Be a man. Buy a house.

Days ago somebody bought a broken-down bung in a so-so part of Vancouver for a pile of money.

Said the listing: “Build your dream home. Great value at $939,900 for a 33.5 x 112.01 building lot with a small two bedroom bungalow, in a quiet location near Queen Elizabeth Park, Oakridge Centre and 41st & Cambie Canada Line station. This is the best buy for a level westside building lot on a quiet street. Don’t delay, call today!”

But it didn’t sell for $939,900 – instead, the deal was $981,000. For a lot.

At the same time, as you know, $800,000 luxury condos in the former Olympic Village go unloved and unsold. Up Vancouver Island, where I am now, prestigious recreational properties listed months ago for $400,000 are  on sale for $186,000. In other words, this is a market traveling in two directions at the same time.

A similar story can be seen elsewhere, whether it’s Calgary or Toronto. Average prices have been moving up as fast as sales volumes have been falling. And meanwhile (as mentioned here yesterday), five-year mortgage money is getting cheaper in a giant vote of non-confidence in the economy.

Against this background of lust and loathing, the stock market has been shooting higher at the same time as the bond market levitates. So, some investors think it’s wise to flock into pay-nothing bonds because that’s better than getting creamed in equity traffic. Others are fleeing fixed income to plunge headlong into stocks convinced that’s the only place to chase yield. And then we have the growing legion of people who see gold – the currency of fear – soaring and can’t wait to pile on because ‘everyone else is.’

Thus, an incredibly interesting time. A real estate bubble, for sure. A bond bubble, likely. A stock bubble, building. A bullion bubble, doubtlessly. And whipsawing human emotions.

Which brings me to Jess, who says he missed coming to hear me talk in his city lately, and has this little problem:

“I would have loved to bring my house lusting fiance and her parents whom lately have taken it upon themselves to become my financial advisors.  In the last year I’ve been told  “You’ll never go wrong buying a real estate”. “Keep paying someone else’s mortgage and see where that gets you”. “I would have killed for these interest rates!” Or my personal favorite “That’s just a part of life, be a man, buy a house”.

“It seems no matter what clear cut warning signs or debt to income numbers I throw at these people, I’m continually laughed out of the conversation.  My fiancé’s siblings have recently bought, the majority of her friends have bought as well.  The lust factor has taken over and good god man, the heat on me is immeasurable.

“Last November, with a whole whopping 5% down saved in my do nothing savings account, I put an offer on a home. My offer was countered by $5,000 and pen in hand, ready to sign on the line, I put the pen down, stood up and walked out of the agent’s office.  At the time I was completely oblivious to the current troubled state of the Canadian real estate market.

“I’m trying to do the right thing while waiting for the impending doom that I believe is sure to come.  Not a day has passed since last November that I don’t hear the grumbles from future wifey about wanting a home.  Help me!”

I’m hearing these days from a lot more people like Jess – one side of the brain screaming danger, the other side seduced by emotion. After all, it takes a real man to stand up to the stampeding, galloping, terrifying and humiliating unity of the herd. As I said above, it ain’t just real estate any longer.

If anything, danger is intensifying around us. Time and again I have told you why the Canadian housing market will not end in a happy place. When we’re there, you’ll know. You will look back and wonder how anyone could have possibly doubted the outcome.

But that’s not the extent of the mess. The next few months have great potential to being  unwelcome shocks. The US Congressional elections and the End of Obama. The brooding currency war between China and the rest. The capitulation of the American housing market. A government and consumer debt crisis. Extreme measures by Washington. And the bursting of any of the bubbles mentioned above, spilling out a toxic Hungarian red tide of investor anxiety.

In fact, as optimistic a guy as I am about the future, this is a worry. Those little deflation-sensing hairs on the back of my irresistibly masculine and well-muscled neck are vibrating. While I have said time and again that being in cash is no strategy, it’s now a haven, at least for a reasonable chunk of anyone’s wealth.

Jess, hang in there. If she loves you she’ll understand you are being a responsible dude. She’s also respect you when you tell her parents to get stuffed. Please send pictures of the moment.

As for everyone else, allow me to suggest this short-term advice: This is not the time to buy a house. It is not the day to plunge into bonds. It’s not the month to load up on equities. It is not the year to lock into a fixed-rate investment. It’s not the moment to buy gold or silver.

Instead, be a man. Sell.

164 comments ↓

#1 DavidL on 10.13.10 at 7:43 pm

So Garth, if I’ve got some spare cash – where do you suggest I invest it? (Are preferred shares the only way to go?) Maybe you can tell us more in Victoria tonight …

#2 I on 10.13.10 at 7:49 pm

Garth:
How about preferred shares?:)

They have been in intense demand, forcing prices up and yields down (you should have taken my advice six months ago). I expect yields will be better six months hence. — Garth

#3 antonio on 10.13.10 at 8:02 pm

This confirms what I have felt for some time. As long as there are women of child bearing age wanting to nest, this market will never go down.

Sure you want to go there? — Garth

#4 alf on 10.13.10 at 8:03 pm

Since you mention holding a larger cash position right now, here is something I found on Mark Cuban’s blog a while back.

The Best Investment Advice You Will Ever Get
Aug 25th 2010 9:24AM

I’m going to simplify what I consider to be the best investment advice I have ever been given and share it with you. Here you go:

1. If you have any credit card or other type of consumer debt on which you pay 5pct or more interest, pay it off. Compound interest is your enemy. The chances of you earning more on your money than you are paying in consumer interest rates are slim. Pay it off.

2. Cash is King. Now that Madoff is in jail, no investment can offer returns with zero risk. If you don’t fully understand the risks of an investment you are contemplating, it’s ok to do nothing. In times of massive uncertainty like we are facing today, doing nothing is a valid and IMHO preferable investment strategy. Just put your money in the bank.

3. Cash Creates Transactional Returns. What does this mean ? It means that you should analyze what you spend money on over the course of a year. You will get a better return on your money by being a smart shopper and taking advantage of cash, quantity or other types of discounts than you will in the stock market. Saving 15pct on the $1k dollars worth of items you know you will absolutely spend money on is a better return on your money than making 15pct in a year on a $1k investment because you don’t pay taxes on it.

If you have under 100k dollars in liquid assets, your net worth will be higher in one year if you follow this advice than if you follow ANY other investment advice any broker or banker will give you this year.

#5 Nostradamus Le Mad Vlad on 10.13.10 at 8:03 pm


“A real estate bubble, for sure. A bond bubble, likely. A stock bubble, building. A bullion bubble, doubtlessly. If anything, danger is intensifying around us. When we’re there, you’ll know. But that’s not the extent of the mess. Hep me!”

Ahh yes, where is Dan? POP ……….. What was that?

All bubbles pop, and it is looking more and more that these bubbles are going to be popping with a greater frequency of speed, and nothing can be done to prevent it.

Life continually unfolds and expands.
*
#101 Fred — That’s why China is using a lot of their US debt holdings to buy tangible, hard assets. They know what’s coming, and are preparing themselves accordingly.

Jessie Ventura says political parties should be abolished. I agree. With the link last night about Pelosi not giving a fat rat’s ass about anything except herself, this from wrh.com:

“The administration doesn’t give a flying Frisbee about the homeless; if one is homeless, it is far more difficult to register to vote than if one has a verifiable permanent address, so they figure their vote won’t make a real difference to the upcoming midterms.”

Not Monty Python’s Confuse-A-Cat, but not far off.

Time for gas / diesel prices to move up?

Obama — following in the footsteps of Jimmy Carter and G.H.W. Bush, a one-term president? And this.

Whitewash in election? Barring vote fraud.

Watching a disintegrating empire. “One has to wonder just when Americans are going to realize what has been done to them, and what form the ensuing fury will take from that moment of clarity.” wrh.com. Sorta goes with the elections.

Banks + Monsanto — Food freedoms disappearing?

The War on Terror has shifted to Pakistan and, curiously enough, they already have nukes and are getting more. Iran and Iraq, of course, don’t. BTW, ObL has been dead for almost a decade now.

5:39 clip “Instead of money being a medium of exchange, interest rates elevate money to being an end in itself.”

New Silk Road. China and Russia make business deals, the US wages war and is almost bankrupt.

Use HAARP to create a dictatorship. And this.

#6 Republic_of_Western_Canada on 10.13.10 at 8:08 pm

A real man does not buy a house. He designs and builds one. Himself.

Hey, I think we’ve stumbled onto something here. Legislation should be introduced which restricts detached house ownership only to those who have designed, built, plumbed and wired their own.

Of course all designs and construction would still be subject to engineer stamp and/or building code requirements, as well as normal inspection.

#7 Kurt on 10.13.10 at 8:25 pm

Thanks for the clarification on 55+ constituting 20% of bankruptcies. That thought makes me sad. I think now I understand why you slag boomers (just as you slag gen x/y) – you’re trying to get their attention before it’s too late for them. I hope it works, because there’s little to no chance of putting your financial life back together after 55.

#8 Mean Gene on 10.13.10 at 8:29 pm

Personally, if I had that kind of money and didn’t need to work, I would be living in Hawaii or some other warm heaven on earth.

Garth wrote:

“But it didn’t sell for $939,900 – instead, the deal was $981,000. For a lot.”

#9 Tonguestump on 10.13.10 at 8:30 pm

“A man is comfortable being alone” Oh and he doesn’t point out that he did the dishes. Can you still buy shares in “pissing off the heavy metal boys futures contracts”?

#10 Jsan33 on 10.13.10 at 8:30 pm

I also am nervous about where everything seems to be going. The only thing I am sure about is that house prices are grossly overpriced and have only one way to go and that will be down (for those that still don’t get it). As far as Gold, Stocks and pretty much every other investment, I am in no desire to guess tops or bubbles and prefer to stay the heck out of the way.

For those that are looking for a measly but at least better than nothing return compared to what the large regional banks are offering, shop around. There are a few CDIC insured banks offering 2% on their high interest savings accounts (Canadian Direct Financial, Ally, etc.). This beats almost every GIC being currently offered and at least you do not have to lock in.

#11 T.O. Bubble Boy on 10.13.10 at 8:31 pm

On the bright side, if you keep some cash on the sidelines, that orange guy’s “high interest” savings account is paying more (1.5%) thanks to Carney’s rate hikes.

The forming equities bubble is an obvious one — how can the market go up seemingly every day (on average to below average volumes)???

The S&P 500 has had very few bad days since late August, and the TSX has been on an insane win streak as well.

This is all coming in an economic climate where:

1) part-time jobs are replacing full-time ones (and even with that, the number of unemployed still continues to rise).

2) all levels of government are defaulting on debt (IOU’s in California anyone?)

3) the US housing foreclosure mess is going back to square one, and may take several more years to sort out

4) Canada’s deficits through 2015 still have us considered to be in better financial shape than most of the G20

5) Commodities — many of which are not produced in Canada or the U.S. — are at all time highs… the price of coffee is making Starbucks raise prices, and is shrinking grocery store sizes (e.g. 454g package is now 350g for the same price). Ya, you need fertilizer to grow most ot them, but I don’t think that all areas of the North American market should be up on this news?

#12 ken on 10.13.10 at 8:33 pm

Im staying in cash,untill ?

#13 MKUltra on 10.13.10 at 8:34 pm

Just say ‘deflation’ happens….commodity prices would likely take a hit….with the CDN$ falling with it….this means we only have two options at the moment!

Buy a home in the USA ASAP! before our dollar is once again trading as a Canadian peso to the Greenback – and all those affordable southern homes are once again a faded memory – OR – buy a home in CANADA ASAP! because once of our dollar is a Canadian peso again, those Yanks will be up here again and buying up our neighbourhoods by the bakers dozen! It will be crazy – wealthy Chinamen vs. horny Yanks in a bidding war for a Canadian home!

So tell all your friends to starting bidding on anything with a mailbox ASAP! Because deflation is coming!!

#14 Jsan33 on 10.13.10 at 8:36 pm

#4 Alf,

That’s true isn’t it. Just shopping around and being more price conscious is a great way to save. I’m amazed at some of the deals you can currently find nowadays. There really is no reason to pay full price for anything. You just need to time your purchases when items are on sale.

#15 junius on 10.13.10 at 8:37 pm

Love it.

I am a bit of a sports junkie. I admit it. I was listening to sports talk radio today in Vancouver and marvelled at the number of ads for HELOCs. It must have been about 50% of the ads.

What killed me was the tag line in one of the ads – “We will give you credit even if your mother won’t give you a loan.”

Real men play sporst and take on debt. What a society!

#16 Onemorething on 10.13.10 at 8:39 pm

#3 Antonio – Hey Captain Short Term – And a divorce pending when it all comes down – get real!

My advise for these troubled souls for over 18 months now is to rent before you own in a neighborhood which you wish to live in.

Try before you buy! This gets the enabling siblings & friends off your back. Misery loves company!

You can also state with evidence that renting that McMansion is half the price of buying right now ie. P+I+T + downpayment + taxes + upkeep.

“I just want us to be happy where we live and this is a 1+1 = 3 proposition”. “We will buy at the end of the rental period for sure”.

Buy’s you two years, pain and right in the window where you can say either “I told you so!” OR “Wow we really dodged a bullit”.

#17 Ayn Rand on 10.13.10 at 8:51 pm

OMG things are not what they seem and appearances can be deceiving.

We are having a major battle with one of our neighbours – we are all new as a developer built 4 homes on 12 acres 6 years ago. We decided to do a title search on the property (we may be in a future legal battle so wanted to arm ourselves with all the info first).

These folks are putting on such airs – the reality is they have a renwed $575K mortgage at prime plus 7% on a home that would be appraised at $550K. Mortgage is with one of the big banks, so they must have bad credit history because I have not heard of prime plus 7%. They had prime plus 7 when they first moved in years ago. Payments would be $4k on a 35 year mortgage.

This guy is a plumber, wife works for mimimum wage at the local retail shop, kids are involved in zero activities (and I can imagine zero education fund) and the guy buys toys for himself constantly – used boat, skidoo, 4 wheeler, etc.

We just put in a great of sweat equity on our place (DIY interlock driveway, 250 feet long and lots of retaining wall) and he always seems to do the same (asphalt, which costs about $15K) as us.

With that type of mortgage, I can’t imagine how he can pay for the paving job. This is really scary – I think he was in previous financial trouble, hence the poor mortgage rate.

#18 dd on 10.13.10 at 8:59 pm

… While I have said time and again that being in cash is no strategy, it’s now a haven, at least for a reasonable chunk of anyone’s wealth….

Sure it is with the CBR index up over 10% and a race for the currency bottom. Food price increase shock coming very soon.

#19 dd on 10.13.10 at 9:02 pm

Gold and silver in a bubble? The general public doesn’t own it and doesn’t care … yet.

#20 robert in london on 10.13.10 at 9:04 pm

That same sign on a post in the US reads “Become a homeowner today. Stop paying rent (or a mortgage) tomorrow.” Oh and succumbing to the pressure of the herd or loved ones to buy a house because the monthly nut has never been lower, without regard for price, strikes me as the apogee of dumbassitude. Very sensible advice Mr. Cuban (#4 alf). Too bad so few will take it.

#21 Timing is Everything on 10.13.10 at 9:06 pm

#4 alf – Good post.

Copy that…K.I.S.S. for at least the next year, maybe two.
And keep your day job (It’s all pensionable time, for me)
————————————————————
Instead, be a man. Sell. – Garth

No way I’m selling….I need my hunting rifle.
Oh the home-base?, We are selling our acreage, in 2025-2030-ish.
No pension….yet. Gotta wait(work) 7 more years to start collecting, when I’m 55.

