Bubble City

The Vancouver crowd waves to the blog.

So the guy who threatened to blow me up digitally (and might actually have), didn’t show. There were no protestors. No need to unleash the pack of hungry German shepherds the hotel had waiting in the anteroom. No projectiles. No exploding gels, liquids or underwear. Just 700 or so very polite, very focused Bubble City residents who had come for a glimpse of their troubled  future.

The crowd was polite and patient. They listened to me fume and gas for a while, then asked some good questions about gold, debt, bonds and borrowing. Nobody argued with my view on the impending implosion in area housing values, or what comes next. Either I was convincing,  hopelessly confusing or this blog has created a sub-species of people who stand to inherit the earth.

God knows Vancouver is ripe for the fall. In every major urban centre there’s a toxic brew of factors making asset deflation inevitable, but this is ground zero. The average SFH is still north of $900,000. Families shell out 70% of disposable income on shelter alone. Household income trails Toronto or Calgary, while housing costs 200% more.

Trouble is, there’s only one outcome when unemployment becomes structural, debt levels soar, interest rates tick higher, taxes swell and affordability ebbs. There is now nothing that can save those Bubble City residents dumb enough not have to harvested their windfall capital gains. No armies of mythical Chinese investors. No federal policy of mortgage interest deductibility. No tax breaks for homeowners or gutting of interest rates.

The outcome is a drop in prices which will build to a crescendo in the difficult years to come. As I told people, it’s not the correction which you have to worry about, but the melt that comes afterward – and will last until 2014-5 when mortgages are reset. And that’s about the time the Boomers will be dumping their suburban particle board Taj Mahals in a desperate dash to liquidity.

No, it’s not a happy picture in a city where the bulk of middle class net worth sits undiversified, unprotected and vulnerable in a single asset.

But is it too late to get out?

Well, here there is some good news.

The latest numbers show the national well of greater fools has apparently not run dry. House sales ticked higher in BC last month, compared to July, while in Toronto prices held firm through the first two weeks of September (but sales were lower by 22%). Houses are still changing hands, of course, even when it takes vendors longer to find buyers, who are a lot more likely to offer less and ask for more.

The bottom line, as I explained it, is to diversify out of real estate and into financial ones. Then  practice tax avoidance. And worship liquidity.

However most people won’t. Hundreds may have shown up to listen to me, but they’re the weird ones. Contrarians. Indie thinkers. Out of the box blog dogs for whom there is actually hope.

My only regret is that I wore steel-and-fibreglass skivvies for naught. I was so looking forward to chaos.

184 comments ↓

#1 Re-diculous on 09.16.10 at 11:35 pm

Just back from the Vancouver session – fantastic presentation. Thanks Garth.

#2 Cameroni on 09.16.10 at 11:41 pm

Too good! Do they all actually know we are watching and waiting! I just hope it’s all on video. What a great moment. The country is finally waking up.

#3 Jimmy on 09.16.10 at 11:42 pm

Good crowd! all those that can’t afford and waiting for the market to crash! maybe they all are living in Stanley Park, best view in town.

#4 The Original Dave on 09.16.10 at 11:43 pm

I think I see someone holding a squirrel.

#5 Hosehead on 09.16.10 at 11:48 pm

What a great night – thanks Garth! It was informative, provocative and entertaining. I don’t think many of the attendees will be buying any olympic village condos anytime soon!

#6 Oakville Owner on 09.16.10 at 11:48 pm

Smart move Garth. Get them to wave and show you their hands. No guns, knives ok the show can go on.

#7 Devore on 09.16.10 at 11:56 pm

Aha, oh look, there I am!

Good show Garth, it was enjoyable to hear you speak. Should have been a little longer, so much to go over.

I’m sure other people will comment on the show, but I was really surprised to hear the Gordon Group people fumble the ball when you handed Duncan an opportunity on a silver platter at the end.

How about, “well, we see things a little differently than Garth, and have reasons to be less optimistic in the near term, and see the gold sector as having quit a bit of upside left”? Gosh, they should have been 100% ready for that.

I’m no fan of the Gordons, never heard of them before, and don’t care for an “all in” strategy, but sheesh, talk about bad impressions.

Sure, it’s a gold shop, so if you want to get all set up, they’re your kind of people. But the thing with an <anything> shop, the thing you have to ask, yourself and them, what’s your exit strategy? When will you tell your clients to get out? Probably never, all the way to the bottom again.

#8 Tom on 09.16.10 at 11:58 pm

Garth,
Enjoyed your presentation, but I’m surprised you didn’t give an estimate as to the magnitude of the coming correction in the Lower Mainland.

#9 Siddelly on 09.17.10 at 12:08 am

I enjoyed the talk Garth, very polished and precise. I must admit I was surprised that your hosts were advocating a 90% position in gold for a portfolio right now. To paraphrase Peter Lynch- ” That’s not diversification, that is diworseification. If the economy actually keeps growing marginally, they may not participate. Thanks to your advice I got my BMO lady to buy Great West Life 5.2% and Power Financial 6% preferred shares and I have actually gained some capital on those ones already.
Thanks for all the great info in The Money Road Garth.

#10 Nostradamus Le Mad Vlad on 09.17.10 at 12:11 am

Wot’s it like to be a rock star, complete with groupies, Harleys, Boomers with Bimmers and signing autographs?

Chill, baby! Enjoy the fame and fortune. You’ve earned it!

4:32 clip Land of the free, home of the broke.

Lead quote puts everything at present into perspective. Spoken in 1881.

Vaccinations = Miscarriages. Plus Stay away from vaccinations.

China and Japan artificially keep their currencies low against the US$; what will the US do?

Scroll down. “WaMu/JPM tried to evict someone (foreclose) when they not only didn’t own the mortgage at the time, they NEVER owned it!”

The Magnetosphere No, I don’t understand either, but it has something to do with space. BTW, ‘owzabout a new conspiracy theory on Sun., Sept. 19. We BDogs need some entertainment here!

#11 tigerbaby on 09.17.10 at 12:13 am

Although the metric used may be debatable, central banks have been adjusting monetary policy to keep the inflation within desired range, just as advertised it appears …

However, the problem is that instead of investing the available money in productive enterprise, people chose to speculate on non-productive assets (much like some people’s fixation on capital gain/loss instead of the income streams)

Thus when the asset price gain ends, as it inevitably would at some point, debt service becomes very difficult, even in extreme low rate environment. Had we been investing in productivity, I think we would be in much better economic shape now.

On another note, I doubt gold will be able to function as money as a long term solution. Given the gold production limits, gold based money places a hard limit on the size of the economy, where as population and education have been going ahead at much higher rates (unlike the ancient times).

The result of implementing gold based currency now is deflation, where there is strong disincentive for productive investment including personal education/training.

I think this is one of the main reasons gold convertibility was ditched in the first place. Whichever country that goes back to the gold standard will experience the resulting deflation and will become less and less competitive on the global stage.

The irrational exuberance may continue in the short term however. Just like the other asset (RE), it appears to keep on going up … until it doesn’t.

#12 midbach on 09.17.10 at 12:17 am

Thanks Garth, I had a great time! You’re an entertaining and educational speaker.

#13 DD on 09.17.10 at 12:18 am

Hey, where’s the inebriated wheel chair bound gentleman and his drunken aid? They were supposed to be up front.

#14 The Original Dave on 09.17.10 at 12:21 am

G Man, can you please be a little tighter using the word deflation. Whenever I read anything related to interest rates or real estate in Canada and skim through the comment section, there’s someone talking about….deflation.

The word is used in all types of situations – it’s strange. People talking about bubble gum being cheaper and they tell their story. The last sentence of the story is one word – deflation. Annoyed.

#15 Bryan Berndt on 09.17.10 at 12:22 am

Hey Garth,

An enlightening talk tonight, though I wonder about the Q&A when the nice blonde lady asked you about your inflation within a year scenario…

How do you get inflation from higher taxes and interest rates?

Higher taxes services debt, and is the result or compensation for things like lower sales tax revenue from decreased consumption and reduced property taxes
due to real estate collapse.

Further, how do you get inflation out of commodities when several key commodities are set to become obsolete by exponential technological innovation in nano technology, ie solar power, desalination, etc…

In the last great depression, for which occurs every ~80 years for the last 600 years, there were at least 7 major sucker’s/dead cat bounce rallies…

What make you think we are only a year from the bottom of this one, or that it is less severe than the past cycles of 600 years plus?

#16 Kate on 09.17.10 at 12:36 am

Garth,

Thanks for the presentation tonight. It was very well-outlined and humorous! The pictures are hilarious. You blog has different tone, btw, less humour and more gloom! And I finally shake a hand of the man I am reading nightly;) Thanks for your insights on investment and RE. Because of your blog, I didn’t buy Vancouver’s RE a while ago and I am happy about it! I am in a lot better position right now and I know a lot more about investing. Count me as another saved soul.

Thanks again,

Kate

#17 TaxHaven on 09.17.10 at 12:37 am

Yeah, #9 Siddelly, but my $8000 invested in one silver stock two weeks ago sold for $9100 this week. Which I will use to buy more of similar, and eventually more ounces of physical gold bullion. All you’ll have, after a year is 5.2% more paper. Which will buy less.

You see, the real problem is what we ultimately DO with the cash…I’ll stick with bullion or cheap real estate – if any – only.

We face a situation in which the buying power of all (paper) currencies will decline as prices of all real necessities rise. Simultaneously with that, non-necessities like financial assets, real estate, derivatives and bonds will devalue.

Yes, it IS possible to witness deflation and inflation at the same time…

http://www.zerohedge.com/article/guest-post-if-what-deflation-looks-like%E2%80%A6

#18 JenC_T on 09.17.10 at 12:47 am

I see people I know in the audience!

Don’t I have smart friends. :)

#19 dark sad person on 09.17.10 at 12:47 am

#9 Siddelly on 09.17.10 at 12:08 am

I enjoyed the talk Garth, very polished and precise. I must admit I was surprised that your hosts were advocating a 90% position in gold for a portfolio right now

********************
Too much bullishness in Gold–
Time to eat the fresh meat-
Hedge off-i think we’re gonna have a sharp dip-that could take awhile to repair itself-
65 WMA around 1000-it wont break that–jmo–

#20 GS on 09.17.10 at 12:49 am

Garth,

Thanks for an informative and entertaining presentation tonight. Your analysis and predictions are, in my opinion, both balanced and well-researched. Thanks for continuing to bring your views to us on a daily basis.

Biggest question: Do you see a possibility of you offering a national fee-based Investment Advisory service in the future? I always wondered if this is what your blog would lead to, and so I was a bit surprised to learn tonight’s event was sponsored by a bunch of brokers. Just curious.

My favourite part of this evening was when you offered Duncan Gordon of the “Gordon Group” a chance to explain his views on gold. His answer was an unintelligible ramble, and I thought you were being generous in describing him as “skating through it”.

Perhaps future blogs will take a closer look at the Investment Advisory business. In my experience the business overpays undereducated salespeople to represent themselves as knowledgeable “advisors.” Success is measured by size of book and dollar value of commissions earned, rather than by returns derived for those clients. The result is a huge incentive for those in the business to focus on marketing and winning new clients rather than on maximizing returns for those clients. This is a topic I would enjoy you spending some time dissecting.

Hope you enjoyed your brief visit to the Wet Coast.

GS

#21 Tim on 09.17.10 at 12:51 am

Hey Garth, what happened to the Surrey show? Developer mafia run you off? I was looking forward to seeing you here.

October 15th. — Garth

#22 604genX on 09.17.10 at 1:00 am

Well worth the $250 per seat (whoever that loser was).

I’m shocked Garth. You actually seem like a hellavu nice guy. You’re blog comments make you come across as a total hardass.

Thanks for the great presentation.

#23 ElMagnifico on 09.17.10 at 1:01 am

Great show Garth, I really enjoyed it! (although nothing was really new to me as I’m a regular visitor of this blog)

Question: what would you advise for young people that start in their work life for a saving strategy?

I don’t have debt, don’t have a car, don’t have a mortgage, but have barely 10k on my RRSP. I can save up to $1k a month now, but with such little amounts, no financial advisors would be interested…

Thanks!

