The ride

An hour by commuter train west of Toronto brings you to downtown Hamilton, a city of half a million people. Grafted to its eastern flank is the suburb of Burlington, where another 170,000 live. And while Hamilton’s been known as an industrial, blue collar kinda place, Burlington’s waterfront is graced with a long boulevard lined with estates, some of which are currently for sale for between $5 million and $9 million.

In fact, that’s a problem. Usually no such homes are on the market. Something’s up.

And despite the odd seven-figure sale, the average home price in the whole Hamilton-Burlington area, says the local real estate board, is showing signs of distemper. In the last 90 days, it;s fallen 5%, and now sits at just $299,000.

I mention this, since anyone getting on the evening GO from Toronto’s Union Station to central Hamilton would be on a ride into real estate reality. The average SFH price in Toronto is about $600,000, or twice that of a region  just an hour away where almost 700,000 people live.

In fact, going west, it gets worse.

In London (population 457,000) the average home price is now $227,000. In nearby St. Thomas, where Ford is about to shut down an assembly plant, houses average $184,000. And down the road another hour or so is Windsor, once the car capital of Canada, where a nice two-storey suburban home can be had for about $150,000.

In fact on Monday Windsor will sell off 19 properties for tax arrears, if you’re interested. (The city is bedevilled with $45 million worth of property tax that owners won’t pay.) On the list is a prime riverfront lot near the glitzy casino, with an unobstructed view of the Detroit skyline. It’s $22,000. And there’s also an urban six-acre undeveloped parcel of land surrounded on four sides by homes, schools and a Shoppers Drug Mart. The price is $164,000.

Of course, one kilometre further west puts you at ground zero for HouseAgeddon – downtown Detroit, a city which has lost half its population. Several days ago, a firestorm swept through a neighbourhood, leaping from one abandoned home to another, taunting fire crews and consuming 85 unloved residences, before being extinguished.

Now you may not think you have anything in common with Detroit. Or Windsor. Maybe even London, or Hamilton or its suburbs which now melt into the GTA. But you do, at least if you’re a homeowner.

The lesson here is that real estate has little intrinsic value. Instead, it’s entire worth is determined by the market. By supply and demand. By the desires of buyers. Identical houses an hour apart can vary greatly in price, and it’s almost always for economic reasons. These days there is little steel being produced in Hamilton, far fewer car parts and railway engines in London, and no more engines in Windsor. As economic opportunity leaves town, so does home equity.

This may be a self-evident, but nonetheless valuable little lesson in economics.

After all, Canada’s unemployment rate is forecast to remain above 8% for some time. Years, maybe. Wages and salaries have flatlined, while household debt has reached historic levels. Almost half of us save less than 5% of what we make and 40% have stopped trying to save anything. Sixty per cent of people say they’d be screwed if they missed one paycheque. And 70% own houses.

I thought of such things as I sat in a Vancouver hotel lobby on Friday and listened to a man who had asked me to help him. At 62 he has not worked since being laid off three years ago from his office job, has a couple of hundred thousand in RRSPs, and a modest house worth $1.2 million.

‘I’m worried. What should I do?’ he asked, dead serious.

This is going to get so interesting.

156 comments ↓

#1 TheBigLebowski on 09.18.10 at 3:00 am

#57 S.B.-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.

Well, you’ve been wrong about gold for ten years and counting, plus 6000 years of history says you have no clue about what you say.

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

Some info for you Garth,
The LBMA trades 20 million ounces of gold a day. Of course most of this would be unallocated gold since there isn’t possibly that much gold to trade daily. That is 7.5 trillion dollars a year. Thats larger than any other commodity market. The world consumes about 85 million barrels of oil a day. Thats about 6 billion dollars of oil every day. The gold market trades about 24 billion dollars a day. Therefore the gold market is 4 times larger than the crude oil market. And you say gold doesn’t play a role in the world’s finacial markets? I think you are wrong.

#2 John on 09.18.10 at 3:04 am

Garth, are there any plans to go te Edmonton?

#3 GARTH FANS=SMALL HANDS on 09.18.10 at 3:35 am

Easy answer for the 62 year old dude. What is the return on 1.4 mil. from the “guaranteed” 5% on those preferreds?
Garth Turner, you have an amazing ability to tell the same dire story over and over again, but yet I still read on. You are an engaging writer.
Why is it that the media only puts forth the stories that are contrary to your message?
Jennifer is a popular name.

GF=SH

#4 Gary in Alberta on 09.18.10 at 3:43 am

Another great and insightful post Garth.

As to the 62 year old property poor fellow you talked to, perhaps he should do the “obvious” and that is just to cash out the bloated free gift horse staring him in the face and move to a small town and get away from the “Extraordinary Popular Delusions and the Madness of Crowds” and learn to be grateful and live a simple and rewarding life. He isn’t going to find a meaningful job as no one will hire him at his age.

Anyway, that’s basically what i have done in that i cashed out and sold two small businesses about 15 years ago and live in a small town in Alberta where i own 2 houses at a cost of $127,500 and $ 64,000 and one on the coast two blocks from the Ocean in another B.C. small town at a cost of $ 210,000. They probably are still worth about what i paid for them.

I still retain some non operated small business interests and i have used my cash fom the sale of my businesses and most of my cash flow to just buy and put away physical precious metals starting at about $ 400 CDN (when gold was about $ 250 US and the CDN $ was about 60 cents)

I couldn’t and wouldn’t work anymore and have just basically “Tuned In, Turned Off and Dropped Out” and have absolutely no interest in being part of the mainstream economy as there is just way to much “VIG” that has to be paid to everyone and everything just to stay even. Life is way too short for the Madness that masquerades itself as sanity these days.

#5 Brian on 09.18.10 at 4:11 am

I tried to access the Howe Street banner audios and articles but they would not come up. They look interesting.
Gold revelations have appeared through your comments for me. It still seems that 5% holdings in gold is practical. Perhaps there should be a link to the Gordon Group.
As I think on Bryan Berndt’s comment I now wonder if his referance to bottom was about the bottom of the Florida market. I bet it was.
#129 Jenny; interesting analysis.
#143 Jess; window dressing on companies revealed but not on banks and their hidden foreclosures. No big deal.
#179 Soylent Green; are there mattresses with tilly pockets so I can hide my cash?

#6 caesarcaesar on 09.18.10 at 4:39 am

Mr. Turner you have correctly underlined your “authentic calling”.

Problems of Armegedonlike proportions for Ontario’s 13 million citizens are ready to be addressed by you.

Don’t forget to include discussion of Ontario’s $245 Billion Provincial Budget’s Deficit, growing near 10% a year.

As to the BC gentleman with a $1.2 million home and an RRSP worth a couple of hundred $K’s, He is worried, correct, but he is worried about what will happen to Ontario’s citizens only.

#7 jed on 09.18.10 at 4:41 am

one thing we often forget, the associated social costs when the price of shelter gets out of control.

http://tasmanianrealestatetrouble.blogspot.com/2010/09/backhander.html

#8 bullion.bunny on 09.18.10 at 5:09 am

parts and railway engines in London, and no more minivans in Windsor

Minivan plant is still running three shifts and re-tooled for the 2008 model. The St Louis plant was closed a few years ago and Windsor remains the only Chrysler minivan plant in North America. In addition Windsor also produces the VW Routan! First in North America to do so…………

#9 Teach a man to fish on 09.18.10 at 5:13 am

We need to teach people to help themselves out and not to depend on help from the gov’t. A hand up, not a hand out.

Vancouver/BC is mostly full of retail and service oriented jobs. Few head offices and little manufacturering (lumber) left.

Toronto/On is simular to Vancouver (retail and service jobs) but with more head offices and manufacturing that is on life-support.

Praries/AB/Sask/MB has food, oil and nat gas but suffers from big booms and busts periods.

Maritimes are full of labour but few jobs.

Canadians are living in a phsychological bubble of the mind that we think “Canada is different” and that it “can’t happen here”. We need to re-start manufacturing in canada, we need to get people motivated to “learn to fish” rather than expect to be “given a fish by the gov’t/taxpayer”, we need to give to charity rather than the gov’t be charity.

Canada has a bright future, but not if everyone is working retail or service jobs.

#10 Alex on 09.18.10 at 5:19 am

Garth, are you still planning on coming to Toronto on Sep 29? I was hoping to attend.

#11 bigrider on 09.18.10 at 6:54 am

Article from the Torontostar stating categorically that there is no housing bubble in T.O and that it is different here. It is not written by a RE shill.

Look, we have to post the opposing view in all fairness. I don’t agree with the articles point of view at all.

http://www.yourhome.ca/homes/realestate/article/862116

#12 [email protected] on 09.18.10 at 6:59 am

No minivans in Windsor?? Chrysler doing a booming business in minivans, some of which they’re selling to VW.

#13 Brewman on 09.18.10 at 7:03 am

Any plans to visit Fredericton, or any other location in New Brunswick?

#14 On Garth on 09.18.10 at 7:10 am

Stewart Thomson on Gath

22. Joe Blow. Garth Turner is a well-known media personality in Canada. He was very “blah” in his writings. Like a typical financial planner. When he started to talk about a coming MELTDOWN in CANADIAN real estate he began to get less mainstream publicity.

23. Garth got caught, like most in the gold community, by failure to understand the TOOLS in Ben Bernanke’s toolbox. He didn’t really grasp the extent of the otc derivatives crisis, and the TOOL of “chop till you drop” rate cutting. The tool to keep the real estate market on the oxygen machine of life support. The oxygen machine that may soon be turned off.

24. One of the richest subs we have, paid sub & billionaire TREX, who I would guess made around $20 million in the past 2 weeks alone in the gold markets, thinks the Canadian real estate market, and the general bond market, could IMPLODE.

WTH is Stewart Thomson? — Garth

#15 David B on 09.18.10 at 7:13 am

And the guys and gals who fueled it all remain top cats in the eyes of the voters AND they continue to spend like a bunch of drunken cowboys home from a long stretch on the range! ……. things here in the East are about the same …. it appears they are hoping TH’s will sell as I see a bunch going up ….SFH … slow at best. Big ones and Ocean Front …. very cool to cold!

Canadian’s got exactly what they voted for. nothing!

#16 Moneta on 09.18.10 at 7:15 am

At 62 he has not worked since being laid off three years ago from his office job, has a couple of hundred thousand in RRSPs, and a modest house worth $1.2 million.
—————-
Expensive neighborhoods are full of people in his situation.

Most people have trouble saving 4000$ per year so for most, accumulating 200K is quite a feat. And to think that they took the 50K increases in home prices for granted considering how hard it is to save is beyond belief. What is it with people to make them think that it is normal to make money without making any effort apart from enjoying your asset? Yes, a couple of people can get a free ride but when an entire nation is on it, bells should be ringing.

That’s why I chuckle when people tell me: “But I’m in Westmount (replace with TMR, Rockliffe…)”.

The writing is on the wall.

#17 Sail1 on 09.18.10 at 7:18 am

Counting a home or any asset as one’s sole investment is unwise. That said, Toronto house prices have posed an average annual gain of 7.1 per cent over the past 15 years. By contrast, the average annual 10-year gain of the S&P TSX is 5.4 per cent.

http://www.yourhome.ca/homes/newsfeatures/article/862116–olive-don-t-listen-to-the-doomsayers-on-housing

#18 Darryl on 09.18.10 at 7:19 am

Duh….. Obviously he should cash in his winning lottery ticket. all 1.2 million of it.

No wonder he was let go .

#19 T.O. Bubble Boy on 09.18.10 at 7:26 am

“At 62 he has not worked since being laid off three years ago from his office job, has a couple of hundred thousand in RRSPs, and a modest house worth $1.2 million.

‘I’m worried. What should I do?’ he asked, dead serious.”

Move to Hamilton? London? Windsor?
Costa Rica?

#20 Onemorething on 09.18.10 at 7:29 am

What should I do?

For god’s sake man, grow a set, get a life, read this blog and listen to the message.

This is exactly the problem with the boomers and their insulation from anything remotely a challenge.

Let’s not stop there, it’s the Xers and Yers who have no clue as well. In typical Canadian fashion, Garth looks like a wizard, reminding people to use common sense proceed with caution.

The only gen who really had it right, played it smart and still today I receive the best advice from, are those from the SILENT one!

Yes 1927-1945 born, depression skinned and absolutely had no choice but to both think and do.

Garth, a son of immigrant parents (eastern block) who moved to Guelph and Hamilton and still live in the same house purchased in 1954 in Burlington have seen it, done it and still in that house today, happy healthy and no mortgage for almost 60 years.

We grew up close to those big beauties on the North Shore and Roseland. Buying a house for 8K cash which is worth 700K today is just a story that is unheard of especially few born in 28′ & 33′ that are still with us today.

With the exception of going from oil to gas, a few new roofing jobs, aluminum gutters and new windows and a simple inside makeover, the house and it’s 30 (70-100 year old trees) which used to be over 50 hasnt changed all the much.

When the boomer across the street turned 65, he had a heart attack, my father at 83 cut his lawn and plowed his drive, my mom swept his walkway, helped keep the garden looking nice.

There is a huge world of hurt on the horizon my friends! I stepped out of the great white north a decade ago and should have been sooner. I’m a user pay guy, like to keep the money I earn and see a future for my children on a global scale.

What should I do, Mr. 62, look across the street and hope the hell there’s a nice old couple living there!

Get Liquid, get out, get with the program!

#21 Moneta on 09.18.10 at 7:33 am

Example of what the credit bubble will do to our brains:

http://www.theglobeandmail.com/globe-investor/personal-finance/financial-facelift/out-of-the-army-into-a-bb/article1710932/

#22 T.O. Bubble Boy on 09.18.10 at 7:43 am

The Calgary Herald really needs to get an editor for the real estate section:

August marked the first year-over-year decline in construction starts of detached single-family homes since June 2009.