Anywho, I’m almost outta sno-cones, and this circus is gonna last a while yet. Everyone enjoying the show?… Or just amusing yourselves to death?

Oh, Jess, why buy it when you can rent it!?
Now is not the time….Control yourself.

#22 EJ on 10.13.10 at 9:08 pm

A million bucks for a 3700 sqft cemetery plot? This is the kind of article you just need to save. 5 years from now, after people have sobered up and prices sunk back to the norm, THIS is the kind of article that will be used as an example for where we went wrong. A simple subtitle of “What the hell were we thinking?!” would suffice.

And to poor brow-beaten Jess: I feel your pain, brother. I don’t understand what it is that turns otherwise rational human beings into drooling, programmed idiots when it comes to manias. Be it tulips, Nortel, or real estate, the behaviour (and end result) is the same. The spell is only broken once the whole thing falls apart and people lose their shirts. It takes a severe ass-kicking from the boot of reality to shake that mentality.

“You’ll never go wrong buying real estate…” Yeah, ok. Go tell that whopping crock to 20 million Americans who owe more than their house is worth.

#23 Grandpa Grinch on 10.13.10 at 9:18 pm

A bubble is defined as a majority of investors chasing returns in a limited market, driving prices well beyond historic norms with no other external influences affecting price.

Gold has risen 10% over the past 30 days due to QE2, currency devaluation & a flight to safety. The majority of investors (95%+) have no investments in gold, silver or other precious metals. These two well known facts run counter to your gold bubble argument, although I wholeheartedly agree that this is NOT the time to buy as gold is overbought. Oil is still underpriced and will run over $100 in the next 3-5 mos. IMHO.

Right now, cash is king. Most people have the mistaken notion that they need to be “all in”. I only buy stocks twice a year, unless a rare opportunity comes up from time to time. Being disciplined and choosing the right sector has far more influence on your returns than most people realize.

#24 Casanova on 10.13.10 at 9:21 pm

Being in cash now seems so painful, especially with interest rates close to zero and lots of money printing going on by central bankers.
The only investment oportunity I see is to short the Canadain Dollar. Seems like a sure bet in this enviroment. But what do I know?

#25 realpaul on 10.13.10 at 9:26 pm

Hey Garth..the Manulife preferreds have till 2014 for a call of $26…paying 5.95%..currently twenty. The CFX.UN units at $15 pay 19%…you could do worse. Not investment advice of course…do your own DD.

We can argue over the gold thing until the cows come home but I’ve made 30% p/a for ten years straight….and I am not a gold believer…but I can understand why the price of all commodities will continue to go up. The direct relation between the ( non not published ) M3 and the price of everything priced in USD isn’t even arguable….just a fact.

I am not hiding a gun in the bunker on top of a pile of canned goods…I am though will to contend with visual ananysis and conclude that this is ‘a trend in motion’ with the commodity complex….it will continue until it stops…..as long as currencies are being debased..evrything priced in those currencies will continue to reprice on a constant basis as input cost remain static. Commodity markets are telling us what the government would rather not admit to…inflation is raging.

#26 ALE on 10.13.10 at 9:26 pm

Best advice yet Garth….s

#27 CREA Circle Jerk on 10.13.10 at 9:37 pm

Garth Said:

Thus, an incredibly interesting time. A real estate bubble, for sure. A bond bubble, likely. A stock bubble, building. A bullion bubble, doubtlessly. And whipsawing human emotions.

The ultimate bubble of all bubbles is the bond market. Yields have been trending down for 30 years since Paul Volcker had the up near 20%. Just look at Japanese yields, which have been close to zero for almost 20 years. The bond market is being maneuvered by the Central Banks of many Western countries who print money, give it to their ‘primary dealers’, and then use it to purchase bond. It’s the ultimate ponzi scheme.

It’s akin to me having a credit card with a $20M balance with a $50,000/annum job, where I write IOU’s on a piece of paper and hand it to my bank with a promise to repay. My bank then extends my line of credit another $1M at a time, and acquiesces to keeping my interest rate a preposterously low levels. The super-high interest rates of the early 80’s are going to look tame compared to whats coming. The $64,000 question is when?

I agree with Garth when he says we’re in unprecedented times. There’s just so much price distortion amongst all assets because the Central Banks of most Western countries are trying to maneuver the price of everything. And the rampant fraud is just crazy. Major banks like Wells Fargo, Wachovia and JPM are hiring/endorsing unqualified people to knowingly jimmy title documents so the can unlawfully foreclose. These are people lives at stake!

The worst part is that a generation of people no longer trust the system or their government, and I can actually envision civil unrest taking hold. And there are no jobs or propers for jobs. The whole thing stinks of greed and incompetence.

#28 The Original Dave on 10.13.10 at 9:42 pm

I have a bunch of old tape decks (hopefully some of you know what those are), and I’ve sold them over the years. As time passes it is more difficult to sell my tape decks. The last few years I would sell a half dozen in a year. This year, I met this one crazed man who has all kinds of tapes and he offered me $250 for one of my tape decks!! It is the only one I sold all year but I sold it much higher than the multiple tape decks I sold in years past.

If The Globe And Mail had to write about my tape deck scenario, the headline would be “Price Of Tape Decks Are On The Rise”

#29 eaglebay on 10.13.10 at 9:43 pm

Cash is not king.
Physical assets like Gold are kings (winners).
Housing is a bubble.
Bonds will be the next bubble.
The federal government is raping us by controlling interest rates and interfering with the free market economy.
The stock market will not be a bubble. All the bad news is already factored in.
The boomers aren’t the only cause of our problems. The generation y and x are just as guilty.
Here in Red Deer (younger population) everybody owns large mortgages and toys like RVs, quads, boats (in the prairies), investment properties (?) and $70,000 trucks.
Most of it on credit. I know, I sell the stuff.
We talk about Alberta’s oil and gas. Well, Alberta’s production, excluding the oil sands, is 80% gas.
Now, NG (natural gas) is being found all over the place.
New York, Pennsylvania, Quebec, Saskatchewan, BC, Ontario. New technology requires less and less people.
The effect on RE is terrible.
Right now sales are extremely low and prices are dropping at a fast pace.
This is the new reality.

#30 Wheels Coming Off on 10.13.10 at 9:44 pm

Good to see the light finally going on for you, that ‘cash’ can be a solid investment. It’s not always about making more, but sometimes about losing less…

#31 TaxHaven on 10.13.10 at 9:44 pm

I’m not IN Canada now so I can safely watch from a distance. And I’m puzzled…

Why isn’t unemployment shooting higher?
Why aren’t interest rates rising?
Why isn’t the rising Loonie killing jobs?
Why aren’t house-lusters worried about THEIR income?
Why are the Tories ahead in polls?
Why are house sellers still delusionally greedy?
Why aren’t condo sales PLUNGING?
Why are savings rates still NOT negative?

What’s up? It’s never-never land. Or la-la land. Or something…

I’ll just keep waiting…Canada’s best customers are, after all, flat on their backs and comatose.

#32 CREA Circle Jerk on 10.13.10 at 9:46 pm

And if the Federal Reserve prints enough to ensure their inflationary environment, and the BOC does a little QE themselves, I can envision housing actually not coming down to much in Canada and/or rising further. The problem is the real rate of inflation would absolutely TROUNCE nominal gains in housing. And of course, much much higher interest rates would eventually follow suit. The middle class will get decimated as wages always serverly lag inflation, and the cost of necessities soars.

I don’t believe this will happen right away, but I’m an inflation proponent in the not-too-distant future. We’ve already had a bout of deflation to a certain extend, and the Federal Reserve couldn’t make it any more clear they will print until they get inflation – at all costs. The shock and awe of QE has to keep coming in ever increasing doses to be effective. Stocks will do ok, precious metals and Ag will hedge better for inflation.

That’s how I see it. If we were headed for a deflationary spiral, it probably would have happened by now. The commodity market RIGHT NOW say it all. They already had their deflation when Oil dropper from $140 to $30 and base metals tanked. JMO.

#33 Duke on 10.13.10 at 9:54 pm

Garth it sounds like you are just as stumped as me. Good to know I’m not the only one. I am a firm believer the market is rigged and that deflation signals are going off around us. Gov’t bond funds are rising which is deflationary. If we were headed for hyperinflation gov’t bonds would surely be falling and everyone would running out of cash right now.

I think this is the last attempt to get people to think qe2 will lead to hyperinflation. Buy now or you’re done! And they are also squeezing the shorts out of the market. This will be interesting. Wouldn’t mind picking up some gold If da bugs lose their shirts.

Good times. Good yes?

#34 WiseGuy on 10.13.10 at 9:56 pm

Take a drive up to Stouffville, approximately 45 minutes on the highway to downtown Toronto and they are offering $32,000 cash back on new homes.

That right there must tell you the state of new houses at least in the GReater Toronto Area.

#35 JET on 10.13.10 at 9:58 pm

There is so much delusion and disillusionment out there…

#36 mid-Ontario on 10.13.10 at 10:03 pm

Garth
You may know a lot about real estate. Real estate remains strong in pricing here in recent months however, I expect the price “melt” to show soon.

I agree that “The next few months have great potential to being unwelcome shocks. The US Congressional elections and the End of Obama. The brooding currency war between China and the rest. The capitulation of the American housing market. A government and consumer debt crisis. Extreme measures by Washington. ”

The unease due to the above is and will continue to be reflected in the price of gold. There is no gold bubble.
I do not see any leasening of unease in the financial world any time soon.

You watch the real estate “melt”. Along side, I will watch the unease grow. Neither of us will be bored.

#37 john m on 10.13.10 at 10:05 pm

#4 alf on 10.13.10 at 8:03 pm <<<<< I agree with your post Alf..nothing is as precious as cash …gamble it and most ventures with a return are a gamble. Once its gone you are toast with little chance of starting fresh in this economy and rebuilding your nest egg.Personally i can't think of anything that is positive…except for perhaps the banks (whose mortgages are guaranteed by the taxpayer)..but they also have a whole lot of money out in high priced automobiles and toys loaned to the risk takers who jumped at the chance for easy credit(how big of a bath will they take in the future on these loans?).Jobs are disappearing and wages are stagnant or dropping and last but not least we have a leadership that is spending money like water apparently oblivious to what is really happening. This will not end well.

#38 Be A Man on 10.13.10 at 10:08 pm

Jess I’m sorry that you missed out and continue to miss out on the real estate boom. Renters are not having a good time of it at all. Landlords are cashing the cheques and building equity with it. It’s almost criminal. Something for nothing, as it were.

Don’t worry about deflation. Warren Buffett, arguably the most intelligent and accomplished investor of our era says deflation is highly unlikely irrespective of who’s hairs are standing on end. I wouldn’t recommend betting against Buffett, but as you can see from reading this blog, many people do.

Buffett says the economy is getting stronger. Sales orders are climbing. Revenue is climbing. His point of view comes from overseeing businesses that employ 60,000 in a wide variety of industries – not talking to himself on a blog.

Canadian real estate prices continue to climb despite all the bears. Over the years, real estate bears have talked much ado about nothing.

They pointed to Australia raising rates many moons ago and Canada would follow suit causing problems for real estate. That happened, and nothing happened. Short rates climbed. Real estate went up. Bond yields collapsed. Real estate went up.

We were supposedly ‘on the verge’ (as Garth put it) of a ‘correction in real estate values which will have implications for all’. Well, that was 2008 – two years ago.

At almost the same time, the bears talked about how unemployment would crush us all and the underemployment was even worse. Well, unemployment (and underemployment) have been higher than we’ve seen in decades and nothing has happened.

Soon, the bears will tie the fall of the real estate market to sightings of Wiarton Willy – they’re grasping at straws and every straw that they’ve grasped has turned to meaningless dust.

It’s a shame.

#39 dd on 10.13.10 at 10:09 pm

This just in:

The Fed just past Japan it buying it own debt. It is second only to China. This is not a good situation. Oh course this might make it to the front page of the Globe and Mail in about six months. But that is a big might.

#40 BrianT on 10.13.10 at 10:18 pm

Two signs from today’s headlines that things are getting really bad in the USA:

1. Goldman Sachs just laid off 25 congressmen
2. Angelina Jolie just adopted a kid from America

#41 nonplused on 10.13.10 at 10:30 pm

There a bullion bubble, no doubt, but it is not done. Gold will rise until the Fed funds rate goes above the inflation rate. And that would be the inflation rate sans hedonistic adjustments and what not. That’s when you call the top.

It’s hard to see how a real swinging bubble can form as the central banks still have lots to sell if they want and miners are trying to get all they can to the market right now. Plus there is a lot of dollar depreciation to factor in. $20/5% = $400 so that is probably the floor. Granted, we’re way, way higher already but the purchasing power of the dollar is probably less than 5% of what it was when the original rate was anchored in people’s minds, so who know what it should be. It’s all Fibonacci numbers from here. And if gold is the currency of fear, no is it’s time to shine. There are more reasons to be afraid than at any time I can remember, and I can remember a lot of times to be afraid.

But the rest of the advice is good. I am timid about buying more at these levels. But I am timid about selling too. Post bubble, whether the dot.com market, natural gas, oil, or probably housing too, when the market settles it’s still worth a lot more than it was before the bubble started. So if $400 is the launch price the future low is something above that. I’m going to guess $800-$1200, depending on how crazy high it runs. If one accepts that (its pure speculation so there is no expectation on my part you would, make up your own number), the current price is extended but not a full blown bubble. When it gets to $2400 (which is slightly above the inflation adjusted high), on the other hand, things are out of hand and I will be reducing my position unless there is calamity on all sides.

The other stuff is all sold already except some energy and mining ETF’s.

I guess the other thing to consider about the old gold high is that it was set in a time when the government had very little debt and North America was a manufacturing powerhouse. So there is reason to believe if the wheels come off the cart prices could go even higher this time, but I doubt it. $3000 dollar gold would be a world of $250/barrel oil prices, collapsing bond markets, government defaults, skyrocketing food prices, collapsing major banks and maybe even a major war. I’ll settle for $1650 for the high, as has been the target from Jim Sinclair for some time but now Goldman sucks has the same target now.

#42 Bigboy on 10.13.10 at 10:34 pm

Garth you are confusing me. Are you suggesting to sell everything and go to cash? As in sell whatever bonds, preferred shares, stocks etc? Your last sentence “be a man sell” would seem to suggest doing that. Please clarify.

Then it would be too easy. — Garth

#43 Bob on 10.13.10 at 10:35 pm

Jess, be a man, provide for your future family. Does that equate to buying a lifetime of debt at its highest possible price, using 19 to 1 leverage that will only become more costly when interest rates rise?

By the way #3 antonio, thanks for your post. It should elicit some entertaining responses.

#44 Karl Johann on 10.13.10 at 10:40 pm

wow, I am in total agreement with what you have been saying. Most people just don’t seem to want to see the truth.
Researched HAARP some time ago, scary stuff.
All Banks are Gangsters, Credit Unions are the way to go.
Monsanto >>> more bad news <<< we don't need.
Cash rules, Credit kills…

#45 Jim Summers on 10.13.10 at 10:44 pm

Thanks Garth, I feel a little less like a girlie man for holding so much cash. I looked at my remaining non-cash investments and they are all at or near 52 week highs. I don’t know if it would be brave or cowardly to sell all my remaining investments and go 100% cash.

