Also, with ALL THE TAXES the First Nations people pay, it’s no wonder they are receiving such top billing in the upcoming Owe-lympics!

Every time I turn on the TV, they seem to be “included” while others are “excluded”.

#81 Joseph on 11.10.09 at 9:56 pm

#14 double mike said,

“What kind of legislation would it be? Tariffs? Last time they tried it caused Great Depression and ultimately WW II.”

If you haven’t noticed, the USA is ALREADY IN A DEPRESSION with official 10.2% unemployment and between 18% and 22 % unofficially if you count those who have given up working or who are working part time, but would like to work full time. And all this with no end in sight to the unemployment numbers getting any better any time soon. It can’t get any worse than this , so yes, by all means, put up the tariffs and re-train the few workers who will be cut off by trade retailiation. The USA will still be better off by the millions of jobs that will be coming back home.

#2 ” If assembling TV sets is 10 times cheaper in China they will be assembled in China, unless we’re talking full blown socialism and 5 years plans.”

Nope, they won’t be assembled there if the USA passed legislation that says products that can be built in the USA need to be built in the USA. The prices will be higher for domestically produced goods, but this is what the US Fed is trying to make happen anyway by weakening the dollar and printing tons of money in efforts to inflate the US government’s debt away. But as it stands now they are trying to accomplish this by walking the US economy and the integrity of the dollar on a tightrope, instead of just waking up one morning and deciding to directly confront the problem, and do away with these insane international free trade agreements which are working against their own national interests on a daily basis.

#82 conan on 11.10.09 at 10:04 pm

Re 74

Good points about Japan but I must admit I am trying without luck to find rates of returns for: Domestic Japanese bond funds 1990 – 2000. Anyone know where to find?

I agree with your one hour out of Toronto theory. Nice homes 150 k and rent them out for 900 + / month. But the klondike age on that stuff might have passed.

There is a definately a Garthometric change due in the RE industry.

#83 Piccaso on 11.10.09 at 10:20 pm

“It’s time to get some asset allocation going here, dude, so plow the fifty grand into the market with some nice energy or financial stocks”

What ?????? Are you nuts ????????

No, just planning on $100 oil and state-propped banks. — Garth

#84 Piccaso on 11.10.09 at 10:37 pm

The only bank play I would buy right now is an ETF called FAZ !!!!!

#85 Piccaso on 11.10.09 at 10:45 pm

U.S. market
Symbol – FAZ

#86 Piccaso on 11.10.09 at 11:17 pm

You want to talk bubble, just take a look at the financial sector. It’s moved 10 fold since March! Nothing like jumping on the financial bandwagon a tad late in the game. lol

#87 Devil's Advocate on 11.11.09 at 6:48 am

#68 Schroedinger’s Bull

You miss the debt aspect side of the story. There is no growth in this model…

Get it?

#88 Taxpayer like you on 11.11.09 at 11:32 am

86 DA – That story has been around this blog several times now. It is interesting to see how prople interpret it.
I see it more of a story of credit liquidity. The tourist simply plays the role of bank. He lends money at zero percent (OK a stupid bank). The hotelier wisely uses the money to pay off other debt which is existing. As you note, no growth. Every party’s books still balance, with
the hundred dollars simply cancelling itself out of both
the asset and liability columns.

What the story needs is an update. Tourist drops C-note on front desk. Holtelier spends it on bottle of wine, gets drunk, tries to get laid from hooker who still owes him $100. Trucker SOL, cant make payments, goes bankrupt,
Baker etc shut down as goods not delivered. Tourist screams he’s been ripped off. Needs at least $200 to “inject liquidity”. Govt bails him out. He leaves town with $100 more than what he came with. Or spends it on hooker first, asks for more, then leaves town.

#89 latinlife on 11.11.09 at 8:43 pm


#90 Nick on 11.15.09 at 7:57 pm

If your home servicing costs are well within your income (say 50%) look to increase your mortgage to ~75% and begin to put the money in RRSP’s. Take the tax return and invest as suggested. If the markets move up lots you can sell to cash out the mortage. If the mortgage becomes a burden you can sell to bring the mortgage back in line with your own affordablity.

I sure hope you are not a financial advisor. — Garth