#24 Jim on 09.17.10 at 1:01 am

Hi Garth

That was a very good presentation. You are very passionate about your topic, and I appreciate you sharing your perspective with us in Lotusland. I didn’t win one of your books, so I guess I’ll have to buy one. Thank you.

#25 Kate on 09.17.10 at 1:13 am

Two questions came up to mind after the presentation:

1. Let’s say somebody is buying a house with 5% down and gets CHMC insurance. What does the insurance cover – just those missing 15% down or the entire mortgage? What happens to the banks revenue when people start defaulting on mortgages?

2. Let’s say somebody dives into the negative equity and it is time to renew the mortgage. Does the bank checks that and renew only the amount up to the current house price or mortgage the whole amount even though it is more than a house cost? What happens to the bank if a person defaults a mortgage on the amount larger than the current house cost?

Thanks!

#26 CalgaryBoy on 09.17.10 at 1:18 am

http://www.keyc.tv/node/41835

“Foreclosures are on the rise… especially in Minnesota.According to Realty Trac, foreclosure activity rose 4 percent in August with five states accounting for half of the nation’s foreclosures – California, Florida, Arizona, Michigan and Illinois.Minnesota is far above the national average with an increase of 11 percent.Blue Earth County has seen 123 foreclosures so far this year; that compares with 88 in the same period last year… or an increase of seven percent.”

#27 Mrrk on 09.17.10 at 1:18 am

Great show Garth… thanks.

Your hosts tonight were great examples of why I avoid brokers. Referring to those clowns as “professionals” is being charitable in the extreme. They’re dangerous to their clients. I am grateful to them for paying your fee but they still deserved to get a “new one ripped”

Thanks again Garth.

#28 Jj196 on 09.17.10 at 1:22 am

Gordon group “some of our clients have 90% of their portfolio invested in gold” – epic fail

Your session was Great Garth, thanks for coming to Van!

#29 Tony on 09.17.10 at 1:31 am

#9 Siddelly on 09.17.10 at 12:08 am

I hope you hedge yourself as your shares will provide dividends but just like the REIT’s you see advertised for suckers preferred shares are in much the same boat. The lure of higher rates a sucker born every day. Sell them before next year, hedge yourself or go short it’s up to you.

#30 Peter Pan on 09.17.10 at 1:36 am

You coming to Vancouver reminds me of a story…

I used to work with one of Canada’s top value equity managers… She told me pre-2000, the place she most hated visiting was Ottawa, because invariably financial advisors would tell her she was an idiot for not investing in Nortel… Technology leader, shining light of innovation, blah, blah, blah… Valuations didn’t matter, a new paradigm was obvious. After a while, she avoided the city like the plague.

Kudos for coming to LaLa Land to spread the gospel of financial sanity…

#31 ulsterman on 09.17.10 at 1:38 am

The “Gordons” tonight at the presentation were truely dire. After hearing their rambling, waffle answers i couldn’t believe that they were top 5% producers in Canaccord or whatever they claimed.

At least Mrs Gordon could just about string a sentence together. Her hubby looked like he was first year ESL. In terms of them drumming up new clients, this night can only be described as an abject failure. Who in their right minds would allow these people to manage their money?!

Garth however delivered a good show and it was exactly what i expected as a regular reader of the blog.

#32 mel on 09.17.10 at 1:46 am

It looks to me a lot of people are going gaga over Financial preffered shares. I think most of the money has been made, and I personally would not risk my $$ when we are at the begining of challenging times for the banks.

But, everyone is different. Will conside buying them in the future, after I know for sure how each one of them will fare in the debt collapse that is just around the corner.

As for Gold, same thing, too much hype! 90% of his money in Gold, sounds like he is doing the same thing that real estate people do, gambling that prices will go much higher. Wish him all the best!

#33 Edmonton Rigman on 09.17.10 at 1:50 am

Nice to see people are waking up to the reality of Real Estate and the Bubble it became due to the actions of Flaherty under the conservative Government here in Canada.
From what I understand in Edmonton the per price SFH and Condos only looked like they’ve gone done 10% ish. This may be due tot the fact many premium Houses in Glenora that were listing for close to 1 million, and higher end ultimate condos like le Marchant Tower & The Arcadia (where Gretzky used to live), have gone down over $200,000 in price and are finally seeing some sales now. Mayb houses listed at 1.2-1.5 million in Glenora are in the $700,000 range and actually moving more so they make the average price seem sooo much higher!

#34 Devore on 09.17.10 at 1:50 am

On another note, I doubt gold will be able to function as money as a long term solution. Given the gold production limits, gold based money places a hard limit on the size of the economy, where as population and education have been going ahead at much higher rates (unlike the ancient times).

Although I agree there is zero chance of gold being used as money, you are wrong. There is always enough gold. Just as fiat money changes value on a daily basis, so can gold. A dollar in 1950 isn’t worth the same as a dollar today, yet it’s still a dollar. What’s changed is its value. It’s a dumb argument, I don’t know why people keep bringing it up all the time.

#35 Devore on 09.17.10 at 1:52 am

Duh, submit too quickly!

I think this is one of the main reasons gold convertibility was ditched in the first place. Whichever country that goes back to the gold standard will experience the resulting deflation and will become less and less competitive on the global stage.

No, it was ditched because dollars were convertible to gold at a fixed ratio, and the supply of dollars was increasing much faster than the supply of gold, despite it being supposedly backed 100% by gold. It was a scam that imploded, and rightly so.

#36 Rsolo on 09.17.10 at 2:03 am

Hi Garth

That was an excellent talk, you’re awesome on your presentation. I enjoyed listening to you and learned so much. I believe people will heed on your advice as you passionately delivered it.

Thanks again and looking forward on your next visit…

#37 Slopetester on 09.17.10 at 2:06 am

No FEDspeak here,just the facts. Does Greenspan suddenly Get Gold? Nope, he just took 17 years pretending he didn’t.

Greenspan’s Warning on Gold
Editorial of The New York Sun | September 15, 2010
http://www.nysun.com/editorials/greenspans-warning-on-gold/87080/

Alan Greenspan spoke at the Council on Foreign Relations earlier today, and what was his advice? That central bankers should be doing what these columns, among others, have been rattling on about, namely that they should be paying attention to gold. “Fiat money has no place to go but gold,” the former Fed chairman said at the Council,

#38 Slopetester on 09.17.10 at 2:08 am

Gold & Economic FREEDOM
by Alan Greenspan, 1966
http://www.usagold.com/gildedopinion/greenspan.html

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.

The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.

#39 betamax on 09.17.10 at 2:10 am

My wife and I are just off the side of that picture — didn’t quite make it in. Such is life.

Great show, insightful and funny as always (we saw you last visit also). I also enjoyed the ad libs — you’re quick on your mental feet, that’s for sure.

The turnout was huge. I would have guessed at least 600 but am not surprised to learn it’s higher. It was an immensely bigger turnout than the previous visit, no doubt partly due to the venue, but I suspect much more due to a change in local perceptions. More and more people in Van are realizing that something stinks in the state of housing.

#40 WhiteVanMan on 09.17.10 at 2:59 am

“90% of their portfolios in Gold” – ???

That’s not exactly balanced and in fact I would say not even a portfolio. The answers Gordons gave on the subject did every other ‘advisor’ in town a huge favour!

#41 Grandpa Grinch on 09.17.10 at 3:05 am

A few observations if I may Mr. Turner:

1) Everyone ….. and I mean everyone who attends your seminar or frequents the blog are weirdos. They’re the one’s who’ve woken up to the fact that the MSM is bought & paid for. We seek timely, accurate & honest information from reliable sources…that includes your views, sans RE agent love doll.

2) Time to pare back the blog a bit, just a bit – and start the nationally syndicated “Garth Turner Radio Hour”. Lets see real time jousting with the blog dogs!

#42 Stright shooter on 09.17.10 at 4:28 am

There are a few here who are infected with “Gold Fever”. I had to look it up and read about it in history to understand and diagnose their condition.

Gold Fever is a psychological affliction of pure greed with no care for themselves or others. Those with gold fever show restlessness, anxiety and a willingness to risk everything to get richer (including their lives). Many who suffer from Gold Fever even up broken, indebted or dead. While very few become rich in the end.

Gold fever is a reoccurring psychological affliction.

Amazing what history can teach you.

Unfortunately, “Gold fever” sounds right for the times we are in. Greedy people with a lack of morals seem who worship money rein today.

#43 Tim from Victoria on 09.17.10 at 5:06 am

“the melt that comes afterward – and will last until 2104-5 when mortgages are reset.”

No doubt a typo, Garth. You probably mean 2014-5.

#44 Brian on 09.17.10 at 6:13 am

The impression I get from Bryan Brendt is that he heard you say that the bottom was to be reached next year. I don’t think this is correct.
I feel a little more enlightened about gold from comments but would like more as to why it is so evil.

#45 Danforth on 09.17.10 at 6:22 am

and will last until 2104-5 when mortgages are reset.

==
40 year mortgages are bad enough, but 105 year terms?!

Typo? Should this be 2014 / 2015 ??
:)

#46 Brian on 09.17.10 at 6:24 am

Bryan Berndt #15 is who I meant.

#47 Bill ( Peterborough) on 09.17.10 at 6:29 am

Re # 147 Nostradamus le Mad Vlad ( yesterday)

All the best to you and your family as well. Enjoy reading your blogs / links, very informative. ( along with some other bloggers out there as well)
-___________________________________________

Re # 150 Old_ is _Gold

Thank you for your clarification. I am really glad you are not another Benny Hinn. I believe you are a good person trying to shine the light as to what is really going on in the world, like a few others out here.

Garth is really not a bad guy, allows alot of different discussions/topics on this blog.

As far as him telling you to take a hike , I wouldn’t take it personally. He has already thrown me off the sight twice.( for my ever insightful comments, which always get twisted around by a certain group or people) I have done my time and pergatory, and am back now.

Be chatting soon. Keep e’m comming.

#48 Jayman on 09.17.10 at 6:31 am

25 Kate
I believe the CMHC insurance covers the bank for the entire mortgage. Or perhaps the difference between the power of sale price and the mortgage amount. Perhaps others could confirm. Nice of the buyers to pay the insurance premium to cover the bank. Best to avoid high ratio mortgage if and when one does decide to purchase IMO.

If you stay with the same bank they usually do not reappraise the house but they can if they wish. This could become more standard practice in a few years if prices are down 20 percent or more. In that case the bank may only renew for 80 percent of the value which would mean the “owner” would have to come up with a wad of cash in order to renew. And that is the “between a rock and a hard place”.

Does anyone else have a different understanding? I’m in Ontario so it may be different in other jurisdictions.

Nice crowd Garth. A bit bigger than when my wife and I saw you at Chapters in Scarborough last winter.

#49 Canuck on 09.17.10 at 6:34 am

Good stuff Garth! You’re not alone…

http://financialinsights.wordpress.com/

#50 DontBelieveTheHype on 09.17.10 at 6:36 am

So Garth, did you meet the buyers of the $250 tickets?

#51 David B on 09.17.10 at 6:36 am

Not surprised from all ya said Garth only a fool would dare a move into that lion’s den. Strange thing about the truth, it’s for real.

Now speaking of jobs to which mortgate payments are vital.

Fr. this mornings WSJ ….

China is considering plans that could force foreign auto makers to hand over electric-vehicle technology to Chinese companies in exchange for access to the natio–market.

America’s National Debt to date, growing at $3.25 B/min – $ 13,546,463,626,445

Will the USA fall …. No! ( because they remain the world’s police force & they raised their ceiling to $20 T last Christmas) The trouble is they owe this money and do not control the lenders …. What China wants China gets.

#52 Mr. Leslieville on 09.17.10 at 6:57 am

It looks like Leslieville real estate has started to moderate.

Check out these charts:
http://www.leslievillepost.com/2010/09/17/charting-leslieville-real-estate-trends/

#53 Toni on 09.17.10 at 6:59 am

Hi Garth,

Not to long ago there was an upcoming Toronto date in your list.
Will you be speaking in TO any time soon?
Cheers
Toni

#54 fancy_pants on 09.17.10 at 7:31 am

lots of smiles in that patient and polite crowd… appears the naysayers couldn’t make it out as they were too busy looking for the next RE deal. Perfect. still time for the enlightened to find the greater fools.
For all those on the fence, an ark may not seem like a good idea either up until the floods hit. Garth is simply giving you a heads up. Haven’t you noticed it isn’t sunny anymore? There is still time to get aboard.