#46 tkid on 10.13.10 at 10:45 pm

Garth, your response to ‘Sherri’ in the previous post was brilliant! Am I allowed to think Sherri is Sherri Cooper?

#47 dark sad person on 10.13.10 at 10:48 pm

While I have said time and again that being in cash is no strategy, it’s now a haven, at least for a reasonable chunk of anyone’s wealth.

It’s not the moment to buy gold or silver.
Instead, be a man. Sell.

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

Cash is a strategy and if you think Deflation is the way forward-it is a damn good strategy-no risk-
At least not short term–
Great-long term purchasing power potential-

Are you advocating selling the 5-10% you said earlier to “hold”?
I sure as hell wouldn’t be selling it-no matter what the price is today-or tomorrow–
Or-are we gonna spend another week seesawing around about the “bet against” the US-
If Mortgage-gate-doesn’t tell everyone how haywire and corrupt the system is and how the thin fabric of lies are-all-that currently holds it halfassed together-I would think that alone-must be at least worth a 5-10% Gold insurance policy-
Especially if you think the Bond market is about to puke-

I think Bonds have quite a ways to go yet-

#48 Debtfree on 10.13.10 at 10:48 pm

@#3 antonio I agree … but I don’t think our girls are up to it …that is to save the market. Japan is the perfect model ..they had no baby boom . They just worked what was left of them after ww2 to death or nearly till forty9 years later (peak earning/spending) 45 +49=1994 . You can ignore demographics but the won’t ignore you.

#49 Safeguards IAEA on 10.13.10 at 10:50 pm

Garth is absolutely right about the intense demand for preferred shares right now. I’ve watched CM.PR.I and CM.PR.H shoot up over the last couple of months.

Great time to reap some capital gains.

#50 Burnt Norton on 10.13.10 at 10:51 pm

#3 antonio on 10.13.10 at 8:02 pm

Yup.

So, methinks, why not be a man (read: male/female/shemale breadwinner) and buy a house in Vancouver?

I guess because da-man (read: male/female/shemale breadwinner) ain’t gonna hear the end of it from baby-momma (read: male/female/shemale homebody) when TSHTF and the day job can’t pay the bills no more.

So while da-man (read: male/female/shemale breadwinner) is out bustin’ his/her/?it’s ass workin’ two jobs, baby-momma (read: male/female/shemale homebody) is gonna get bored and end up bangin’ the rich dude/dudette who rents a sweet pad down the street.

Or maybe da-man (read: male/female/shemale breadwinner) and baby-momma (read: male/female/shemale homebody) both end up having to work two jobs, in which case the kids become antisocial pyromaniacs and burn the house down anyway.

Lose-lose situation, my friends.

BTW – the “prestigious” properties near Ukee are in the middle of nowhere (albeit God’s country) and it takes eons to drive there from anywhere (I know – we risked life & limb years ago to detour there / check it out). Why the frack would anyone buy a place there when for $186K you could stay at the Wick in Tofino four weekends per year (including gourmet meals and expensive wine) for 20+ years? Duh.

A few posts now suggesting that regional differences in Canadian RE do actually exist…hmm…could it possibly be (a little) different here? I guess the buyer of that $1M lot thinks it is. Nice place to pitch a tent. I guess he/she won’t need a sub-zero sleeping bag.

#5 NLMV – nice reference to “confuse-a-cat”. Classic.

#51 Tryingtobepatient on 10.13.10 at 10:58 pm

If there are bidding wars happening, it shows that there is still pent-up demand. Garth, you said it yourself: the law of supply and demand. There are few listings. There are still many interested buyers. The media is no longer firing off headlines about the fall of prices. Of course bidding wars will continue. And now, the “threat” of rising interest rates will not make mortgages unmanageable for the next few years–or so the public believes. It seems like the same vicious circle all over again. What you think will stop this cycle?

#52 Devil's Advocate on 10.13.10 at 11:01 pm

”Time and again I have told you why the Canadian housing market will not end in a happy place.” – Garth

I’ve read this line stated by you a number of times before and can not help myself this time asking “End? What do you know that we don’t? How is it that the housing market is going to end? Do you mean the end of this cycle in which case it will be the beginning of the next? Do you mean the end of the market coinciding with the end of humanity? What do you mean “end”?

I know this might seem like nitpicking but I just can’t help myself. Really, the market goes up and it comes down, everything has a beginning and an end. Which is the beginning and which is the end which is just indication of the next beginning?

I must go to bed now as this is the end of my day… but wait tomorrow is another day! Oh I am so confused. Maybe it will be different tomorrow. Maybe the sun will not rise, hit high noon and set. Maybe it will just appear the sun does not rise as it is behind the clouds and the day is solemn and grey. Maybe they were right and the world is indeed flat and if you venture too far you will fall off into…?

There is no rocket science here… the markets, all markets – as all things, have their cycles. Timing is a bitch if you court her at the wrong time in the cycle. ;-)

#53 Maxamillion on 10.13.10 at 11:01 pm

There is another line to add to the “Be a man. Buy a house.” This one comes from the novel The Apprenticeship of Duddy Kravitz by Mordecai Richler: “a man without land is nobody”

#54 Old_is_Gold on 10.13.10 at 11:08 pm

It’s not the moment to buy gold or silver. – Garth
__________________________________________________
Sorry Garth, you’ve been wrong on that since 2008 and you are still wrong, those are the only investments to buy – even at today’s prices, why wait till silver hits $150, and the greatest of the greater fools want to jump in? And gold goes to 2500, and the average Joe put his wife up for sale to buy gold? That will be the time to sell PM’s and buy a generator or two, lots of seed and a cave somewhere in the Rockies!

You didn’t think it was going to crack a 1000, so you probably think that it won’t crack 2000. But it will – wait and see!

#55 wes_coast on 10.13.10 at 11:10 pm

I like this post Garth. We are in the bermuda triangle of Kineasian economics. Every time the market (housing, debt, equity, commodity) have attempted to go through a natural purge to punish those that made mistakes and thereby reinforce people’s instinct for risk – the Kinesian central bankers have swooped in to save them. Post 2008 they figure more of the same monetary policy at a scale greater than anyone could fathom will force the GDP needle point north. All our gauges for running the economy have been manipulated to report statistics that read: the recession is over. As Garth has said over and over – It didn’t end. The reason no one knows where to put their money (and why so many fled to gold) – is that in the bermuda triangle – you have no idea which way is up, how fast you’re flying or where you’re going. Most people are worried about where to plug in to make a return like we used to get – that’s as silly as asking for peanuts from the stewardess while flying through a worm hole in the space time continuum. Defense is the new strategy. Until we’re out of the triangle. Defend what you have; just don’t ask me how. The strategy may change by the time I click submit. After all – the laws of a normal world no longer apply here.

#56 Devore on 10.13.10 at 11:32 pm

JPM did a report recently on the foreclosure fiasco, and one of the things they mentioned was that the average foreclosed mortgagee was in arrears for 12-14 months. That is to say they have not been paying their mortgage for over a year. That’s sure gotta free up a lot of cashflow for consumer spending.

#57 Calgary Illusion on 10.13.10 at 11:49 pm

“gold – the currency of fear”

It’s one of the best performing assets since the early 90’s. Considering the potential impact of foreclosuregate in the US (i.e. wiping out more banks and needing another TARP program), this is where the money is flowing. China just anounced they are increasing their reserves as well. If gold was in a bubble, central banks would be selling….not buying. The ongoing currency war and imminent QE2 will add further strength for bullion for some time.

#58 cj on 10.13.10 at 11:51 pm

“Be a man, sell” I agree about the home and bonds. Do you also mean equities too? I have been adding more equities since the last correction that pay a nice dividend – banks, utilities, REITs, pipelines….

#59 dmc on 10.13.10 at 11:56 pm

http://tasmanianrealestatetrouble.blogspot.com/2010/10/ambition.html

What lunatic thinks they can get 75k more on a 300k house, than they paid 7 months ago? And why didn’t they just rent?

#60 Timing is Everything on 10.13.10 at 11:57 pm

Evicted family reclaims foreclosed home with attorney.
10-13-10

I’d feel more comfy buying Mexico than the USA…Wow.
Of course, who would buy in either of these ‘banana republics’? Cheap to visit on a vacation though…Ha!

http://www.youtube.com/watch?v=3biQwMTW-1Y&feature=player_embedded#!

#61 TrueGrit on 10.13.10 at 11:58 pm

Garth, do you remember 1994 and 1996? I would not be so quick to write off Obama. In my experience, Republicans always overreach when they think they have momentum on their side. Any gains they make this year will be wiped out in 2012.

#62 Utopia on 10.14.10 at 12:00 am

“The lust factor has taken over and good god man, the heat on me is immeasurable”. —Jess.

I feel for you Jess. The pressure to buy is incredible. I respect your courage and convictions though. Reading your comments about the day you walked out of the Realtor’s office after having been countered 5000 dollars on a deal gave me added respect for you. I hope you have the fortitude to keep fighting the impulse.

I have a friend, a young Dentist. He is in a very awkward position with his new wife. All her friends are pressuring them to buy a house as they have already done so. He is resisting though and told me he reads this site amongst many others.

He has his doubts about the future and does not want to be financially strangled while he contends with student debt or become trapped into ownership of a home at a time when he still does not know where he will finally practice dentistry full-time.

His nwife actually does support him despite the pressure and yet his friends are dismayed that he has not taken the plunge as he now has two small children.

It can be overwhelming can’t it. The social pressure ro conform to the norms of ownership despite the negative implications associated with real estate at this time.

Pat yourself on the back Jess. You are a rare breed and ahead of the pack. While the average Canadian has bitten off as much of an iceburg as the Titanic did on it’s maiden voyage you have wisely chosen to reconsider and wait. Your ship will sail under better conditions at a later date.

I think a great part of the impulse to buying at your age relates more to timing related to your age and demographic than market fundamentals. Just the idea that you might have to wait 5 or more years for a good buying opportunity must seem like a life-time right now. Pressures from family and friends can be unbearable.

Hold your ground though and you will be amply rewarded.

Continue to save Jess, pay down your debts and make plans for a better future than your counterparts. While they wallow in debt 5 years hence from their poor buying decisions today and you are meanwhile vultching at the bottom of the market for a sweet opportunity in the best neighborhood in town you will get your vindication.

Just keep in mind one of the very simple rules for investing in residential real estate. The average home price should not exceed the average income in your area by more than 3.5 times. If it does then you overpaid. This is a really important point that has been hammered home a thousand times or more on this blog site.

So don’t worry. Your time is coming. It is just not yet.

Eventually (exactly when we just don’t know), prices will revert to the mean. That is an OK time to buy. Now is not that time. Do the math Jess.

Then say three Hail-Mary’s and thank your lucky stars that you are one of the very few in your circle of friends, family and associates who have actually taken the time to educate yourself about real estate fundamentals.

Then breathe a great big sigh of relief in the knowledge you are correct and tell the in-laws to “get lost and just stuff it”

(Because they are wrong)

#63 Dan in Victoria on 10.14.10 at 12:26 am

Republic_of_Western_Canada @6
Ha! Design and build their own house. I contracted a house about 20 years ago, the owners had done their own plans and they had been approved by the city.
Nice joint, all fancy renderings etc.
I looked at it and said sorry we can’t build this.
You have a 2 story house your ground floor plan has a front entry with the stairs going up on to the second floor.
Problem is you have a bedroom over the stairwell on the second floor, how are we getting that to work?
Keep in mind the city plan checker had signed off on it.
Hmmm I got the revised plans back with the stairs moved out to the front of the house floor plans now worked fine.
Can’t build this either I said WTF not??? says the owner?
Look at your front elevation plan I said the “turret” you drew on the front of the house for the stairs only goes about half way up the second story then the roof tilts in , your’re only going to have about 5 feet headroom over the stairs.
Long story short we got it done but it was a grind.

As far as framing, wiring and plumbing us “professionals” have enough trouble getting that right.

#64 Nostradamus Le Mad Vlad on 10.14.10 at 12:43 am


#10 Jsan33 — “I also am nervous about where everything seems to be going.”

— and —

#17 Ayn Rand — “OMG things are not what they seem and appearances can be deceiving.”

Above two are correct. See links surrounding Nov. 8-11 as a tipping point.

#44 Karl Johann — Good post and right on.

#50 Burnt Norton — Great sketch!

#51 Tryingtobepatient — “What you think will stop this cycle?”

Once this cycle finishes shortly then another begins. It’s almost on cue when TSHTF.

Told you! Silver is far more reasonable than gold. But — 12:21 clip Silver gone by 2020?

Link in. Maybe something, maybe not.

Monsanto at work?

VAT As all dubya’s tax cuts disappear on Dec. 31, so Obama’s new taxes will come into effect. Pure hard-line socialism.

Back to the bartering system?

Interest rates — Going up world wide?

The myth of currency wars.

China moves closer to owning America.

Mike The Engineer: This — Nov. 8 – 11 Tipping Point may have had something with what happened yesterday. Also — 11:36 clip Could also be part of the whole.

Further.

#65 Landless Serf on 10.14.10 at 12:46 am

Great post. I really needed this today. I feel that I can relate to Jess. All around me people are pressuring me to buy. After all, the in-laws see renting as “paying someone else’s mortgage”

It’s getting hard to stay the course…prices in Vancouver keep going up. It seems maybe I will be priced out forever…

What has this world come good income and several hundred thousand dollars down payment can’t buy a home? All because many people are taking $400K to $500K mortgages and renting out basements to drive up the price?

#66 CalgaryNewbie on 10.14.10 at 12:48 am

“This confirms what I have felt for some time. As long as there are women of child bearing age wanting to nest, this market will never go down.”

FYI – We moved from Toronto in 2008 to Calgary right when the market was going down..took a bit to sell our house but we did. I have since then been trying to convince the hubby that we should continue to rent. He thinks we are wasting our money. I think otherwise. I am a woman with 2 young children and who knows I might want another – but I don’t think that the fact that I have a uterus makes me so ignorant not to see what is happening in the Canadian Real Estate Market. I am offended by your comment . perhaps you should listen to the women in your life. We have brains as well!

(I told you not to go there… — Garth)

#67 Don on 10.14.10 at 12:52 am

I feel for Jess… was in a similar situation with an ex and her parents a while back. It worked our well for me in the end though… I married someone else!.. a woman who lives in reality and deals in common sense. There is an equal amount of men and women who have been lusting after expensive houses as of late.

And Jess if you love her, marry her but stick with your gut on the house front at all cost, money stress in a new marriage can be a deal breaker. And as you have probably learned by now…wisdom doesn’t necessarily come with age. Stare the HouseHerd down and CHARGE!!

#68 Crash Callaway on 10.14.10 at 12:56 am

Jess,

You are spot on.
Stand your ground.
The idiots who drank the Kool Aid are applying pressure through intimidation and guilt trip.
They need a steady supply of fresh galley slaves in order to keep their good ship lolipop scheme dreams alive.
Like drowning men they flail & clutch and bring down everyone in sight including their own family.
Anything to keep their own chowder heads out of the water.

#69 Timing is Everything on 10.14.10 at 1:10 am

#66 CalgaryNewbie said – “I am a woman with 2 young children and who knows I might want another”

Does your hubby get say if he wants another? He might not want another.

#70 Just a Tech on 10.14.10 at 1:13 am

Maybe the Mattress is the best option right now? At least you don’t have to pay account fees.