With Alberta at the lead, housing construction starts across the Prairies will increase significantly compared to 2009, says a federal housing agency.

So, Alberta will increase significantly from 2009, and also slow from 2009? The pace of housing starts in the second half of 2010 will slow, but will also increase 40% in the 3rd Quarter?

Is the goal of these articles to confuse people, so they’ll believe anything you say?

#23 i.see.debt.people on 09.18.10 at 7:55 am

‘I’m worried. What should I do?’ he asked, dead serious.

No brainer. Sell the house; take the $1.2m cash and invest it to spawn off a stream of investment income.

#24 Darryl on 09.18.10 at 7:59 am

Garth

Wake up . I’m having m coffee and no comments to read yet. You must be moderating on BC time. It is different over there.

#25 Cow Man on 09.18.10 at 8:15 am

Amigos:
Meanwhile today’s Hamilton Spectator reports on record residential building numbers through 2010 in Grimsby, Hamilton, and Burlington areas. Up 33% over last year.

#26 DARLENE on 09.18.10 at 8:16 am

I was just wondering why Waterloo/ Wellington Regions where left off your list?

Is the MSM spin correct when they say that this region is one of the best from Ontario for economic development and that they place in the top ten for incomes across Canada.

Don’t get me wrong, I live here. We still have high unemployment, HST is causing a slow down,and all is not as rosy as it seems. But I guess I’m just feeling a bit slighted by your omission of this region in your post today. I just need some reassurance that it will drop here just like everywhere else.

#27 Daisy Mae on 09.18.10 at 8:29 am

No comments? Everyone is probably speechless….

#28 JET on 09.18.10 at 8:32 am

Dangerous: http://www.yourhome.ca/homes/newsfeatures/article/862116–olive-don-t-listen-to-the-doomsayers-on-housing

#29 GTA Realtor on 09.18.10 at 8:47 am

Looking like outright deflation…

#30 AJ on 09.18.10 at 8:57 am

Thanks for using Hamilton as an example Garth. It looks scary from the highway, but actually is a very impressive place.

#31 refinow on 09.18.10 at 8:58 am

Garth, I think it is very evident that sky is falling, and so are the vast majority of house prices in this country.

I think we get that, but I wonder why your blog does not look forward as to some actions that may offer homeowner some options as to how the weather the greatest correction in housing prices.

It is easy to focus on cities like Detroit, maybe in some twisted way it makes us feel a little better because things in Canada are not that Bad. Yet ???

For me, this week the top 15 reasons list that the US is heading for a double dip, was by far the most frightening>

It is easy for you to suggest the diversification of assets, but the sad reality is that a very large percentage of Canadians only asset is their home. Its easy to suggest that everyone should get out now before things get worse, but flooding the market with listings will only dilute demand with the increased supply.

I think most Canadians will continue with denial, that it will never happen here. The media, realtors and Government will continue to search for any possible glimps of a trend, percentage, or any fact that will keep our hopes alive….

But for those who choose to weather the storm, what suggestions can you offer?

I think this blog has become obsessed with the viewing of train wrecks, like Detroit….

#32 michael k on 09.18.10 at 9:00 am

Garth, tell the 62 year old to sell the house, retire and move to windsor. Problem solved.

#33 steve p on 09.18.10 at 9:10 am

What does Toronto produce?

finance, real estate, insurance are all parasites that feed off production and natural resources

government services are consumption that must be paid from production and natural resources extraction

Toronto is basically the above two (fire sector and govt)

how long can high prices last in Toronto?

#34 junius on 09.18.10 at 9:23 am

Sell the House! Sell the House!

My god. $1.2 million invested wisely should easily pay $50K per year in revenue and twice that on a very good year.

He could live in a great condo in Yaletown or Coal Harbour for $30-40K per year. A lot less in other parts of the city.

Rental prices are going down like housing prices. His window will close soon.

Sorry I missed you in Vancouver Garth. I had an interesting week in Toronto where things remain “different here”. Just like Van.

#35 fu_ming_xia on 09.18.10 at 9:26 am

What 350K gets you in Toronto.
http://www.youtube.com/watch?v=o72fK8XXkQg

#36 Paolo on 09.18.10 at 9:30 am

Good read – puts recent events in perspective:

http://www.yourhome.ca/homes/realestate/article/862717–why-housing-bubbles-aren-t-good-for-you

#37 junius on 09.18.10 at 9:39 am

#11 Big Rider,

The David Olive article does appear to be written with an unusual degree of balance. However – IMO – it does offer a very naive perspective.

My favourite line in the article betrays the flawed assumption – “There’s simply no comparison between housing-market conditions north and south of the border.”

That is true in the short term but not in the long term. People who differentiate us so completely from the US experience are naive. Sure our banking system was different enough to avoid collapse. However we still had our form of teaser loans and are almost as debt ridden and over leveraged as the US. In matter of degree it is very similar.

What no one successfully explains is how Canadian prices can on average remain so much higher than US when our societies are so inter connected on an economic basis. As US wages fall inevtiably so will the prices for our imports to them. We will see US corps in Canada pulling out due to higher costs of wages and living. I can tell you I see lots of jobs currently being lost in film and television, new media and other areas where our costs make us uncompetitive.

His final argument is that Toronto is an “outlier” which is simply different because of healty economy, immigration, blah, blah, blah.

What he fails to address is the one issue that none of these people seem to want to address properly – affordability. Most immigrants don’t have millions of dollars but move from places with cheaper real estate. Most people have too much debt and can’t afford a higher priced place. Most people have had flat wages for years. Most industries are not hiring anything but temporary workers and contract employees.

I spent a week hearing about how different Toronto is. We will see.

#38 kitchener1 on 09.18.10 at 9:48 am

The industrial heartland of Ontario is really feeling the pinch.

Hamilton/Kitchener-Waterloo-Cambridge/London/Windsor have all seen better days.

The problem in these areas that most residents do not see is simple.

A lot of people in these regions purchased property when it was dirt cheap even 10 years ago, today, these same folks would not be able too or would not purchase at current prices.

Thats the problem with all housing and the bulls fail to see it. It was the availability of cheap credit and lax lending that fueled the housing market and not fundamentals.

Bottom line is that RE will go to where wages are.

I think that our front row seats to the US housing meltdown is taking its toll on the general pyschique of homeowners. Everyone knows of at least one person or maybe more that has been laid off in the last 2 years. Some of these folks have found work (at much lower pay) while others have found nothing yet. The hope that everyone was holding out for a recovery is now fading fast.

Best case is we stay were we are and have minimal growth 1-1.5 gdp per year, worst case is we double dip and stagnate again for 6-12 months.

When hope fades it turns into fear and fear my friends is even a more powerfull force in the markets then greed!!

#39 Bill ( Peterborough) on 09.18.10 at 9:52 am

Friend up from Windsor asked if I wanted to buy his duplex for $ 140,000.00. ( bought it a while long ago when Windsor was productive for $185,00.0.00) All payed of by renters. Asked him why he was selling, he said it will probably be worth alot less next year. I said so it’s payed off. He said pretty soon won’t have any renters, utilities , taxes are starting to kill him if he keeps raising rent to offset cost will loose tenants. Plus no jobs out there.

My response; With friends like you I don’t need enemies. lol

Food for thought:

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

http://www.youtube.com/watch?v=AhvfCFCfdNk&feature=related

http://www.youtube.com/watch?v=-UOKTNFMgQ8&feature=related

#40 dd on 09.18.10 at 9:52 am

#31 refinow

…I think this blog has become obsessed with the viewing of train wrecks, like Detroit…

Thank gold he is not a gold bug.

#41 fu_ming_xia on 09.18.10 at 9:55 am

re:#11 Big Rider
http://www.yourhome.ca/homes/realestate/article/862116

This is what I tried to post as a complaint to the Toronto Star, as they NEVER open their youhome.ca articles to the public

“TorStar,

Why don’t you ever open up the comments sections for aricles that analyze the Real Estate Market? I have noticed that for the past few articles on yourhome.ca, you have locked the article down? If you were so confident in your reporting, you should have no problem opening the forum for clean debate. But, since you depend on all that advertising revenue from those who don’t benefit from a downturn in real estate, why rock the boat!?? Most other news papers G&M, FP, even CBC.ca allow comments all ALL their articles! Its so obvious who you’re in bed with.”

when I press submit……this is the error I receive, and hasn’t been fixed for months:

Sorry, we are currently experiencing technical issues.
Our technical staff is working on the problem. Please report any concerns to [email protected].

Give it up. This is an advertising section masquerading as news. You are witnessing the death throes of journalism. — Garth

#42 C on 09.18.10 at 9:58 am

I’ve lived in Burlington my whole 35 years, and I have never seen as many properties up for sale along Lakeshore as there is currently. They sit like wounded dinosaurs hoping some greater fool will come along and place a bid. Obviously these homes are owned by older people who likely have massive tax-free gains waiting to be harvested. I think that the scent of what is going on is in the wind and these homeowners are thinking now may be as good as it gets for a while.

On another note, notice how the Baltic Dry Index $bdi had a heck of a rally recently. When it bumped up against the 200 day moving average it got rejected and has been weak since. Baltic Dry Index is a good indicator of economic activity.

Also, Rona, Ron.to is weak again and a good indicator of what’s going on in the Canadian real estate market. If we get the predicted Canadian real estate recession look for this stock to be taken out to the wood shed.

#43 junius on 09.18.10 at 10:04 am

The company that I operate is split between Vancouver and Toronto. 2 of our staff live in the Hamilton area – actually beyond Hamilton further West and South.

The do not come into the office in Toronto more than 2 days a week. While this is inconvenient for both of us it solves the most fundamental problem – wages. If I had to move them into Toronto I would have to pay each of them more than 10K per year or more to make up the differences.

They both own nice homes for remarkably cheap prices. Neither is over leveraged and both are happy with the arrangement.

My question is this. Why will other companies – that can – not make similar moves? We have seen decades of outsourcing to cheaper countries. We see call centers being set up in New Brunswick or Manitoba or other lower cost places within Canada. How can price differentials of a Toronto or Vancouver possibly sustain themselves IN THEIR EXTREME in a world where digitalization allows for increasingly more work from home or remote locations?

It will be true that many will have to work downtown and others will want to live downtown. However these price differentials will also drive many businesses to move further and further from the major centers. Watch for the signs.

#44 S.B. on 09.18.10 at 10:22 am

Where I live (renting in a newer condo!) along King St. W in Toronto there are about 10 condos from developer Freed in varying stages of completion. All are priced for perfection ($550+/sq ft).
I noticed he’s branched out into Muskoka/Gravenhust lux homes on a golf course.

Here are the ‘specials’. I guess at 2% rates one can afford a(nother) $700,000 home up north??

http://www.muskokabayclub.com/inventoryspecial.htm

#45 BrianT on 09.18.10 at 10:30 am

Here is a guy with quite likely as few as 15 yrs left on this planet, 1.4 million dollars Cdn and the freedom to live almost anywhere as he is nobody’s errand boy. Yet is is “worried”.

#46 Gord In Vancouver on 09.18.10 at 10:33 am

I thought of such things as I sat in a Vancouver hotel lobby on Friday and listened to a man who had asked me to help him. At 62 he has not worked since being laid off three years ago from his office job, has a couple of hundred thousand in RRSPs, and a modest house worth $1.2 million.

‘I’m worried. What should I do?’ he asked, dead serious.
_________________________________________

That comment doesn’t surprise me at all. In Vancouver, people like him have the “I don’t want to miss out on a future spike”, or “I don’t want to downsize” mentality.

Vancouver office jobs that can pay the bills are still very scarce; hence, he should sell and relocate. Let’s not assume that all of this problem is attributed to age discrimination.

#47 Brian on 09.18.10 at 10:38 am

Sold my anchor of a house last month, never really happy with it or the neighbourhood anyway. Investing the 300,000 and adding to it yearly with intrest,military pention and income tax returns. Living on my sailboat in Vancouver Island for 1800 dollars a year with water, showers, wifi, and mountian views. In a few years when prices become sane again I will be ready. Until then I will be checking my prawn traps and drinking wine in secluded coves.
Thank’s Garth
Brian

#48 DaBull on 09.18.10 at 10:47 am

After all, Canada’s unemployment rate is forecast to remain above 8% for some time. Years, maybe. Wages and salaries have flatlined, while household debt has reached historic levels.

I like how you think Canada only includes the industrial belt of Southern Ontario. A little secret, The West has resources and the rest of the World wants them.

What is happening in Ontario is just the outcome from relying on the cheap CAN dollar manufacturing to remain competitive. They should have invested more in technology and innovation long ago but they didn’t. Now it’s to late.

This is good for the resource rich Provinces in the West though. Me thinks population is going to begin shifting from East to West.

#49 Bill Gable on 09.18.10 at 10:59 am

Want to see really scary RE numbers, try Maui Caounty, Hawaii!
All those over eager sun freaks bid up Maui junk, most on leased land from AMPAC, and now it is in a swan dive.
How about a nice new studio condo, across the street from a neat beach, West Maui – 22 grand, in an REO sale.
Nice one bedrooms in Napili for 125 K. Mind you, these are just a sample, because of course, there is high end, and I mean high end inventory, just dying on MLS on the Island. These huge places for Multi millions sitting there, like dead geese.
Today’s post about Mr. Turner’s baffled 62 year old, just about made me I’ll. How many other naive dumbbells are out there?
Sell. Get liquid, get anything, do something – the window is closing, can you feel it? Actually, my gut says that we are further down the road to Perdition than any of us could imagine.
Oh, and please, we are tied at the hip to the USA. They keep doing fiscal face plants in the snowbank, we will suffocate, and die like the smile on Bob Rennie’s smug mug.