#55 Tallguy on 09.17.10 at 7:37 am

Great Blog Garth.
Just wondering as when we can expect your presentation in Toronto

November 9. — Garth

#56 Leanne on 09.17.10 at 7:39 am

I think you meant to say the melt would last until 2014-15, unless things are far worse than we realized…

#57 S.B. on 09.17.10 at 7:59 am

The post reads: “Halifax
Thursday October 7, 7 pm, Ashburn Gold Club. Register here.”

Gold club? Somehow I would not expect Garth to present at a gold club – must be a Golf club. :P

On that note I have seen excellent historical charts that show gold is always clobbered as equity markets fall. Gold is simply a commodity – like oil, sugar, etc.

#58 T.O. Bubble Boy on 09.17.10 at 8:03 am

So, should we expect even more listings to hit the Vancouver market today as the folks in the picture start dumping their $900,000 bungalows?

#59 Cashman on 09.17.10 at 8:20 am

Death threats against dear old Garth? I guess that’s what happens when one is a contrarian. It must have been from one of those real estate pumpers. Why threaten ol’ Garth, he is not responsible for this mess, Jim Flaherty and his band of merry men are. If one is going to threaten someone, then at least get your target right. Garth is giving his observations and predictions. He’s not the one ramping up the printing presses and raising interest rates. Garth is not eroding your savings. In fact he is telling us how to PROTECT our savings. Unlike those so called ‘advisers’ in the finance industry who happen to work for a bank.
Why go through the bother of taking down his website when it is just as easy to start your own and trash talk the other person’s and discredit him with one’s own facts and figures. Far easier I think and easier to get converts too.

#60 John on 09.17.10 at 8:25 am

Not even any heckling realtors in the crowd? I hear they’re mobilizing.

The Halifax presentation at “Ashburn Gold Club” should be Golf Club. You do need a couple pieces of bullion to play there!

#61 GTA Realtor on 09.17.10 at 8:31 am

#20 GS on 09.17.10 at 12:49 am:
“In my experience the business overpays undereducated salespeople to represent themselves as knowledgeable “advisors.” Success is measured by size of book and dollar value of commissions earned, rather than by returns derived for those clients. The result is a huge incentive for those in the business to focus on marketing and winning new clients rather than on maximizing returns for those clients.”

Hey – GS! This synopsis sounds a lot like another business I’m intimately familiar with. :o)

#62 jess on 09.17.10 at 8:35 am

Regarding the ad from yesterday made me think of Time’s Magazine’s cover with “Broadcast Yourself”

Time Brokerage

Former Talk-Radio Host Gregg Rennie Pleads Guilty In Ponzi Scheme; Weizhen Tang Arrested At Toronto Airport
By PatrickPretty.com 10:30 a.m. Jan. 14, 2010

http://www.10news.com/news/24598290/detail.html

SAN DIEGO — Police in Westminster, Colo., a suburb of Denver, burst into the corporate offices of Get Real With Dave looking for the man behind the business, Dave Burke.

The Securities and Exchange Commission said Monday it has filed civil charges against the host of a Persian-language business radio show who is accused of targeting his Iranian-Americans listeners in a $20 million investment fraud.

The SEC sued NewPoint Financial Services Inc.; its president and co-owner John Farahi, who hosts the show on Los Angeles radio station KIRN; his wife and company co-owner Gissou Rastegar Farahi; and NewPoint Controller Elaheh Amouei.

The lawsuit, filed Friday, alleges fraud and the unregistered sale of securities. It seeks to have the defendants give up any “ill-gotten gains” and pay unspecified civil penalties.

For the last several years, Sean Hannity and the Freedom Alliance “charity” have conducted “Freedom Concerts” across America. They’ve told you that they are raising money to pay for the college tuition of the children of fallen soldiers and to pay severely wounded war vets. And on Friday Night, Hannity will be honored with an award for this “Outstanding Community Service by a Radio Talk Show Host” at Talkers Magazine’s convention.

But it’s all a huge scam.
=
Authorities say investors who trusted local radio stations lost millions to Champions Group CEO

McKinney Courier-Gazette reports

Real estate and investment guru and radio talk show host Cliff Robertson, who said he could sell “ice to Eskimoes” pled guilty Wednesday in federal court to bank fraud and aggravated identity theft

… individuals who listened to Rennie’s radio show,” prosecutors said. “[His] victims also included a church congregation that had invested funds that the congregation had raised in anticipation of building a new church.”

Rennie fleeced investors by telling them he handled “risk free federal housing certificates with guaranteed rates of return,” prosecutors said
The practice of “time brokerage” is more likely to lead to deception than traditional advertising because those buying the time often disguise their pitches as regular programming. In Kansas and New Jersey, people pretending to be lawyers bought time for Spanish-language shows offering immigration advice, which served as promotions for their bogus law practices.
Time brokerage is appealing to radio-station owners because they can receive $150 to $500 an hour for air time with little effort. Buyers of time “come in, perform their act and leave,” says Bill Parris, a consultant for MultiCultural Radio Broadcasting Inc. The New York City company owns about 45 stations whose air time is all brokered. In a wave of radio industry consolidation, media chains have been snapping up FM stations with good signals, leaving a pool of small AM stations that can still be bought for relatively little.

Station executives who speak only English are often unaware of what is happening. At WLQY and elsewhere, managers often lease time to one entrepreneur who then subleases it to another, so there isn’t even the minimal screening normally given to an advertiser or buyer of time.

About 500 foreign-language radio stations in the U.S. now engage in time brokerage, double the number of a decade ago, according to David Schutz, co-founder of a San Diego consulting company that specializes in station acquisitions. The stations draw loyal immigrant audiences who have few options for news or information in their native languages.
======================
Foreign-Language Programs Often Go Unscrutinized, Until Complaints Arise

by Jennifer Levitz, Wall Street Journal
October 31st, 2006

#63 Joel Brico on 09.17.10 at 8:55 am

Remember Garth does not hate gold. (remember 10%) He hates excessive greed. Gold or real estate – when you are all-in in one asset you are at risk. Or, your investment (gold) is going to pay out when everything blows up.

The message I hear is slow and steady wealth building and not get rich quick. Most people do not have the skills to properly accumulate an asset such as gold over a time period. Most buy in large amounts at the top in greed or panic. Then sell when it tanks.

I bet the guy with 90% in Gold they are talking about has an average price $600.00 oz or less. A core position build over time.

Garth tries to save and educate the common Canadian and provide reasonable advice. Not go all in at $1280.00 an oz on greed. Buy 10 oz – maybe, but not 100oz at $1280.00. Right now – 1 in a million is all in on gold, but 8 in 10 are all in Real Estate. Like my gold example – your house is owned or purchased way below current valuations as a place to live or rent and can pay the mortgage or generate revenue, then you are ok. Sadly, many bought at the top (2007-10) and cannot pay or generate positive revenue.

#64 Happy renter on 09.17.10 at 9:05 am

Hey Garth, seems you’re all over the place, caller “Mike” made a reference to you on Hotproperty on CP24.

Which leads me to this post. Does anyone in the GTA think “guest host” and show sponsor Al Sinclair actually believes what he’s putting out there?

“Mike” asks the question about if it’s a good time to buy or should he wait.

Senile Al’s response…”What you’re waiting for is trouble, rising interest rates, rising house prices, biding wars again in the spring…”

Al denies that prices are down.

Host Ann Rohmer (who does bring credibility to the show and challenges some of the things said) asks “if someone puts their house up for sale today will they get the same or less than they would have gotten six months ago?”

Al takes about a quarter second to mutter “the same” and changes topic.

All I know is that I sold my house in Barrie 2 months ago. Not one house has sold in the neighbourhood since and some that were 20 thousand more than mine are now 10 thousand less than I sonld mine for and still sitting there. 3 of them have taken them off the market (one of them owed more than they could get for it and another that is sticking it out are under contract to buy a new house to be built in the spring – their price is down 50 thousands since they listed).

My favorite part of the latest Hot Property episode is when caller “Mike” anounced that he had been renting and saved 75% to put down.

Al’s response was “What I know is that houses for rent are never as ggod as the houses you can buy. Treat yourself to the lifestyle. Get into a house you own. And the money you’re paying for rent…you might as well be burning it.”

As for my experience, I’m renting a nice house for half of my previous mortgage with no taxes, no utility bills and no worries about fixing anything.

I’d be curious to know from “MiKe” how much of his 75% he would have saved or paid on his mortgage if would have bought previously.

I need to get back to “Hot Property” they’re flogging $700 000 town houses for first time buyers…

#65 MDG in Burlington on 09.17.10 at 9:17 am

“As I told people, it’s not the correction which you have to worry about, but the melt that comes afterward – and will last until 2104-5 when mortgages are reset. ”

Garth,

I am assuming that you meant 2014-5 and not 2104-5…..

I want to buy eventually and hope to in 2014 if the timing is right both with the market and personally…

#66 Herb on 09.17.10 at 9:36 am

All right, Garth, time to fess up.

How much protection money is the Ottawa Real Estate Board paying you to stay the hell out of Ottawa?

#67 learning james on 09.17.10 at 9:38 am

Read some comments on a Globe and Mail article on real estate and comments heavily favoured a significant price decline. We are ready. Your prediction for slow melt is based on sticky price theory, but prices can get “unstuck” sometimes and decline rapidly. This could be one of those times, since we watched USA experience, it could be a mad race to the bottom. Sellers (and their lenders) could panic making a bad situation worse. Negative feed back loop. Why is everyone so sure it will not happen ? Just to look like a “reasonable” person whose “moderate” views should be accepted ? Why not a Wyllie Coyote event, what makes Canada different ? Will the USA recover enough in the meantime to save our butts ? This time, it does not appear it will happen – everyone very negative over there still. Chindia, Brazil etc. “might” do the job this time. Or not. To a large extent their demand is for materials that are made into products for export (China), but final demand is weak. I am not buying survival gear, but it appears a long and messy road lies ahead.

#68 Tom on 09.17.10 at 9:43 am

Garth,
how could you recommend a financial advisor-Gordon Group, who has some clients with 70% of their portfolio in Gold. When he was asked about the rationale, he weasled out of directly answering the question and came up with some stupid, general statement to the effect of “you have to know where you want to go and how to get there…” Very insightful, is that why suckers pay these people big bucks? Why don’t they just admit they don’t know more than many lay people?

I continuously recommend that people use an advisor. Who they select is a personal choice. — Garth

#69 Dan on 09.17.10 at 9:45 am

Thank you Garth for a good session. Very informative and with a great sense of humor. I was very surprised by how those investment consultants came across…looked amateur and poorly prepared.

Many comments regarding the hosts of last night’s event are unfair. This couple is actually very rare on two counts: (a) they are contrarians, totally unafraid to take an unconventional view of the world and are among the few financial professionals I have met in Vancouver who are unwilling to feed off the housing frenzy, and (b) they hosted a no-pressure, non-commercial event stressing education and the totally free expression of opinion. Many people who ask me to speak for them do so only in the hope a large crowd will make them money. These people are decidedly different in having as public education their main motivation. Like them or not, they were our hosts, they paid for and facilitated an event we all enjoyed and deserve thanks, not ankle-biting. Some people can speak easily in front of 700. Some cannot. — Garth

#70 Mel Eager on 09.17.10 at 9:54 am

Howdy Garth and Pack,

My wife and I own a SFH in Oakville Ontario. It is a 1959, fully detached 900 square foot Bung on a 61 X 117 foot lot.
We’re south of the QEW.
We bought in 2003 at $251,000 and similar bungs in our neighbourhood (looking at MLS map view) are listed around $400,000. I mean, this is what they are listing at, these properties do not seem to be moving, and I have no idea what the ones that do get sold are selling for?

My questions: How much of a correction will our house experience realistically? Are these not the houses that the Boomer are going to trade their McMansions for? So will the correction be milder in our case?

Cheers,
Mel.