#71 Evangeline on 10.14.10 at 2:38 am

just a thought … I’ve been told that the stock market is a “leading indicator” …. if that is true, perhaps the stock market is doing well because it foresees the “End of Obama” as a good thing. A lot of business people see him as an economic dunce who is making the U.S.’s economic woes worse not better, and it’s possible they are betting the “End of Obama” will be a huge improvement.

On the other hand, the investment atmosphere now is eerily similar to what was going on just prior to the October 2008 crash: commodities running higher with lots of yakkity yak about commodities and gold being safe havens, about bonds being undesirable, about the U.S dollar being in a death spiral, and all of the above being discussed under the shadow of an impending U.S. election that promised big changes.

#72 Coho on 10.14.10 at 2:54 am

Jess, like many of the young and in love, you are probably underestimating the destructive force of meddling in-laws. Today, it’s pressure to buy a house, what will it be tomorrow?

Secondly, if you are being laughed at by your fiance’s family they probably don’t respect you, which may eventually rub off on your girl.

Third, hope that she will be more your wife, than her parents’ daughter. In other words, she should put you first as you should her.

You’re not the only one that needs to stand your ground. She needs to stand beside you…if not, then today’s love may become tomorrow’s headache.

Good luck.

#73 Cash Heavy on 10.14.10 at 2:56 am

“While I have said time and again that being in cash is no strategy, it’s now a haven, at least for a reasonable chunk of anyone’s wealth. This is not the time to buy a house. It is not the day to plunge into bonds. It’s not the month to load up on equities. It is not the year to lock into a fixed-rate investment. It’s not the moment to buy gold or silver. ” – Garth

Words of wisdom like those above are priceless. Acting on remembering the advice is the best investment one can make in today’s market.

We are cash heavy, 99% liquid in fact, awaiting your future advice with patience.

Patience, now that’s something the world seems short of these days.

#74 confused and a little crazed on 10.14.10 at 4:08 am

h garth,

from other poster responses. It suggests theybelieve u told them to sell everything. I do not belive that is true. I sold some stocks and move the money into diffrent blue chip stocks that were already down 40- 60 % in the year. Though it hard to predict the low…they care currently 7 % below when i bought them . their yield is about 4- 4.5 %.

long term stocks are good because they have value ( they create something)
i did buystocks last year and they are up and sold them during the slight contraction to buy even safer stuff with even greater marketshare.

i do believe that most of the year stocks will go up due to earning but once housing downturn part 2 in late Nov- dec 2010 then who knows …i think it will go down again as a reflection of high unemployment , less services, higher taxes .

it will be an interesting year

ps buy a lot for only $900k…that is winning the lottery…crazy

#75 Devil's Advocate on 10.14.10 at 5:22 am

#68 Crash Callaway;

We always have a jug of Kool-Aid* on the go in our refrigerator, and yes it’s stainless – the refrigerator. Kool-Aid* is best when allowed to steep over night and always remember to rinse those very last sprinkles from the packet into the jug when mixing as it is they which add that extra kick of flavour.

* Kool-aid is a trademark of Kraft Canada Ltd, Don Mills, Ontario M3C 3J5. Kool-Aid is not a significant source of saturated fat, trans fat, cholesterol, fibre, sugars, vitamin A, calcium and iron.

Man I just know there is a timely parable in there somewhere…

#76 Devil's Advocate on 10.14.10 at 5:49 am

What I have in cash has cost me nothing but opportunity – of which of late there has only been speculative gamble. Of that which I have in long term investment has too cost me nothing but opportunity and made me, thus far, equally little as that held in cash. Of that which I have tied up in a home has kept a roof over my head and held well enough it’s value as bought with prudence not as speculative gamble but security.

I should change my online name from Devil’s Advocate to “Even Steven”.

#77 HouseBuster on 10.14.10 at 6:29 am

I still don’t understand why anyone would want to live in Vancouver.

#78 bigrider on 10.14.10 at 6:46 am

#3 Antonio on the nesting instincts of women.

You’re probably right. Better to get them in their late forties and fifties when they have been damaged by divorce and subsequent dis-illusionment. They’re just interested in getting humped like porn stars and ho’s at that point.. .LOL

#79 Moneta on 10.14.10 at 6:51 am

And now, the “threat” of rising interest rates will not make mortgages unmanageable for the next few years–or so the public believes. It seems like the same vicious circle all over again. What you think will stop this cycle?
———————
When mortgages become underwater, chances are homeowners will not be able to shop around for lower rates. So even if the posted rate is low, the spread will surely rise.

Bye bye better than prime.

http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/td-overhauls-mortgage-program-as-housing-market-slows/article1752474/

#80 theletterM on 10.14.10 at 7:41 am

Jess, don’t listen to your parents or the in-laws about this important decision. Boomers only see the low rates and the inalienable “rite of passage” when it comes to real estate. I’m pretty sure the entire Boomer generation has never used the words “student” and “loan” in the same sentence.

#81 dandy on 10.14.10 at 8:02 am

I agree it’s not the time to be buying anything at the moment. The opportunity has been there to buy for the last 5 years and anyone without stocks, gold, bonds and even houses should be kicking themselves.

Probably the best thing to own right now is debt (manageable debt) because the value of the money in ones bank acc is going down. It really sucks for everyone who has been conservative but it looks like the reality of inflation thanks to world governments Q.E. (money printing then spending).

My advice (for what it’s worth) Read Read Read. Find out about what’s happening in the world of money, and not just on this blog. Spend money on investment research and only use established companies.

My regular reading for the last 7 years has been
Money week
The daily Reckoning
Fat Prophets
Economist

Plus numerous investment books
One up on Wall street
madness of crowds
black swan

Because of everything I read I’m ready for these days and the future.

If you can’t invest your own time and money in getting your finances ready no one else will do it for you no matter how much you pay them.

#82 Sean on 10.14.10 at 8:19 am

#57 Calgary Illusion on 10.13.10 at 11:49 pm
“gold – the currency of fear”

If gold was in a bubble, central banks would be selling….not buying.
——————————

Not exactly… remember the “geniuses” at the BOE were announcing bullion sales into the exact low back around $250. Central bankers may be geniuses or idiots, depends on your viewpoint… the real question is who do they work for?

#83 Got A Watch on 10.14.10 at 8:29 am

MortgageGate is the largest single risk to the global financial system near term, and it is blowing up now, not next year, or in 2012.

In the last 24 hours, we’ve had:

-all 50 States joining an investigation
-NY State banning foreclosures all together pending “review”
-almost a complete stop on all US foreclosures
-all major US Banks (and several major foreign) implicated
-JPM and others saying they are “no longer using MERS” (JPM are the majority owners, LOL)<—huge vote of non-CONfidence
-more rule breaking coming to light
-the MBS and derivatives issues all over the Blogs and reaching the MSM
-the Obamanoids in complete disarray, begging for "no moratorium" to save their Bankster friends

Enormous Mortgage Bond Scandal (Felix Salmon, Reuters) about yet another way the Banksters defrauded purchasers of MBS (a new one, not to be confused with all the other previously disclosed ways they defrauded the world).

$6 Trillion + in MBS alone from ’03-’08, plus other derivatives and derivatives of derivatives on top, total unknown, probably pushing $10 Trillion +. And owned by Banks and Pension Funds world wide, all of whom will be looking to sue somebody and everybody involved – it’s a no brainer, take a 70% loss on the MBS etc, or sue for full recovery based on fraud, which would you choose?

Not to mention the implications of MERS non-standing vs collecting on the “mortgages” – that alone could sink the usual suspect Banks to the bottom of the ocean. They can only become “unsecured” creditors at best, and have no standing to foreclose.

The Two Faces of MERS (Christopher Lewis Peterson
University of Utah – S.J. Quinney College of Law)
a law Prof dissects MERS in a scholarly fashion, it spells FRAUD and TAX AVOIDANCE SCHEME, in neon letters 300 feet high. Not to mention gross incompetence, the Mafia would probably have done better due diligence to keep the scam running. Banksters are just lazy, cheap and stupid in their vast greed and criminality, a very dangerous combination for the wider economy.

The largest systemic fraud in history, making “sub-prime” look like a sideshow. Madoff was a two-bit corner card hustler compared to the “financial institutions”.

The game is afoot. CDS are moving up on the Big Bankster suspects.

#84 Prof. ANON on 10.14.10 at 8:37 am

@ # 6 Republic of Western Canada

No need for an engineers/inspectors stamp of approval unless you sell the house. Let Darwin take his share.

#85 Hiteclowtec on 10.14.10 at 8:54 am

John Snow explains the pyramid scheme known as Quantitative Easing

Former Treasury Secretary John Snow explains the short strokes of QE last night on PBS Nightly News. He makes no bones about explaining the government’s objective in printing more money (adding to tax payer debt) in order to buy paper assets in the open market. To wit:

“…you buy government paper that’s held by financial institutions or individuals. And then they have the money. And then they go out and buy some other financial assets, stocks. And they drive up the value of those other financial assets so we get an increase in the value of financial assets which means an increase in the value of lots of peoples’ household wealth. And the idea is if household wealth goes up, then that will be a spur to spending.”

So you artificially prop up asset prices above market values in the hopes that people will not sell their assets at these elevated levels and bank the profits, but rather you hope that they will continue to hold their units in the ponzi scheme, “don’t worry be happy”, and find a way to keep spending no matter how bad the economy looks. Wow, this is the best plan of the most educated and informed financial minds in the government? Who wants in?
—————————————————————-

Zero Hedge and Karl Denninger have also been on the market is rigged theme for some time now. Take some profits and get to cash while the getting`s good.

#86 fancy_pants on 10.14.10 at 9:10 am

The secret to happiness, Jess, is move away from the land of milk and honey / cedars and rain to a more affordable location. Then you can buy the home the wifey so wants and get away from the outlaws.

Or you can just follow the example courtesy of the banksters down south…buy a house and then wrap up your mortgage into a tradable security, give it a great name and put it on the open market. Not only will you be mortgage free but you may make a few $ of it as well. Of course make it complicated enough that they can’t trace the title back to you. presto. Some other fool owns your debt and you get the house.

The only remaining challenge will be how will you ever get a good night’s rest in it?

#87 CREA Circle Jerk on 10.14.10 at 9:10 am

nonplused said:

When it gets to $2400 (which is slightly above the inflation adjusted high), on the other hand, things are out of hand and I will be reducing my position unless there is calamity on all sides.

That’s the approximate price of gold using the government’s jimmied CPI numbers since its all-time high. The real inflation adjusted price is WAY beyond this number.

Unfortunately, my wife still won;t invest any of our saving in this. I’ve been pounding the table since $950. GRRRRR. BTW silver is probably an even better play than gold. Also, I see palladium topped $600, a 9-year high. Coffee, soybeans, corn and wheat are going ga-ga. Where’s this so called deflation?

#88 Live within your means on 10.14.10 at 9:12 am

14 Jsan33 on 10.13.10 at 8:36 pm
#4 Alf,

That’s true isn’t it. Just shopping around and being more price conscious is a great way to save. I’m amazed at some of the deals you can currently find nowadays. There really is no reason to pay full price for anything. You just need to time your purchases when items are on sale.
…………………..
We too like to have cash on hand so that we can take advantage of sales. I recently bought 20 cans of coffee (tho only my husband drinks it) because it was 30% less than the current price. I buy when grocery items when things are things are on sale, but am aware that the 2F1 sales at our 2 major grocery stores always jack up the original price to make the sales price look better.

Even still, I have noticed that grocery prices on many basic food items have increased 20-30% this year. I really feel bad for low income families. Canada Post is having a food drive for non-perishables this Saturday so I shall be contributing. I hope others will as well.

#89 Ben Bernanke on 10.14.10 at 9:22 am

If I had a reliable dealer in Windsor, I’d put all my money in gold and silver. No reason to trust paper anymore.

Sure, who needs money? — Garth

#90 JB on 10.14.10 at 9:31 am

Age 36. Married with child.

Confused.

#91 Dave on 10.14.10 at 9:43 am

Hi Garth,
You wrote:
In fact, as optimistic a guy as I am about the future, this is a worry. Those little deflation-sensing hairs on the back of my irresistibly masculine and well-muscled neck are vibrating.

And a few months ago you put the chance of a depression at 2 in 5.

Would you estimate those odds any differently now?

Actually my odds then were 2 in 10. Same now. — Garth

#92 Brian1 on 10.14.10 at 10:01 am

It seems to be not about being a man as it does being a positive thinker. I have been kicked out of restaurants and cigar stores where the owners accused me of bad karma. What do they know about karma? We are trapped in one big ‘group norm’, and now we again follow America where our banks lower the interest rates eventually to zero. This could result in higher house sales and higher house prices for a while putting me back with egg on my face. Soon, though, it will go my way. You’ll see.

#93 BrianT on 10.14.10 at 10:03 am

#87CREA-when deflation is mentioned they are referring to asset and wage deflation for then general public-it sounds better than the seldom used term it is-an inflationary depression. When the accurate term is used, the public automatically visualizes wheelbarrows full of cash straight out of Weimar. What they miss is that there will be no magic funding of the general public this time around-basically the ave wheelbarrow will be empty. Products which will increase in price will have a global demand, not just an internal demand.

#94 BrianT on 10.14.10 at 10:09 am

#83Got-the most amusing part of this is that it was only a few months ago on this blog when exactly what you just typed would have been shouted down as “conspiracy theory” or “tin foil hat nonsense”. Very slowly the average person is starting to realize that there are an awful lot of cockroaches in the building and the MSM story that they are being wiped out is a fairy tale. Meanwhile the termites are working away behind the scenes.

#95 Pete on 10.14.10 at 10:17 am

How many Realtors are no this blog? From the looks of it 4-5 realtors spreading their pro-RE propaganda in the face of CRASHING sales and falling prices. With crazy Ben printing money this will have a negative effect on housing. Why? Because food and energy is going through the roof and people are maxed out. Gas prices will continue getting higher along with heating gas(just in time for winter) . This will impact house in a negative way as people who need to sell will now need to sell faster thus lower their prices and those who simply can no longer afford to own are forced to sell. builders are lowering their prices can you can just go out and see for yourself. Reqaltors , builders and mortgage brokers are hurting really bad. The longer people wait to buy the faster and harder RE will fall. Canadian RE is by far the biggest housing ponzi in the world thanks to Harper and CHMC. Hey realtors what if CHMC doesn’t back mortgages unless buyers have 15-20% down? How fast will the ponzi crash? Canadian housing market isn’t strong but rather a weak ponzi that can crash faster with one movement of the pen.

#96 Randman on 10.14.10 at 10:22 am

Sure, who needs money? — Garth

Gold IS money,Garth!!

Sheeeshhh

Hardly. — Garth

#97 wes_coast on 10.14.10 at 10:22 am

@ #89 Ben Bernanke said: if I had a reliable dealer in Windsor, I’d put all my money in gold and silver. No reason to trust paper anymore.

———————–
As Canadians we have to remember to sort our information into : applies to USA and applies to Canada.

The bank of Canada is not debasing our currency (as I write this we’ve hit parity with the USD) so for Canadians to flee our currency doesn’t make sense. Holding gold to some degree is a good idea but as these valuations – I’m not feeling the love. In many ways our currency reflects oil and gold prices so if your bet is that tangible assets will rise as QE2 takes hold in the US – the Canadian dollar should be a good place to be.