#50 Got A Watch on 09.18.10 at 11:02 am

The global newsflow is negative, currency wars lead to trade wars lead to real wars. PIIGS in Europe slid closer this week to the cliff edge of default. This crisis is on track to emulate previous Kondratieff Winters. A decade of turbulence lies ahead.

Seen in that context, the Canadian real estate market continuing to levitate by magic is the obsession of navel gazing crack smokers. Of course it can’t and won’t. How obvious does obvious have to be?

Gary Shilling on the Chances of a US Double Dip

Long roundup of the current economic backdrop in the US. Let’s just say he is a bit Bearish, and a bit Deflationista.

With his accuracy of predictions, which is pretty good, it should be read anyway. Just wear a smiley face t-shirt.

The asymmetry of information continues. The MSM still talk “recovery”, while competent reality based analysts who have not suffered a rectal-cranial inversion, are just about all Bearish, they only differ on the degree and the range of (poor) outcomes.

Zero Hedge is the tip of the reality based attack. In just over 1 year, it has rocketed to the top of financial/economic Blogs, now getting more daily unique page views than most others combined. Yet still a voice crying in the wilderness, unknown to the masses. The truth is not a big seller, delusion is much more popular. To cut through the lies, you need to know the other side of the argument, and that is what they provide, the anti-MSM.

FT Alphaville was patrolling the same areas for years, a UK predecessor to ZH who also spend their days cutting through the fog of lies that the MSM spread. Some of the most insightful analysis you can find anywhere, free.

Let the truth set you free of delusion. File the MSM in the round file on the floor beside your desk, they are becoming increasingly irrelevant, as they diverge ever wider from the facts.

The internet is the great information leveler, you can read things for free now that 20 years ago only a few subscribers to private newsletters would. This Blog is a great starting place for Canadians, but you need to look out to the world. Canada is but a blip in global GDP, we are fated to be tied to the fortunes of others. Crisis in far places wash ashore here, the globe is more tightly inter-connected now than ever before.

The ride is going to be bumpy. Arm yourself with reality, and you will be far ahead of the other 99%+ of the population.

#51 Another Albertan on 09.18.10 at 11:04 am

#4/Gary:

Vigorish is an interesting concept. I have felt similarly for a number of years.

For the uninitiated, http://en.wikipedia.org/wiki/Vigorish

Everyone else’s mileage may vary.

#52 Toronto Guy on 09.18.10 at 11:11 am

Love this quote. Does this sound familiar around Canadian real estate right now? lol.

Also, I like Tony Wongs work on the Toronto Star. I think he is an objective real estate reporter. Hard to find these days.

“When people start using phrases like ‘this time it’s different, or we have a new paradigm, or I better buy now or I won’t be able to afford it,’ then you know you’re in trouble,” says economist Will Dunning.

http://www.thestar.com/article/862717–why-housing-bubbles-aren-t-good-for-you

#53 dark sad person on 09.18.10 at 11:11 am

#38 Bill ( Peterborough) on 09.18.10 at 9:52 am

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

The content is only for the deep thinkers-

That old Bag Lady-with the “bling” from Britain-
Is up to her elbows in the gut pile–

http://www.youtube.com/watch?v=wTLKDKYf9Vw

#54 rosie on 09.18.10 at 11:17 am

# 31 refinow

What to do, what to do. Get out of debt. Stay away from the stock market, it is rigged beyond redemption. Downsize if you can. Watch what is going on in the States, it’s really getting ugly down there and it is coming this way. Treat you house like a home, not an investment otherwise you will get burned. Live within your means and save save save every penny you can. If you plan on retiring soon live on your future pension income and see how you do. If you believe in deflation, cash is king. If you believe in inflation, gold is king. Get both. This bust is going to happen rapidly and globally. Since 08 the world has been living on borrowed (money) time. I think that’s about it. Any other ideas would be appreciated.

#55 jess on 09.18.10 at 11:36 am

Brain , what are you thoughts on transparency and disclosure requirements as of September 7th/2010

Assets Eligible as Collateral under the Bank of Canada’s Standing Liquidity Facility

http://www.bankofcanada.ca/en/financial/securities_160710.pdf

Assets Eligible as Collateral under the Bank of Canada’s Standing Liquidity Facility

This one on page 4/6 caught my eye

– a statement that the assets supporting the ABCP do not and will not include, directly or (including through second level assets ):CDO’s or other highly structured products; synthetic assets or similar assets that directly or indirectly involve the transfer of credit risk by means of credit derivativies

#56 Dan in Victoria on 09.18.10 at 11:37 am

What should I do? Here let me fix that for you, What should I have done?
The regulars here know the answer.
Your earning years are basically done, you have to take your assets and start NOW to make them work for you.
The house although it is dear to you must now be converted to income producing assets.
And no I don’t mean a reverse mortgage.
If you are meeting with Garth it means you are following this blog, and all of our ramblings. You know.
At 1.4 million (for now) net worth, your house is paid for I hope, you have a chance to get out now with some $$$$ take it.
Fear is even stronger than greed, what point are you at?

#57 Cameroni on 09.18.10 at 11:37 am

Speaking of supply and demand.

I just talked to a young gal who works in the gas station where I fuel up. She is 25, got a good education in the wrong field, wants to buy a house one day but is trapped in debt repayment on student loans and cannot even afford to quit her minimum wage job to step up in the world.

As she explained to me, her monthly income is less than 1500 dollars, her food and rent is 900 and she has no family to help her out.

She got a job offer recently but it was not guaranteed long term so she is trapped. She cannot afford to miss a single pay cheque or she’s homeless. Not even one.

So gambling on a move to a better paying job without any assurance of security is out of the question for her right now. And saving to buy a house is but a pipe dream.

I think the Boomer’s are about to discover that the biggest part of the demand for their homes has already been consumed. That segment of the population with the cash, the jobs and the ability to max out monster loans at cheap interest rates might not be as large a group as was hoped for.

And these Gen-Y kids who were simply born at the wrong time and were unable to take part in the economic good times are just shaking their heads in disgust as they find themselves trapped in crappy jobs with high debts and a terrible sinking feeling that they might never participate in the home buying craze.

(maybe they got lucky and just don’t know it yet)

#58 the commenter formerly known as... on 09.18.10 at 11:41 am

Anecdotal for you folk. I just showed my wife the pic of last night’s party in downtown Van. She says hi :-)

One that note, she started telling me about a women from her work in Surrey. This woman and her hubby (Realtor) bought a new home recently for over a million bucks. She came to work bragging like a male peacock spreading its colourful tail feathers to allure the opposite gender.

Problem: They never sold the other home before they bought this one. Now, months later, panic has set in and she has changed her tune dramatically (signs of outward stress). They are still carrying both homes and there seems to be zero interest in the one they are trying to sell. Ouch!

It is arrogant, greedy folk like that I hope get fleeced.

#59 PR on 09.18.10 at 11:55 am

#1 TheBigLebowski
You are right! 98% of the pepole, including professional have no clue why gold perform the way it is for the last 10 years. Year after year they warn you of the ” danger” of gold. And guess what hapen year after year,up,up,up. They don t know that the paper they have in their hand that call money, was is in reality a ticket that show how mutch gold you have in the vault. A lot a pepole have to do their home work fast, they may one day wake up and not be hable to eat whit their paper money! Its already 4$ for a loaf of bread.

#60 bullion.bunny on 09.18.10 at 11:57 am

This seems to be down to credit availability; in the absence of a gold standard, the authorities could ease policy and stave off recessions.

But if we have reached the end-game of the debt super-cycle, then recessions will be more frequent. The last recession started in December 2007; if the cycle is 56 months, the next one is thus due in August 2012, less than two years away. Such short, sharp shocks make high-yield bonds look a very bad investment. The asset category changed in character during the great moderation; junk bonds used to be investment grade bonds gone bad, but after the mid-1980s, companies issued primary debt at junk yields. An economic cycle that lasts almost nine years gives investors a chance to earn their yield and get out before the bust; a cycle that lasts less than five years makes that much more difficult. The same principle applies to private equity.

Read more: http://www.businessinsider.com/recessions-will-now-be-far-more-frequent-than-were-used-to-since-we-just-ended-a-debt-super-cycle-2008-8#ixzz0ztsFxcUr

#61 Cameroni on 09.18.10 at 11:57 am

To # 41 “C” who wrote:

“Also, Rona, (Ron.to) is weak again and a good indicator of what’s going on in the Canadian real estate market. If we get the predicted Canadian real estate recession look for this stock to be taken out to the wood shed”.
—————————————–

I keep hearing this kind of comment regarding Rona and related companies but I have to tell you that I do not share your doubts about the strength of this company or the sector in general.

Their sales for new home construction may slow down in recessionary times but there is almost always an uptick in sales related to repairs and maintenance. That is good business too.

In other words, when people decide they will not move up they instead invest in renovations of their existing home and that is quite a normal outcome.

Let me give a second example. Canadian Tire is seeing growth in it’s auto parts and do-it-yourself segments again and that is also good for business. When consumers feel they cannot afford to hire labour to repair their vehicles they spend more money on buying the components and trying to do the work themselves.

Rona will be just fine if they evolve with the times.

No “wood shed” event is on their horizon.

#62 jess on 09.18.10 at 12:02 pm

42 junius

growth in the Interactive kiosks –
cards you purchase ahead (smart cards)
place you order ahead online
pickup your prepacked frozen machine made food

…3d printers for food be next?;^)

#63 jess on 09.18.10 at 12:16 pm

http://www.publicintegrity.org/investigations/tobacco/articles/entry/763/

Made To Be Smuggled
Russian Contraband Cigarettes ‘Flooding’ EU
By Roman Shleynov, Stefan Candea, Duncan Campbell, Vlad Lavrov | October 19, 2008

…”BTF officials proved eager to help their prospective new clients. At the company’s main factory, the undercover team was offered Jin Ling by the container — each one filled with over 10 million cigarettes. “We don’t care” what happens to the cigarettes, Dmitry Gyrja, BTF’s logistics manager told the reporters. “According to Russian law it doesn’t matter. All the transportation arrangements are up to you…” With payment in advance, he added, a container could be ready and waiting in two weeks.

Their price per container: $102,500 (£59,000 or €73,000) — about one cent per cigarette. If the contents of one container reached Sweden or Germany and were sold at full legal price, they would be worth $3.2 million (€2.3 million). In Britain or Norway, where cigarette taxes are high, the same shipment would be worth nearly $6 million (€4 million). Even at half the price — which black market cigarettes usually sell for — the profits would be immense.

#64 CrowdedElevatorfartz on 09.18.10 at 12:17 pm

Saw you in Vancouver the other night Garth, another good show. Have to agree with the other Bloggers, The Gordon’s had 700 potential customers in their hands and seemed somewhat unprepared but c’est la vie. The room is a business expense/tax right-off. Perhaps next time.
re the 62 year old man you mention in your blog.
Did you smack him in the head and tell him to wake up?
Sell your house NOW and RETIRE you idiot ! Geez !
( although after listening to some of the people in the audience sitting around me that were saying,”Really? I didnt know that?” ,to just about every stat you posted. Apparently Mr 62 Year Old Millionaire isnt the only financial boob in Vancouver).
Keep up the seminars, your informing the public one at a time.

#65 Keith in Calgary on 09.18.10 at 12:32 pm

Bottoms_Up…….

Continued from the last thread……..more deflationary examples for public consumption……if anyone else here can add to this I think that would be a great snapshot of reality……..and these ones are food no less…….

Over a year ago Pistachios were up to $14.75 a kilo…….and that was at a Real Canadian Superstore, the cheapest supermarket in Calgary. I quit buying them and switched to peanuts. Yesterday 1.2 kilos of pistachios was down to $11.99……I still bought peanuts again.

Parmigiano Reggiano……that delicious brick of Italian cheese goodness that goes to well with wine on a Friday night used to be $25 – $27 for an average sized chunk. Yesterday it was $19 +/-………I still passed and bought a fantastic Brie for $6………and my favorite wine was on sale at $5.99…….used to be $11……..

I am very vocal in public about saying out loud about how expensive a certain food product (or anything else is) within earshot of store employees and other consumers. Been like that for about a year now……..screw ’em.

It’s torch and pitchfork time………

#66 S.B. on 09.18.10 at 1:03 pm

The gold cult devoteess vitriol is inceasing on this blog!
:o

Look at this long term gold chart – I see two giant gold bubbles. At no time did gold server as a hedge for falling equity markets!!

I refer mainly to the periods surrounding 1981, 1987, 2000 – if you know the equity markets, – and the likely 2nd ‘Dip’ headed our way (mainly in US equities I am guessing):

This chart ends at 2009 – but the current gold bubble is similar to 1980’s. History, what a bummer it is.

http://www.futuresbuzz.com/gc.bmp

#67 young & foolish on 09.18.10 at 1:20 pm

“The lesson here is that real estate has little intrinsic value”

True … but it’s also true about luxury items.

Will we become a “rational” society where we pay doctors who offer the public vital services more that athletes and movie stars? Will well paid professionals return their BMWs, purchase beaters, and stop shopping at Holts in favour of Walmart?

Supply & demand …. and the fickle mood swings of Mr. Market are sure to keep watchful people on their toes!

#68 Off the Leash on 09.18.10 at 1:46 pm

“In fact on Monday Windsor will sell off 19 properties for tax arrears, if you’re interested. (The city is bedevilled with $45 million worth of property tax that owners won’t pay.) On the list is a prime riverfront lot near the glitzy casino, with an unobstructed view of the Detroit skyline. It’s $22,000. And there’s also an urban six-acre undeveloped parcel of land surrounded on four sides by homes, schools and a Shoppers Drug Mart. The price is $164,000.”