#71 "We're Different Here" Argument on 09.17.10 at 9:55 am

VI Funcanuck here in Nanaimo……

One the nat’l news it was menioned that 1 of 7 Americans are now officially POOR–the highest level in 30 years and 54 million don’t have health care insurance.

Had a cousin visit from Terrace last weekend who stated the RE market wouldn’t decline as there are 4 mines “in the works.” This Terrace, BC folks-beautiful wilderness but small town BC that is 16 hrs drive from Van and 8+ hours from Pr. George.

He also said his job may end in the next year and had a very high estimate of what his house was worth given reno’s and a large shop.

You can’t argue with family–love ’em.

A buddy in Van said recently he’s looking to buy a condo and I politely referred him to this website (again). He claimed he’d wait a few years and I hope he has the will power to do so.

#72 BrianT on 09.17.10 at 10:03 am

#70Mel-yes, the correction will be milder for your house. Hard to say what the ultimate bottom would be but IMO 250 would be hard to hit even in the absolute worst case scenario-it is mostly land value. Overall, Oakville is about as desirable, RE wise, as anywhere in the country.

#73 Lexie on 09.17.10 at 10:15 am

From NW Calgary, here is a realtor trying to relive the past. What if the best offer is $329K? Does that mean the whole neighbourhood goes down too?

http://www.realtor.ca/propertyDetails.aspx?propertyId=9938696&PidKey=206104417

http://www.dericburton.com/pdfinfosheet/c3445435.pdf

#74 TaxHaven on 09.17.10 at 10:17 am

It’s peanuts.

I’m sure anyone in Vancouver – which is a sleepy little backwater in terms of a worldwide, 24-hour gold market – who is 90% in gold has no more than $30K or $40K and that all in mining stock. I doubt that many have the perspicacity (or the balls) to be 90% in in bullion…

But it is precisely BECAUSE the gold market encompasses millions of transactions in countries where gold is seen as wealth and billions of paper dollars-worth of trading daily that I think the 90%-ers may end up having the last laugh…

#75 grantmi on 09.17.10 at 10:22 am

#4 The Original Dave on 09.16.10 at 11:43 pm

I think I see someone holding a squirrel.

I don’t see anyone holding one.. but one was certainly there to see if anyone was nuts??

http://bit.ly/bMuE7h

#76 Old_is_Gold on 09.17.10 at 10:28 am

Gold is just another asset and an investment

It is almost a currency since it is readily exchangeable for local paper currency anywhere in the world at a near fixed exchange rate

It is also highly liquid and easily transportable

It will always retain some value, and in times of crisis this value can be quite high

Its best use is to trade it at the right price for tangible goods like RE, a business, food, gas, maybe even equities / bonds etc. It would be foolish to hang on to it for all your life unless you have plenty of cash to meet all your other needs

It is not yet in a bubble, that will happen when people line up around the block to sell scrap gold as they did in 1980

Best not to think of it emotionally but rather as another commodity investment like oil or grains

#77 Scalgary on 09.17.10 at 10:28 am

Garth,

All these comments make me more curious to attend your session in Calgary. When is it? I dont want to miss this time… Thanks.

#78 Old_is_Gold on 09.17.10 at 10:30 am

#47 Bill ( Peterborough)

You’re welcome!

#79 Cooliecat on 09.17.10 at 10:34 am

The link to register for Victoria is not working

The broken link is fixed. Thanks. — Garth

#80 Vic_guy on 09.17.10 at 10:41 am

The link to your Victoria talk is broken, it is returning a 404 page not found message.
Is the another way to register ? Can I register by email ?

Fixed now. — Garth

#81 David B on 09.17.10 at 10:43 am

Thank goodness for people with both a set of good eyes and command of the English language and get a full nights sleep. Where would hard/older working/retired people be when correction and editing is required.

Thank you!

#82 pezzazz on 09.17.10 at 10:50 am

I am shocked and disgusted with the performance that the Gordon Group put on. I am an advisor in Vancouver and listening to their rambling and disturbing comments makes me incredibly frustrated. I would suggest to everyone out there considering looking for an advisor that they pose questions to that potential advisor to see what their core market philosophies are on ALL asset classes.

Thanks again Garth, your presentation is a well oiled machine even if I may not see eye to eye on all your views on the marketplace.

#83 Burnaby Boy on 09.17.10 at 11:14 am

Isn’t Vancouver a mining town? So 90% in gold should be a pretty good bet for a local that knows the market.

#84 Burnaby Boy on 09.17.10 at 11:16 am

The Gordons were smart enough to bet on Garth so lousy as they are in the entertainment business maybe they are better at investing.

#85 AM on 09.17.10 at 11:17 am

#25 Kate

I think there needs to be more discussion on renewing an underwater mortgage. I think this will be commonplace in a few years time when the current 5 year terms expire (especially on the 5/35 mortgages) and house values have corrected.

The consensus has been that the banks will renew based on your credit score and ability to pay. What has not been discussed to any great degree is the rate you will be renewing at. Most of us renew at the banks discounted rate which can be 1.5 to 1.75% below the posted rate (on a 5 yr fixed); this is done in competition with other banks to keep you as a customer. On renewal, with an underwater mortgage, you have no leverage to negotiate. For this reason, I think many will be facing the prospect of renewing at the posted rate. What is the alternative? Can you cross the street to the other bank and negotiate a better rate? Not a chance; you will have to have your property appraised, only to determine (or confirm) that you need more mortgage than your house is worth, and you will not qualify.

The way I see it, in this situation, you have no choice. Most in this position likely do not have the additional funds to bring you above water again.

Anyone, correct me if I’m wrong, but unless your bank takes pitty on you, you will be renewing at the posted rate.

#86 bullion.bunny on 09.17.10 at 11:18 am

Like it or not, the Gold Standard is coming back in a major way. Most likely it will be a private one!

Absurd. Less than 1% of the population owns gold. You guys are so out of touch. — Garth

#87 dark sad person on 09.17.10 at 11:19 am

You cannot have both Inflation and Deflation at the same time-that’s impossible-
While you can have both forces at play-only one can prevail-

You can have some prices rising and others falling at the same time-but that is neither Inflation or Deflation and the reasons for price directions are influenced by any number of factors-such as simply supply/demand weather-speculation-geopolitical-and also Inflationary or Deflationary pressures-as in too much available money/credit-or too little–

Of course you can have asset deflation and price inflation concurrently. We do now. — Garth

#88 Prufrock on 09.17.10 at 11:33 am

We were there last night and enjoyed the talk. Thanks Garth. Thanks also to the Gordons for hosting (my coffee was great), but it was a bit of a missed opportunity for them to state their investment philosophy concisely and convincingly. Preparation is everything.

But I can’t resist one further comment: it’s not uncommon to see an absence of credentials behind a financial adviser’s name. False modesty? One half of the Gordon group, I see, has a BA, but is that enough? These days you need a PhD to teach Shakespeare to college students, and yet a BA (or less) is sufficient to advise people how to invest their savings?

#89 Shoggy on 09.17.10 at 11:35 am

Article in the Van Sun this morning says that median Canadian income is around $68,000, and they list the cities with the highest median income. Saskatoon has a higher median income than Vancouver!! But of course the drug dealers don’t declare their income, so the numbers must be way, way off.

http://www.vancouversun.com/Calgary+leads+Canada+median+family+income/3537360/story.html

#90 Cooliecat on 09.17.10 at 11:38 am

Thank you Garth I am now registered

#91 echo on 09.17.10 at 11:40 am

Thanks for the show last night, I’m a big follower of your blog so there wasn’t a lot of things said that I wasn’t already aware of but it was very well done on your part. Unfortunately for your hosts I don’t think the same could be said, they should have ran away with it when you handed them the mike, I couldn’t even understand what he was saying.
You’re also much more likable in person than you are on your blog….phew for your wife:)

#92 JM in London on 09.17.10 at 11:42 am

#64 Happy renter on 09.17.10 at 9:05 am

My wife and I were watching Hot Property last night with fascination…comedy central!

You really think Ann brings credibility or am I missing the a sarcastic tone? This is a serious question as I’m a bit of a dullard – sorry if I offend.

#93 dark sad person on 09.17.10 at 11:49 am

Of course you can have asset deflation and price inflation concurrently. We do now. — Garth

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

G-we need to eliminate the words-
Inflation and Deflation-when talking about “prices”
It’s confusing as hell and prices are neither I or D–

#94 JM in London on 09.17.10 at 11:55 am

#85 AM on 09.17.10 at 11:17 am

I think you are entirely correct with your sentiment. The banks here have been quietly unhappy with the whole broker world (I’m one) as well as the “carry trade” that happens at renewal time. They’d very much like to keep you as a customer through the entire amortization.

Two things:

1) The discounted rate that “most” renew on usually doesn’t happen unless the “valued customer” asks – and even then it isn’t put forth very quickly – and assumes you have a credit history to support it. We regularly see people who are (IMHO) mistreated and bullied by their banks rather than helped and they’ve had enough.

2) I’m thinking that the posted rates are a bit optimistic…there will likely be a “special” rate for underwater situations just like there is for people with less than perfect credit (70-80% of people out there fall into this)

#95 [email protected] on 09.17.10 at 11:56 am

Well looks like US home prices still have a bit further to drop.

Look what $75K buys you in AZ now.

http://www.flexmls.com/link.html?rlnqp8yuqda,12,1

Renting my first AZ home now for $850 per month. Considering using that to purchase another although at $75K don’t really need a mortgage at all.

#96 Devore on 09.17.10 at 12:10 pm

#85 AM

The consensus has been that the banks will renew based on your credit score and ability to pay. What has not been discussed to any great degree is the rate you will be renewing at.

Ah, exactly. Once your mortgage is underwater, or even if your equity has shrunk significantly, you’re captive to your bank. And they WILL bend you over with the highest rate they think they can get away with, and still have you make payments.

Most people will not have the leverage (har har, leverage, get it!) to go across the street and get a better deal. Tough times ahead for those “home owners”.

#97 R on 09.17.10 at 12:13 pm

#43…..#45…..I don’t think thats a typo……Tee Hee

#98 caesarcaesar on 09.17.10 at 12:22 pm

700 renters hoping for a market crash

Ontario has a $245 Billion dollar Provincial deficit, Quebec has a $145 Billion dollar Provincial deficit.
Both are growing near 10% a year.

Thank you for your concern for Vancouver but please take your Armagedon scenario back to Eastern Provinces where it belongs.

#99 T.O. Bubble Boy on 09.17.10 at 12:24 pm

@ #83 Burnaby Boy:
“Isn’t Vancouver a mining town? So 90% in gold should be a pretty good bet for a local that knows the market.”

I’ve never heard Vancouver described as a “mining town”? What percentage of residents work for mining companies?

Yes, GoldCorp has its HQ in Vancouver… but many others do not:
Barrick Gold – headquarters=Toronto
Kinross Gold – headquarters=Toronto
Yamana Gold – headquarters=Toronto
etc.

#100 rory on 09.17.10 at 12:28 pm

#88 Prufrock on 09.17.10 at 11:33 am

“But I can’t resist one further comment: it’s not uncommon to see an absence of credentials behind a financial adviser’s name. False modesty? One half of the Gordon group, I see, has a BA, but is that enough? These days you need a PhD to teach Shakespeare to college students, and yet a BA (or less) is sufficient to advise people how to invest their savings?”

Common sense and letters behind your name do not go hand in hand. Thers is no correlation – none. Book smart means nothing in the financial world.

I get there is a sense of entitlement just because you get letters behind your name. If all things are equal then the guy with the letters gets the nod but things are never equal.

As to needing a PhD to teach English, it is just academics and schools making themselves feel better and superior about themselves.

I would rather have someone enthusiastic then research dead or just looking for ego stroking.

#101 Devore on 09.17.10 at 12:31 pm

Of course you can have asset deflation and price inflation concurrently. We do now. — Garth

They’re calling it “biflation”. There’s plenty of credit, for people who know how to get it. It’s just not being spread around to all economic participants, rather it’s pouring into certain assets, and not others.

We’re now consistently seeing many things that we need, consumables, commodities, services, etc, rising in price, while many of the things we own, and optional luxury items, are becoming cheaper. Stagflation in the 70s was a similar phenomenon in some ways. To a large extent, measures like CPI average out these different directions, and give us a fairly low inflation number, but there’s probably not a person on the planet whose monthly basket of goods looks anything like CPI, or even close to it. Not to mention goofy things like adjustments and substitutions.