#98 Basil Fawlty on 10.14.10 at 10:27 am

In a world of beggar thy neighbour competing currency devaluations, in an attempt to maintain exports, cash gives me the creeps.

#99 Fuzzy on 10.14.10 at 10:38 am

For quite a while I have been saying to be patient and keep most of your cash on the sidelines. Things will eventually become clearer in the future. Now the dam US FED is doing another futile round of QE and asset classes are all going ballistic. This will not end well, I never thought it would such a test of my patience as markets continue to rally on dellusion.

Though cash is a safe haven for now, I feel much better having 10% of my wealth in buillon, just in case TSHTF big time.

#100 DaBull on 10.14.10 at 10:40 am

#29 eaglebay

New technology requires less and less people.

What??? go out to a rig site, frac site or production facility. New technology actually require more people and with even higher skill sets.

You may think that because the number of rigs is down in Canada that the oil/gas industry is in the doldrums when in reality the number of days to drill a well has gone way up. Also the number of people and specialized equipment required to drill these high tech wells has increased significantly.

As little as 5 years ago 85% of the rigs in Alberta were drilling for conventional gas and over 50% were drilling for lost cost shallow gas. Now even though only 50% of rigs are working, these rigs are drilling unconventional horizontal multi-stage frac’d wells. These type of wells take more than 3 times as may people as conventional shallow gas to complete and can cost up to 10 times more.

Right now the oil and gas drilling industry is so tight for people that wages are again heading up and heading up fast.

So a $95,000 jacked up F-350 with a quad in the box and pulling a $80,000 wake board boat will once again be the norm in Alberta.

All I can say is “Yahooo….” Alberta is in the drivers seat once again.

and to you eaglebay… why not get out and get on the gravy train instead of complaining about it. Just think you can buy yourself a jacked up $95,000 pickup and join the crowd. Yeeeehaaa… the good times have returned.

#101 JustMe on 10.14.10 at 10:41 am

Hey Garth what is your prognosis for commercial real estate?

#102 Chaos on 10.14.10 at 10:51 am

Jess

Be a Man

Kick the whole crew to the curb and…

Get a dog and a pick-up truck!

You ll be way happier in the end.

#103 dark sad person on 10.14.10 at 11:01 am

#95 wes_coast on 10.14.10 at 10:22 am

The bank of Canada is not debasing our currency (as I write this we’ve hit parity with the USD) so for Canadians to flee our currency doesn’t make sense.

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

“If” QE 2-does go ahead–
(which I’m skeptical about actually happening)
Watch our 3 little US/GS Puppets H-F-C-say it’s the greatest plan ever hatched–
Those who can’t see Deflation-do not know what it is-
Obviously if there was Inflation-there would be no need to QE-
Credit would be flowing and we would have “real inflation”
Until Credit starts flowing again-Deflation rules-
Prices can remain and continue higher-but not forever-because the market dynamics of affordability-will catch up-sooner or later-
Speculation and Sentiment will drive prices-but at some point-those who bought at the highs-must have someone to sell to and if they can’t find a buyer-they will very fast-become underwater bag holders-
Prices always lag in Deflation and when they hit the buyer exhaustion mark and they “must” at some point-
look out below-

#104 PTDBD on 10.14.10 at 11:11 am

“There are limits to the divergence there can be between Canada and the United States,” Carney said.

Apply the usual formula:
Q.E. for U.SA. = Q.E. for Canada * 10

#105 Another Albertan on 10.14.10 at 11:11 am

#133/Taxpayer:

I believe you are misreading the graph and are coming to incomplete conclusions. Sorry.

The reason the “boomer bulge” is contracting is not principally due to death. That may only be a very small part of the equation. (You better hope so, otherwise the claims of better health and greater lifespans over the last century are complete false!) The fact is that the overall population is growing. In 85, the population was 25.854M. In 95, it was 29.303M. In 2005, it was 32.356M. That is essentially a 25% increase over 20 years. The population would have to grow uniformly across all age categories in order for the numbers to stay the same.

The median age in 1985 was 31. 20 years later, it was 38.5. The proportion older than 65 is increasing and is now over 13%. This is from the same document and only serves to understate Moneta’s previous comments about the overall aging of the population and the number of taxpayers who will be working to support “the system”.

In those 20 years, a mini-boom of boomer’s kids occurred. The overall national population increased because of that and immigration. Ergo, the proportion of the population born between 1955 and 1965 drops. It has to. It’s simple arithmetic. The death rate of that cohort is clearly not greater than the population growth rate.

Everyone else’s mileage may vary.

#106 Taking Stock on 10.14.10 at 11:15 am

Where are you speaking in Kelowna tonight?

Rotary Centre for the Arts. — Garth

#107 AM on 10.14.10 at 11:17 am

#77 HouseBuster on 10.14.10 at 6:29 am

“I still don’t understand why anyone would want to live in Vancouver.”

Hey…all you realestate pumping nit-wits in vancouver, let this be known that not everyone wants to live in vancouver, the lower mainland or on vancouver island.

GET IT! Now quit using this to support your claim as to why vancouver real estate will continue to go up.

#108 Beer Coffee on 10.14.10 at 11:17 am

Im a Canadian living outside the country earning CHF so the perspective I have is not entirely the same as someone earning CAD.

From my point of view, although the price of gold is relatively high compared to a while ago, it has not changed its fundamental charachter in that all major currencies are (still) depreciating against it which can be clearly seen here:

http://www.galmarley.com/Chart_pages/currency_charts.htm

I dont buy paper gold – I get the real thing in a metals custodial account. My last purchase was a week ago. Yes – the cost was relatively high – and there may be some short term volatility in the price, but I sleep very well at night. Im holding it for the long haul – and the nice thing about it is my wife is totally in agreement.

I see investment in physical gold as a wealth preservation tool to hedge against the ongoing currency debasement that is prevalent by all monetary powers/central banks today.

Sell real estate and buy gold!

#109 Agio on 10.14.10 at 11:33 am

As for everyone else, allow me to suggest this short-term advice: This is not the time to buy a house. It is not the day to plunge into bonds. It’s not the month to load up on equities. It is not the year to lock into a fixed-rate investment. It’s not the moment to buy gold or silver.

——————————————————————–
While I’ve always admired your irresistibly masculine well muscled neck from afar in a purely mano-a-mano kinda way now I’m starting to think you may have a future writing books and passing along practical financial advice.

#110 VICTORIA TEA PARTY on 10.14.10 at 11:51 am

STARS ALIGNED FOR QE2; MORE TEARS

Well, Garth, another parade of bad-news numbers out of the US. It’s not getting better at all, is it, as a lot of us posters here been grinding on about for such a long time, now.

This unwind is a simply huge economic event that fascinates and terrifies all at once. This is the lead of a story from Yahoo this date:

WASHINGTON (Reuters) – New U.S. claims for jobless benefits rose last week, hardening the view the central bank will pump more money into the economy, and keeping pressure on Democrats poised to lose congressional seats in November 2 polls.

At the same time, record-high imports from China helped push the U.S. trade deficit wider in August, while rising food and energy prices pushed inflation at the wholesale level up twice as fast as expected last month.

There was more news:

Housing foreclosures hit a monthly total of 100-thousand for the first time last month. Our Loonie is basically at par with the Greenback, US bond yields very low, oil in the low 80s and gold pushing toward $1,400 US an ounce. That, along with your “real estate melt” prediction means that Canada (and the US as far as I can figure) is still in recession as you point out regularly.

QE2 ON THE WAY; HELP WE DON’T WANT!

The rescuers of those Chilean miners are rescuers in every sense of the word.

But the economic so-called rescuers from the US Fed/Gov’t in DC, Helicopter Ben and Tiny Tim, are pretenders, frauds and economic interlopers who will do us no good at all, and again give the world the shaft.

Like the first round of QE (Quantitative Easing or money printing), a second round, QE2, will ALSO be a screw up because those boffins still don’t understand that a country can’t borrow its way back to prosperity.

In their defence other countries, bracing for more US dollar anxiety, may be forced to go the QE route as well!

And that would result in exactly WHAT? Deflation or inflation or hyperinflation? That is the argument, isn’t it, that just keeps on arguing until one of them shows up. But when?

So, the stars have aligned themselves for another massive injection of printed US currency, and the announcement could come at the November 3rd FOMC meeting.

And if the markets have also digested this guaranteed-to-end-in-tears news, pushing indexes and averages way up from where they should logically be, what happens on November 4th?

Does the market start to IMPLODE (as opined by the Daily Reckoning blog) since that QE2 news will have been fully discounted by then?

Or will the gravity-defying market merriment keep on going until Hell freezes over? That is the question, isn’t it? We all await.

EXCELLENT VICTORIA PRESENTATION

Last night I brought a couple of family members to your talk in Victoria. Your predictions of continued market volatility and various recommendations were akin to a long cold dip in Juan de Fuca Strait at Christmas time!

Our wheels are still spinning over your photo of that home in Pennsylvania, that SOLD for $100.00, which the audience thought would sell today for 700-Gs in Oak Bay!

Wake up call or what?! I know its “location X 3” but that pic is an indicator of “things to come”; here!

Those family members BTW are renting, sitting on the sidelines waiting to buy. We discuss your blog a lot and study the market closely. Prices here are still way out of kilter as far as we’re concerned.

Meanwhile their “homeowner” friends labour forever under huge life-time mortgages with monster monthly payments.

#111 Marcus Aurelius on 10.14.10 at 11:56 am

Why would anyone want to live in the Greatest Place On Earth(tm)?

Well, depends if you have a time machine.

I grew up the Lower Mainland in the 1970s and 1980s (before Expo ’86) and it was a fine place then. Vancouver had plenty of useful shopping malls, little in the way of traffic gridlock, and the ever-poplular wet coast weather.

Then Expo ’86 happened and the city fathers got their wish: Vancouver became a world-class city. Perhaps they should have researched what that was beforehand. Gangs and drug traffiking in a port town are all part of the deal.

I moved away in 1991 when I realised that I would never be able to buy a house there. Moved to Saskabush for a couple of years. Yeah, that’s when I appreciated being able to mow my lawn in December without using spent fuel rods to melt the lawn first.

And only 3 years earlier I said that I could not think of a reason for ever leaving. Well, I did find a reason.

At least I still have the memories.

#112 Reasonfirst on 10.14.10 at 11:59 am

#100 DaBull

It isn’t the technology itself requiring more people, its the more difficult drilling requiring more technology. Think a little harder.

#113 T.O. Bubble Boy on 10.14.10 at 12:02 pm

Wow — the website (nobankqualify.ca) is a re-hash of every RE slogan:

http://www.nobankqualify.ca/custom/index.cfm?id=194562

Will I Need A Big Down Payment?
You don’t need a large pile of money for a down payment either. If you’ve been held back by the idea that you have to save up $10,000 to $20,000 or more to put down to buy a good home, forget it.

Being A homeowner Just Makes You Feel Good
In addition to the smart financial reasons for buying your own home instead of renting, you’ll feel better about yourself and your life. You’ll provide a safer place for yourself, your spouse, and your family. You can decorate your home just as you please. You’ll enjoy having people over to your home.”

#114 april on 10.14.10 at 12:13 pm

One blogger here suggested investing with Financial or Ally because the pay 2% on a savings acct. These I take it are online banks but not knowing anything about them, where their located or who they are how can one feel safe investing with them?

#115 Got A Watch on 10.14.10 at 12:23 pm

I’d buy silver certs at RBC at the spot NY price. Cheapest way to buy bulk. A paper option that RBC won’t go out of business before you withdraw your profit. You place your bets and you take your chances.

It’s just a low way to trade blocks of spot silver (or gold, I play silver), to me. No admin cost or storage cost or annual fee or any other charge, just trading commission, like $225 CAD flat to buy or sell 10K oz of silver – beat that. With free currency conversion and choice to hold in US or CAD $. I know futures are cheaper to buy, but are much harder to play and much more risky, me, I’m not good enough. The certs trade at NYMEX spot, which is want you want anyway for the big uptrends vs the US $, you can watch the price live (1 min delay) at Kitco or via your borker or many other sites. The % gains of silver in US $ have outpaced the loss in value of the US $ vs the CAD $. Holding gold or silver in CAD $ is not as profitable at most crisis times.

Calculate the difference in the spread on coins and bars at coin shops, and what you get when you sell. Or the “allocated” vaults or whatever, where you pay a % each year +. It just lowers the trade cost, which helps the bottom line, the one I like. The only bad thing I can say about RBC certs is you can only trade them during NYMEX hours, and they sometimes rip you on the current spread for a dime or a quarter. But I have had it go the other way, by the time my sale went through the price had dropped and I got over the spot price by 20 cents, I was watching it live on a fast day. RBC is cumbersome, they have to contact the NY trading desk on the phone and get a live price, apparently they haven’t got the internet yet. There is an overnight risk there, as the spot price trades 24/5. But what can you do, nothing is perfect. Life is risky, then you die.

They may not be money, but it takes a phone call to sell, and the money can be in your RBC account in 48 hours. If you think The Royal is going to shut it’s doors and vanish, which I personally think is less likely than being hit by a meteor, then I guess it’s too risky for you. The Government will bail them out as necessary, if they don’t, we’ll all have bigger problems to worry about. Stock up on personal defense technology.

Most people already have physical in the form of jewellery. Rare diamonds are actually going up faster than gold. Get some coins if you don’t have any. I have some, but I’ve had them for years now. I have always recommended 10% -25% allocation to precious metals, even 50% if you are a worrier. Me, I play the mining stocks, so I don’t go that big on the actual metals.

I personally have had 100% of my trading accounts in silver and miners at times, and been 90% cash at others. Take a profit when you can and run, you can always find a new trade.

Right now, silver and gold are wildly over bought and due for a correction. That does not mean they can’t run higher from here, but they are getting exhausted. Always happens, even in the strongest Bull run. Just sayin’. I’d have to recommend buying on the next dip, you should have already bought some if you wanted shiny metals, what have you been procrastinating about.

I’ve told over 50 people to buy gold years ago, only 1 guy to my knowledge bought any substantial amount. But what do I know, I’m just a self taught trader. Everybody has to make their own choices.

#116 eaglebay on 10.14.10 at 12:28 pm

#100 Dabull

Do your homework.
A directional drilling rig employs a few more workers but requires less drilling rigs than in the past.
All in all less workers.
Sales of trucks including jacked up F350 is way down.
Also the price of natural gas is way down and customers for natural gas are fewer.
Sales of houses are way down and “for sale” signs are all over the place. Stelmach is in control.
I’m not complaining, only stating the facts.
I go to rig sites every week and also to oil and gas lease sites. Many pumpjacks are idle and gas production is down.
Enjoy you F350 at $1,400 a month. Have you checked the value of your house lately? Like they say, it’s only worth what a buyer will offer you.
Live the dream.

#117 American's Take on 10.14.10 at 12:36 pm

I’ve been following Garth’s blog for some time now from a distance. I’m an American, currently living in Seattle, traveling often to Canada, and I am fascinated by many of the comments I read daily on this blog. Some comments are of complete delusion and ignorance, some are struggling with a decision about what they should do (to buy or not to buy, rent or not to rent, sell or not to sell), and some are a refreshing voice of reason and truth. I don’t know why I love this site so much. Maybe I enjoy “people watching” and trying to understand if human behavior is different from culture to culture or country to country, of course while sitting here naked in my bed at 6:00 a.m. as it beats the hell out of sitting on a sidewalk cafe at this time in the morning. I must say that some of the comments I read are laughable propaganda with respect to what he/she believes about the crisis on this side of the border, and some comments are spot-on. From what I’ve read thus far after six months on this site, I have decided to post for the first time and provide some of my very own feedback.