Now Garth you know full well that those properties will not sell for those ridiculously low prices as they get bid up by vultures anxious to feast upon the carcass of greater fools, only to be disappointed to hear that the property owners (not quite dead yet) bucked up and paid those delinquent taxes well before the properties hit the auction block. But your sensationalism does get those juices flowing. ;-)

#69 Mean Gene on 09.18.10 at 1:49 pm

62 years of age, asset rich, cash poorish and @20 years left on the life-meter…

If it were me, dump the house and go live in Europe for a couple years, then take half of the proceeds of the house sale and buy a place on Vancouver Island from the investments.

Easy peasy.

#70 S.B. on 09.18.10 at 1:52 pm

Cameroni – on the link posted here, on the front page a disturbing article about people working multiple jobs in BC:

http://www.piquenewsmagazine.com/pique/index.php?cat=Features&content=Labour+changes+1737

The solution? Change our lifestyle & expectations. What is considered poor?
We have: clean air, clean water, accessable health care, still a bit of a social safety net (CPP, Disability, etc.), relatively uncorrupted police and govt., decent transit, schooling for everyone, low crime rates. We have it made. How many hundreds of millions of people around the world live in filthy slums?

I’m not that old but I remember receiving my brother’s hand-me-down clothes. This would be unthinkable today! Charge it to Visa, buy new stuff. Poor? What is poor.
Poor is paying for granite & stainless + condo fees + interst for 35 years. Now that is poverty.

#71 Sherri on 09.18.10 at 1:58 pm

Q: WTH is Stewart Thomson? -Garth

A:

https://www.gracelandupdates.com/index.php?option=com_content&view=article&id=47&Itemid=54

#72 Patz on 09.18.10 at 2:07 pm

There’s a recent post at The Oil Drum which illuminates our economic mess and its relationship to energy. Oil is so ubiquitous in everything it would be easier to enumerate products and services that don’t use it or depend on it. So the effect of the price of oil ripples through the economy with each tick up or down. How important this is has not been a subject mainstream economists have tackled so they’ve missed something important. But there’s a concept that needs to be understood first: that is summed up by EROEI—energy return on energy invested. Quick example: the eroei from Saudi Oil is very high and from the tar sands it’s very low. Mid east oil reserves are the last of the “stick a straw in the ground and suck it up” oil. Tar sands require extensive mining and processing, it costs way more in dollars and energy to get a barrel of it out of the ground. Same applies to deep water oil—low eroei, in other words expensive oil.

So a study by David Murphy at the Oil Drum has shown that when oil is expensive, i.e. has a low eroei, the effect is a drag on the economy and we go into recession. That lowers the demand for oil and the price drops. When the price drops we use more; the economies rebound and the price gets driven higher. Rinse and repeat. It puts us on what some have called an “undulating plateau.”
From the Oil Drum article: “it is not just simply having access to energy per se that causes economic growth, rather the energy must be accessible cheaply. For example, the inflation-adjusted price of oil averaged across all expansionary years from 1970 to 2008 was $37 per barrel compared to $58 per barrel averaged across recessionary years.”

The problem with what Garth said his Vancouver soiree (90% of which I agreed with) is that for China and India to drive us out of recession/depression they, and we, must have access to cheap energy. But the world has run out of cheap energy—or best case, is on the cusp of that. So the Asian giants will drive the price of oil up and as a result GDP everywhere will fall. And it is far too late to replace the cheap oil we’ve been using with anything else. In order to do that we would have had to start at least in Carter’s presidency.

It may not be the end of days; it certainly is the end of business as usual.

Link to Oil Drum article: http://www.theoildrum.com/node/6961#more

#73 BrianT on 09.18.10 at 2:21 pm

#60Cam-expenditures on renos of existing homes decline dramatically during a real estate bear market. A bull market convinces home owners that renos pay for themselves- a bear market makes that confidence a lot harder to instill.

#74 T.O. Bubble Boy on 09.18.10 at 2:22 pm

Prices in Toronto must come down… or everyone will become a renter:

http://www.realtor.ca/PropertyDetails.aspx?PropertyID=9950650&PidKey=-1777342771

Price: $739,000
Description says that this rents for $2400/month.

With 25% down ($184,750 down payment), this would have a $554,250 mortgage.

With a 25-year amortization at the current “special” posted 5-yr fixed of 3.99% on that $554,250, the monthly mortgage is $2912.46. Add on property taxes, and you’re already losing almost $1,000 per month without any other costs factored in!

If you go 5%/35-yr, this is even worse:
mortgage = $702,050
@3.99% = $3,090.52
with Property Tax that’s probably $3500/month in carrying costs… and you’re getting $2400 in rent!

#75 BrianT on 09.18.10 at 2:29 pm

#59Bullion-on a macro level, the economies of countries are similar to the economies of companies. Some companies are profitable, others are money losers. The same applies for countries-the mark of a money losing country is the increasing reliance on debt to keep the scheme running-any money losing venture can be kept afloat as long as increasing sums of debt are added-obviously the end result isn’t pretty. The reality is that quite a few countries, including the USA, are money losing economies overall. This is hard for most to accept as the USA was a strong money making economy decades ago.

#76 Increasing that 1% on 09.18.10 at 2:37 pm

Just in Hamilton other day, took a different route than in past (S on 8). There are some really nice areas, and there even is (a ?) mountain(s). Well, there are two very large hills on different sides of the highway, that the clouds were on top of..And, it has a decent University, College, Tertiary Hospital, Children’s Hospital, infrastructure, waterfront…Sometimes it takes more than ten visits to appreciate a place

For the 62 yr old, IMO he can find meaningful work, looking outside of his usual paradigm, maybe not at the pay he was used to. Travel around Canada, see there are other places, that may not be as scary as thought…know the options, stop worrying- yeah, more easily said than done

Hope all’s well with those Kamloopians today

#77 robert in london on 09.18.10 at 2:45 pm

#60 Cameroni

I don’t know about woodshed events either because share prices and the real economy have never been more disconnected. What I do know is that if we “adjust” from a wants to needs basis with respect to housing and its related appurtenances a whole lot less money will be spent at Rona, Home Depot and Home Hardware. If the business models of these companies are predicated on the dreamy notion of ever rising demand (and price) for housing I would not be an investor at anywhere near current share prices. I think a lot of these companies have only studied the economic landscape through a rear view mirror and their best years are actually behind them. They have overbuilt for a mythical demand they will never live to see.

#78 Ben on 09.18.10 at 2:45 pm

At 62 he has not worked since being laid off three years ago from his office job, has a couple of hundred thousand in RRSPs, and a modest house worth $1.2 million.

‘I’m worried. What should I do?’ he asked, dead serious.

——————————————————-

Your joking right?

#79 T.O. Bubble Boy on 09.18.10 at 3:11 pm

Garth, here’s another new TV show that you’ll disagree with… not quite house porn, but over-simplified financial advice: Burn My Mortage!

http://www.wnetwork.com/Shows/BurnMyMortgage.aspx

Basically, the premise is to do a “Debt Do Us Part”-Type assessment of a family’s finances, and find ways to re-direct cash to paying off their giant mortgage.

I guess a show called “put my mortgage in my RRSP” isn’t as exciting for TV viewers?

#80 andrewS on 09.18.10 at 3:13 pm

#47 DaBull

“This is good for the resource rich Provinces in the West though. Me thinks population is going to begin shifting from East to West.”

This has been happening for decades.

This is kind of the rub. Ontario does not lack for resources. You might not be able to burn them in a car, but you can use them to build a car to burn a lil bit of Fort Mac and get places. Seriously – go look up “Ring of Fire”.

However, Ontario has a long tradition of ignoring its North. Parry Sound is Cottage Country and nothing more; north of there is a bunch of barren swamps and Sudbury is a remote outpost. Nickel has gone through the same bull market as oil but the dingleberries in Queens Park don’t bother to do anything with it. Sudbury and Thunder Bay should be like Fort Mac or Yellowknife. Yet they’re not.

The government would rather prop up the decaying industrial cities in the southwest and the development industry in the GTA. Ontario does not want to see itself as a resource economy and that is its downfall.

By the way, our fellow could consider moving to Northern Ontario. The people are friendly, the outdoor opportunities rival anything BC has to offer, and you can live like a king up there with a million dollars burning a hole in your pocket.

#81 Betamax on 09.18.10 at 3:16 pm

#60 “In other words, when people decide they will not move up they instead invest in renovations of their existing home and that is quite a normal outcome.”

That’s not what happened in the US. A recessionary environment rife with unemployment and crushing debt means no money no credit for renos.

#82 Patz on 09.18.10 at 3:35 pm

A suggestion Garth: would you look into the type of blog structure that allows answers to comments underneath the comment. It allows threads to develop in the comments section and is more intuitive and interesting.

I have considered that. Decision pending. — Garth

#83 Timing is Everything on 09.18.10 at 3:38 pm

#46 Brian

http://www.youtube.com/watch?v=7l996DkPuZo&feature=related

http://www.youtube.com/watch?v=oozH6Veba-Q&feature=related

#84 Brian on 09.18.10 at 3:58 pm

Jess; are you talking to Brian and not Brain? If so, are you insulted for some reason? The window dressing is just a smoke screen by Obama to distract attention from the hidden foreclosures of banks in the U.S. What is the relevance of Canadian Banking Regulations to the American S.E.C. if that is what you are referring to?

#85 Ndg on 09.18.10 at 4:00 pm

#16 Moneta
You are so right!
Same here in my “name” part of town.

#86 dark sad person on 09.18.10 at 4:05 pm

#49 Got A Watch on 09.18.10 at 11:02 am

Zero Hedge is the tip of the reality based attack. In just over 1 year, it has rocketed to the top of financial/economic Blogs, now getting more daily unique page views than most others combined.

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

I’ve found that-you gotta watch-what you’re reading over at ZH-
Some of it’s good-but lots isn’t–
Seems to be a lot of sensationalism-especially by many of the guest commentators-like that anal-Goldbug Elgonzo or whatever he calls himself-the one who is constantly spouting Hyper-inflation and has the ZH Goldbugs worked into a frenzy-with his total BS-economic theory’s–
Very few Posters/Goldbugs on ZH- actually have a clue-
The smartest-in the know Goldbugs-I’ve run across-exist on this blog–

#87 VancouverGoinUP on 09.18.10 at 4:28 pm

Key Point

“The lesson here is that real estate has little intrinsic value. Instead, it’s entire worth is determined by the market. By supply and demand”
Or as we say in Vancouver “A Thing is only worth What someone is Willing to Pay”. The rest of Canada is screwed but Vancouver is sittin pretty. Big big Demand and a dwindling supply getting smaller by the day. Anyone who listened to financial planners in the last 10 years who pumped stock and shunned the Vancouver Special is left on the sidelines with a 500k plus loss; they are shell shocked at the losses they incurred. Rent? Forget it; those who chose not to Buy lost out big time period! Biggest fool out there was Shiller claiming “Vancouver the bubbliest city in the World” as house marched up 50% from his comments. The man knows Real Estate in the US but not in Vancouver. Those who listened to Shiller are shell shocked on the sidelines; they are the Have Nots while the owners of tha tiny Vancouver Condo are the “have’s. Those who listened to Shiller never heard “Past performance is not indicative of Future Returns” VancouverGoinUp even in the rain

#88 Patz on 09.18.10 at 4:52 pm

There’s a lot of confusion about inflation and deflation here. Price movement is a result of or a symptom of inflation or deflation; it is not the condition. Inflation can only happen in a growing economy where credit is expanding. (The trick at this point is to have it without it having you—i.e. running out of control.) Deflation happens when credit has expanded to a point where it can no longer be sustained, creating multiple demands on the underlying wealth. It is key to understanding the two conditions to realize that credit is money. E.g. A house ‘appreciates’ from $300 K to $500 K. We now have an increase in ‘value’ of $200 K. But, it’s an unrealized increase and at that point has no effect other than psychological. But suppose the owner extracts $100 K in a home loan. Now the increase has become real; there is $100 K in the economy that wasn’t there before simply on the apprehension that a house has increased in value. But it didn’t do anything productive; nor did it’s owner. It was inflated by perception. In the U.S. this process resulted in trillions of new money.

But when facts on the ground and perceptions shifted, all of those new claims on wealth began to be extinguished and the result is a deflation. We are in a compressive deflationary spiral now and won’t get out of it until enough of the inflated wealth—that which was created mostly by perception—is eliminated.

We may get a few bounces along the way but things are going to get a whole lot worse before they get better. (Getting better may not happen but that’s a whole ‘nother story.) Garth in his talk saw deflation correctly but I fear he sees inflation again much sooner than is possible.

So look for the prices of discretionary items (like pistachios) and most assets to fall while the prices of many key items like food and energy may increase. Cash will rule but most people, through unemployment and loss of equity, will have much less cash to work with.

@ 40 Garth sez: “Give it up. This is an advertising section masquerading as news. You are witnessing the death throes of journalism. — Garth”
Verbis veritas!

#89 prairie gal on 09.18.10 at 5:00 pm

@ #155 Nostradamus Le Mad Vlad, you do realize that volcano eruptions cause significant global cooling for a couple of years. This more than offsets the greenhouse effect… until it doesn’t.

I expect a cooling effect until the aerosols from the volcanos precipitates out of the atmosphere – two to three years max. Depends on the severity and content of the eruption. Yes, volcanos emit a tiny amount of greenhouse gases, but the particulates and aerosols they emit dwarf any heating effect from the GHGs.

Also, in the past ten years, the solar forcings have been much weaker than historically, offsetting the greenhouse effect. Sun spot activity is low. This also has a cooling effect and is taken into account in climate models.