I buy my own groceries, and see some things doubled in price in the last few years. All services, from phone, cable, to haircuts, and restaurants going up in price every single year. Not very many things I HAVE TO buy on a regular basis are getting cheaper. Heck, even Walmart stopped rolling back prices.

But DSP can only think in simple terms of inflation and deflation. He’s running around, seeing an inflation here, a deflation there. Doesn’t know what’s going on, or what to do, getting all worked up over people not seeing things his way.

There may be a general deflation coming our way, if debt and credit gets destroyed in a major way. There may be general inflation, if recovery and credit pick up. The money supply and credit only tells you part of the story. Where the money goes into, tells another. For the rest, look around you. Equations don’t model the reality of billions of autonomous systems interacting (just ask the global warming alarmists). That’s why Austrian economics is so great; they don’t try to solve for X, because with a billion variables, it is pure hubris to pretend you can.

#102 Mister Obvious on 09.17.10 at 12:36 pm

Thanks Garth,

I have played drums for 45 years and know a little bit about timing. You timing is impeccable my friend. I can’t recall a (non-musical) one-man show that flowed quite so flawlessly. I’m not sure how many of your audience realize the rehearsal and logistics that go into something so polished. That’s because you make it look easy. I know perfectly well it’s anything but. And the price was right too. The same cost as an abandoned Detroit bungalow.

And for some of you other doggies out there I say this: It’s extremely bad form to slag Garth’s hosts as some posters seem to be doing. If there was time to be gracious, this is it. Grow up.

#103 Northern Dirt on 09.17.10 at 12:40 pm

#89 Shoggy

Oshawa in the top 10??

Oshawa, Ont.: $83,220 ????? Really?.. Nutty..

#104 Kate on 09.17.10 at 12:57 pm

#Mister Obvious
I think people are trying to be realistic about the hosts. Of course, it is very nice of them to provide us with Garth and coffee but they positioned themselves as financial advisers and apparently they didn’t look good to some people.

#105 supersocco on 09.17.10 at 12:57 pm

You were preaching to the converted. Lots of head-nodding and knowing giggles all around me. Thanks for the talk. I, the converted, need to focus on tax avoidance after listening last night.

#106 Jeff Smith on 09.17.10 at 1:01 pm

>#56 Leanne on 09.17.10 at 7:39 am
>I think you meant to say the melt would last until 2014->15, unless things are far worse than we realized…

The yankee melt is almost 5 years long already and going strong. I don’t see why ours won’t last beyond 2015.

#107 TimF on 09.17.10 at 1:02 pm

Saw you last night (Sep 16).

Pretty good. Although many believers were there I did catch some comments from people who didn’t really know you – these were mainly positive. I think you did some good. I hope so. I think you are rescuing souls from the bloodbath one at a time.

Thanks for your continued efforts.

#108 bullion.bunny on 09.17.10 at 1:03 pm

Absurd. Less than 1% of the population owns gold. You guys are so out of touch. — Garth

Denial right to the end, in the face of overwhelming facts. Gold is only a reference in a sea of competitive devaluation……when are you finally going to get it………Oh well maybe never.

It is impossible to have a ‘standard’ when nine out of ten people do not participate. Do you not know the definition of words you use? — Garth

#109 VancouverGoinUp on 09.17.10 at 1:04 pm

Look, Vancouver is going nowhere but up. People don’t understand. First of all there is limited land. Secondly Vancouver is considered the best place on earth. Thirdly millions of Chinese immigrants with cash in hand want to buy Vancouver and surrounding neighbourhoods – especially flood plain areas like Richmond. Serioulsy, Richmond (just south of Vancouver ) is on a flood plain. Chinese investors are buying tear down houses for 750k then builidng a 3500sq foot home all at a total cost of over a million backs. The rest of Canada doesn’t get it – Chinese investors buy with cash – NO MORTGAGE. There is no bubble here – prices will skyrocket as investment money flows to the best place on earth with a limited supply float. Think of Vancouver as a stock with a billion ounces of gold and a small float (the land) Vancouver is Goin Up!!!

#110 grantmi on 09.17.10 at 1:14 pm

Washington State budget deficit hits $520 million, 6.3% cut next

“It’s going to be ugly!!!” (1:28min in)

http://www.komonews.com/news/local/103063499.html?tab=video

“”””””””””””””””””””””””””””””””””””””””””

But BC is different! Can’t happen here!!!!!

#111 TimF on 09.17.10 at 1:15 pm

“Absurd. Less than 1% of the population owns gold. You guys are so out of touch. — Garth”

Although I loved your presentation I’ll nitpick here.

Guess what the best asset class in the last 10 years in the US was (according to Dave Rosenberg) – that’s right Gold, by a country mile actually.

Guess what was second – another asset class you don’t like much – yes Bonds.

Owning gold is not necessarily to say things will go poof, and yes it doesn’t pay you to own it. But it has been around for 5000 years and it IS very good insurance against the gentleman who run for political office in most countries, including here.

Nitpicking aside – thanks again, your efforts are much appreciated.

My comments were not about gold’s performance, but the stupid statement somebody made about the creation of a private gold standard. Gold will never again be a standard. — Garth

#112 Causalien on 09.17.10 at 1:18 pm

There was a gentleman in the Q&A session who talked about CMHC buying the mortgages from the bank and creating bonds out of it. Garth then proceeded to say that he should hold his own seminar. I looked it up a bit and found only some mention of Canadian Mortgage Bond: http://www.cmhc-schl.gc.ca/en/hoficlincl/in/camobo/loader.cfm?url=/commonspot/security/getfile.cfm&PageID=178515

As an investor and day trader, I need to fully investigate the implication of this. Can somebody (or the gentleman in question) confirm that this is exactly what was discussed?

#113 Slats on 09.17.10 at 1:19 pm

@ 13) My care aid was in no condition to drive..

#114 dark sad person on 09.17.10 at 1:30 pm

#101 Devore on 09.17.10 at 12:31 pm

There may be a general deflation coming our way, if debt and credit gets destroyed in a major way. There may be general inflation, if recovery and credit pick up. The money supply and credit only tells you part of the story. Where the money goes into, tells another. For the rest, look around you. Equations don’t model the reality of billions of autonomous systems interacting (just ask the global warming alarmists). That’s why Austrian economics is so great; they don’t try to solve for X, because with a billion variables, it is pure hubris to pretend you can.

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

Of course-in his long winded explanation-he forgets-we are riding on a wave of Government stimulus-which is actually Deflationary-because-it’s “borrowed” and charged to us peons-through taxation-
Governments main purpose is to defend high prices-with our money–

Food prices going up the last while-
hmmm-must be that nasty Inflation happening again-
*********

Despite a large rise in the two months to August, wheat prices remain well below levels reached during the boom in 2008 and market pricing indicates that the risks of further large price spikes have eased.

The spillover from wheat to other food prices, in the absence of further large output revisions, should be limited by the temporary nature of the shock, ample wheat inventories, buoyant harvests for other major crops, and relatively stable energy prices. Upside risks include a more widespread supply shock driven by global weather patterns and protectionist government interventions.

http://www.imf.org/external/pubs/ft/survey/so/2010/new090110a.htm

***************************
So-the price of your $500k home drops 10% in 1yr and your grocery bill increases by 10% in a year-
It must mean Inflation huh

Do you see-why nothing you say-makes sense?

This is looking the Deflation monster-right in the eye-

http://research.stlouisfed.org/fred2/series/MULT

#115 ALE on 09.17.10 at 1:33 pm

Of course you can have asset deflation and price inflation concurrently. We do now. — Garth

I’d say instead hard asset prices will decrease at the same time as consumables increase in price. Can’t argue there, it’s happening.

The terms deflation and inflation however should be reserved for referring to money supply including credit marked to market. This definition, as used by real (read Austrian) economists, is a more fundamental cause of long term price changes. If you follow inflation and deflation in those terms you’ll have more success in predicting prices then by merely observing the symptoms of historic monetary inflation and deflation (today’s prices).

#116 thecomingdepression on 09.17.10 at 1:34 pm

GOLD: I have had an ad on craigslist looking to buy GOLD OR SILVER for approx. 1 year. VERY rarely does anyone respond. Nobody is looking to buy or sell. Which means, people have NO interest in it OR the VERY rich are the only people that accumulate OR people are so buried in debt they can’t afford it. I also have been hitting garage sales for years talking to people asking them to sell their stash. NOBODY has a stash of anything. The masses are completely IGNORANT of GOLD and SILVER. Its just another commercial on TV for them. Take that to the “bank”.

#117 JM in London on 09.17.10 at 1:38 pm

#88 Prufrock on 09.17.10 at 11:33 am

As for a bunch of letters P(iled)h(igh)and D(eep) behind a name, it matters not a whit. If you’re a follower of this blog you’ve no doubt heard others here speak to this on several occasions. Classical education is all well and fine to get your foot in the door but that’s all it should do. Our education system is better than a lot of the world but it is IMHO severely lacking – ESPECIALLY in areas of finance, or for that matter basic financial literacy such as balancing a cheque book. Once in the door I do believe financial advisors, RE people, Mortgage Brokers, etc. should have a very high standard as far as an apprenticeship or continuing education goes. It rubs against me in the worst way to say it as I’m libertarian and that path just means more bureaucracy – I shudder over this – and we mortgage guys are making limited progress with organizations like CAAMP – The coming lesson from Mr. Market should also go a long way to cleaning up some of the chaff as well…

the other side of this is the sheelple need to wake up and take some responsibility here. There is a certain amount of laziness that is frighteningly pervasive in that people throw their hands up and scream “but it wasn’t MY fault” as most (if not all) the information is there if it is wanted. That’s where the doomers seem to find “the pattern” in the “new world order” – in the information and its subsequent and inevitable distortion…

#118 JM in London on 09.17.10 at 1:44 pm

#96 Devore on 09.17.10 at 12:10 pm

#100 rory on 09.17.10 at 12:28 pm

well spoken points from you both! – Rory, My last post was an echo of yours but I read Prufrock and got a little passionate and THEN read yours – damn passion! Could have saved a few minutes!!

#119 C on 09.17.10 at 1:50 pm

“Hot Property” is absurdly biased. I watch it just to hear what the other side is saying and it’s a farce. Why not have a real estate bear on there to provide acutal information? Al Sinclair is a like a used car salesman pumping his properties.

On another note, I’m not really sure that Canada will see a slow melt. I think most Canadians are aware of what is going on in the US real estate market. If the average Canadian homeowner begins to sense that Canada’s real estate market is not just correcting 5-10% the momentum could really be explosive. The main reason is fear and the fact that as Canadians we had/have front row seats to the US housing catastrophe. Basically the US is in a depression, which is a prolonged severe depression. A Canadian credit bubble which pumped up a Canadian real estate bubble can not outlast a depression going on with it’s largest trading partner. Throw HST and rising variable interest rates into the mix and this baby could become scary. I just got back from Vegas last week and it is a fun city! I’d love to have a 1 bedroom condo down there. I looked online and they have plenty of them on or just off the strip for $150K-$200K. Do you know what that gets you in the GTA? Pretty much Zip! Something is not adding up and eventually that inbalance will work itself out.

For goodness sake, 1 in 7 Americans are living in poverty, their real estate market is in the tank, US firms are not hiring, there is no economic recovery. What happened to “if the US sneezes, Canada catches a cold”? Maybe resources will help the west (a bit) but come on now, is Ontario really much different from Illinois, Michigan, Indiana, and New York? I think not. The Canadian house illusion is fading and soon reality will be evident. Thank goodness I sold in April 2010 and renting. My wife and I are projecting a home purchase in 2-4 years.

#120 C on 09.17.10 at 1:54 pm

Regarding my comment I meant to say that a depression is a prolonged severe recession :)

#121 C on 09.17.10 at 1:55 pm

Spelling troubles today… must be Friday :)

#122 dark sad person on 09.17.10 at 2:03 pm

Here’s Mish to explain it for you Devore-

Those who knew a credit implosion was coming, got treasury yields correct, the equity crash correct, the rise in the dollar correct, and the strength in gold correct.