Before I start, let me preface it with the following: Now, I’m not saying I am the authoritative expert with respect to real estate on a whole, but I am certainly a well-educated fellow who has a penache, respect, and understanding of real estate. I study and watch it closely, not only locally but globally, including much of Canada. You see, it is a passion, a hobby, and release of mine, for better or worse. By trade, I am a large-corporate global treasury manager (cash flow expert and money policy expert) who is recently unemployed from the bank for which I worked. I was one of the “good guys,” seemingly constantly fighting the internal banking attitudes and credit policies of the banking industry in the U.S., only to find that nobody really wanted to hear my take on the matter at the time.

I’m a registered Democrat, 34 years old, own my car outright, 5’8″, 160 pounds, very fit, blue eyes, brown hair, good looking, clean cut, … Wait, this isn’t that kind of website… back on subject… Oh yes, I am a home owner, have $0 debt except for my mortgage (monthly breakdown of mortgage is $3,850 for principle and interest, $704 for property taxes, and $976 for home owner’s dues for a grand total of $5,535. I need the mortgage-interest expense write off each year for IRS purposes, something not permitted in Canada), and you bet your ass I’m going to collect unemployment at 100%. Let’s just say my previous employer is not only one of the largest banks in the world, it is also one of the largest companies in the world (not going to say the name, but you could probably figure it out from there). Don’t worry about me, though, I’ll be okay with considerable liquidity to ride this baby out. I certainly live within my own means and I’m not really a fan of those who do not. I am blessed having come from a small-town in a hick-state, had very little as a youngster, put myself through college, and got the hell out of there to make something of myself. I’ve relied mostly on street smarts as opposed to book smarts, and it has served me well so far… fingers crossed.

As someone who owns a condominium in downtown Seattle, is recently unemployed as a result of the housing crisis, and is a witness to the destruction of greedy banks and sheeple qualifying for mortgages who wouldn’t even qualify for jury duty, I’ve seen my fair share of ignorance immediately around me. I’ve seen the signs of a forthcoming bubble and economic demise. I’ve also seen the results and witnessed first-hand what a bubble does to everyone surrounding it. I can now say the matter doesn’t look any better in Canada than it did here only a few short years ago, especially when I review statistical data that supports the undoubtedly forthcoming Canadian housing melt/crash (I’ve yet to decide if Canada will melt or crash… jury’s still out on that one for me). Furthermore, I must stress that I mostly agree Garth in almost all of his daily postings to the point I find myself laughing in short bursts aloud. Hell, we could even be brothers we think so much alike, although I would be the younger, better fit, and better looking one, of course. Garth could be the smarter one if he wants that title… I don’t really care.

What I find to be more telling of a Canadian housing crisis is not only statistical data, but more so the attitudes and comments I read on here every day. I’ve watched this site grow in numbers with anticipation of a pop. It is the attitude and mix of people I read here that echos that of a not-so-long ago pre-bubble-pop United States. The questions of “should I or shouldn’t I” increased in numbers as the pop neared. Banks began to brace with even lower rates as the market demand for real estate decreased. Banks became more creative with new loan products. Properties had slight price declines or sat on the market for several months before the masses would even realize it. Realtors began coming out in droves, much like cock roaches or bed bugs, to dissuade changing market attitudes toward real estate, hiding pertinent vital statistics from potential buyers. This too is what I see happening in Canada today. All leading indicators I can remember are being mirrored, unfortunately. And yes, this includes sub-prime lending and ARMs, regardless of what you’d like to call it. You can try to polish a turd, but you’ll still have a turd.

At the very top of this list is Vancouver. It really stands out of the mix. I’ve found that if one has to beg the question, “should I or shouldn’t I?,” then it probably means only one thing – When in doubt, DON’T buy and DO sell! When masses are going one direction, the sure tell way to make money or protect your existing money is to do precisely the opposite.

Vancouver is well-poised for a market correction of mass proportion. I must admit I feel badly for my Canadian friends when I hear friends from Vancouver explaining to me why they’re different and values will decline at a minimum if any at all. I hear all excuses from immigration, expansion limitations, industry (honestly, what industry are we referring to here?), the weather, and the winter Olympic games. Every, not some, but every argument they spew toward me as to why Vancouver is different, I can very easily rebut using statistical data from similar places in the U.S., including San Francisco, Seattle, Portland, etc. Now, I could speak for hours why Vancouver will decline and my predictions by how much, but that isn’t really the point. The point is to take warning of of the signs and act accordingly. Be smart and try to thwart future regret and financial hardship if you can. Now is the time to act responsibly and stop the rhetoric of being a decision-making junkie. Garth is providing aid in this matter, from what I can see, to the best of his ability. He is not a nay-sayer, he is a realist with a background and expertise that should be respected and certainly taken into consideration. I see no hidden agenda, other than to do his countrymen and countrywomen well.

In the U.S., we did not have a “Garth Turner” providing such a vocal service to the people. I wish we had. Instead, I listened to ME and my gut-check feelings, and I was right. I was able to hedge against this systemic collapse as best as I could before the crash actually ensued. Unfortunately, though, it isn’t ONLY about the real estate one owns or doesn’t own. As is evidenced by my recent unemployment, I am a statistic of the 9.6% unemployment rate we face today. Real estate is so intricately intertwined with our economic system, that it touches and affects every man, woman, and child. Whether one owns or not is often a matter of economic conditions bestowed upon that person, or it can be a deliberate decision or choice, or a combination of the two.

I do often hear on this blog of individuals facing extreme pressure from friends or family to own as opposed to renting. It appears there is truly a negative stigma associated with renting in Vancouver, which is frankly beyond me. I’ve “penciled” it out many ways and owning at those price levels for the average income simply does not add up. That negative stigma of renting did not seem to happen as frequently in the U.S. from as much as I can tell, so that may be a cultural difference? I’m not sure. In 2008, about 62% owned in the U.S., vs. 70% in Canada today. The number of home owners in the U.S. has, of course, fallen since then with foreclosures and people selling as fast as they can so they could rent more affordably for a like-property. To Garth’s previous points, owning is a privilege, not a right – shelter is a right as not everyone is meant to be a home owner. In the last decade there has been an increased sense of entitlement to ownership on a global basis, I believe much of it pushed by government, banks, and realtors.

The only advice I can offer is to be prudent and listen to yourself, not the next buyer, realtor, friend, or family member. As an individual, you ultimately may not be protected in an economic collapse or melt down with respect to your existing employment, but you can assuredly be responsible for your decision to reduce your debts as much as possible and to carry a large monthly payment in home ownership vs. a smaller, more manageable rental payment for a similar property. A smaller monthly rental payment certainly provides you additional flexibility and liquidity should one be affected by unemployment. Let’s face it, at least 1 in 10 are affected in the U.S. as of today, and that is being very conservative in my humble opinion. Of course, this should be looked upon by a case-by-case basis. For me, it made more sense to own as I gain more through the interest expense write off, a luxury not afforded to Canadians under existing Canadian tax law (I was an extreme exception), but for most it probably makes more sense to rent.

If you are not in a position to carry a large mortgage should you find yourself unemployed, you may consider renting and living with the peace-of-mind and flexibility it affords you. That makes a person rich in many respects, not being imprisioned by a large mortgage, and soon it may make you the envy of all your friends and family. Jess, you were wise to put the pen down and walk away. Continue to trust in yourself, and you will look back in a few years in awe of the demise that surrounds you, only to know you still have a fiance or wife at your side that now understands and appreciates your manliness to stand up to the pressure of the masses. You’ll also probably be able to afford to buy her that nice Balenciaga or Valextra bag she’s been eyeing, instead of facing divorce that is so often caused by financial hardships (like holding a mortgage that is underwater and possible unemployment). I say rent for yourself, your wife, your marriage, your soon-to-be popularity, your pocket book, and your peace of mind. Yes, this would be prudent and wise. And if she isn’t there because you chose to rent as opposed to buying, she didn’t deserve a man of your character. Either way, you win.

#118 thecomingdepression on 10.14.10 at 12:42 pm

Quite funny still..Gold in a bubble. Absolutely since your $850 bubble..LOL.
When the government stops issuing fake currency at an alarming rate, interest rates stay at zero and the DEBT is paid off, that’s when GOLD is in a bubble. When all these happen, you can take your BIZARRE remarks and stick them where the sun don’t shine, into a real bubble and that’s HOUSING. US and CANADA. For the next 20 years….

#119 tony w. on 10.14.10 at 12:44 pm

For those in need of a dose of high blood pressure, look no further than today’s Globe and Mail Real Estate Collection magazine and the article: “A period of Adjustment”.
My brothers and sisters who “market” new homes and condos in Toronto should be ashamed of themselves!
And Globe editors should blush at the outlandish quotes from the usual suspects…

#120 Live within your means on 10.14.10 at 12:45 pm

Thankfully, my husband and I were of the same mind when we married 23 yrs ago – get rid of all debt ASAP. Unfortunately, we weren’t investment wise and having interviewed 3 people, we went with an MF sales guy and are mostly back to square one, or less, after 10 years. Fortunately, we have NO debt, NO mtg and pension plans, albeit not to live a ‘high life’.

Hubby’s twin and family drove 13K to spend Thanksgiving with us. Tho his bro has a good paying, secure IT job, his wife hates hers. She used to earn $65K+ as a chemist/salesperson for big pharma/cosmetic cos. Then she had some major depression problems due to stress. We understand thaqt. But, we believe she took advantage of the situation. Now she’s screwed and nobody wants to hire her in her field because of her past history. She’d get some of the blog guys panting as she’s extremely pretty and sexy (from Paris), according to most male POV’s.
PILs put money in their 3 sons’ accts a few weeks ago, but told us they put much less in my DH’s twin chequing acct. as they’d spend it as fast as it was deposited. They put it in another acct. which they can’t touch until they go to France.

#121 eaglebay on 10.14.10 at 1:01 pm

This much better than cash.

Retire rich by sticking to these three important trait

The safest stocks in the world right now have three important traits.
The first trait of a safe stock is a rock-solid financial condition. The best financial condition possible is when a company has plenty of cash and little or no debt.
Think about your own financial condition. Would you rather have $1 million in cash and no debt or $1 million in debt and no cash? It’s a silly question. Everybody would love to have $1 million in cash and no debt. It’s the same with a business.
The best example is Microsoft (NASDAQ: MSFT, Stock Forum). No matter what anyone says about it, I’m 100% certain Microsoft is one of the safest stocks in the world today.
Microsoft is in the best possible financial condition. It has $36.8 billion in cash, stocks, and bonds and less than $6 billion in debt. It could completely eliminate its debt and still have more than $30 billion left over. If you paid all your debts and had $30 billion left over, you’d feel pretty secure.
Microsoft shareholders feel that way every day. No matter what happens in the world, there’s never a financial crisis at Microsoft.
Here’s a list of more safe, blue-chip stocks that are all in a strong financial condition…
Company Cash/Securities Debt
(Billions) (Billions)
Microsoft (MSFT) $36.8 $5.9
Johnson & Johnson (JNJ) $18.9 $11.6
Intel (INTC) $18.3 $2.3
Costco (COST) $5.3 $2.2
Automatic Data Processing (ADP) $1.7 $0.04
TJX Companies (TJX) $1.5 $0.79

A strong financial condition is just the beginning. The other two traits of safe stocks are just as important…
The second trait of a safe stock is that it generates more cash than it reinvests to keep the businesses going.
Again, think of yourself… Would you like to run out of money two days before you get your paycheck? Or would you like to have $5,000 more than you spend each month? That $5,000 is excess cash flow. You’d feel more secure with plenty of excess cash flow each month.
It’s the same with businesses. Businesses that generate excess cash flow every year are safer than those that don’t. Johnson & Johnson earned more than $15 billion of excess cash flow in the past 12 months. Automatic Data Processing earns about $1.5 billion in excess cash flow per year. In fact, all six stocks listed above generate large amounts of excess cash flow every year.
The third trait of a safe stock is that it’s obviously worth more than its stock price. I’m not talking about a company worth $50 a share that sells for $48. That’s too close to call. I’m talking about companies worth at least 50% more than their stock price.
Intel (NASDAQ: INTC, Stock Forum) at $18 a share is a great example. Right now, the stock market says Intel’s business is worth about eight times the excess cash flow it can generate in one year. That’s an absurdly low price. Over the past few years, we’ve seen great businesses sell for several times that: Gillette, Wrigley’s, and Anheuser-Busch were all bought out for 28-32 times one year’s excess cash flow.
Intel is too big to be bought out. But even if it were only worth half what Gillette, Wrigley’s, or Anheuser-Busch were worth… that’s 75%-100% upside from here. With a great financial condition, excess cash flow, and a low stock price, Intel is one of the safest stocks in the world today.
To recap, the safest stocks in the world…
* Have a rock-solid financial condition, usually with more cash than debt.
* Generate more cash than needed to keep the business going.
* Are worth at least 50% more than their current stock price.
Many investors think they must take big risks to make big money in stocks. It’s just the opposite. You have to eliminate the risk of loss as much as possible.
Invest only in the safest stocks, and you’ll retire rich. And if you wanted to, you could probably retire years ahead of schedule.

#122 CREA Circle Jerk on 10.14.10 at 1:24 pm

#103 dark sad person on 10.14.10 at 11:01 am

“If” QE 2-does go ahead–(which I’m skeptical about actually happening)Watch our 3 little US/GS Puppets H-F-C-say it’s the greatest plan ever hatched–
Those who can’t see Deflation-do not know what it is-
Obviously if there was Inflation-there would be no need to QE-Credit would be flowing and we would have “real inflation” Until Credit starts flowing again-Deflation rules-

DSP, the CRB RIND Index (the spot price for 22 sensitive basic commodities) at an all time high. Price deflation is NOT happening for 2 major reasons in my view: A) the increasing demand for ag, raw materials and precious metals in developing BRIC countries is more than making up for the slack demand here AND B) The Federal Reserve and other Western countries and doing, and will continue to do QE until they get inflation.

It doesn’t matter that bad assets are sucking credit out of the system at an alarming rate when QE is (bogusly) repairing balance sheets and world demand is making up the slack. To believe deflation is happening is to believe the CRB Index is going to reverse in a catastrophic fashion. I don’t believe so. High and increasing prices are here to stay for basic necessities, and probably stagnating for luxery items (or growing at a slower pace). The Fed will not stop until inflation set s in. QE2 is guaranteed – even if it’s stealth QE (like weekly POMO operations).

We’ve already had the deflation in 2008-early 2010. Now, prices of many basic materials are shooting up. The CRB Index doesn’t lie. There is no deflation going forward. I just hope inflation doesn;t get out of hand.

Oh yeah, the CPI was up 0.4% this month in America.

#123 CREA Circle Jerk on 10.14.10 at 1:33 pm

Oh yeah, the CPI was up 0.4% this month in America.