Obviously climate models do not take volcano eruptions into account until after they erupt since they are difficult to predict. So now climate models will be adjusted to account for the recent volcanic activity.

#90 Nostradamus Le Mad Vlad on 09.18.10 at 5:15 pm

The Ride in Hamilton. A magnificent city, home of the Tabby Cats and St. Joseph’s Hospital, where my brother was born.

Moi? I was made out of rusted spare parts at the local Dofasco mill. That’s why I am still a machine!

As far as Detroit goes, see the first link (2:08 clip) of the difference between Hiroshima and Detroit then and now.

#20 Onemorething — Great post! One thing my better half and I realize is that as our children are now adults, we are no longer responsible for bailing them out when times get tough, which is happening now.

They are free to make their own choices in life, and also to live with the consequences.

You are right in that there will be a world of hurt when sheeple are unable to offload their prized possessions, their homes, cars and worthless things to pay for their retirements.

It’s a simple idea to follow, yet requires an over-abundance of self-discipline to give an accountant or CFP the right to withdraw $250 per paycheque and put into RRSPs / investments.

#53 rosie — “This bust is going to happen rapidly and globally.”

Rapidly is right, and this is what is going to catch most off-guard.

2:08 clip The difference between Hiroshima and Detroit in 65 years. Well worth watching — the classic version of “What goes around, comes around”.

DetroitObama ran under the title “Change Is Good”, or something similar. Well, The National Debt has continued to increase an average of $4.11 billion per day since September 28, 2007. What is so good about that? Nothing has changed, only the wars created by the elite have increased.

What’s in your wallet?

Goldbugs – Bullion Bunnies You may already know this. Forewarned is forearmed.

Sexy Silver — Outperforming gold?

CMHC Look out Cdn. taxpayers!

Weather is getting a little uppity here in the PNW.

#91 jess on 09.18.10 at 5:59 pm

brainsail

Inequality Index
http://extremeinequality.org/?page_id=8
About Us
The Working Group on Extreme Inequality began coming together in 2007. Many of the organizations involved in the Working Group had, over the years, been active in organizing against poverty and economic insecurity. That effort had helped us understand that the fight against inequality, to make significant headway, has to both “raise the floor” and challenge the concentrated wealth and power that increasingly sit at the top of our economic ladder.

======
circle game

TheRecord.com – Local – Local councils have hiked water bills 54 …
Put another way, saving water at home triggers a rate hike to claw back the money you saved. Waterloo increased its rates in part to recover revenues lost …
news.therecord.com/article/777867

#92 Watching in Kelowna on 09.18.10 at 6:05 pm

Windsor has 19 properties to auction off…Kelowna has 93 properties on their tax sale list, all apparently 3 years in arrears from what I can gather. Wasn’t the boom in full swing 3 years ago? So why did people not pay their taxes when the property values were heading up, up, up? Taxes were probably going up too…

#93 nocte_volens on 09.18.10 at 7:10 pm

Just got back from seeing Garth in Kamloops at the Howe Street money expo. It was a good show all around and Garth gave an excellent presentation. Turnout was surprisingly low…seating for 200 with probably only 100 people there. It was mainly a gold and mining show, so I feel that indicates the investing public has no interest in either yet. I expect in a few years, should the gold bugs be right, the money expo in Kamloops will have a couple thousand attendees, with more outside clamouring to get in.

#94 Nostradamus Le Mad Vlad on 09.18.10 at 8:01 pm


Alzheimer’s First it was Vitamin B, now an Asian spice.

Not as terrifying as The Exorcist, but real math comes mighty close. “Today, 10,000 people get 30% of the total income in the United States”! Wow! Talk about mal-distribution of wealth!”

7:10 clip Forced back to the forest outside NYC.

NY & California “California employers eliminated 33,500 jobs in August as the state unemployment rate rose to 12.4%.”

4:56 clip Fort Knox is empty (except for spiders, cobwebs and dust).

6:16 clip Tungsten-filled gold bars. Plus 1:59 clip.

4:49 clip Creating money and pretty ladies in five minutes!

Poverty “One has to wonder if the financial markets are not being deliberately manipulated to completely destroy the middle class in this country.” wrh.com. There’s been some chat re: a market (like housing) correction.

Central Banks “That news may well adversely affect US financial markets this next week.” wrh.com. So, if the weather holds up good, there may be flatlining markets starting Monday!

S-510 in the US Formerly Bills C-51 and C-52 here, but now it’s Bill C-6. Monsanto = Early Unexpected Death.

GW Reversed The last ice-age, 13K years ago took less than a year to develop.

#95 dark sad person on 09.18.10 at 8:11 pm

#53 rosie on 09.18.10 at 11:17 am

If you believe in deflation, cash is king. If you believe in inflation, gold is king

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

Agree-cash is king in deflation-so is Gold–cuz-
it’s money–
Gold sucks in Inflation-although-it retains its buying power-it is a poor investment–
Gold Miners lag in Inflation as well–
Always rising input and labor prices kills profit–

It’s easy to see that Gold is a very poor hedge against Inflation–

http://67.19.64.18/news/2010/1-8lm/image002.gif

Notice how well Gold did vs DOW in the 30’s-deflation-
Then compare how poorly it did during the 80’s and 90’s which was inflation all the way–

2001–Something happened-that broke Gold out of a 20 year bear market–
That “something” was Hyper-inflation of the credit money system-
Gold seen the credit risk-so did the long Bond-

Both reacted violently-in a perfectly coordinated spike-2001

http://research.stlouisfed.org/fred2/series/DTP30A28

http://www.the-privateer.com/chart/gold-pf.gif

#96 dark sad person on 09.18.10 at 8:47 pm

#81 Patz on 09.18.10 at 4:52 pm

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

Great post–

Sentiment rocks-just make sure you’re riding on its coattail’s-not standing in front of it–

#97 Sam on 09.18.10 at 8:51 pm

“Give it up. This is an advertising section masquerading as news. You are witnessing the death throes of journalism. — Garth”

Lol. Garth – I have a new respect for you.

#98 sarg0n on 09.18.10 at 8:56 pm

WIN-A-PIG. WIN-A-PIG.

Come on, Garth…by next week you’ll have been
through Saskadoom at least twice, possibly
thrice.

Just put on your torso armour, grin and bear it.
We need your sage advice. I personally know
several people who are still investing in GICs
for Pete’s sake.

No ‘Winnipeg Handshakes’, we swear.

#99 goldenfox on 09.18.10 at 9:01 pm

I hate to be the bearer of bad news, but……

snippet

“By now everyone ‘knows’ that the US consumer is hunkering down, paying down debt and performing other mythological tasks. Alas, as the WSJ points out today, this is not exactly true… In fact not true one bit. The reality is that over the past two years, US consumers have not been deleveraging as a voluntary act of eliminating debt, but have been actually aggressively leveraging more and more until the bank providing them credit puts them into involuntary bankruptcy, cutting off the money spigot. This is a startling realization, confirming that the average American is actually hyperleveraging to the point where all available credit is forcefully eliminated by a lender institution!”

http://www.zerohedge.com/article/debunking-great-myth-us-consumer-deleveraging-or-why-us-economy-will-end-not-whimper-bang

#100 junius on 09.18.10 at 9:20 pm

#86 Vancouvergoinup,

It is good to have a crazy bull on the site now. It has been a long time. We had a number last fall and a few stayed until the Spring.

Great to see there are so many still out there who are absolutely clueless.

Please stay. We all enjoy a good bull fight. Hopefully you will actually have something to say that doesn’t include the usual banal, predictable and aimless “it is different here” arguments.

Ole!

#101 Foggy on 09.18.10 at 9:38 pm

At 79 Andrew S – Quote:

“By the way, our fellow could consider moving to Northern Ontario. The people are friendly, the outdoor opportunities rival anything BC has to offer, and you can live like a king up there with a million dollars burning a hole in your pocket.”

When I lived in Ontario I had a cottage just south of North Bay. I had the option of purchasing a home in that area for not much money. A few problems with living north of Huntsville. First you have an extended winter. The snow is more or less gone by end of April. You then have a very narrow window of lovely Spring before the blackflies hit mid-May. Joined immediately by the mosquitoes who are thick and ravenous. By July the mosquitos are still thick and aggressive and now joined by their buds – the deerflies. This goes on until the middle of August when they finally start to taper off. By September you are free and can enjoy the outdoors all day and into the evening. Then the cold rains of October/November and you’re back into Winter. Basically the best part of Spring/Summer is ruined by the density of the pests. Too much of a compromise for me, so I went East.

#102 goldenfox on 09.18.10 at 9:43 pm

BNN like CNBC becoming shill for bankers

http://news.goldseek.com/LemetropoleCafe/1284937260.php

#103 Industrial Guy on 09.18.10 at 10:16 pm

Garth, You know things are bad when dentists leave town because no one has benefits at work.

Let’s be honest. The situation here in SW Ontario is desperate. Many of the major manufacturers have closed up their tents and left town or claimed bankruptcy. Some are just surviving on “Government infrastructure jobs” and wondering what they’ll be doing after the program ends in March next year.

Who will replace the closed factories which paid industrial wages operated by John Deere, Western Star, Sterling truck, Crane Valves, Ford of Canada, DDM Plastics, Noble Metal Processing, Raymond forklifts, storeimage, Alumetco, Altec Carlisle, Dana, Dura Automotive, Genfast and Flex n Gate? Both the enormous Martinrea (1,200 employees) and Firestone facilities in Kitchener are now closed. This is not just about house prices anymore. An entire way of life is dying off. There are some companies moving in but, they generally pay minimum wage or slightly higher. Benefits? Job security? Dream on.

The business / labour climate in this area is toxic. Employees are desperate to keep their industrial wage jobs. These workers know they will either never work again or find a job with such generous wages and benefits once their plant closes. The occupation of the AMCAN plant in Hamilton and Meridian Automotive Systems plant in Brantford over severance payments is proof that. The two year strike at Engineered Coating Products defies all logic. After the loss of two years wages, what could they possibly gain? Solidarity has a high price tag and nothing tangible is gained at the end.

The higher Canadian dollar has even reduced the competitiveness of call centres in SW Ontario. In Brantford, the giant call centre which once occupied most of the top floor of the old Eatons Centre has been downsized and relocated to an industrial unit on the outskirts of town. It was actually once the largest employer in the city. The vacant Eatons Centre is now occupied by offices of the City of Brantford. Oh yes, the City purchased this huge vacant building at fire sale prices. Industrial property is not immune from the effects of falling demand either. About a third of the downtown Brantford is being demolished this year. The is the same downtown area that was used as a movie set for the horror film Silent Hill ….. as is.

#104 DaBull on 09.18.10 at 11:11 pm

#79 andrewS

By the way, our fellow could consider moving to Northern Ontario.

The flies… my god the flies and other flying things that can carry off small children. No thanks, Alberta’s north is bad enough with horse flies that can remove a half pound of flesh with each bite and those ever pesky blood sucking mosquitoes.

#105 garthfan on 09.18.10 at 11:45 pm

Congratulations on the success of your speaking gigs, Garth.

It’s been worth reading your blog the past couple weeks just for the insight on how Noam’s theories (such as the Propaganda Model of the Mass Media) are being applied. I’m more than a little embarrassed to admit it, but I find that there even more interesting than studying economics or following the Money Road. Ah well, women like me are fickle LOL!

Peace out,
garthfan

Chomsky on Universal Grammar…
http://www.youtube.com/watch?v=rnLWSC5p1XE

#106 caesarcaesar on 09.19.10 at 12:14 am

#102 Industrial Guy

-Let’s be honest. The situation here

DELETED. Yes, let’s be honest. You are still banned, whatever anon you use. — Garth

#107 Nostradamus Le Mad Vlad on 09.19.10 at 12:34 am


Mesdames et Messieurs, voici et maintenant . . . Garth and his Groupies!

1:12 clip Nancy Pelosi has been promoted by The Wizard of Oz. Great commercial!

WW3 in all its glory. Spoken of by dubya and his merry band of neo-cons.

Figures mean zilch to those who homeless or jobless.

Frankenfish Courtesy of a Monsanto near you!

Cities are disappearing (insolvent) quickly.

Sing-along with Hank and Timmy!

TARP The Unbearable Lightness of Being TARP.

#108 Alan on 09.19.10 at 12:39 am

We are using past experience to determine what the future will look like. May I submit that the future will be both deflationary and inflationary. Real estate will crater and also skyrocket.

All of the above will happen due to the major shift driven by economic centers that will be determined by who is correctly positioned to serve the masses that congregate at centers of distrubution. Jobs will be driven by this massive global re-arrangement of commerce and many cities will benefit. Think Venice during the 15th century or San Franciso during the gold rush or Fort Mac during the oil sands boom, or Vancouver during the Asian economic boom that will happen over the next 30 years. Many cities that are not positoned correctly will die, real estate values will crater and people will re-locate to save themselves, their families and buy into the next gigantic demographic shift.

#109 TorontoBull on 09.19.10 at 12:42 am

102
thanks for the nice summary

#110 The Original Dave on 09.19.10 at 2:25 am

Okay gold bugs and gold haters, I’m going to tell you a little something that will leave most of you scratching your head in regards to gold. Just about everyone will disagree with me, so I’ll thank you in advance. Thank you.