Gold does well in times of economic stress, especially in the senior currency – in this case the US dollar. It is the only commodity whose long term trendline is intact from 2000. Gold is money and as money it should do well in deflation in the country of the senior currency. It did.

In credit-based system, especially where credit dwarf money supply, credit itself (and the value of credit marked-to-market on the balance sheets of banks) is of paramount importance.

Those who insist inflation is about prices, as well as those who view inflation as an increase in money supply alone (ignoring credit), are going to continue to get the economic picture wrong.

If you are focused on prices or money supply alone, you are focused on the wrong thing.

In a fiat credit-based economy, where credit dwarfs money supply, changes in credit is what’s important, not changes in money supply, not nominal changes in prices.

It’s as simple as that.

http://globaleconomicanalysis.blogspot.com/

#123 betamax on 09.17.10 at 2:06 pm

#102 “bad form to slag Garth’s hosts”

Let us not show bad form, old chap. Yes, I’m surprised at the vehemence of some, but the Gordons should have been better prepared. I think they were functioning in ‘social’ mode rather than ‘business’ and sometimes it’s difficult to switch back when called on. I’ve sometimes had to answer questions off the cuff and sometimes you’re in the zone and sometimes you’re not. One day you look like a genius, the next like an idiot, though you’re the same person both days. So I won’t judge them on the basis of one answer.

Gordon made a joke about his wife bringing both the beauty and the brains to the relationship — maybe its truer than he knows?

#124 Prufrock on 09.17.10 at 2:26 pm

@rory

“I get there is a sense of entitlement just because you get letters behind your name.”

I’m not sure if this is directed at me, but if it is, I can assure you there isn’t. In any case my point isn’t about letters, but qualifications. If you really believe what you say, put your money where your mouth is and have your next operation done by someone without “M.D.” behind their name.

#125 beng on 09.17.10 at 2:34 pm

Thanks you Garth and a thanks to the Gordon Group for organizing and paying for the event.

I was expecting a sales approach by the organizers towards the attendees, but that was not the case at all.

Their clients are heavily invested in gold and so what. They sure are delivering great returns on those investments now aren’t they. Maybe their investment strategy is to reduce gold exposure when they believe the top for that asset has been reached. We don’t know, so judgements being made are uncalled for.

Garth, you are an excellent speaker – well done!

#126 David B on 09.17.10 at 2:35 pm

More sad news from South of the Border: (WSJ)

By MARK WHITEHOUSE

U.S. households saw their wealth decline in the second quarter despite their efforts to save more money, underscoring the economy’s struggle to recover from the recession.

Not to be on dark side but why is it our MSM continues to only print approved Ottawa (Harper & Co) press releases? or is that Canadian Sheild they talked about so strong even the mighty USA couched with Europe and Asia can not move it?

Yup Greater fools buy buy buy and borrow borrow borrow …. and those dam fools who pay down debt save wisely will miss out on the good times.

#127 Mark on 09.17.10 at 3:07 pm

#96, exactly. Or the mortgage will go back to the CMHC, and the bank gets paid, in full, and can use the proceeds of the CMHC mortgage insurance to go out and write a new loan at the higher interest rates.

This is why Canadian banks are fundamentally solid. Anyone with a loan is extremely vulnerable, unless they can pay it off prior to maturity.

#128 Mark on 09.17.10 at 3:18 pm

#25 Kate:

” 1. Let’s say somebody is buying a house with 5% down and gets CHMC insurance. What does the insurance cover – just those missing 15% down or the entire mortgage? What happens to the banks revenue when people start defaulting on mortgages?

The insurance covers the entirety of the mortgage against default. The bank is repaid every dime owing at the time of default.

Banks’ revenue is unnaffected in the short term. And actually rises in the long term as the bank is able to raise interest rates on housing-secured loans across the board without worrying about mass defaults (as the defaults are insured against!).

The way the CMHC insurance is structured, the banks actually have a massive incentive to destroy the value of the housing market, to collect on the insurance.

“2. Let’s say somebody dives into the negative equity and it is time to renew the mortgage. Does the bank checks that and renew only the amount up to the current house price or mortgage the whole amount even though it is more than a house cost? What happens to the bank if a person defaults a mortgage on the amount larger than the current house cost?”

Banks would typically offer renew the mortgage, but at a higher “spread” (ie: interest rate), incorporating the fact that much of the loan is now unsecured and hence, more risky.

If a borrower doesn’t accept the bank’s offer, and can’t repay the loan in full (or find alternate financing), then the bank claims under the CMHC insurance policy for default.

As you can probably imagine, once a person is in negative equity, it will be extremely difficult to ever build equity in the asset, because lenders will demand progressively higher interest rates.

Mortgages now go on credit reports, so one would also anticipate a higher cost of credit across their entire spectrum of borrowing if they are in negative equity. No more cheap car loans, for instance.

#129 Jenny on 09.17.10 at 3:19 pm

Hi Garth,

Great talk last night. I was the woman who asked you the question about deflation. I wanted to discuss this further with you.

I’m still not convinced that inflation is going to happen. I believe that you were arguing that inflation will occur due to the savings by corporations in America and due to increasing taxes. I am having trouble understanding how you think inflation is going to occur and here’s why:

First, as you mentioned this is a jobless recovery. If people have no jobs, demand for goods drops. If demand drops, prices drop unless supply dramatically drops as well. But as you pointed out currently both India and China are still producing large quantities of goods to sell to North American and Europe. But we’re not buying. For example, Americans have had a change of heart and they are saving like crazy. Take a look at the personal savings rate in the US, from 1.7 in August 2007 to 5.9 in July 2010. In June 2010 the Washington Post published this headline “Savings rate grows faster than consumer spending.” (http://www.washingtonpost.com/wp-dyn/content/article/2010/06/28/AR2010062805097.html). I find it hard to see how prices are going to increase when people just aren’t buying products and as jobs remain hard to find consumer spending will be repressed and saving rates will increase.

Second, you argue that India and China will continue to grow and this will impact our economies. But if consumer spending remains low or goes lower in the Western world who will buy these products? At the end of the day these countries must be able to sell their products. As Gary Shilling pointed out last year he sees emerging markets in serious trouble because they are dependent on exports. And while one can argue that China/India could sell to their middle classes, the reality is these groups are too small to sustain the high level of growth we have seen in these countries. (http://www.forbes.com/2009/03/11/shilling-froehlich-china-intelligent-investing-bull-bear.html)

Third, the situation you describe in the Canadian housing market is credit deflation. How can inflation be on the horizon when you are predicting the price of the major asset a person will dramatically decrease over the next 4-5 years? Why do you think it will only be confined to the housing market?

I look forward to hearing your responses to my questions.

Cheers,
Jenny

#130 Jeff Smith on 09.17.10 at 3:19 pm

>#109 VancouverGoinUp on 09.17.10 at 1:04 pm
>Look, Vancouver is going nowhere but up. People don’t
>understand. First of all there is limited land. Secondly
>Vancouver is considered the best place on earth. Thirdly
>millions of Chinese immigrants with cash in hand want to
>buy Vancouver and surrounding neighbourhoods –
>especially flood plain areas like Richmond. Serioulsy,
>Richmond (just south of Vancouver ) is on a flood plain.
>Chinese investors are buying tear down houses for
>750k then builidng a 3500sq foot home all at a total cost
>of over a million backs. The rest of Canada doesn’t get
>it – Chinese investors buy with cash – NO MORTGAGE.
>There is no bubble here – prices will skyrocket as
>investment money flows to the best place on earth with
>a limited supply float. Think of Vancouver as a stock
>with a billion ounces of gold and a small float (the land)
>Vancouver is Goin Up!!!

Aha! I know you! You are back. Nosty Jr. right?!

#131 Jeff Smith on 09.17.10 at 3:21 pm

>#109 VancouverGoinUp on 09.17.10 at 1:04 pm
>Look, Vancouver is going nowhere but up. People don’t
>understand. First of all there is limited land. Secondly
>Vancouver is considered the best place on earth. Thirdly
>millions of Chinese immigrants with cash in hand want to
>buy Vancouver and surrounding neighbourhoods –
>especially flood plain areas like Richmond. Serioulsy,
>Richmond (just south of Vancouver ) is on a flood plain.
>Chinese investors are buying tear down houses for
>750k then builidng a 3500sq foot home all at a total cost
>of over a million backs. The rest of Canada doesn’t get
>it – Chinese investors buy with cash – NO MORTGAGE.
>There is no bubble here – prices will skyrocket as
>investment money flows to the best place on earth with
>a limited supply float. Think of Vancouver as a stock
>with a billion ounces of gold and a small float (the land)
>Vancouver is Goin Up!!!

Oh don’t forget, if you live in Richmond, you have a greater than average change of becoming rich. Richmond sounds eerily similar to Rich man! Good karma

#132 Old_is_Gold on 09.17.10 at 3:29 pm

The new definition of RECOVERY:

US household wealth falls 1.2 Trillion in Q2

Despite the frugality of households and companies, total U.S. debt edged up 1.2% as state, local and federal governments borrowed to finance massive deficits. Government debt, including the liabilities of state and local governments, rose 4.6% to $11.1 trillion in the second quarter. That’s nearly $38,000 a person.

http://online.wsj.com/article/SB10001424052748703904304575497783824078838.html

#133 Mtl RE Observations on 09.17.10 at 3:35 pm

Garth, any plans on putting a recording of your presentations up on YouTube after your done with the tour? Any plans to come to Montreal?

#134 Helen on 09.17.10 at 3:41 pm

Just spoke with my pal, he is Chinese and looking for a house in Toronto – Richmond Hill (Leslie& Major Mack) – he said there are still multiple offers in this area and no price drop at all. Many people from Hong Kong buy houses in this area, many of them don’t even live in Canada, they just own houses here.

#135 dark sad person on 09.17.10 at 4:09 pm

#115 ALE on 09.17.10 at 1:33 pm

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

Buy this man a beer–he gets it–
Ale-if you please–

#136 VancouverGoinUp on 09.17.10 at 4:16 pm

Was just out in Richmond looking at the old neighbourhoods being bulldozed down and the new houses being constructed. Things couldn’t be better.
Best weather in Canada, limited land, money rolling in, The World wanting to live here. People don’t understand, houses are being snapped up from investors all over the world as Vancouver is dirt dirt cheap. Folks VancouverisGoinUP – not you or anyone can stop it. I know its a bitter pill having missed out on one of the biggest booms in real estate. But folks its only going to get better as the Middle Classes in China get richer and desire Vancouver real estate. Quite simply the prices are going to be double or higher in the next 10 years. Sure your average Canadian might get slaughtered if interest rates go higher – but Vancouver is not for average Canadians – It is for rich overseas investors. I’m sorry for some of you who missed the boat and are now bitter. Fact of the matter is Vancouver is Goin Up and you still have time to get in on this mother of all bull markets

#137 Bill ( Peterborough) on 09.17.10 at 4:26 pm

Garths Comment

My comments were not about gold’s performance, but the stupid statement somebody made about the creation of a private gold standard. Gold will never again be a standard. — Garth

——————————————————————-

Pretty hard to put gold as a standard when most countries around the world no longer own the gold in their own countries. ( the banking cabals own most of it).

These countries are just nice enough to hold the gold for them . Having bartered the gold away for fiat currencies. Now most countries are selling off their resources to huge conglomorates( owned indirectly by the Cabals) for more fiat currency.

Wild. Print money at almost zero cost, lend it to countries. Charge large interst, use gold as security, then go after countries resources once gold is used up as collateral.

Next world standard will be the new and improved computer/tracking chip.

Step Right Up. Winner ever time.

http://www.youtube.com/watch?v=OQfjIw3mivc

#138 ExRichmondHillResident on 09.17.10 at 4:36 pm

@#134:

My friend just bought a house in that area (Richmond Hill – Leslie & Elgin mills) and she got it for ~8% below the asking price. NO bidding war. Seller was quick to accept the offer without a fight (no counter offer). And yes she came from Hong Kong.

#139 landlessinvan on 09.17.10 at 4:45 pm

Was just in my bank, and talking with a banker there; he says the word on the street among realtors in Kits/Point Grey is that 9 out of 10 houses are being sold to Chinese. And the Chinese are buying up entire apartment buildings in Vancouver. So, no, it’s not over yet. People are still buying.