Edit: CPI was up 0.4% in August

#124 Love this Blog on 10.14.10 at 1:37 pm

#110 American’s Take,

Good post, welcome and thanks for your thoughts and experiences

#125 BrianT on 10.14.10 at 1:40 pm

Always look to a qualified financial professional to manage your money-the good ones always have an impressive office and an expensive watch http://sports.yahoo.com/nfl/news;_ylt=AjLt5ynW2E1eMxFpYlMwjuE5nYcB?slug=nfp-20101014_elway_bilked_out_of_milllions_in_ponzi_scheme

#126 ALE on 10.14.10 at 2:00 pm

#38 Be A Man

Average prices in Calgary are down %15 from the peak.

#127 Live within your means on 10.14.10 at 2:02 pm

Hubby told me last eve. that there’s a job advertized that both he and his boss would both be qualified to apply for. His boss told him about it. For hubby it could mean another $30K max. His boss about $20K max. His boss has my hubby pegged for taking over his job.

But, both are stressful jobs. Hubby is a people person – loves the interaction with all the principals, VP’s of the schools and is well respected by them. (He’s the only male that has been invited to a female teacher pot-luck party?). No, I’m not worried !!

Tho he’s said it would increase his salary and his pension, I don’t think he’d be happy in either of those jobs. He’d basically be behind a desk, dealing with quasi beaucracts, and that’s contrary to his personality.

He spent months developing, on his own time, an inventory system for all IT equipment for the school board. They are now testing it now and hopefully it should be used this year. He has now spent oodles of hours, on his own time, on another program to make the ‘service IT desk’ more efficient. For him, it’s a challenge and he loves ‘learning’

#128 Behavioral Finance on 10.14.10 at 2:03 pm

#11 T.O. Bubble Boy

“The forming equities bubble is an obvious one — how can the market go up seemingly every day (on average to below average volumes)???

The market can do whatever it wants to. Most of the shares are owned by somebody, the only thing that really trades is the float of the stock which would be determined by people making the market in that stock on everyday basis. People making the market would be market makers, high frequency traders etc. This only implies to day to day activity.

#129 junius on 10.14.10 at 2:07 pm

#110 American’s Take,

Great post. Thanks for spending the time.

#130 young & foolish on 10.14.10 at 2:16 pm

Ha! the Fed is giving the banks big money for next to nothing, and they in turn are buying up foreign debt yieling much higher interest rates, foreign real estate, and other foreign assets … thereby restoring their balance sheets while passing on the debt to taxpayers!

Why would they lend money to over-indebted individuals and to domestic businesses who are already suffering from over-capacity issues.

Deflation is still a danger, as demand is still dropping.
Hold on to your money, and remember, things are not always what they seem!

Thanks Garth, for waiving the danger flags!

#131 Laura on 10.14.10 at 2:46 pm

I hear you buddy.

We are in the same situation. Luckily my parents knew better and pointed us towards this website, (which we have been following religously for months now). However our friends and family and my new husbands parents all tell us we are throwing money away renting and we have to grow up sooner or later and take the plunge.

It is hard to watch friend after friend purchase a new house and shiny stainless steel and hardwood, but in a few years we will be the ones laughing.

We are saving up for a much larger downpayment and trying to not bring up the housing conversation with anyone.

Good luck!

#132 Prof ANON on 10.14.10 at 3:06 pm

Ummmm…Mr. T speaking on gold. Cringe humour at it’s best.

http://www.youtube.com/watch?v=pWAu7FmKbYc&feature=player_embedded#!

#133 dark sad person on 10.14.10 at 3:07 pm

#114 CREA Circle Jerk on 10.14.10 at 1:24 pm

DSP, the CRB RIND Index (the spot price for 22 sensitive basic commodities) at an all time high. Price deflation is NOT happening for 2 major reasons in my view: A) the increasing demand for ag, raw materials and precious metals in developing BRIC countries is more than making up for the slack demand here AND B) The Federal Reserve and other Western countries and doing, and will continue to do QE until they get inflation.

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

You are mistaken about the $CRB

http://barchart.com/chart.php?sym=%24CRB&style=technical&p=MO&d=M&sd=&ed=&size=M&log=0&t=CANDLE&v=0&g=1&evnt=1&late=1&o1=&o2=&o3=&x=74&y=9&sh=100&indicators=&addindicator=&submitted=1&fpage=&txtDate=#jump

************************
It doesn’t matter that bad assets are sucking credit out of the system at an alarming rate when QE is (bogusly) repairing balance sheets and world demand is making up the slack.

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

You are mistaken about that too–

The Credit destruction outweighs the printing by a massive margin-

They are not “repairing” balance sheets-
They are trying to show solvency on their balance sheets-
Their marked to market liabilities/ABCP are allowed to be held on-off balance sheets-because of “special accounting” rules
That allow them to hide in level 3 “assets”

I would show you in detail-if i had the time-

*********************
The CRB Index doesn’t lie. There is no deflation going forward. I just hope inflation doesn;t get out of hand.

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

The CRB index–is not a measure of Deflation/Inflation But-
even by using your wrong measuring stick-which you say proves Inflation
The $CRB Index-above–says you are wrong-
We are nowhere near an”all time high”
And if the skewed CPI data shows a half % increase-so what-
Most of it is all from the last stimulus goose-
Which is now wearing off-which is why they’re talking about “needing” more-
Like i said–if Inflation was perking-they wouldn’t think-they need more-
They would in fact be-sopping up all the excess liquidity they have pumped–
They can print all they want-it will not become Inflationary-unless credit destruction-somehow- miraculously reverses and credit starts flowing into the economy and people start spending again-

#134 Foggy on 10.14.10 at 3:31 pm

For all you renters that are being pressured into buying, here is my story. It’s 1988 and I’m thinking maybe I should buy a home. I look at prices and mortgage rates (double digit) and can’t believe my eyes. It would cost me around $2200 a month to own some crappy bungalow in Scarborough compared to $550 per month for my 3 bedroom duplex. And that’s not figuring in taxes and utilities. I explain all this to my friend at work to which he responds ” Well ya gotta just bite the bullet and jump in. Houses won’t get any cheaper”. I retorted that if that’s what it will cost me to own a home than that’s absurd. I will rent for the rest of my life before I lay out that kind of money each month. And I meant that.
Fast forward to 1991 and my fiance and I are looking at the market again, in the GTA area. A new subdivision home that sold for $240K, 3 years previous, is now listed for $165K. And those double digit interest rates are now flirting with high single digit. So we got the down payment together and bought. The payments were affordable and we had a home.
There is such a thing as “timing” in the real estate market for first time buyers. You must be patient.

#135 triplenet on 10.14.10 at 3:49 pm

But it didn’t sell for $939,900 – instead, the deal was $981,000. For a lot. – G.

The 2nd most important principle of real estate investing: know you land value – precisely.

#136 NeedAHouse on 10.14.10 at 3:56 pm

Well, this is an interesting story.

http://calgary.ctv.ca/servlet/an/local/CTVNews/20101004/cgy_mortgage_foreclosure_101004/20101004?hub=Calgary

sucks, wonder how frequent this is going to be in a few years

#137 Flase Facade on 10.14.10 at 3:57 pm

Let me give you an example to illustrate that Jess did the right thing by walking away from the deal. I was looking at the Millennium (Under) Water in Vancouver.

The unit was $800,000 as indicated in Garth’s story.

With a 25% down payment ($200,000) – mortgage amount was $600,000.

A 5 year fixed mortgage at 3.44%, monthly payment would be about $2,985.

Add property tax say $400 and strata fee say $ 400, we would be looking at $3,785 a month.

One would have to find a tenant to pay this amount to break even!

There was an equivalent unit for rent. The owner was asking $1,800 per month. He would have to rent it out for over 37 years to recoup the total cost (800,000/1,800/12).

Jess, you are man enough to rent! Ignore all the noise around you. Listen to Garth!

#138 Midas on 10.14.10 at 4:42 pm

For those of you with a steady income and a surplus, I suggest you follow Marc Faber’s advice and buy some precious metals every month. Don’t try to time the market. Too many variables at play.

The long term trend, however, is obvious. The dollar, euro, yen and pound are going to decline against the precious metals.

#139 AxeHead on 10.14.10 at 4:43 pm

#117 America’s Take…Thanks for the insight.

#140 VICTORIA TEA PARTY on 10.14.10 at 4:45 pm

#117 American’s Take

Thanks for your extensive piece on you and your country’s life at this point in history. And especially thanks for saying that we are not immune from the slings and arrows of American Empirical Shift which is taking place and has such profound potential outcomes. Black Swans will be arriving at any minute, I guess!

Garth has great faith that the USA can revive itself as it has in past painful bouts of economic or cultural adversity and flat-out civil war.

My question to you is what catalyst will allow your country, and empire, to regain its footing. For I fear that each successive day that passes, while this ennui continues, China gains strength on strength throughout its entire industrial and intellectual base, never mind what might be going on in her military community.

Canadians provide approximately two per cent of world GDP. For some this allows us to bestride the world and tell the Americans how they should do this and that and how amazing we are alongside of all of those low-brow Yanks and their weird ways. This is called chauvinism and, regardless of what one thinks about the American military/industrial complex and people, without you all, we’d be a pretty sorry lot up in this neck of the woods, believe it. Nevertheless some of us STILL don’t get it.

I’ve been critical of certain fiscal and monetary decisions that have been made by your so-called “betters” partly because our “betters” up here tend to copy them, hook, line and sinker! But that’s where the bitching stops, or at least that’s where it should stop.

My heart goes out to your countrymen/women/children who subsist on food stamps, government largess and hope. This is very tragic indeed and actually quite frightening.

Take care.

#141 TheBigLebowski on 10.14.10 at 4:51 pm

#2 I
They have been in intense demand, forcing prices up and yields down (you should have taken my advice six months ago). I expect yields will be better six months hence. — Garth

Yet any advice given to people with regards to the biggest bull market in history over the past decade is either sensored or deleted. The blog is almost as free as the front running and black box trading that makes up 80% of the stock market these days.

If you are suggesting that endless, repetitive, inane comments made by obsessive, anti-social, doomer shut-ins with an unhealthy fetish for semi-useless pieces of metal have been denied here, you are living proof to the contrary. — Garth

#142 Jeff Jones on 10.14.10 at 4:56 pm

>>> While I have said time and again that being in cash is no strategy, it’s now a haven, at least for a reasonable chunk of anyone’s wealth.

After you spent the last few months bashing the cash holders, now you’ve joined them!

I guess you should revise your 5-6% per annum plan, to reflect what a cash holder will get.

#143 Mister Obvious on 10.14.10 at 4:57 pm

A word to the wise. There’s a lot of STD’s (Sexually Transmitted Debts) going around these days. Practice safe investing and be careful who you marry.

#144 The Original Dave on 10.14.10 at 5:12 pm

it’s funny that all the perma bears are here congratulating Garth on his advice to sell. What they fail to realize is he’s made a truck load and those that were invested made a truck load. You guys were hiding underneath your bed and missed another run up.

It’s not that Garth has come to his senses, it’s that things are looking overbought. Regardless, I’m sure there are many that are happy to stay in cash permanently.

#145 Devil's Advocate on 10.14.10 at 5:14 pm

“Hey realtors what if CHMC doesn’t back mortgages unless buyers have 15-20% down?” #95 –Pete

Well Pete, I can’t speak for the other REALTORS on here but this REALTOR would wholeheartedly welcome such a change and hope to hell they do it. Anything I can do to spur it along?

#146 JM in London on 10.14.10 at 5:34 pm

Well things are definitely similar here in London town – that 1.5 mil property went for almost full pop plus (from what I’m told/saw) a few other high end things here coming in close to asking but anything from 400k down is slowing. Oct numbers are shaping up to be slower still. Had to miss our local Lowes home improvement grand opening but went in to check it out today on my way back to town (Glorious long weekend here by the way!!) and I must say, the temple of house porn was interesting. The Interesting part? It opened in another failed US retailer – Sam’s Club – ampossible omen of things to come?

#147 Midas on 10.14.10 at 5:37 pm

Gonzalo Lira on Mortgage Backed Securities and the Mortgage Electronic Registration System. SNAFU.

http://gonzalolira.blogspot.com/2010/10/second-leg-down-of-americas-death.html

“To repeat: If the chain of title of the note is broken, then the borrower no longer owes any money on the loan.”

“The foreclosure mills actually, deliberately and categorically faked and falsified documents, in order to expedite these foreclosures and evictions.”

“The fraud committed by the foreclosure mills casts enough doubt that now, all foreclosures come into question. Not only that, all mortgages come into question.”

“This is a major, major crisis. This makes Lehman’s bankruptcy look like a spring rain, compared to this hurricane.”

#148 Steady Eddie on 10.14.10 at 6:01 pm

Precious metals are not in a bubble. Everything priced in USD is going up. The USD is dead. The world is sick of USD fraud and getting bombed with USD that they now need to institute capital controls to protect themselves. Either a new Global FIAT currency or currency backed by a commodity ie.. gold will replace the world reserve currency. Gold won’t drop $1000/ounce for the next 10 years. For paper to be tempting I’d need to see interest rates at 10%+ like in the 80’s – which will NEVER happen until the world economy is reset. 2010-2020 = 1930-1940. History is repeating itself.. countries are creating their scapegoats ie… France + Roma.

All paper currencies die… it’s just when…

Do you want to own paper money at 0% interest or Gold at 0% interest.

Everybody still talks about gold, how many conversations do you blog dogs have about Assignats? – exactly.

GAME OVER – start again with a new human paradigm
Replay YES/NO?

#149 Teena on 10.14.10 at 6:15 pm

#136 NeedAHouse

http://calgary.ctv.ca/servlet/an/local/CTVNews/20101004/cgy_mortgage_foreclosure_101004/20101004?hub=Calgary

sucks, wonder how frequent this is going to be in a few years

I don’t feel any sympathy for their case, regardless of the pics of their kids who may soon be living in the box of the 4×4. Love how they play the “poor me” card. I suspect there will be many more of these cases in the near future. People looking to place blame elsewhere, rather than admit their situation is a result of poor choices, and all choices have consequences.

#150 Pat on 10.14.10 at 6:34 pm

#117 American’s Take wrote:

“In the U.S., we did not have a “Garth Turner” providing such a vocal service to the people. ”

I disagree. We had, for example, Patrick Killelea (patrick.net).

#151 Nostradamus Le Mad Vlad on 10.14.10 at 6:45 pm


#76 Devil’s Advocate — “. . . of late there has only been speculative gamble.”

If there is only speculative gamble happening in the RE market, that (to me) indicates that individuals haven’t learnt a damned thing about the reality of life. Maybe these greater fools need another short, sharp shock going through their lives.

#83 Got A Watch — “The game is afoot. CDS are moving up on the Big Bankster suspects.”

Goes nicely with the mid-terms Nov. 2, the Tipping Point between Nov. 8-11, the US govt. possibly shutting down the ‘net Nov. 30 plus all the stuff in between.

Thing is, if the elite want Obama to continue destroying the US middle-class, just as C-H-F and the CPC are doing here, then all that has to be done is a false flag during the Tipping Point, when Obama can declare martial law and suspend all civil liberties, rights, etc.

CPC would probably do the same thing here.

#94 BrianT — Eloquently stated! Some of us nutbars (such as “Men In Black”) do have some life left in us!

#98 Basil Fawlty — “. . . cash gives me the creeps.”

Hypothetically, what of a one world currency? Other than Chindia, NKorea, Russia, Iran and a few other non-western countries, it is an alternative.

#110 VICTORIA TEA PARTY — “QE2 ON THE WAY; HELP WE DON’T WANT!”

— and —

#103 darksad person — “If” QE 2-does go ahead – (which I’m skeptical about actually happening)”

So two excellent posters looking at both sides of the same coin!