The Gold bull market did not start in 2000 and it didn’t start in 2001. Gold’s bull market began in the year 2007. There was a major move in 2000 – the crash of the Nasdaq. The crash of the tech. bubble forced governments to drop rates and get people investing again. People borrowed beyond belief and since 2000 EVERYTHING WENT UP. Hooray. House prices, food prices, wages, car prices, uranium, lumber, natural gas, silver, platinum, palladium, titanium, tin, copper, zinc, lead, squirrel meat, pulp and paper….we can list thousands of things that increased rapidly since 2000. This has nothing to do with gold and a bull market in gold, this has to do with credit and the credit mania. Prices of everything went upwards. Please don’t call the last 10 years a bull market in gold. For 7 of those years, gold miners weren’t making any money because the cost of energy, wages, base metals outstripped any gains gold miners would have made by mining gold.

The gold bull market started in 2007. After 7 years of our aggressive credit mania, the move came to an end. We had crashing prices of everything! All the things I mentioned in the paragraph above lost significant value. All of things (except gold) are leveraged assets. People borrow to buy those assets because they serve an industrial purpose or are a necessity of life. With crashing credit, the leveraged asset prices weren’t sustainable, so they dropped due to less ferocity of buying. What was left standing was the one asset that it doesn’t make any sense to borrow to purchase – gold.

The seperation in the price of gold versus the rest of the assets in 2007 and since is what started the bull market in gold 3 years ago. All the gold miners that are now looking to take over other companies and mines or that are showing much higher profits, are the result of the gap between gold and the capital costs (oil , copper wages) that have decreased since credit collapsed in 07.

So what we have is a nice 3 year run for gold miners where they’ve been making money. Gold isn’t a bubble (yet), it’s not even close. The bull market didn’t start in 2000. If you consider gold’s bull market as having started in 2000, then there were thousands of other assets that had a bull market that started in 2000. The obvious and easy conclusion is that we had inflation (or even hyperinflation) since 2000 and so everything increased in price. Just like every hyperinflation in a credit economy, they end with extreme cases of deflation to compensate for the extreme run- up in prices….just like we’re having.

This is all quite simple. It gets tiresome of hearing two sides of an argument and knowing that both sides are pretty confused. The gold bugs pat themselves on the back for their purchases and actually believe the drivel they exude….and it’s tough for many to argue with them for that very fact.

I’ve participated in the run-up and have benefited in the gold market. I do think that eventually, those that don’t understand why the gold market is doing well, will get clobbered in the future. Kind of like those that were buying tech stocks in 1999 of companies that had no earnings and P/E ratios of 500.

#111 Brian1 on 09.19.10 at 2:49 am

I have changed my name to Brian1, though I don’t think I’ll have much to contribute, but you never know. I welcome all other Brians. Sorry if you wanted #1.
However, I do think Jenny is correct and don’t think price inflation will last. Gold will eventually fall in price, China will slow growth in spite of what major investors are hoping for and house prices in Toronto face a possible 70% decline over next 5 years because of condos and rising unemployment. Please prove me wrong.

#112 Cameroni on 09.19.10 at 2:51 am

#69 S.B. said:….

“I’m not that old but I remember receiving my brother’s hand-me-down clothes. This would be unthinkable today! Charge it to Visa, buy new stuff. Poor? What is poor?”.
———————————————————-

Many thanks for the link to the article from Pique Magazine. I actually had no idea things were quite that bad out in Vancouver. It was a fascinating read that confirms my suspicions about how difficult our national labour markets are getting.

The comments regarding short-term contracts, part time work, casual labour etc were especially telling and I have seen how these issues have grown from being an unusual circumstance into a major trend over the last 15 years.

I think we can expect to see more of the same.

So what is poor? I may have already related this story once here but I am always up to repeating myself like the senile old fart I am becoming.

I spent some time in North Africa. One day I had to replace broken boot laces so I bought a new pair and changed them over while sitting in the lobby of a decent hotel. When done, I threw the old laces into the trash.

The desk clerk, seeing what I had done, came over, salvaged my laces from the trash and spent a few moments behind the reception desk sewing the broken pieces back together. Then, with a big grin he put them on his own shoes and showed me!

Then I realized that even though he was so poor that he would salvage my cast-off goods from the trash without a hint of awkwardness or lost pride that the real poverty was actually inside my own head.

I hope you understand what I mean.

#113 Brian1 on 09.19.10 at 3:00 am

I do not think that the Canadian banks will do well in the future because the pension funds are desperately trying to find places to put their money and are coming up with very few choices. Pensions of all civil servants will follow the same fates as those in the states. The Canadian government will not support these outrageous demands of CMHC and unions. They will eventually end up in court.

#114 Brian1 on 09.19.10 at 3:05 am

I would like to be proven wrong.

#115 Cameroni on 09.19.10 at 3:26 am

#72 BrianT said:

“#60 Cam- Expenditures on renos of the existing homes decline dramatically during a real estate bear market”.
————————————————-

Hi Brian, I don’t disagree with that comment from you.

What I was referring to though was simply that there is a shift in the types of products that get sold in strong economic times and during booms versus the kinds of products sell during downturns. I have seen this with my own eyes over several recessions now.

There is no doubting that sales slow down but I have never seen them fall to zero either. Rona will get through this patch as will Home Depot and many others. Let’s give them some credit for knowing their own business’s and being cognizant that they are in a cyclical industry and that it is in their best interests to closely follow real estate trends.

Even during the great depression homes still got repaired. New construction may have fallen off a cliff but workers were still in demand repairing roofs, fixing rotten steps, propping up broken fences and mopping up damage in leaky basements.

The world never came to an end and even though sales of construction materials dropped off in a significant way,….there were still sales.

It is interesting when we discuss deep recessions and depressions too that we look at the statistics of the damage while glossing over how much did not change at all.

Employment numbers are one of those numbers that gets discussed often because of course unemployment in the dirty thirties was a huge issue. We might hear for example that as much as 20% of the labour force was out of work but never hear that 80% of the labour force hung on to their jobs (for dear life perhaps).

In other words, the outlook for suppliers of building materials may be diminished but it is not totally destroyed and investors have already priced this decline in sales into the share values.

The valuations are based on same-store-sales, earnings per quarter, management people and practices, the economic outlook etc. If Rona or others were to suddenly embark on a massive expansion of stores across the country though, then I would have real concerns. What we are seeing instead though is some consolidation of services and that is a good thing in light of the economic outlook.

I am not concerned.

#116 breezer1 on 09.19.10 at 5:06 am

from financial insights…
Hello all

Last week I noted the sly way that CREA reported their August sales stats and the way that our critically-thinking media was happy to regurgitate CREA’s sales report verbatim as ‘news’. It’s unfortunate, but it seems that there is often a glaring inadequacy in the reasoning ability of some reporters. Perhaps it’s just me, but I can’t help but notice that this reasoning deficit is particularly acute when it comes to reporting on residential real estate stats. I’m amazed at how willing our media seems to tow CREAs line.

Here are just some examples…

Or….this….

Or my local real estate board, which just last week touted the fact that prices had risen month-over-month in August. Our local media ran with the story. I have no problem with that. But where were they when in June and July our local house prices experienced consecutive and significant month-over-month declines? Why no mention of this? And where was the mention of fewer sales, or the fact that home prices were still below their May peaks?

It got me thinking about the role that real estate-related advertising revenues might play in shaping the tone of the real estate-related stories being carried.

Newspaper advertising is a $1.2 billion industry in Canada. It generates 34% of the total operating revenues of all newspapers in Canada. In a fascinating piececarried in the McMaster Journal of Communication, the inherent biases of a profit-oriented media are explored. I’d encourage you to at least read pages 9 to 10 of this article, as this section deals with the advertising conflict of interest I mentioned above.

Here are a few snippets to consider:

“Building relationships with advertisers limits what news a medium will include. Anything that can be viewed as contrary to business priorities or will interrupt the “buying mood” of consumers often dissuades the advertisers that fund newspapers.”

“It would not be financially reasonable for newspaper owners to publish editorials that offend their advertisers or deter consumption. This results in the censorship of news content, whereby journalists are less likely to pursue (certain) stories”

“Since publishers like CanWest Global are more dependent on advertising revenues than they are on subscription payments, selling advertising space becomes the top priority of the company”

Next time you pick up a newspaper, be it local or national, look through it with a critical eye. Notice how much of the advertising space is taken up by real estate ads. Most newspapers also carry a weekly listing of open houses, often as a separate flyer. I can’t say for sure whether or not this advertising revenue would influence the tone of the reporting when it comes to the current real estate market, but it certainly should make you crank your BS detector up another notch.

At the end of the day, it doesn’t matter. The media can only spin the facts for so long. I’m curious to see how the big Toronto papers will spin the monthly real estate numbers for September. If the first two weeks are any indication, it should be ugly again. Mid-month sales numbered 2,623. This represents a 22% drop over the same time period last year.

“Oh crap….guess we better report these numbers in reference to their month over month change”.

Also not good. The first two weeks of July saw 2,732 sales. And for that matter, the first two weeks of September saw prices fall from the first two weeks of August.

“Guess we’ll be focusing on the year-over-year price change then”.

Sure you can. But give that another month!

-Ben

Add a comment to this post

#117 betamax on 09.19.10 at 5:50 am

#86 VancouverGoinUP: “Biggest fool out there was Shiller claiming “Vancouver the bubbliest city in the World” as house marched up 50% from his comments.”

You are confused about what a bubble is. The 50% march you refer to merely confirms Shiller’s claim.

#118 bullion.bunny on 09.19.10 at 6:30 am

#102 Industrial Guy on 09.18.10 at 10:16 pm

Wow, I knew it was bad……but! I did not realize that so many companies had closed in SW Ontario. Wait until 2011 when more SW Ontario companies start to buckle under the load of higher taxes. Both levels of government are going to have a real problems on their hands, one that they can never fix………..WOW!

#119 Bill ( Peterborough) on 09.19.10 at 7:18 am

Re # 52 dark sad person

**************************
more food for thought:

http://www.youtube.com/watch?v=4PpMdTmVMpo

http://www.youtube.com/watch?v=_d8C4AIFgUg

#120 Moneta on 09.19.10 at 7:43 am

Those who listened to Shiller never heard “Past performance is not indicative of Future Returns” VancouverGoinUp even in the rain
————-
Paper gains.

#121 nibs on 09.19.10 at 7:45 am

@ #3
“Why is it that the media only puts forth the stories that are contrary to your message?”

http://financialinsights.wordpress.com/2010/09/18/the-media-spin-machine/

#122 junius on 09.19.10 at 7:45 am

#102 Industrial Guy,

Indeed. Things are bad in SW Ontario as they are in many places. No doubt our banned friend at #105 was going to spew his rhetoric on how the West is different – except it is not.

We have yet to come to terms with the long term impact of a generation of outsourcing jobs, declining productivity at home and lack of corporate innovation. Perhaps the biggest crime of the Debt Bubble of the past few decades is that it hid the fact that real incomes were not rising and our economy was being hollowed out.

These jobs are simply not coming back. It may take a decade or more to bring unemployment back to historical levels. Meanwhile thousands will find themselves trading in their high paying union jobs for much lower wages in unskilled positions – if they are lucky.

#123 rosie on 09.19.10 at 7:59 am

#94 Dark sad person

You are making the assumption that fiat currencies will retain there values in relation to gold. Cash may not be king after all if hyperinflation takes hold like it did in the 70’s.

#124 junius on 09.19.10 at 8:35 am

#86 Vancouvergoinup,

So, let’s hear your case on Vancouver goin up forever. I look forward to it. Just for clarity, here is a short synopsis of the Bull case from my perspective.

You mentioned Robert Shiller and indeed he is an important starting point. Shiller’s studies proved that North American Real Estate prices follow certain long term patterns based primarily on affordability measured in household income. The price of homes over the past 100 years or so has been roughly 3-4 times the household income of an area. Some areas such as major centers and coastal areas have shown a tendency to skew more towards the 4% range and others less desirable in the other direction.

Deviations may occur for a period of time due to changes in supply or demand, economic stability or decline and of course cost of borrowing money. However in the long run prices always return to the historical averages.

Vancouver is now priced in the 8-10 times salary range. The average household makes just less than $70,000 per year. The average home is more than $600k or higher depending on what statistic you use. In any event, severally unaffordable.

What is the Bear case and how did we get here?

The combination of a baby boom population in their peak earning years and the access to cheap debt led a wave of real estate increases across North America. The situation in the US began to unravel in 2005 leading to a long term housing implosion.

The situation in Vancouver was similar but deferred like much of Canada due to our historic 2-3 year lag behind the US economy along with some other factors. However in 2008 prices began to decline in Vancouver and we saw the beginning of a return to historical prices.

However, the situation deteriorated so bad in the banking system that the gov’t intervened with historically low interest rates along with CMHC rule relaxation in order to stimulate the market. This worked and in 2009 the market rebounded to new heights in the Spring of 2010. However the pool of new buyers gradually dried up and a few of the rule changes were tightened up.

Let’s also not forget that Vancouver benefitted from a $6 billion dollar investment in the 2010 Olympics. This spending help delay the recession and lead to a general public feeling of euphoria and invincibility.

April 2010 was the peak. Buyers he were pulled forward into the market and it declined rapidly through the summer. Prices have only fallen 3% from their highs but will adjust more through the fall. By winter it will be clear that we are in a multi-year decline. Sentiment will change for a long, long time.

The pace and amount of the decline is the only thing worth debating. If interest rates stay low for an extended period then it may be more gradual. However we are now past the tipping point. See the Olympic Village for proof.

The key issue facing all Canadians is affordability. Wages are flat if not declining. Our debt levels have never been higher. Taxes have already increased. The baby boomers are retiring. The economy continues to sputter and we may have a double dip this fall. Best case is 2-3% GDP increases over the next few years however the slack in the economy is so significant it will have little impact on individual households.