#140 Yaun Way Road on 09.17.10 at 4:46 pm

BIG NEWS:

China is talking about selling it’s 1.5 TRILLION dollars in US T-Bills….

http://www.telegraph.co.uk/finance/currency/8002719/Chinese-think-tank-warns-US-it-will-emerge-as-loser-in-trade-war.html

Ding Yifan, a policy guru at the Development Research Centre, said China could respond by selling holdings of US debt, estimated at over $1.5 trillion (£963bn).

#141 Yaun Way Road on 09.17.10 at 4:54 pm

#131 Jeff Smith and #109 VancouverGoinUp
>Look, Vancouver is going nowhere but up. People don’t
>understand. First of all there is limited land. Secondly
>Vancouver is considered the best place on earth. “…Oh don’t forget, if you live in Richmond, you have a greater than average change of becoming rich. Richmond sounds eerily similar to Rich man! Good karma”

Karma has nothing to do with money. Ask a buddist they will teach you want Karma means and it’s not money related.

Vancouver is an ok city in Canada. It’s not the best place to live in Canada nor the world, period. It’s not even a “World Class city”, what, 3 million people and as many hours of rain.

You’d have to pay me to live in Vancouver, oh wait, forget that, free cash isn’t worth living there.

Vancouver thinks is is the “Centre of the Universe” but it’s actually 4,200km east. BOoya..

#142 nibs on 09.17.10 at 5:00 pm

@ #109 VancouverGoinUp

Yeah….’rich Asians’ will keep things afloat…..good luck with that!

The ‘Hot Asian Money’ fallacy:
http://financialinsights.wordpress.com/2010/09/11/the-hot-asian-money-fallacy/

#143 jess on 09.17.10 at 5:08 pm

http://www.corpwatch.org/article.php?id=15481
Capital markets have no memories,” said Richard Portes, a professor of economics at the London Business School. “Bankers simply charge premium spreads high enough to take defaults and still end up, on average, with profitable lending.”

KAZAKHSTAN: Kazakh Bank Lost Billions in Western Investments
by Landon Thomas Jr., New York Times
November 27th, 2009

In the last few years, big banks have found many surprising ways to lose billions of dollars by making loans that turned sour. But few can match the odd tale involving Kazakhstan and a little-known bank. From 2003 to 2008, Credit Suisse, Morgan Stanley, Royal Bank of Scotland, ING and others funneled more than $10 billion in loans into Bank Turalem, during the Central Asian country’s boom spurred by its rich deposits of oil and natural gas. Many of these loans are now bust.

=
‘naked’ CDS
Richard Portes
http://www.nytimes.com/2009/11/28/business/global/28kazakh.html?_r=1&em

=

SEC cracks down on ‘window dressing’
U.S. regulator tightens rules on companies hiding debt
Last Updated: Friday, September 17, 2010 | 12:54 PM

Read more: http://www.cbc.ca/money/story/2010/09/17/sec-debt-window-dressing.html#ixzz0zpI5hP7V

#144 Kate on 09.17.10 at 6:05 pm

Thank you, guys, for you answers, now it is clear. Banks are in win-win situation unless the mortgage is not CHMC-insured. So, when people with risky mortgages start to default, the taxpayers are paying for it. And if the traditional mortgages with 20% down start to default, then the banks are loosing money? Does 20% come from the bank assumption that RE will never go down more then 20% (owner equity)?

#145 Increasing that 1% on 09.17.10 at 6:21 pm

Awww, those people look so happy, and friendly in pic. What did you say to them, Garth?! Had you just flashed them your ‘steel-and-fibreglass skivvies’? Orr, maybe it was the coffee…hmmm-
…hey, we never had coffee, and the Starbucks beside was closed for reno’s when you were here, talking to us ‘Eastern Provinces’ people (#98-caesarcaesar)-

guess, according to 98, 700 people were brainwashed to go see you, Garth, and they couldn’t be too bright anyways, seeing as dey mut ave all bin renters dahh…

#146 brainsail on 09.17.10 at 6:24 pm

1 in 7 poverty rate in the US

Out of curiosity I tried to compare the Canadian poverty rate to the US and could not find a clear answer. The US uses a metric based on income. For example, a family of four, less than ~$22k income is below the poverty level. For Canada I found a reference to that less than $39K income for a family of four (2008) is below the poverty level. I found another one that stated Canada does not use the term “poverty level” and uses “low income” instead and it is defined as a family that spends more than 63% of their income on the basics, “food, clothing and housing”. Does anyone know the real answer?

#147 Reasonfirst on 09.17.10 at 6:39 pm

#139 landlessinvan

So we here from you that you talked to someone who heard from someone that the word on the street is….

and all those someones have a vested interest.

#148 Kurt on 09.17.10 at 6:39 pm

Just out of curiosity, do VancouverGoinUp and landlessinvan originate from the same IP address?

#149 dale on 09.17.10 at 6:43 pm

“landlessinvan on 09.17.10 at 4:45 pm Was just in my bank, and talking with a banker there; he says the word on the street among realtors in Kits/Point Grey is that 9 out of 10 houses are being sold to Chinese. And the Chinese are buying up entire apartment buildings in Vancouver. So, no, it’s not over yet. People are still buying.”

90% of Vancouver, IS Chinese, who else do you think is going to buy? Kligons?

#150 Increasing that 1% on 09.17.10 at 6:49 pm

#138. X-RH res, re: Richmond Hill

Ah, yes, but It’s Different, at Major Mack.

#151 jess on 09.17.10 at 6:54 pm

…okay gold bugs …food for thought
social unrest in china is building especially when ..

acid- laced waste spills into a local river, killing enough fish to feed 72,000 people for a year. ”

http://noir.bloomberg.com/apps/news?pid=20601124&sid=a49vhbBazOPE

#152 Tom on 09.17.10 at 7:04 pm

Nice of the Gordons to host the event-good way for them to try and drum up business…But seriously, how long does it take to get a financial planning designation? You don’t even need a commerce degree. So, the designation doesn’t say much about competence and it is very difficult to find out about people’s track record. Many that would recommend someone may have only had experience with 1 or 2, so they don’t really have a baseline for comparison. Considering that no one can consistently beat the market, I’d be suspect of anyone who has an approach that is radically different that a middle of the road, diversified plan.

#153 VancouverStraightDown on 09.17.10 at 7:12 pm

“Look, Vancouver is going nowhere but up. People don’t understand. First of all there is limited land. Secondly Vancouver is considered the best place on earth.”
“Best weather in Canada, limited land, money rolling in, The World wanting to live here. People don’t understand, houses are being snapped up from investors all over the world as Vancouver is dirt dirt cheap. ”

===============================

Vacouver rains a lot and the housing is very very very overpriced – why would you want to be a live in a sardine can (13,817.6/sq mi), why not Victoria (10,869.9/sq mi) or start up the overpriced condos in Nanaimo (2,282.3/sq mi).

Too crowded and overpriced…

Schill…

#154 DJH on 09.17.10 at 7:20 pm

Garth, I agree with your criticisms of our current federal government. If you had the power of H and F, what precise steps would you take to make things right?
1. ?
2. ?
3. ?
4. ?
5. ?

#155 Nostradamus Le Mad Vlad on 09.17.10 at 7:26 pm


It was Big Oil that funded the Copenhagen farce, and this is the reason. They are not done yet.

GW? The Gods Must Be Crazy!

3:30 clip Peopleville. Has a C&W feel.

4:26 clip Can gold be printed?

Is it any wonder that California and the US are going broke?

Gobal climate disruption. Replaces, CC, GW and GC.

#156 jess on 09.17.10 at 7:28 pm

Chinese citizens need to get approval from their local authorities to invest more than the equivalent of $50,000 a year overseas. So how do they work around the restrictions ?

http://www.nytimes.com/2010/09/18/business/global/18chinareal.html?pagewanted=2&ref=world

#157 Tennie on 09.17.10 at 7:34 pm

Thanks Garth for giving us information to empower ourselves and plan for the future.

I totally appreciated that the Gordon Group didn’t place any pressure on the audience to use their services, and would like to thank them for hosting the event.

#158 dark sad person on 09.17.10 at 8:15 pm

146 brainsail on 09.17.10 at 6:24 pm

Does anyone know the real answer?

***************
No-but we should declare a “war on poverty” like the US did-we see how well that’s worked out-same for the war on drugs and for-no child left behind–

You “might” be able to find the numbers-through Tax bracket inflows- the number of-low income-tax payers-
Not sure if this would tell you the number of people/contributors-but it “might” be found in that data-
It may also be used (if its available) to monitor any increase-in contributors-
Couldn’t go by revenue levels-cuz that will float-
Good luck sifting through that maze–

http://www.youtube.com/watch?v=F-H55V_oma0&feature=related

#159 Mel in Victoria... on 09.17.10 at 8:22 pm

Were any of the three CKNW Amigos at your presentation.ie Campbell, Levies and Jergoff??

#160 blobby on 09.17.10 at 8:30 pm

Hi Garth

Just wanted to say, i enjoyed last night. My *ONLY* complaint was that the more complicated ideas you discussed in terms of investment were talked through so quickly i hardly had time to take a lot of them in..

#161 goldenfox on 09.17.10 at 8:36 pm

Absurd. Less than 1% of the population owns gold. You guys are so out of touch. — Garth

And some people say gold is in a bubble.

#162 Whistler Dude on 09.17.10 at 8:57 pm

Whistler is said to have 950-ish RE listings. That wouldn’t include the 45 condos and homes that were listed in http://www.piquenewsmagazine.com for tax auction. If you gamble and buy one (one guy bought/put a deposit on- 4 last year). Should you win the bidding, the original owner has a year to pay the back taxes and still has the use of the property.
Did I mention that 70% of the properties in Whistler are owned by Vancouverites. The toys are the first thing to go….

#163 brainsail on 09.17.10 at 9:08 pm

#157 dark sad person

Thanks for the response. After a little more research I now realize that there is not a definitive answer to my question. Like unemployment numbers every country uses different metrics making it impossible to do an apples to apples comparison. I was reacting to Canadian responses when the US 1 in 7 lives in poverty and wondering if poverty levels weren’t any different in their own backyard. I don’t think we will ever know.

#164 Nostradamus Le Mad Vlad on 09.17.10 at 9:15 pm


#152 Tom — “. . . how long does it take to get a financial planning designation?”

I have never asked our CFP how long it took him to get the designation, but he said that every summer, he travels back to Ontario for two weeks to keep his certification, and one week for a holiday.

#165 An Cat Dubh on 09.17.10 at 9:19 pm

Next time you come to the Okanagan try coming to Penticton or Vernon for a change. Not as centralised, but nicer cities.
BTW Alan Greenspan talking about the economy makes as much sense as a crackhead talking about brain surgery.

#166 dark sad person on 09.17.10 at 9:25 pm

#151 jess on 09.17.10 at 6:54 pm

…okay gold bugs …food for thought
social unrest in china is building especially when ..

acid- laced waste spills into a local river, killing enough fish to feed 72,000 people for a year

***********************
Not sure your of what the reference to Goldbugs means-but-it sounds like mother nature is fighting back and using the people and imposing productivity tariffs on the Chinese Government–
China is an overheated-overinflated-polluted wreck-
Good for the People-to have the courage to stand up to Corporatism and bribed Politicians-
Low wages weren’t the only reason the corporate rats abandoned the sinking ship that is/was North America-
Low environmental standards are huge savings to the Sociopaths-that care not one whit-about the premature deaths of the common people-all in the name of big largess–
China has just spent hundreds of billions building expensive City’s that sit completed empty-
Ghost City’s where no one can afford to live-
That money was wasted-now-Mother Nature calls-for much more–

http://www.reuters.com/article/idUSTRE58G00T20090917

http://www.youtube.com/watch?v=1EBw_da7BZk

#167 Keith in Calgary on 09.17.10 at 9:46 pm

Price deflation 101…….