Gentlepersons, a race to the bottom, no less, and the winner takes all!

#117 American’s Take — “I don’t know why I love this site so much.”

Welcome to this bunch of looneybins! Garth’s site is akin to an intoxicatingly, strung-out and permanently high junkie.

People with more than an ounce of common sense come to absorb as many differing POV’s as possible.

That’s why!

#57 Calgary Illusion — “gold – the currency of fear”. Another POV. Plus — Gold vs. US$

#152 Screwed in BC on 10.14.10 at 6:55 pm

#117 American’s Take

Excelent post!

#153 hobbitt on 10.14.10 at 6:57 pm

#92 Brian1 on 10.14.10 at 10:01 am
It seems to be not about being a man as it does being a positive thinker. I have been kicked out of restaurants and cigar stores where the owners accused me of bad karma. What do they know about karma?
======================================

Out of my store! I will sic my dogma on your karma!

#154 American's Take on 10.14.10 at 7:03 pm

#140: Victoria Tea Party, first, thank you for the kind words. I too have great faith the USA will one day redeem itself with respect to both the economy and global policy. After years in office with “W,” I look back in shame at what has happened. At age 22, my political views were a major contributing factor for me leaving the hick-state in which I was born. See, we’re not all bad. In fact, I’d venture to say we’re more good than bad as a population. The election of President Obama was indeed testament to the fact that the USA can and does continually reinvent itself for the better, trading one viewpoint to another all together. Now, the outcome of that election has still yet to be determined when considering the success of the policies, but I am of strong belief we should stay the course. After all, this new administration has only had 20 months to try to undo what damage was created over the previous 96 months. Re-electing the party into office that continually operates with fear-mongering and war pushing is, in my opinion, not the answer. Remember, where we are today is as a direct result of poor banking policy (or lack thereof) from the previous war-mongering and money-greedy administration.

Unfortunately, people so often have a tendency to forget exactly where and how this all began. What most people see is where we are right now and today, and thus current policies and administration suffer for it. The current administration was and is faced with a mountain of issues to resolve from “W,” and the American public are not known for their patience, especially when times are difficult. If you recall, the financial melt down began just prior to “W’s” exit from office – not when President Obama assumed office.

The catalyst to help regain our footing and put us in a leadership position is no longer any single catalyst. The U.S. must remain focused on the economy and global policy and leadership. The U.S. is still the most robust and diverse economy, and it leads in way of global outreach and policy. Additionally, the U.S. is gaining in knowledge capital through better programs for education and immigration, much of it from India and the EU. A new generation is in play, while emerging technologies and the careers associated with those technologies will put considerable strain on capital. I tend to think of it as a long-term strategy to economic prosperity that must make a “pit stop” along the way. The problem is so much of our competitive gap has indeed been eliminated in the mix due to implementation of poor government policies, lack of enforcement of banking regulations, and stupid voters. I still believe “W” stole the election fair and square.. not once, but twice. That’s a whole other story, though. If you have time, watch the movie “Recount.” I found it sheds a lot of light on what happened behind the scenes in the Florida polls.

China has certainly gained in many of these arenas with respect to growth of knowledge capital and economy. But I do not believe China has done anything ingenious with its fiscal leadership or taking a leadership role in sound economic policies or emerging technologies. I am of strong opinion, as is most of the G20, that China itself has had much to do with the demise of North America’s economy and Europe’s economy. Much of this is due to a sever lack of transparency in the Chinese political, military, monetary, and banking policies. Because of that alone, I feel China’s truth will ultimately come to fruition, and probably sooner than later. The more pressure on a balloon, the sooner and louder it will pop. Right now, China itself is facing a little-discussed economic collapse of their own that they are trying to hold together with duct tape, string, and spit. Perhaps the most telling is the fact that China has been artificially devaluing its currency to put it in a competitive advantage within manufacturing and exporting for quite some time. Additionally, it is no secret China has been conducting “stress tests” on its banks in fear of a housing collapse in excess of 50% (I’ve read as much as 60%, but I am trying to be conservative). Relative to all other global economies, China’s is under the most scrutiny right now.

Having said that, I feel the catalysts needed to regain footing would be to continue focusing on and creating change in domestic policies that adversely affects commerce and the consumer, continue harboring the strength of the G20 to put pressure on China to value its currency at a fair level, which is probably 35%-40% higher than where it stands today. Also, the economies intertwined with China must begin taking a hard stance and developing ways to level the playing ground (I could go on for days about this). I feel trade and reliance between the EU and North America should become more of a focus, moving forward, until China will “open its books” for review. In a sense, our economies, the U.S. and Canada haven’t really “diversified” their trading partners enough to include that of other nations. Both of our economies have relied heavily upon China to produce inexpensive goods. What can be said for an individual’s portfolio with respect to diversification can be applied on a macro level too. Diversification with trading partners is key. China is not transparent, and an economy without transparency is not sustainable in the long-term. I am not a fan of excessive money printing (QE), but until a clear and aligned strategy between all major economies is in play, I’m not sure if there is much more that can be done to remain competitive as QE does devalue the USD, allowing the U.S. to compete against China, marginally.

Canada and the U.S. share far more in common than any other two nations on Earth. As much as we like to differentiate ourselves from one another, the fact of the matter is that we are, indeed, very close to one in the same, except for that hockey thing I still don’t understand (just kidding). Sure, there will always be nuances that make us US and you YOU. But, for the most part, we should work together to overcome and realize our economies and population pool are absolutely incredible. The truth is, there is probably more difference between Washington State and North Carolina than there is between Washington State and B.C. (that is not a joke). The U.S. is a huge and very diverse population with very different beliefs from region to region. This makes it exponentially difficult and problematic to create and implement policy that best fits everyone. Hence, we’re not perfect by a long stretch. Therefore, one must make a decision to do something about it and go where one fits in best, much like I did. Unfortunately, I do agree with you that Canada has had a propensity to adopt many of the same fiscal policies of the U.S., which may not fare well. I don’t know if this is a good strategy or not, but in my opinion, it is not. I, on the other hand, would have learned from the demise of our economy and done many things differently, which is why I am perplexed. Did the U.S.’s “betters” and Canada’s “betters” all go on a ski trip together and get wasted at an apre ski party and decide to just “go for it!”??? Who knows. Please understand, however, that Americans bitch too and bitch a LOT about fiscal and monetary policies that were previously in play and that are now in play today.

I guess I haven’t provided much insight to the “catalyst” that will pull us from this muck, other than to continue keeping the faith that our Administration is truly doing all it can to rally the nations and markets. Keep sight our economies are relative to one another and that although we may be in the crapper for now, so are others whether they admit it or not.

I feel if we stay the course and allow the new administration to do its job, we will eventually be better off. This is not without any length of time or pain, though. The new policies will be quite difficult to accept for a lot of people, but will probably be necessary to create balance in the system. I am bracing for TARP 2.0, and I’m not yet convinced the American people will stand for it. Good and bad will come of it either way, but ultimately progress will be made. It really becomes more about picking the lesser of two evils. Do you provide additional stimulus at the risk of the taxpayers, or do you allow the banks to fail at the risk of a run? I feel there is a price to be paid for what happened in the previous administration, and that price will come to the taxpayer in the form of additional stimulus and lost jobs. A run on banks would, perhaps, be one of the worst things that could happen, and therefore I do not believe that will be permitted as it will severely undermine consumer confidence more than it already is.

I do believe China will have to raise its currency valuation, making it much easier to repay indebtedness and compete on a level field. This in itself will alleviate many of the underlying issues that are pulling our economies into the muck, but not all of them. If China doesn’t raise its valuation, many economies will simply abandoned or significantly reduce trade with China. Yes, that would be a very painful move but alas a necessary move. And, as I said earlier, the U.S. must remain focused on its own domestic policies and change that which is adversely affecting commerce and the consumer, while continuing to rally the strength of the G20.

Keep the faith and stay as liquid as possible. This too shall undoubtedly pass.

#155 Dan in Victoria on 10.14.10 at 7:04 pm

“Jess”
Pat @152 hit a home run regarding Patrick Killelea
Go to his site and read the left hand column, it’s 3 pages or so, it will give you the info you need Re rent or own. I totally forgot about it. Thanks Pat.

http://patrick.net/housing/crash.html

#156 American's Take on 10.14.10 at 7:07 pm

Errrrr, ummmm, VERY SORRY for the book I just posted. I didn’t realize it. I’ll keep it down to a paragraph or two, moving forward.

#157 Bill ( Peterborough) is a FRAUD on 10.14.10 at 7:31 pm

#141 TheBigLebowski on 10.14.10 at 4:51 pm

Quit bellyaching doomer boy. The debunkers get edits when we’re getting out of control on anti-doomer crusades as well. Still a free place to post as long as you don’t sound like a raving luna…OH THAT’S RIGHT! You’d be in the know there better than me. 8)

#158 BrianT on 10.14.10 at 7:47 pm

#158America-probably the most word for word accurate stating of the MSM spin I have seen here (maybe anywhere). You might have a future in news-you could replace the bubble headed bleach blonde who comes on at five.

#159 DaBull on 10.14.10 at 7:52 pm

#112 Reasonfirst

Not… It’s technology. All technology in the end requires more personnel. There’s the people to invent it, the people to build it, the people to sell it, the people to support it, the people to use it and finally the people to recycle it when it’s life cycle is over. So technology in the end actually requires a lot more people with different and better skill sets than the simple unskilled job it replaces. So to you I say “get your head out of your arse and maybe then you can see a little clearer”.

#116 eaglebay

The company I own just happens to be in the unconventional oil and gas business. There is more to a unconventional drilling lease than just the drilling rig and directional crew. There is a whole lot of other services required. The frack crew alone reminds me of a small army when they move on to those leases.

Here are just some services required; Water haulers, and not just one but lots of them, to haul the massive quantities of water, frac sand haulers to haul the massive quantities of frac sand. Tank rentals and the truckers who haul these to and from the lease. Construction and road builders to build gigantic leases and upgraded roads to haul all this crap on. Equipment rental companies to supply all this specialize equipment required these days. Large camps and/or a whole lot of hotels/motels rooms to house and feed all these hard working poeple.

It’s not like in the past when they just cleared the trees and dragged every thing in on an old goat trail. And this certainly isn’t the shallow gas bald ass prairie drilling on zero disturbance leases that you find around your neck of the woods. The world is a changing, get use to it.

Companies are spending big money these days and require more and more people to accomplish the job. The only jobs I see being replaced by technology are those that don’t require specialized skills. So if you want to make it in this new World you had better get on the technology band wagon. It’s the future buddy.

PS: I know you think technology some how replaces people, but in the end it really creates 2+ jobs for every job it replaces. Plus these new jobs require a more highly educated and skilled person. Good for both business and the worker.

#160 S.B. on 10.14.10 at 8:04 pm

Over the short term, emotion trumps the fundamentals.
For this reason there should be a good supply of greater fools going into 2011 – interest rates are low, it’s easy money.

Human vanity defies all logic and reason. Example: you can buy a decent used domestic-made minivan for 15,000. Or, you could purchase a new Porsche Cayanne S for closer to 6 figures…
Either of these will transport your family and goods in comfort.
But the person leasing a $90k SUV is seen as successful, discerening, refined. Or perhaps just someone who has good credit. Big difference in monthly cash flow.
Maybe the smart family is banking an extra $700/mo into savings and will retire 5 years earlier…

#161 Nostradamus Le Mad Vlad on 10.14.10 at 8:05 pm


#150 Steady Eddie — “All paper currencies die… it’s just when… Either a new Global FIAT currency or currency backed by a commodity . . .”

Accurate. Something, somewhere is gonna blow big time, the question is where. Good post.

Scapegoat Found A lady has been found laughing uncontrollably, so the financial crisis is over until next week.

One way of dealing with sheeple “U.S. troops now being trained to boss communities and run local governments are being readied to oversee a post-collapse America in which riots and civil unrest similar to . . . Europe . . .” Plus — Acropolis.

False Flag in dollars and elections.

Foreclosuregate Wall St. is getting scared. ForeclosureGatedCommunity “. . . the “invisible bailout” — the one you never hear about, the one that forces millions of people to subsidize bad lending practices in order to prop up Wall Street.”

Tipping Point? Something to ponder.

Currency Scraps “The ‘quantitative easing’ policy, courtesy of the Fed (read: massive inflation due to printing money like crazy) has already had an horrendous effect on the buying power of We the People. This may work well for large US exporters to make their goods more attractive because of a cheaper dollar, but is strangling the American people economically, particularly in the areas of food and energy.” wrh.com. Plus Trade Deficit widens.

Russia seems to be okay financially.

Three min. clip George Carlin — Prophet. Who controls America, Canada and the western world. They have raped us, left us for dead and are moving east.

Goregate strikes again! GW Fraud — this.

Pension Start-up Costs The UK begins with a tax raid on pensions and the rest will follow orders in the other western countries.

9:37 clip 1981. We lived a blissful life in Toronto with (gasp!) a mortgage plus a home.

#162 Taxpayer like everyone else on 10.14.10 at 9:02 pm

105 AA – excellent points. I had considered the immigration factor, as I believe it now produces all the net population growth, but having no data on ages, I could only assume they are a mixed demograph. I didnt have any problem coming up with boomer immigrants I know – there are many. As far as the death rate, again I
have not examined the data, but should you go to your
30 or 40 year re-union, I can assure you that you will be
surprised as to the people who didnt make it. I wouldnt be surprised at close to 10% by the latter 50s.

Nevertheless, from the data in the link, I estimated the four age groups separated at ages 18/38/55 in 1985 to comprise approx 26/36/18/20% of the pop (notice the
near total containment of the boom) and in 2005 as
approx 22/28/27/24% which is suprisingly even (the
boom is split). We could probably add another percent at
the top end for the five years since.

Now back to the original stat regarding age proportions
of bankruptcies. The 55+ demo has increase from about 20 to 25% of the pop, but the proprtion of bankruptcies
is reported to have quadrupled. And the portion of 18-34 bankruptcies decreased by more than half I think, but their representation in the general pop is down about 25%. Yes, the mileage may vary as the age goups dont align exactly.

Appreciate the “deep blog” after what we’ve seen here recently.

#163 ExExpat on 10.14.10 at 11:39 pm

#156 American’s Take

I have to agree with you long term, the transition is a bear though – no pun intended. I spent time in China in 1990, got a tourist visa 1 week after martial law was lifted and spent the next 6 weeks in south and central China. Fantastic, once in a lifetime experience, incredible energy and people, but the Chinese government system is no more the future than dictatorships or Middle East petro monarchies. I saw hundreds of photos at train stations of executed “counter revolutionaries” – which at that time meant anyone who bucked the system. I realize there have been enormous changes in the last 20 years, but I don’t think that cat has really changed its spots.

So, yes, China has enormous economic development and increased wealth, but the status quo will only stand as long as the defects in the system can be papered over with lots of cash and growth, which doesn’t last forever. The Chinese will eventually take care of their problems and evolve a free government, but until then they will never be an international leader. I agree with you, tattered as it is, the US will still have this role for some time, and may re-invent and recapture its greatness. And like the British before them, hopefully when it’s time to pass the leadership torch there is a democratic country waiting to pass it to.

#164 Soylent Green is People on 10.15.10 at 10:14 am

Buying 20 cans of coffee in advance is not living. Your bargain is a waste of money and no way to live.

Yuck.