Meanwhile interest rates may stay low for sometime but only because the economy is so weak. Once they do begin to rise – as they inevitably will – they will quickly bring down prices. Every 1% increase will bring a 10% increase in monthy payments. Many feel we are in for a period of hyper inflation and could see 10% or more in just a few years. However even if we return to 6-8% historical averages the cost of borrowing will bring home prices down substantially.

Now I suppose you have a litany of arguments on why Vancouver is different. Immigration? No land? Best Place on Earth?

Please. Spell it out. Can’t wait.

#125 Zaza on 09.19.10 at 9:18 am

This shack went on market recently in our area. When we were passing by we bet with my wife on price. She bet $350K and I said $500K. Looks like I was closer to truth. Recently three properties in our area were taken off the market. http://www.realtor.ca/propertyDetails.aspx?propertyId=9950634&PidKey=-174075237

#126 blase on 09.19.10 at 9:19 am

Hey Garth,

Any comment on the fact that median prices in Calgary have been climbing nearly every day for the past 2 weeks? Condos especially, which were at median 350 but are now up to 363,000. Also SFH have begun nudging up as well…

I addressed this. — Garth

#127 Old_is_Gold on 09.19.10 at 10:02 am

#93 Nostradamus Le Mad Vlad on 09.18.10 at 8:01 pm

6:16 clip Tungsten-filled gold bars. Plus 1:59 clip.

The MSM floats all kinds of ‘alarming’ news about gold, and although Bob Chapman claims to be a NWO fighter, he is not the most reliable source of information out there.

The average person cannot buy kilo or bigger bars of gold anyway, sticking to 1 oz. Maple Leafs is probably the best and safest way. Even if the story is true, the big boys play ‘money games’ all the time. Let the Brits and the Chinese sort it out, doesn’t really change a thing about the value of gold nor how little people concerned with protecting something of their fast dwindling wealth are concerned. There are still enough sources for gold coins with minimal premium that average folks can safely buy.

#101 goldenfox on 09.18.10 at 9:43 pm

BNN like CNBC becoming shill for bankers

http://news.goldseek.com/LemetropoleCafe/1284937260.php

From a gold investors’ perspective, this is great news. Let the MSM keep dissing gold. The day CNBC and BNN turn bullish on gold as they always seem to be on equities / RE etc. will be the day to sell all your gold and buy RE.

#128 45north on 09.19.10 at 10:06 am

Watching in Kelowna: why did people not pay their taxes when the property values were heading up

because higher property values may make you feel better they don’t give you a dime until you sell

Golden Fox: instead of the US economy decelerating at a rate proportional to the removal of credit from the system, it will grow and grow until it hits supergiant status, only to collapse into a neutron star

http://www.zerohedge.com/article/debunking-great-myth-us-consumer-deleveraging-or-why-us-economy-will-end-not-whimper-bang

While spending by individual families resembles a super giant star, the overall decline should be gradual because each family loses its credit one at a time. The bank sends each family a letter saying “your middle class status has been revoked”. Maybe that’s not the actual wording.

Industrial Guy: The situation here in SW Ontario is desperate.

thanks for the update. I worked in the summer at Glidens Paint Factory on Wallace Ave in Toronto to pay for my tuition. 40 years ago. All the factories are long gone.

#129 Old_is_Gold on 09.19.10 at 10:28 am

#102 Industrial Guy on 09.18.10 at 10:16 pm

Good post!

Reminds me of Pennsylvania in the 70’s when the steel mills started shuttering up. Many previously vibrant communities began to look like war zones. Although between 1980 and the end of the last decade most of the western world (and by default all exporting countries) seemingly experienced a boom, in reality it was always a facade. The fundamental shift that occurred worldwide after 1971 when Nixon decoupled the dollar completely from gold was that growth became completely DEBT based rather than SAVINGS based. To keep the fantasy alive, it became necessary to offer more and more credit with less and less collateral at lower and lower rates, booms financed purely by credit are like balloons that keep getting pumped with more hotter air all the time, the game can last only so long.

So here we are / 0 percent rates, credit amounts in the trillions, approaching quadrillions and no real growth! Whether the consequence was intended or not, it is an unavoidable consequence. There ain’t a man alive that can fix this mess without imploding the whole system. Those scenes from the 70’s / early 80’s are returning with a vengeance US wide, but this time the credit capacity of much of the world has been tapped out. The credit cards of individuals, municipalities, Sates / Provinces / The Feds are all maxed out. All that is left is the printing press – so as the MSM keeps repeating the mantra and perhaps one of the few truths they let slip out (because it is agenda) is that there is a ‘NEW NORMAL’ in the world, and regrettably that new normal is missing what used to be known as the MIDDLE CLASS.

So we watch and wait, and while some of us prepare, the majority will only wake when its too late, like those still chasing bricks and mortar, in many cases just plywood and mortar, thinking its the goose that will lay golden eggs!

#130 Old_is_Gold on 09.19.10 at 10:41 am

RE #102 Industrial Guy on 09.18.10 at 10:16 pm and my last post –

Here’s the confirmation from a recent Maclean’s article about the transformation that is rapidly taking place in America. To think that all this has happened over less than 3 years makes me shudder. If such a fundamental transformation can take place while the politicians and media keep people hypnotized that all will be well soon, just go back to sleep, then I don’t even want to think what the landscape will look like in a few years. Litter not being picked up from parks, libraries closing, paved roads being crushed back to gravel…what’s America coming to? But its different in Canada, so we need not worry!

Maclean’s article headline / Collapsing bridges, street lights turned off, cuts to basic services: the decline of a superpower

http://www2.macleans.ca/2010/09/14/third-world-america/

#131 Old_is_Gold on 09.19.10 at 10:45 am

http://www2.macleans.ca/2010/09/14/third-world-america/

What is WWW2?

First time I’ve seen a web address with the number 2 after WWW in it, could this be the beginning of a two tier internet? Just wondering!

#132 Bill Gable on 09.19.10 at 11:11 am

“In the financial markets, a lack of liquidity immediately leads to falling prices,” said Lou Barnes, the founder of Boulder West Financial Services. (Boulder West was acquired last year by Premier Mortgage Group.) “In the real estate market, something different happens,” he added. “Illiquid real estate markets freeze.” That is what is happening now. For months, the Obama tax credit had been the only grease in the housing market. Now that it is gone, the buying and selling of houses is essentially grinding to a halt.

Why is this happening? Just as the subprime bubble of 2006 and 2007 required one kind of perfect storm — namely, incentives to throw underwriting standards out the window — we are now living through the opposite kind of perfect storm. Essentially, every participant in the housing market has a reason to be afraid. And that fear is paralyzing.

The prospective buyer, for instance, has two good rationales to fear buying a new home. One is the unemployment rate. “A major psychological thing happens with high unemployment,” says Dave Zitting, a veteran mortgage banker and founder of Primary Residential Mortgages. “Those with a job worry about whether they are going to keep that job” — which, in turn, prevents them from taking the plunge on a new home.

The second reason is that, Mr. Yun notwithstanding, most people simply do not believe that housing prices are even close to hitting bottom. “In the Bay Area, a house that was worth $300,000 a decade ago became a million-dollar home,” said Greg Fielding, a real estate broker and blogger. “Now it is listed at $800,000.” That price, he suggested, was still unrealistically high. The seller, meanwhile, doesn’t want to face the fact that his or her home is too richly priced, and won’t sell at a more realistic price — which may well be below his or her mortgage debt.

There is also an immense amount of inventory that has yet to hit the market but will, sooner or later. People in the real estate business have taken to calling this “the shadow inventory.” It consists of homes for which the owners have stopped paying the mortgage but the banks haven’t foreclosed on yet, foreclosed properties that have not yet been put up for sale, homes with modified mortgages that the owners still can’t afford and will soon default on and so on.

Mr. Barnes describes the shadow inventory as akin to “ranks of Napoleonic infantry, rows deep, hidden in the fog.” This inventory, estimated by Rick Sharga of RealtyTrac to be between three million and four million homes, is almost certain to drag down home prices for the foreseeable future. “The disinterest of buyers, in an interest-rate environment that may be the lowest ever, is striking,” Mr. Barnes said. But, he added, it makes perfect sense. Since 2007, housing prices have been in a deflationary spiral, and nobody can say when it will end. “It doesn’t matter if interest rates go down to 2 percent,” Mr. Barnes said — buyers won’t reappear in big numbers until they can see the light at the end of the tunnel.

So that is what it looks like for the prospective borrower. Now look at it from the lender’s perspective. Chastened by the excesses of the bubble, mortgage lenders have swung hard in the other direction, becoming excessively, almost insanely, conservative. They demand high FICO scores. They won’t lend to anyone who is recently self-employed — even if the potential borrower has socked away a lot of money in the bank, or is making a good income. They won’t count income from capital gains.

“I have wonderful people in my office every day who would have qualified for a loan prior to the bubble” but now can’t get one, Mr. Zitting said. Mr. Barnes said: “Underwriting standards are vastly tighter than any time in my lifetime. It is choking off buyers.”

—- Coming to Canada, or already here?

#133 junius on 09.19.10 at 11:30 am

#107 Alan,

How will so many people re-locate when they are tied to 35 year mortgages that they can’t get out of?

#134 Hiteclowtec on 09.19.10 at 11:41 am

More bad news.

Garth, your favorite cowboy boot store Western Corral on Avenue Rd. is closing. “Store closing forever” the ad says.
And where are the journalists during this retail apocalypse in the GTA ? “The death throes of journalism” indeed .

You have now broken my heart. I will have to go to Calgary for my Libertys. — Garth

#135 Another Albertan on 09.19.10 at 11:49 am

#129:

It’s just the name of the server.

There is already a multi-tiered “internet”. It depends entirely on where you live and what you are able or willing to pay. It’s always been this way.

#136 Keith in Calgary on 09.19.10 at 11:53 am

#130 Bill Gable……

The “shadow inventory” here in Canada sits on Kijiji.ca under the “for rent” section………heh.

Garth……

Get your next pair of boots from the world famous http://www.albertaboot.com right here in Calgary……been getting my boots custom made there since 1992 myself.

#137 Timing is Everything on 09.19.10 at 12:00 pm

#31 refinow

“Its easy to suggest that everyone should get out now before things get worse, but flooding the market with
listings will only dilute demand with the increased supply.”

>>>Many in the 0,5/35,40 group will not have a choice. Many like the unemployed 62 year old with the $1.2mil house will not have a choice. The timing for them to sell will be chosen for them. That is far from everyone.

“But for those who choose to weather the storm, what suggestions can you offer?”

>>>The storm is here. If you are not ready by now, it may be too late. You start to worry, then panic and really screw it up. It’s never too late to make a better decision. Don’t panic. It will not help.
We disussed selling in April/2009 as we saw the storm brewing on the horizon. The timing was not right for us to sell our home’base’. Of course, we do not have a sub-prime mortgage or unemployed 62 year olds. Sadly, many ‘opportunities’ await.
Our family is ready.

“I think this blog has become obsessed with the viewing of train wrecks, like Detroit….”

>>>Folks in a precarious situation, like to gawk at folks in a more precarious situation. It makes them feel better about themselves. However, It does obsolutely nothing to help their own perilous future.
Human nature perhaps…they just can’t help it.

#138 dark sad person on 09.19.10 at 12:08 pm

#109 The Original Dave on 09.19.10 at 2:25 am

Please don’t call the last 10 years a bull market in gold. For 7 of those years, gold miners weren’t making any money because the cost of energy, wages, base metals outstripped any gains gold miners would have made by mining gold.

The gold bull market started in 2007. After 7 years of our aggressive credit mania, the move came to an end. We had crashing prices of everything! All the things I mentioned in the paragraph above lost significant value. All of things (except gold) are leveraged assets. People borrow to buy those assets because they serve an industrial purpose or are a necessity of life. With crashing credit, the leveraged asset prices weren’t sustainable, so they dropped due to less ferocity of buying. What was left standing was the one asset that it doesn’t make any sense to borrow to purchase – gold.

The seperation in the price of gold versus the rest of the assets in 2007 and since is what started the bull market in gold 3 years ago. All the gold miners that are now looking to take over other companies and mines or that are showing much higher profits, are the result of the gap between gold and the capital costs (oil , copper wages) that have decreased since credit collapsed in 07.

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

Dave–i agree about the bull market in mining stocks-taking off in 07-because of the dynamics you mention-but Gold the metal itself is the only traded commodity that has not broken its trend line in the last 10 years-
The type of Inflation that started in 01/-was no run of the mill Inflation-as occurred from 1980-2000-
Otherwise-how do you explain the bull market in the long Bond-that also broke out of a 20yr bear market-
Smart money bought Gold and smart money bought the long Bond–
The long Bond did break the 10yr trend line-but only briefly and that was based on a Trillion dollar money goose and is now back in developed trend up-
Gold and the long Bond signaled credit risk until 2007 and since-has been signaling default risk-
Credit acts and spends like money in expansion-
In contraction it acts different-the money part-evaporates and all that remains is debt-which commands “real cash money” to erase or simply default when as we know-there isn’t enough money in the system to cover and Government printing is not funneling into the economy at anywhere near the amount needed to erase debt–
World debt-marked to market-would show clearly-we are already in default-as in bankrupt-
The amount we can print-
(that actually finds its way into the economy) that ends up paying down debt–is just too tiny–it’s simply not enough and can never be enough-unless they actually do drop money from helicopters and Hyper-inflationists would do well to understand-that Inflation-of any kind has to start within the credit market-as in loose lending and that just ain’t happening-

#139 dark sad person on 09.19.10 at 12:20 pm

#122 rosie on 09.19.10 at 7:59 am

#94 Dark sad person

You are making the assumption that fiat currencies will retain there values in relation to gold. Cash may not be king after all if hyperinflation takes hold like it did in the 70′s.