8 months ago my wife fell in love with a classy pair of business/social dress pants at JONES NEW YORK (a high end women’s designer clothing store)……100% cotton, black (of course) and frankly, they made her look great……here’s the prices right from the store tag……

$110.00 + GST
$ 90.00 + GST
$ 63.00 + GST
$ 45.00 + GST
$ 26.99 + GST
$ 24.99 + GST

She paid $18.99 today + GST……….

2 years ago you’d have never seen that………and if those of you wish to deride my example by saying one sample does not make a stat, you’d be correct, as long as I couldn’t post a lot more of them that is………and I can.

#168 HouseBuster on 09.17.10 at 9:51 pm

Come on Garth. These are Canadians we are talking about here. Did you think they would be anything other than polite?

#169 Alex on 09.17.10 at 9:55 pm

Typical full month september sales in Toronto are 7,000. Past 2 weeks of 2,613 is pretty low (although it included the labour day period at the beginning of the month)

About prices, it’s important to remember normal seasonal variances.http://guava.ca/?cat=3

Comparing aug to sept, 2004/2009, there is an average 3.7% increase.
2004 305k/321k
2005 323k/338k
2006 338k/349k
2007 368k/380k
2008 365k/368k
2009 388k/409k

Whereas comparing 2010 mid-month aug/sept we have $413k/$412k. A 0.2% decrease.

Seasonally adjusted this appears to be a 3.9% decrease? If so, that would be one of the biggest monthly drops, seasonally adjusted, in the history of toronto real estate.

#170 Mark on 09.17.10 at 10:21 pm

#144 Kate,

“Thank you, guys, for you answers, now it is clear. Banks are in win-win situation unless the mortgage is not CHMC-insured. So, when people with risky mortgages start to default, the taxpayers are paying for it. And if the traditional mortgages with 20% down start to default, then the banks are loosing money? Does 20% come from the bank assumption that RE will never go down more then 20% (owner equity)?

Many, if not most of the >20% down mortgages, and most definitely the high risk ones, are insured under another government program called the NHA, which provides a loan guarantee similar to that of the CMHC, but at a lower premium.

So once, again, the banks are covered.

The 20% downpayment requirement for an uninsured loan is a completely arbitrary requirement in the Bank Act. It used to be 25%. The idea of a downpayment is to ensure that someone has ‘skin in the game’.

The Canadian housing market probably won’t collapse overnight. Over the next number of years, as equity dissappears, borrowers might be forced, by the banks, to obtain CMHC insurance upon renewal.

For example, if someone puts 40% down to buy a house, and the market drops by 30%, the bank will require the borrower to obtain CMHC insurance at the time of renewal, or make a large cash deposit to bring the loan into compliance, because their equity will have dropped below the 20% threshold required for a renewal without insurance.

As the downward spiral continues, eventually the CMHC’s losses will become unbearable politically, or the entirety of the mortgage market will fall under CMHC insurance.

This has already happened in the United States, where nearly the entirety of the mortgage market is now insured by the US government.

#171 T.O. Bubble Boy on 09.17.10 at 10:24 pm

Another Van City RE pumper:

http://stubellblog.blogspot.com/2010/09/rent-or-buy-in-vancouver.html

Garth – I hope you survive your trip into the surreal bubble land!

#172 Jeff Smith on 09.17.10 at 10:40 pm

>#140 Yaun Way Road on 09.17.10 at 4:46 pm
>BIG NEWS:
>
>China is talking about selling it’s 1.5 TRILLION dollars in
>US T-Bills….
>
>http://www.telegraph.co.uk/finance/currency/8002719/Chinese-think-tank-warns-US-it-will-emerge-as-loser-in-trade-war.html
>
>Ding Yifan, a policy guru at the Development Research
>Centre, said China could respond by selling holdings of
>US debt, estimated at over $1.5 trillion (£963bn).

Personally I think that China holding $2.5 trillion plus of US dollar does not make this a real threat to the US economy. Last time I checked, the US economy is worth $14.3 trillion plus annually. I mean if China sell the entire holding of the us $ holding, it might be a short term blip of discomfort to the US economy. In this sense, yes, many people will see their wealth reduced, but the US economy will survive intact. The fact that the US dollar is the reserve currency will mitigate the damage.

#173 Debtfree on 09.17.10 at 11:02 pm

Thanks Dale for the Klingon bit …. that just cracked me up.

#174 Bottoms_Up on 09.17.10 at 11:02 pm

Tucked away into a small corner on page A14, under the heading “Home economics” in Friday’s paper of the Ottawa Citizen, a message from the newspaper itself:

“…Not only is a house likely to be our single largest purchase, it becomes almost a life-long financial burden….Rock-bottom interest rates, …have prompted Canadians to jump to the housing market…..according to the OECD, 7.5% of Canadian households would be in trouble if rates return to normal levels…We lock up almost all of our money in our houses, when maybe that money could be working harder and better elsewhere. If rising mortgage rates interfere with our plans to buy McMansions, then maybe we should find smarter ways to invest.”

http://www.ottawacitizen.com/business/Home+economics/3536943/story.html

Garth, it sounds like MSM Ottawa is listening to you.

#175 BrianT on 09.17.10 at 11:12 pm

#124-Pruf-no wonder Madoff was so successful-his status as head of the Nasdaq would be like music to the ears of people like yourself.

#176 dark sad person on 09.17.10 at 11:21 pm

#163 brainsail on 09.17.10 at 9:08 pm

I don’t think we will ever know.

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

Likely not-
The way they can hide unpleasant data in Canada-would make Paulson and Geithner blush in envy–

Maybe we can get a better stat–once the food stamp program starts in earnest–

#177 Bottoms_Up on 09.17.10 at 11:28 pm

#167 Keith in Calgary on 09.17.10 at 9:46 pm
———————————————-
I’ll got a couple for you. For a year or two now, I haven’t been buying much old cheddar cheese because it just got way too expensive (it use to be around $6-7 for a brick of Black Diamond and then jumped to $9 and stayed there).

Today at the grocery store (Loblaw’s) I noticed their regular price for the brick is now set at $7 (a 22% decrease), and they had a sale on for an extra buck off, so all in all a 33% decrease.

Also, just purchased a stainless steel refrigerator from Home Depot for $400 off an original sticker price of $1500 (a 27% price reduction), and got free shipping to boot.

The HST hurt on that one though.

#178 Chaos on 09.17.10 at 11:32 pm

Jess,

Chinese nationals move their money out of China through nominees in $50,000 chunks. It costs between 8-10%, $4000-$5000 per chunk. It is known as “Fragrant Grease” and is accepted as the cost of doing business. You might be surprised just how many relatives a rich Chinois will attest to having.

Now you know.

#179 Soylent Green is People on 09.18.10 at 12:51 am

HarperCon, by destroying the long form census, will make sure no one will ever know the rate of poverty some children live in Canada. He doesn’t want those numbers out, are you crazy?

The governments around here deliberately make the poverty data confusing because they don’t want anyone to know the truth. And it’s bad. I don’t know how I get out of bed every morning when I think about the children in Canada living in squalor and God only knows what else.

It’s kind of like the mattress companies all name their mattresses different weird names so you can never compare prices from one store to another, even Sleep Country does this.

Was an industry ever as dirty as the mattress sellers?

~~~~~~~

The mattress industry is very unique. Very few people go through the mattress shopping experience without confusion or some feeling of loss of control over the purchase decision. There is a very good reason for this phenomenon. It starts at the top, with the major manufacturers and works it’s way down all the way to the sales sharks, excuse me, sales associates on the display floor. The system was designed so that the customer has limited bargaining power, but there is a way to beat it.

http://www.mattressscam.com/

#180 dark sad person on 09.18.10 at 12:57 am

#42 Stright shooter on 09.17.10 at 4:28 am

There are a few here who are infected with “Gold Fever”. I had to look it up and read about it in history to understand and diagnose their condition.

Gold Fever is a psychological affliction of pure greed with no care for themselves or others. Those with gold fever show restlessness, anxiety and a willingness to risk everything to get richer (including their lives). Many who suffer from Gold Fever even up broken, indebted or dead. While very few become rich in the end.

Gold fever is a reoccurring psychological affliction.

Amazing what history can teach you.

Unfortunately, “Gold fever” sounds right for the times we are in. Greedy people with a lack of morals seem who worship money rein today.

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

You and “whoever” wrote that pos article-have no friggen idea what Gold is-or what its functions are-
What discipline it forces on people-what discipline it forces on Governments-
Morals?
Gold is the guardian of Morals-unlocking it and setting it free-was the beginning of Societal breakdown-
The power it held-in the hands of the people-was stolen
and along with that-went property rights–
But fear not–Gold will be back–ohhh pardon me-
Gold “is” back-in fact it never left-
It’s been quietly waiting for strong hands to carry it to the house of Currency’s where it once sat-at the head of the table-
Once all the weak hands are flushed and the inevitable currency runs start (they will) this always happens (always)-
Gold will have more paper thrown at it than you could imagine-
Gold will command the amount of paper it takes to satisfy-what Gold decides-will be fair price-
This story has been ongoing for 88 years now-
But–if can’t feel the “quickening” of the last 10 years-you are truly asleep
Gold is biding its time-watching frantic Governments throwing Trillions of Dollars at the Debt monster–
Gold has seen this play–many many times–
Gold smiles–it knows it will be called on by Governments to kill Debt-
Debt is an old acquaintance of Gold-they’ve crossed paths many times over the thousands of years-

When Gold smiles-Debt trembles in fear-
Gold despises Debt–
Debt fears Gold–
Fear is an old acquaintance of Gold too–
Gold likes Fear-they are old friends-spanning back Century’s/Eons–
Fear brings the people to Gold and Gold likes people-

Gold was put here to protect the people and their property and put Power (another dear friend)in peoples hands-
Power to control Governments-Power to protect their property rights-power to have pricing control in a free Market–
The opportunity to save the fruits of their labor and make it impossible for Governments to steal peoples wealth via Inflation–

You obviously know none of this–
The Goldbugs do–

‘Gold is the guardian of Morals’? Know I know you eat the stuff. — Garth

#181 Patz on 09.18.10 at 1:00 am

#69 Dan:

Classy response to the facile criticisms of the hosts Garth. Anyone who read their handout newsletter would also realize they were contrarians. I spoke to them briefly afterwards and found them quite intelligent. (Besides she’s hot!)

#109 + 136 Vancouverisgoingup —- I suspect those are by our old friend Devils Advocate. Check the IP.

#182 dark sad person on 09.18.10 at 9:53 am

‘Gold is the guardian of Morals’? Now I know you eat the stuff. — Garth

**********************
The great Philosopher Seneca said to Nero-just before Nero handed him the knife-which he used to take his own life-as the great Empire was in the late stages of collapse-from–
Monetary debasement of Gold–

‘non vitae sed scholae discimus’

Fire is the test of Gold;

Our plans miscarry because they have no aim. When a man does not know what harbor he is making for, no wind is the right wind.
.. If one does not know to which port one is sailing, no wind is favorable.

It is not the man who has little, but the man who craves more, that is poor.

Marcus Aurelius—

All things are woven together and the common bond is sacred, and scarcely one thing is foreign to another, for they have been arranged together in their places and together make the same ordered Universe. For there is one Universe out of all, one God through all, one substance and one law, one common Reason of all intelligent creatures and one Truth.

Frequently consider the connection of all things in the universe.
We should not say ‘I am an Athenian’ or ‘I am a Roman’ but ‘I am a citizen of the Universe.

#183 Herb on 09.18.10 at 9:56 am

Bottoms_Up @ #174,

that bit of Ottawa Citizen news is like Abelard counselling chastity after having been denutted by his paramour’s uncle. It’s the “Homes” section, along with “Sports” and “Entertainment,” that generates advertising, not to mention advertorial, revenue. The “Main” (news) section only serves as wrapper for the marketing bundle.

Having cancelled my subscription in January on the stated grounds that I did not like to be a target for marketing and political manipulation, I am glad I did not accept the latest offer to come back to the fold, despite the small relapse into reality.

#184 Big Nasty on 09.18.10 at 1:01 pm

I totally understand that real estate is a horrible investment in the long run. One is better off investing proceeds properly (ie: max out tax efficient vehicles – RSP, TFSA). But I do have one problem when it is time to retire – do I simply rent until I am no longer here ? If I were to buy real estate I am treating it as my retirement home. Thoughts ?