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

I’m not sure how you interpreted that message from what i said-
As long as we are in Deflation and have the same $ as we do today-of course Cash is king-assets drop against the dollar-making the dollar stronger when weighed against any basket of assets-
In relation to Gold?
Where did I say that?
In the 70’s-yes there was a run on the USD-thus the 20+% interest rates-in order to halt $ dumping and to suck the money back out of commodities and back into the dollar-
Volcker didn’t tame Inflation-he saved the USD-
That’s all–

#140 Lawrence on 09.19.10 at 12:38 pm

a couple of hundred thousand in RRSPs, and a modest house worth $1.2 million.
Garth what planet are you on this guy has more than most people will have in their entire life. Why post this crap for the poor sap who wasn’t fortunate enough to be able to save or get a unionized public employment with a juicy pension such as you recieve. Government pensions such as yours are what is draining our system. Should you not want to post this comment I’ll know I was not wrong in my opinion.

You fail to understand my point: the person with only $200K in RRSPs at age 62 is in dire straits – unless he sheds the Vancouver myopia which does not allow him to see that his home must be liquidated. This is what real estate can do – blind and diminish. If he does not sell now, he stands to see much of that wealth evaporate over the coming years. As for the completely unrelated ‘juicy’ pension that I receive as a guy who spent 9 years in Parliament, it is $26,000 a year and I donate it to charity. I know it is easier to blame others than face your own shortcoming, but try not to sound like a total idiot. — Garth

#141 jess on 09.19.10 at 1:07 pm

Brian ….sorry i should have checked my typo.
What is the difference between principles-based accounting and rules-based accounting?

Rules-based accounting is basically a list of detailed rules that must be followed when preparing financial statements. Many accountants favor the prospect of using rules-based standards, because in the absence of rules they could be brought to court if their judgments of the financial statements were incorrect. When there are strict rules that need to be followed, the possibility of lawsuits is diminished. Having a set of rules can increase accuracy and reduce the ambiguity that can trigger aggressive reporting decisions by management. The complexity of rules, however, can cause unnecessary complexity in the preparation of financial statements.

Principles-based accounting such as generally accepted accounting principles (GAAP) is used as a conceptual basis for accountants. A simple set of key objectives are set out to ensure good reporting. Common examples are provided as guidance and explain the objectives. Although some rules are unavoidable, the guidelines or rules set are not meant to be used for every situation. The fundamental advantage of principles-based accounting is that its broad guidelines can be practical for a variety of circumstances. Precise requirements can sometimes compel managers to manipulate the statements to fit what is compulsory. The problem with principles-based guidelines is that lack of guidelines can produce unreliable and inconsistent information that makes it difficult to compare one organization to another.

http://www.investopedia.com/ask/answers/06/rulesandpriciplesbasedaccounting.asp
===
accounting rules FAS 166 ,167 established a new set of reporting rules for how u.s. banks must deal with their off balance sheet spv’s. these rules brought nearly 362 billion in assets and liabilities back onto bank bakance sheets, a large percentage of which (roughly 322billion were consumer loans…”

http://research.stlouisfed.org/publications/es/10/ES1018.pdf
=

#142 dark sad person on 09.19.10 at 1:08 pm

#118 Bill ( Peterborough) on 09.19.10 at 7:18 am

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

Dumbed down-entertainment addicted Societies–by design-
No question-
We’re out here-all alone-too small to matter-to voiceless to be effective-
Sites like this-unless-deemed to dangerous to be allowed to air-will eventually filter through to the sleeping crowd about what’s happening-but-it will take a long time and only pain-inflicted by the market-can change this-
Maybe too late by then and our kids will likely still be fighting and dying- in some foreign shithole as we drain the last of the worlds remaining oil-for profits only the connected few will benefit from-

http://www.youtube.com/watch?v=2BcrbEexjYw

#143 junius on 09.19.10 at 1:36 pm

#107 Alan,

You may also try to explain how housing prices can possibly rise in a period of hyper inflation. Given the Bank of Canada’s to control inflation wouldn’t that mean interest rates would rise to levels not seen since the 80s?

Do you really expect salary levels to rise in a manner that could keep pace with rises in interest rates? I don’t think so.

The more likely scenerio is the prices will fall slowly over the next few years as we continue through this deflationary period. We could see 10-15% the first year followed by 5-10% the first year. However once interest rates kick up we could see another 20-30%.

#144 mikef on 09.19.10 at 1:36 pm

To #16 Moneta:

No doubt Big M

Finished reading the Montreal Gazette:

In the Real Estate section page after page of open houses and homes for sales.

In regular times the baliff/real estate auction section
is a quarter to half a page.

Today it is a page and a half.

#145 Taxpayer like everyone else on 09.19.10 at 1:43 pm

122 Rosie – I am not aware of a defined rate at which we term it “hyperinflation”, but Canada was nowhere near
hyperinflation in the 70s. The rate maxed out somewhere
around 15%. Are you referring to somewhere else?

#146 Alan on 09.19.10 at 1:44 pm

Junius,

The problem with your argument is that your frame of reference is too small. This is not an insult, just an observation. All of your previous post can be cut and pasted from the myriad of articles, comments, blogs and ramblings of psydo-economists on any given day. The point that I would like to make is to think about where you may have invested 40 or 50 years ago and the kind of foresight you may have had to indulge in order to be able to determine your next move.

You may have invested in Detroit or the Rustbelt, bought industrial land or commerical property because you knew manufacturing would become a major force in the area, building automobiles for the N. American market that was exploding after the second world war that also brough upon the baby boomer generation. Owning land in Detroit would have been a smart idea no? Now Detroit and it’s simblings are a wasteland. So the question you need to ask yourself is where is the new Detroit(s) of the 21st Century going to be? What are the major economic drivers of the next 10 to 30 years going to be and position yourself accordingly.

As I mentioned in my previous post it is too simplistic to just say we are going to have major deflation or hyper inflation. We are in an economic climate we have never witnessed or lived in…and it will be determined by “GLOBAL” commerce more than ever.

The last 20 to 50 years manufacturing (in general) was localised and meant to serve people of a continent. Today we have seen manufacturing jobs that have been exported and will only return when massive measures are taken but this will take another generation.

So take a look at the earth from 80,000 feet and ask yourself where the direction, velocity and money is heading and you will be able to see where Vancouver is heading. There will be softness in the real estate market from time to time and there will be large declines in certain areas of the city and province but there will also be increases in land (especially farmland) in others. Vancouver is the drop off and exit point of Asian Pan Pacific enterprise which will be the reason the markets will continue to buoyant. Please see San Francisco as an example of real estate bounce in a country with declining real estate.

#147 bigrider on 09.19.10 at 1:59 pm

#89 Nostramdamous

A lot of self discipline to allow an accountant or CFP to withdraw $250 per paycheque for RRSP’s

Accountant? Why an accountant?

#148 gold bugger on 09.19.10 at 2:32 pm

Keith,
In a world full of econo-ignoramuses, you take the cake.
The price of things is not determined by how much you want to pay, or how much you think it’s worth.
That’s just your Marxist fantasy.
In the real world, all consumers compete for scarce resources, outbidding each other with dollars.
When you babble out loud in a grocery store about the price of cheese, employees and other shoppers can more easily identify you as an idiot, or insane, or both.

#149 Lawrence on 09.19.10 at 3:05 pm

#138 Garth If this poor saps house drops 40 % in value he will have close to a mil. Again a very small percentage of the population will have this cash at the age of 62.
People in the private sector do not get pensions of 26,000 a year after 9 years of work you may give yours to charity 99.99% don’t.
I’ve been semi retired for a very long time from the private sector. Calling someone an idiot on a opinion isn’t the most intelligent comment you have ever made on this forum.

Make an idiot comment, and reap the rewards. — Garth

#150 Timing is Everything on 09.19.10 at 3:28 pm

#107 Alan said – “Many cities that are not positoned correctly will die, real estate values will crater and people will re-locate to save themselves, their families…”

>>>Agreed.

#131 junius on 09.19.10 at 11:30 am

“How will so many people re-locate when they are tied to 35 year mortgages that they can’t get out of?”

>>>One by one, they will move away with nothing and start anew in a more hospitable, nurturing environment. Why on earth would they stay and struggle to merely exist? Quite simply, they will not. If you have nothing you are not ‘tied’ to anything. You can’t get blood from a stone…Blah, Blah….

One by One, they all fall….(musical interlude)

http://www.youtube.com/watch?v=IZ22M_mnWMg

#151 Timing is Everything on 09.19.10 at 4:06 pm

#150 Timing is Everything

Should read #108 Alan said….Not #107, sorry about that.

#152 Mister Obvious on 09.19.10 at 4:50 pm

I’d like to share a personal view of employment, savings and debt:

I was born and raised in Vancouver. I am now 60 and have been retired since the age of 57. Many have the opinion that is far too young to leave the work force. I don’t think so. I began working at 17 and felt 40 years was respectable contribution to Canadian Society. Nor was I ‘sick of work’. Well, perhaps I was sick of some aspects, but honestly, I just felt it was just time to move on from the nine to five. I haven’t looked back since. Not once.

I never was one to define myself by my occupation. In my final work years I was a fairly competent technologist. However, at home I was something else altogether (ask my wife). At least I made my own decision to retire and didn’t have the rug pulled out from under me like so many of my colleagues recently have. I fancied myself a bit like Jerry Seinfeld when he walked away at the top of his game. They offered me a lot of cash to stay on but the lure of money was diminishing just like my time left on this planet. It was an easy choice.

I was lucky. When I entered the work force in the late sixties, jobs were hard to find and easy to lose. Most of the work available to a young pup like me was dirty, low paying and insecure. I was laid off dozens of times from dozens of jobs. This was always due to lack of work. Senior workers, often less productive than me, were usually retained.

Why was this lucky? Because I learned very early on that nobody owes me a job much less cares about my personal financial welfare. I could be hired as long as I filled an immediate need but I would be let go the very second I did not. No altruistic government agency ever had my best interests at heart. My success and/or wealth depended on my own actions. A simple concept really, but I had it driven home with a sledgehammer.

Here’s key part. I decided not to get bitter about it. I could have, but instead I embraced pragmatism. That’s what we all must do soon. (I dare say that learn to be pragmatic pretty much constitutes the essence of Garth Turner’s message).

I never lived one day expecting my job was in any way ‘protected’. I knew the pink slip could arrive any day of any week. I avoided debt like the plague. I always saved for what I wanted before I purchased. I always had six months to a year’s worth of savings to shield me from uncertainly. I saved up money for five years to get myself through two years of technical school. It was tight, but I graduated debt free and moved to a series of increasingly better jobs and a more rewarding career. But I was always, always, always ready for that random notice: “Friday will be your last day”.

It’s true I did own a home for 25 years and had a mortgage for 9 of those years. And it’s also true that occurred during an anomalous period of history where real estate values rose at an almost unprecedented rate. But I took none of that for granted. I paid my mortgage as fast as possible and thanked my lucky stars.

I am now renting, liquid and invested as per the suggestions of people like Garth. Not ‘because of Garth’ mind you (I had never heard of him when I gave up on real estate). But he has been invaluable to me for explaining the genesis of that peculiar smell in that air that says its time to get pragmatic again.

#153 Devore on 09.19.10 at 5:27 pm

#74 BrianT

#59Bullion-on a macro level, the economies of countries are similar to the economies of companies. Some companies are profitable, others are money losers. The same applies for countries

But who really wants to be a “profitable” country? What IS a profitable country? We’re now seeing the Swiss central bank, facing a currency that is stubbornly appreciating, powerless to trash it, is that a profitable country, or a money losing country?

Why do they want to make their currency cheaper? Would a stronger currency mean the country is more profitable? Not in this bizarro world, where we have, quite literally, a currency race to the bottom, as the western central banks are all in turn weakening their currencies, round-robin style.

What is in the interest of central banks and governments, and what is in the best interests of the people, is not often the same.

Is a strong country one with a weak currency, that is able to attract manufacturing and export industry, or is a strong country one that is able to attract capital and whose citizens can purchase imported goods cheaply?

Too great an imbalance either way is not good, but today, as each country is trying to protect whatever is left of their decimated industry, and to maintain foreign markets with increasingly cheaper currency, we cannot all be exporting to each other, that’s like having a domestic market based on people reselling things to each other at increasingly higher prices.

We can’t all be at the bottom, and we can’t all be at the top.

#154 MikeT on 09.19.10 at 8:55 pm

Hats off to you, Mister Obvious!
My deepest respect to you, and thanks for your post. Such a down-to-earth approach!
Working in financial industry (if you can call it an industry), and having a fast-growing career, I have the same approach that no one ever owes me anything, that I could lose my job anytime, that if I want to progress – it’s up to me to work on it, and that I must invest in my own education if I want to get more dough for what I do. I think these are the main ingredients of a successful life and will stick by them, because thanks to people like you I see that this is the right thing to do.
Once again, hats off and a deep bow to you! Enjoy your very well-deserved retirement and thanks for being my hero!

#155 walter safety on 09.19.10 at 11:13 pm

You all have plans for the 62 year old to sell his house but he likes his life.There are so many things that need doing why not have him go to work doing them. Painting,cleaning, dog walking,delivery,organizing,house sitting,spell checking this site,customer service battles etc.He must of learned something while working.I am a CFP and call this the $160,000 difference ,over 10 years it will keep him in his house and he saves the $50,000 it costs to move! Retirement is overrated, common labour is satisfying and he is not speculating on anything .His problem is not his house .The problem is he can’t see all the work that needs to be done.

The problem is somebody gave you a CFP. — Garth

#156 Seen this in the US and it's come to Canada on 09.20.10 at 1:17 am

For the 62 year old who owns a home worth 1.2 million sell it now!